Draftkings Inc. · NASDAQ:DKNG
Draftkings — Investor Day (March 2022)
50 slides from Draftkings's investor day presentation, Mar 3, 2022
Slide 1: DraftKings Investor Day March 2022
| 1 DRAFTKINGS INVESTOR DAY MARCH 2022
Slide 2: Legal disclaimer
| 2 Legal disclaimer No Offer or Solicitation This presentation does not constitute a solicitation of a proxy, consent or authorization with respect to any securities of DraftKings Inc . (“DraftKings”, “the Company”, “we” or “us”) . This presentation also does not constitute an offer to sell or the
Slide 3: Legal disclaimer (continued)
| 3 Legal disclaimer (continued) Forward - Looking Statements and Non - GAAP Financial Measures This presentation, and the accompanying oral presentation, contain forward - looking statements within the meaning of Section 21 E of the Securities Exchange Act of 1934 , as amended, and the Private Secu
Slide 4: Investor Day Takeaways
| 4 Investor Day Takeaways TAM larger than we thought for both OSB and iGaming; increasing total North America estimate from $67B to $80B 1 Top 3 operators in U.S. OSB industry account for 80%+ of GGR; DKNG GGR share 25% and 19% for OSB and iGaming, respectively 2 Investment in product features will
Slide 5: TAM and Legalization
AFT KINGS TAM AND LEGALIZATION
Slide 6: U.S. OSB TAM implied by New Jersey gross revenue per adult
| 6 $28B $26B $54 $244 $360 $740 NJ 2018 NJ 2019 NJ 2020 NJ 2021 NJ’s OSB gross revenue per adult – assuming no growth going forward – implies a U.S. OSB TAM of $28B or $26B if we adjust for the state’s relative GDP Source: NJ Department of Gaming Enforcement; U.S. Census Bureau; U.S. Bureau of Econ
Slide 7: NJ is an appropriate extrapolation point for OSB
| 7 $7.27 $3.26 $12.00 $5.90 $12.30 $13.85 $12.16 $11.43 $20.75 $17.45 $21.12 NJ WV IN PA NH IA CO IL TN MI VA OSB Gross Revenue Per Adult – First Consecutive September to December (Four Months of Gross Revenue Per Adult) NJ is an appropriate extrapolation point given its gross revenue per adult com
Slide 8: U.S. iGaming TAM implied by New Jersey
| 8 $52B $48B $123 $149 $197 $246 $299 $483 $970 $1,367 NJ 2014 NJ 2015 NJ 2016 NJ 2017 NJ 2018 NJ 2019 NJ 2020 NJ 2021 • NJ iGaming was $1.4B industry in 2021; growth accelerated following the introduction of OSB in August 2018 • Assuming 0% growth from 2021 to 2023, a mature NJ implies $52B in Gro
Slide 9: Extrapolating from NJ is likely conservative given PA and MI iGaming
| 9 $69.52 $42.55 $131.88 $142.10 NJ 2019 (6th Full Year of iGaming) WV 2021 (1st Full Year of iGaming) PA 2021 (2nd Full Year of iGaming) MI 2021 (Partial Year of iGaming) iGaming Gross Revenue Per Adult – 2021 State Performance Benchmarked to NJ in 2019 (Twelve Months of Gross Revenue Per Adult) E
Slide 10: State legalization of OSB and iGaming
| 10 Source: U.S. Census Bureau Note: States within each category sorted by launch date where applicable. Live DKNG states sorted by DKNG launch date. Washin gto n, DC and Puerto Rico are considered states for the purposes of this page. (1) Indicates states that have legalized sports betting in some
Slide 11: Estimated Canadian online sports betting and iGaming gross revenue
| 11 $3B $6B $2B $4B OSB iGaming Population Method GDP Method Estimated Canadian Online Sports Betting and iGaming Gross Revenue Source: U.S. Census Bureau; New Jersey Division of Gaming Enforcement; Statistics Canada; U.S. Bureau of Economic Analysis; W orl d Bank Note: Per Statistics Canada, the C
Slide 12: U.S. OSB and iGaming Share
| 12 U.S. OSB AND IGAMING SHARE
Slide 13: Intricacies when assessing state-reported share by operator
| 13 There are several intricacies when assessing state - reported share by operator State Reported Share Considerations State reports have a wide range of transparency; 4 of our 17 states provide operator - specific net revenue, 5 provide operator - specific handle and GGR, and 8 do not provide ope
Slide 14: Illustrative example of promotions impact on GGR share
| 14 $2.3 $2.3 Gross Revenue GAAP Net Revenue $4.3 $2.3 Gross Revenue GAAP Net Revenue Illustrative Example: Operator Using Only Profit and Odds Boosts ($ in millions) ~65% GGR Share We provide an example to illustrate how an operator’s mix of promotions may significantly impact state - reported gro
Slide 15: Methodology (Total U.S.) for evaluating U.S. share
| 15 Methodology 1 (Total U.S.) There are three methodologies to consider when evaluating U.S. share • Total U.S. share: Measures an operator’s ability to get live and capture share across all states • DraftKings’ Q4 results below • Total U.S. share, excluding Nevada: Measures an operator’s ability
Slide 16: DraftKings and two other operators account for 80%+ of OSB GGR
| 16 DraftKings and two other operators typically account for 80%+ of each state’s OSB GGR 8 13 1 12 1 6 8 14 2 3 Number of Operators Q4 2021 OSB GGR Share (% of GGR) 21 17 25 11 11 Source: State Gaming Reports; Eilers & Krejcik Gaming Note: Number of operators as of December 31, 2021. 78% 86% 81% 1
Slide 17: Number of live states by operator
| 17 Number of Live States by Operator DraftKings is in more states than any other OSB operator Source: DraftKings Internal Analysis Note: Does not include operators who are only live in 1 state. 36% Live % U.S. Population 27% 34% 34% 30% 32% 25% 23% 18% 14% 17 States 15 States 14 States 14 States 1
Slide 18: Keys to our unique and sustainable differentiation
| 18 9 keys to our unique and sustainable differentiation Preferred real money gaming brand among U.S. consumers ~6M all - time paid users, 10+ years of data creates meaningful head start for acquisition Tech driven platform drives optimization based on player specific LTV Outpacing competition with
Slide 19: Progress across product roadmap priorities: the 4 C's
| 19 We have made significant progress across product roadmap priorities with exciting new developments to come C Control DraftKings will control its own destiny across every consumer product it operates by owning and operating all of its own core technology C Content DraftKings will offer the broad
Slide 20: iGaming differentiation from owning our technology platform
| 20 iGaming is a great example of how we have been able to differentiate from our competition when we own our technology platform DraftKings iGaming: Areas Of Historical and Future Investment Source: Internal DraftKings data (1) DraftKings launched DK Rocket in September 2021. 27 New titles from DK
Slide 21: Content expansion for our OSB product
| 21 Following the completion of our migration, we shifted focus to invest heavily in content expansion for our OSB product Same Game Parlay NFL Player Props In - Game Micro - Markets
Slide 22: 2022 OSB innovation: social functionality
| 22 2022 will be a year of innovation for our OSB product; social functionality is one way we will differentiate from competition and drive long - term retention Friends Dashboard Spectator Mode Bet Groups Popular/Friends Bet Feed
Slide 23: Path to $6.7B to $9.5B North American gross revenue at maturity
| 23 Based on conservative end of TAM ranges, DraftKings is on track to achieve $6.7B to $9.5B North American OSB and iGaming gross revenue at maturity Source: NJ Department of Gaming Enforcement; U.S. Census Bureau; U.S. Bureau of Economic Analysis (1) Based on GDP method extrapolation on page 6. (
Slide 24: Unit Economics
AFT KINGS UNIT ECONOMICS
Slide 25: Clear path to profitability based on payback periods and state economics
| 25 Clear path to profitability based on customer payback periods and state - level economics; multiple proof points achieved already We invest in acquiring players with goal of 2 - 3 year gross profit payback As customer cohorts “stack,” a state turns contribution profit positive after 2 - 3 years
Slide 26: Gross profit payback period for a customer cohort
| 26 Gross profit payback period for a customer cohort is the number of years required for gross profit to exceed customer acquisition investment Cohort Gross Profit Calculations Gross Profit Year 1 Customer Cohort Economics State Level Economics Enterprise Economics Year 1 Net Revenue Year 1 Gross
Slide 27: Customer and revenue retention by cohort
| 27 83% 88% 96% Year 1 Year 2 Year 3 100% 122% 143% Year 1 Year 2 Revenue Indexed to Year 1 Year 3 Revenue Indexed to Year 2 >80% customer retention and >120% revenue retention year over year; revenue from retained customers more than doubles from Year 1 to Year 3 • As of FY 2021, we have 90 quarte
Slide 28: Retention in OSB-only states versus multi-product states
| 28 88% 90% Year 1 Year 2 100% 124% Year 1 Year 2 Revenue Indexed to Year 1 Cohort customer and revenue retention in OSB - only states is similar - to - better than customer and revenue retention in multi - product states • As of FY 2021, we have 90 quarterly cohorts across 14 states (3) since laun
Slide 29: Drivers of strong retention
| 29 Our strong retention is driven by acquiring quality customers, putting the customer first, cross selling, and continuous product improvement • Acquiring the right customers: Targeting high - quality customers is the first step in strong cohort performance • Always putting the customer first: Cu
Slide 30: Gross margin leverage for a cohort over time
| 30 Gross margin leverage for a cohort is achieved over time due to promotional spend decreasing, economies of scale, and operational initiatives Customer Cohort Economics State Level Economics Enterprise Economics Cohort Level Gross Margin Improvement Many of our variable costs are tied to gross r
Slide 31: Financial disclosures validate payback periods on an LTM basis
| 31 Our financial disclosures provide sufficient information to validate our payback periods on an LTM basis LTM MUPs Current Period LTM MUPs Prior Period LTM Acquired Paid New Actives LTM Acquired Paid New Actives Calculation Customer Acquisition Cost Calculation Player Retention Rate Months Playe
Slide 32: Sub three-year payback periods
| 32 Using the previously outlined methodology, we can prove out sub three - year payback periods 2.8 Years 2.2 Years 2.5 Years 2.5 Years LTM Q1 2021 LTM Q2 2021 LTM Q3 2021 LTM Q4 2021 Payback Periods by Acquisition Period Based on Actual Results (Number of Years) LTM MUPs (Current Period) 1,089k 1
Slide 33: States turn positive after two to three years
| 33 The result of strong payback periods is that states turn positive after two to three years DKNG State Launch and Profitability by State Customer Cohort Economics State Level Economics Enterprise Economics State 2018 2019 2020 2021 2022E % Pop NJ Q3 2018 Launch Profitable 2.7 % WV Q3 2019 Launch
Slide 34: New Jersey net revenue and contribution profit
| 34 $21 $85 $153 $239 ($10) ($5) $8 $68 Launch Year (2018 A) Year 1 (2019 A) Year 2 (2020 A) Year 3 (2021 A) Net Revenue Contribution Profit NJ was highly profitable in its third full year; expect profitability to continue to ramp quickly in 2022 Note: Does not include DFS or retail businesses. Con
Slide 35: Acquired and cumulative gaming customers over time
| 35 Increased sales and marketing spend due to unprecedented number of new players at a historically lower cost per acquired player Select State Launch Commentary Acquired and Cumulative Gaming Customers Over Time Note: Acquired gaming customers and cumulative gaming customers do not have the same
Slide 36: Faster customer acquisition: Arizona versus New Jersey
| 36 First Quarter Second Quarter Third Quarter Fourth Quarter Fifth Quarter Sixth Quarter Seventh Quarter Eighth Quarter NJ (Actuals) AZ (Actuals) We are acquiring customers much faster than before; more OSB customers per adult acquired in AZ over two quarters than in NJ over eight quarters Cumulat
Slide 37: FY 2021 and FY 2022 contribution profit build
| 37 Already Contribution Profit Positive Not Yet Contribution Profit Positive Cumulative Contribution Profit Already Contribution Profit Positive Not Yet Contribution Profit Positive Cumulative Contribution Profit Contribution profit turns positive as we shift from focusing on customer acquisition
Slide 38: Enterprise Economics
AFT KINGS ENTERPRISE ECONOMICS
Slide 39: Expected long-term gross margin rate
| 39 Expected gross margin rate has come down by ~200bps primarily due to NY Note: Cost buckets represent expected year 5 population weighted average across our 18 multi - operator states and provinces with legalized OSB or iGaming. Excludes any contribution from DFS which has ~80% gross margin. Inc
Slide 40: Long-term external marketing spend
| 40 Long - term external marketing scale will be achieved through decreasing customer acquisition spend and optimizing our CACs Long - Term External Marketing Spend External marketing is primarily a product of customer acquisition in newly launched OSB and iGaming states and provinces 1 Applying cu
Slide 41: Long-term SG&A as a percentage of net revenue
| 41 Expected long - term SG&A will comfortably be in the mid - to - high teens as a percentage of net revenue Long - Term SG&A Short - term cost growth due to unique North American online gaming industry dynamics; pulled forward staffing to launch states and be competitive with at scale global peer
Slide 42: Long-term Adjusted EBITDA estimate of $2.1B
| 42 $ 0.4 $ 3.3 $ 2.5 $ 0.4 $ 0.1 $ 6.7 $ 3.9 $ 3.2 $ 2.1 Net Revenue COGS Gross Profit External Marketing Contribution Profit SG&A Adjusted EBITDA $(2.8) $(0.7) $(1.1) Increasing long - term Adjusted EBITDA estimate to $2.1B before GNOG synergies, Marketplace, Media, and any other new initiatives
Slide 43: Marketplace
AFT KINGS MARKETPLACE
Slide 44: Early success with NFT marketplace
| 44 DKNG has had early success with its NFT marketplace and has a clear right to play in the space based on customer overlap; early innings of industry show massive TAM potential LTM NFT Secondary Sales and Monthly Unique Buyers (4) ($ in millions) DraftKings Marketplace Overview Source: Internal D
Slide 45: Appendix
AFT KINGS APPENDIX
Slide 46: Financial disclosures and example payback period calculations
| 46 Financial disclosures and example payback period calculations Notes: Includes all B2C revenue from OSB, iGaming, DFS, and other. Implied new actives (k) = (12 / Months played) * New MUPs (k) . LTM Q4 2021 Months Played New MUPS (k) Implied New Actives (k) Implied CAC ($) ARPMUP ($) Revenue / Ne
Slide 47: Reconciliation of GAAP to Non-GAAP Operating Expenses
| 47 Reconciliation of GAAP Operating Expenses to Non - GAAP Operating Expenses FY 2020 to FY 2021 Operating Expenses Reconciliation ($ in millions) Stock - based compensation expense Amortization of acquired intangible assets Transaction expenses Depreciation & Amortization Litigation Other (a) (b)
Slide 48: EBITDA Build
| 48 Reconciliation of GAAP Operating Expenses to Non - GAAP Operating Expenses FY 2020 to FY 2021 EBITDA Build ($ in millions) 1Q20 2Q20 3Q20 4Q20 2020 1Q21 2Q21 3Q21 4Q21 2021 Net Revenue $113 $75 $133 $322 $644 $312 $298 $213 $473 $1,296 Cost of Revenue $47 $32 $72 $134 $285 $157 $159 $142 $223 $
Slide 49: Methodology for cohort customer and revenue retention
| 49 Detailed overview of methodology for cohort customer retention and revenue retention • Year 1 is defined as the first 4 full quarters following a cohort’s acquisition quarter. For example, Year 1 is Q1 2019 to Q4 2019 f or a customer acquired in Q4 2018. • Year 2 is defined as the 4 full quarte
Slide 50: OSB state reporting methods
| 50 Description States Method 1 Handle, GGR, and NGR are reported by operator PA, MI, AZ, and CT Method 2 Handle and GGR are reported by operator IN, NH, IL, NY, and OR Method 3 Handle and GGR are reported by license, which may be shared by multiple operators WV and IA Method 4 GGR is reported by l