DraftKings Inc. Class A Common Stock Wells Fargo 9th Annual Consumer Conference
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Trey Bowers, the gaming, lodging, leisure analyst here at Wells Fargo, and it is my pleasure to welcome remotely Jason Robins, CEO and Chairman, co-founder of DraftKings. Thank you so much for your time today. We will just go ahead and kick it off. I think top of mind for a lot of investors these days, Jason, is prediction markets, and maybe you just want to kick off with kind of an update a quarter and a half into the market, what you are seeing and any learnings you have made in this first, what do we have? 5 months.
Yeah. It has been only a couple of weeks of NFL, so obviously still early, but we really are seeing just phenomenal trends, not just with predictions, but also in the core business. Actually, maybe I will start for a moment on the core. Everybody was concerned about handle growth. We have seen enormous handle growth to start the season, 15% so far month to date. And really just great engagement from customers there. This is on the Sportsbook side, obviously. iGaming, we have started to regain some share, seeing growth accelerate there as well. So really, really healthy trends in the core business. That business is on track to deliver what we had previously communicated, which is about $1 billion in adjusted EBITDA in 2026 and should increase pretty materially in 2027. So really excited about that.
We will have an update more on what 2027 looks like in our November earnings call. Predictions, not surprisingly, has been a huge growth story for us. We are up almost 2.5x from our July volume. That is just 2 months ago. Obviously, with World Cup, it was still a big month in July, and we are about 2.5x, a little less, but almost 2.5x, and trending higher every week. And really just seeing great improvement from a competitive positioning. We are up to almost double-digit share of the sports market and higher if you look at just the NFL piece of it. We actually feel we have the best offering now in NFL. We have 3 times as many NFL markets as our competition, about 1.5 times as many college football and Major League Baseball markets.
So we feel like really quickly, in a very short period of time, we have gone from what was objectively not the greatest product in market about 8 or 9 months ago, 10 months ago, to now we feel the best sports product in market, backed up by the content offering and the breadth of that. And we have a ton of new features and other stuff coming too. So we are just getting started. As I mentioned, we are only 2 weeks into NFL season, and we have a lot more planned for the coming weeks and months.
And was that share number you referenced, was that a handle share in prediction market states, or just help us understand Yeah.
Consumer volume. So the total volume that is traded by a customer is not the sort of number that is inclusive of the backing on the other side of the stake, but the actual true consumer volume.
Any update just on what you're seeing from a competitive response from either the prediction market platforms or your OSB peers?
Well, everybody obviously right now, it's just sort of like OSB was in 2020, 2021, maybe even a little bit of 2022. It's kind of the time when there's a lot of competitors out there that are thinking that they can have material share, and we welcome that. We love competition. We've dealt with that in every single vertical we have. And again, our strategy has always been, and consistently has been, to win on our offering, to win on our product and customer experience, and we again think that we're executing that. As I mentioned earlier, we think we have the best sports marketing, at least in the core sports. There's some tail sports stuff in tennis and a few other things that we need to build out, but we obviously prioritized NFL, college football, baseball, the majority of the volume's coming on.
I think the fact that in such a short period we put together the best offering shows that we actually are on a trajectory to, just like we did in Sportsbook, have a superior product and ultimately that's what wins in these industries, I believe.
On the second quarter call, you guys talked about being really pleased with the customer acquisition costs you were seeing. Are you still continuing to see that trend, and where should we go from here?
Same story, really. I think the customer acquisition costs and the pace at which we are getting new volume, new customers on in these non-OSB states is real. We did mention earlier that we are going to evaluate and be data-based. I do expect that we are going to increase some of our spend, probably pulling forward from some of the spend that we intended to deploy in 2027, just because we are seeing such amazing conversion onto the product and the efficiency seems really strong.
Any sense on an order of magnitude on that, or is it too early to say?
I think too early to say. We did want to communicate that based on exciting early results, we do anticipate spending a bit more, but I don't know exactly what that number will be. It will obviously be just like this is very data-dependent, and it's still a long season. We have a lot of ways to go. Based on the trends we're seeing, we could see meaningfully more investment, and I think that's a good thing because it should accelerate our revenue and our gross profit for next year.
Is that investment kind of spread equally amongst promotional dollars, marketing dollars? Just give us a sense for how that's deployed.
Yeah, it's really a bit of both because, of course, new customers, more new customers mean more new customer promotions. So it is some additional marketing spend that we are deploying into a very friendly and efficient environment. Also it's just the fact that we're getting a higher volume of new customers than we thought, and even if we didn't spend any more in marketing, that would come with more new customer promotions, but also, of course, comes with more gross profit next year. Really our plan right now is to kind of let that data come in, optimize, and then on the November call, we're going to have an update for what we think not only the rest of this year will look like, but also how much gross profit and additional revenue we believe we can generate in 2027.
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