Draftkings Inc. · NASDAQ:DKNG
Draftkings — Investor Day (November 2023)
44 slides from Draftkings's investor day presentation, Nov 14, 2023
Slide 1: DraftKings Investor Day November 2023
| 1 DRAFTKINGS INVESTOR DAY November 2023
Slide 2: Forward-Looking Statements
| 2 Forward-Looking Statements This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, including statements about DraftKings Inc. (“DraftKings”, the “Company”
Slide 3: Legal disclaimer (continued)
| 3 Legal disclaimer (continued) No Offer or Solicitation This presentation does not constitute a solicitation of a proxy, consent or authorization with respect to any securities of DraftKings. This presentation also does not constitute an offer to sell or the solicitation of an offer to buy securit
Slide 4: Investor Day Takeaways
| 4 Investor Day Takeaways States are larger and growing faster than anticipated; we now expect the OSB and iGaming TAM to grow from ~$20B in 2023 to ~$30B in 2028 in existing states alone(1)1 Our superior product and technology, scale, and brand are driving rapid share gains across both OSB and iGa
Slide 5: Existing State Opportunity
| 5 EXISTING STATE OPPORTUNITY
Slide 6: The OSB and iGaming TAM will reach ~$20B in 2023 in existing states
| 6 The OSB and iGaming TAM will reach ~$20B in 2023 in existing states alone(1) OSB and iGaming Gross Revenue (GGR) in States(1) DraftKings is Live $1 $2 $4 $1 $2 $1 $3 $5 $7 $7 $10 B il li o n s o f D o ll a rs 2018A $0 2019A 2020A 2021A 2022A 2023E $0 $1 $3 $7 $13 $20 U.S. OSB U.S. iGaming Ontari
Slide 7: New Jersey GGR is continuing to grow rapidly
| 7 10 years into iGaming and 5+ years into OSB, New Jersey GGR is continuing to grow rapidly $0.0 $0.1 $0.1 $0.2 $0.2 $0.3 $0.5 $1.0 $1.4 $1.7 $2.1 $0.2 $0.4 $0.7 $0.7 $0.9 B il li o n s o f D o ll a rs 2013A 2014A 2015A 2016A 2017A $0.1 2018A 2019A 2020A 2021A 2022A 2023E $0.4 $0.7 $1.3 $2.1 $2.4
Slide 8: Combined OSB and iGaming GGR in States
| 8 $26 $28 B il li o n s o f D o ll a rs Today (2023E) 2026E 2028E $20 $29 $33 Sources: State Gaming Reports; iGaming Ontario; Eilers & Krejcik Gaming U.S. Sports Betting And Online Casino Outlook (XLS) – August 2023; Internal estimates. (1) New Jersey, West Virginia, Indiana, Pennsylvania, New Ham
Slide 9: Share
| 9 SHARE
Slide 10: Our U.S. OSB and iGaming GGR share is increasing
| 10 March 2022 OSB GGR Share Target: 20-30% Sources: State Gaming Reports and DraftKings internal data. Notes: Gross revenue as calculated pursuant to each state’s definition; no adjustments were made to this state data. (1) Share is calculated on a trailing three-month basis. Share denominator inc
Slide 11: Leading Product and Technology, Brand, Scale
| 11 LEADING PRODUCT AND TECHNOLOGY Vertical Integration: Create unique products for the U.S. sports fan, powered in-house Single Wallet: Deliver a seamless experience across states and DraftKings- branded products Scalable Regulatory Platform: Facilitate responsible gaming, data privacy, and securi
Slide 12: Our Same Game Parlay has advanced and is now in-house
| 12 In two years, our Same Game Parlay (SGP) has advanced and is now in-house(1) Merchandizing Content Third Party Third Party Third Party • Content cards (editorial story) • Trending SGP and bet count • Quick SGP (pre-packs) • Pre-match core sports • Live SGP • Pre-match long tail sports • Content
Slide 13: Our jackpot offering is a unique differentiator
| 13 Our jackpot offering is a unique differentiator 1. To-date refers to results as of November 13, 2023. 2. Single-level jackpots allow customers to be eligible for a single jackpot due to their jackpot-eligible wager. 3. Multi-level jackpots allow customers to be eligible for multiple jackpots du
Slide 14: Progressive Parlay Offering
| 14 Progressive Parlay will be DraftKings Sportsbook’s newest offering, coming soon! Progressive Parlay Offering Description Parlays that can win even if one or more legs miss! • Customers wager against the house • “Over / under” on 3 to 12 legs • More picks = more potential ways to win • More pick
Slide 15: Consumers are recognizing DraftKings has the leading product
| 15 Consumers are recognizing that DraftKings has the leading product in the industry Player F Player E Player D Player C Player B 3% 6% 6% 13% 33% 36% Player F Player E Player D Player C Player B 4% 5% 8% 14% 30% 36% Which platform do you view as having the most intuitive interface/best user exper
Slide 16: State Economics
| 16 STATE ECONOMICS
Slide 17: All state vintages are inflecting to positive Contribution Profit in 2-3 years
| 17 All state vintages are inflecting to positive Contribution Profit(1) in 2-3 years (1) Non-GAAP financial measure. Refer to the Financial Reconciliations section of this presentation for a reconciliation of historical results. National marketing is allocated based on new customers acquired. Gold
Slide 18: Newer state vintages are generating positive Contribution Profit faster
| 18 Newer state vintages are generating positive Contribution Profit(1) faster Average Quarters Since Launch to Reach Trailing 12-month Positive Contribution Profit(1) 11 8 Q u a rt e rs 2018-2019 State Vintage 2020-2021 State Vintage 2022-2023 State Vintage 5 (Expected) (2) (3) (4) Golden Nugget O
Slide 19: A more rapid pace of customer acquisition is driving faster state Contribution Profit
| 19 A more rapid pace of customer acquisition is driving faster state Contribution Profit(1) Average Pace of Customer Acquisition by State Vintage 2018-2019 State Vintage 2020-2021 State Vintage 2022-2023 State Vintage (2) (3) (4) 0 8 16 24 32 40 Months Live P e rc e n ta g e o f A d u lt P o p u l
Slide 20: Handle continues to grow for years after states launch
| 20 Handle continues to grow for years after states launch $12 $1 $25 $16 $35 $28 $7 $45 $37 $17 B il li o n s o f D o ll a rs 2018-2019 State Vintage 2020-2021 State Vintage 2022-2023 State Vintage 2020A 2021A 2022A 2023E 108% OSB and iGaming Handle(1) by State Vintage 40% 29% 32% 75% YoY 143% (1)
Slide 21: Promotional Reinvestment lessens as our states mature
| 21 Promotional Reinvestment lessens as our states mature P e rc e n ta g e 2018-2019 State Vintage 2020-2021 State Vintage 2022-2023 State Vintage 2020A 2021A 2022A 2023E Promotional Reinvestment(1) by State Vintage Δ bps (300) (300) (1,000) (1,500) (400) (700) (1) Represents promotions as a perce
Slide 22: Strong Net Revenue growth across state vintages
| 22 As a result, we are continuing to see strong Net Revenue growth across state vintages $274 $34 $517 $336 $775 $784 $279 $1,163 $1,215 $921 M il li o n s o f D o ll a rs 2018-2019 State Vintage 2020-2021 State Vintage 2022-2023 State Vintage 2020A 2021A 2022A 2023E Net Revenue(1) by State Vintag
Slide 23: Adj. Gross Margin Rate increases as states mature
| 23 Adj. Gross Margin Rate(1) increases as states mature A d j. G ro ss M a rg in R a te 2018-2019 State Vintage 2020-2021 State Vintage 2022-2023 State Vintage 34% 37% 41% 46% 12% 28% 43% 48% 4% 30% 2020A 2021A 2022A 2023E Adj. Gross Margin Rate by State Vintage (1) Non-GAAP financial measure. Ref
Slide 24: External Marketing lessens as states mature
| 24 $197 $385 $167 $264 $155 $224 $344 M il li o n s o f D o ll a rs 2018-2019 State Vintage 2020-2021 State Vintage 2022-2023 State Vintage 2021A 2022A 2023E External Marketing lessens as states mature (2) (3) (4) External Marketing(1) by State Vintage YoY (15%) (7%) (31%) (15%) (6) (1) External M
Slide 25: Customer Economics
de RAFT NS CUSTOMER ECONOMICS
Slide 26: We have acquired new customers at less than 3-year Adj. Gross Profit paybacks
| 26 Historically, we have acquired new customers at less than 3-year Adj. Gross Profit paybacks D o ll a rs Acquisition Quarter Year 1 Year 2 Year 3 External Marketing Cumulative Net Revenue Cumulative Adj. Gross Profit(1) Illustrative Average Customer Economics (1) Non-GAAP financial measure. Refe
Slide 27: Increased customer acquisition while decreasing CAC
| 27 Over the past two years, we have dramatically increased customer acquisition while simultaneously decreasing CAC C u st o m e r A c q u is it io n C o st (1 ) in D o ll a rs C u sto m e rs A c q u ire d 2021A 2022A 2023E Customer Acquisition Cost(1) Customers Acquired (1) Customer acquisition c
Slide 28: Our OSB hold percentage is increasing
| 28 Our OSB hold percentage is increasing as we improve our bet mix and trading operations G ro ss G a m in g R e v e n u e ( G G R ) a s a P e rc e n ta g e o f H a n d le 2021A Hold % 0.7% Higher Average Leg Count 0.3% Optimized Trading 0.2% Sport Outcomes 2022A Hold % 1.2% Higher Average Leg Cou
Slide 29: Payback periods are shortening
| 29 As a result, payback periods are shortening M o n th s 2021 Cohort 2022 Cohort 2023 Cohort Less than 3 Years Approximately 2.3 Years Projected Customer Payback Periods(1) (1) Customer payback periods refers to the amount of time required to generate cumulative Adj. Gross Profit that is equal to
Slide 30: Outlook
| 30 OUTLOOK
Slide 31: Adj. EBITDA of $1.4B in 2026 and $2.1B in 2028 from existing states
| 31 We expect Adj. EBITDA(1) of $1.4B in 2026 and $2.1B in 2028 from existing states alone(2) $1.3 $2.2 $3.7 $4.7 $6.2 $7.1 ($0.7) ($0.7) ($0.1) $0.4 $1.4 $2.1 B il li o n s o f D o ll a rs 2021A 2022A 2023E 2024E 2026E 2028E Revenue Adj. EBITDA 23% 30% Adj. EBITDA Margin % Expected DraftKings Reve
Slide 32: Legalization Upside
| 32 LEGALIZATION UPSIDE
Slide 33: We expect more U.S. states to legalize OSB and iGaming
| 33 We expect more U.S. states to legalize OSB and iGaming DraftKings Live with both OSB and iGaming DraftKings Live or Pending Launch(1) with OSB FY 2022 OSB Legislation Introduced iGaming Legislation Introduced(2) Included in Guidance (1) Our revenue and Adjusted EBITDA guidance for fiscal years
Slide 34: Up to an additional $6.2B of annual Adj. EBITDA from further legalization
| 34 There is potential for up to an additional $6.2B of annual Adj. EBITDA(1) to DraftKings from further OSB and iGaming legalization in the U.S. $0.5 $0.9 $1.1 $1.6 $4.8 $0.3 $0.6 $0.6 $0.9 $1.4 Percentage of U.S. Population Legalizing OSB and iGaming B il li o n s o f D o ll a rs +10% +Legislatio
Slide 35: Additional Growth Vectors
| 35 ADDITIONAL GROWTH VECTORS
Slide 36: Mega Trends and DraftKings Positioning
| 36 Sports viewership transitioning quickly from legacy linear to digital streaming Global trend towards regulating online gaming Consumers looking for more interactive experiences and deepening engagement with favorite apps DraftKings has leverageable assets to capitalize on mega trends Mega Trend
Slide 37: Appendix
| 37 APPENDIX
Slide 38: State vintage results reconciled to enterprise financial results
| 38 State vintage results reconciled to enterprise financial results Financial Results in Millions of Dollars Totals may not sum due to rounding. (1) Non-GAAP financial measure. Refer to the Financial Reconciliations section of this presentation for a reconciliation of historical results. (2) Inclu
Slide 39: Detailed financial elements
| 39 Detailed financial elements Financial Elements Capex and Capitalized SW(1) Expect annual investment between $100M and $150M Change in Net Working Capital Expect change in net working capital to be neutral or a modest source of cash Expect approximately 3% annual dilution due to stock-based comp
Slide 40: Number of unique customers on our platform is rising
| 40 The number of unique customers on our platform is rising 0.8 0.9 1.4 1.7 1.7 1.7 1.9 1.7 1.8 1.8 1.9 1.9 1.9 1.9 2.4 2.6 3.2 3.4 3.8 4.0 4.4 4.5 4.9 5.2 6.0 6.2 6.6 M il li o n s Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2
Slide 41: Financial Reconciliations
| 41 FINANCIAL RECONCILIATIONS
Slide 42: Reconciliation of GAAP Gross Profit to Adj. Gross Profit and Contribution Profit
| 42 Reconciliation of GAAP Gross Profit to Adj. Gross Profit, Adj. Gross Margin, and Contribution Profit Financial Reconciliation in Millions of Dollars Totals may not sum due to rounding. 2023E 2022A 2021A Net Revenue $3,695 $2,240 $1,296 GAAP Gross Profit NA $756 $502 Depreciation and Amortizatio
Slide 43: Reconciliation of Net Income (Loss) to Adjusted EBITDA
| 43 Reconciliation of Net Income (Loss) to Adjusted EBITDA ◼ Adjusted EBITDA — We define and calculate Adjusted EBITDA as net loss before the impact of interest income or expense (net), income tax provision or benefit, and depreciation and amortization, and further adjusted for the following items:
Slide 44: Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses
| 44 Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses Totals may not sum due to rounding. Stock-based compensation expense Amortization of acquired intangible assets Transaction expenses Depreciation & amortization Litigation Other (a) (b) (c) (d) (e) (f) GAAP to Non-GAAP Exp