Thank you for standing by. Welcome to the DraftKings' Q2 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to hand the conference over to your host, Mr. Stanton Dodge, Chief Legal Officer. Sir, you may begin.

Good morning, everyone, and thanks for joining us today. Certain statements we make during this call may constitute forward-looking statements that are subject to risks, uncertainties, and other factors, as discussed further in our SEC filings, that could cause our actual results to differ materially from our historical results or from our forecast. We assume no responsibility to update forward-looking statements other than as required by law. During this call, management will also discuss certain non-GAAP financial measures that we believe may be useful in evaluating DraftKings' operating performance. These measures should not be considered in isolation or as a substitute for DraftKings' financial results prepared in accordance with GAAP. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available in our earnings presentation, which can be found on our website in our quarterly report on Form 10-Q filed with the SEC. Hosting the call today, we have Jason Robins, Co-Founder, Chief Executive Officer and Chairman of DraftKings, who will share some opening remarks and an update on our business; and Jason Park, Chief Financial Officer of DraftKings, who will provide a review of our financials. We will then open the line to questions. I will now turn the call over to Jason Robins.

Good morning, everyone, and welcome to DraftKings Q2 earnings call. I want to touch on a few topics today. Let me start off with my thoughts on Q2. I'm really pleased with how we performed in the quarter. We generated $466 million in revenue, which exceeded the midpoint of the guidance we provided on our Q1 earnings call by $33 million and we outperformed the midpoint of our adjusted EBITDA guidance by almost 40%. Our core B2C revenue grew 68% versus Q2 of last year. Our organization is executing very well. We have struck a great balance of continuing to drive top line growth, while also capturing meaningful efficiencies that are helping our bottom line. From a top line perspective, our customers are playing more frequently than we expected, and we're seeing great success driving parlay mix in our sportsbook product. In fact, our parlay bet mix increased by 1,700 basis points in the quarter compared to Q2 of 2021. I really love how we are merchandising our same game parlays, which I think have great personality. Hopefully, you have seen our new parley merchandising in the app, which gives our customers fun ways to engage with these types of wager. We're also making great strides on improving the customer experience, such as ease of getting money on and off the platform and many other areas related to overall app usability and experience. We expect to continue to make these investments on an ongoing basis. And on the costs side, we continue to drive efficiencies during Q2. We captured $40 million of 2022 cost opportunities on top of the $50 million we captured in Q1. These efficiencies are in a variety of non-compensation areas and are a great demonstration of how our organization rallied around an important initiative and delivered…

Thanks, Jason, and good morning, everyone. I'll start off by providing color on Q2 and then I'll shift into our outlook for the back half of the year and beyond. Please note that all income statement measures discussed below, except for revenue, are on a non-GAAP adjusted EBITDA basis. We executed very well in Q2. And our customer activity continued to be very robust, with no indication that the macroeconomic environment is impacting engagement. In Q2, we generated $466 million of revenue and negative $118 million of adjusted EBITDA. Both of which outperformed the guidance we provided on our Q1 earnings call. Our B2C segment grew 68% versus Q2 of 2021 compared to Q1's year-over-year growth of 44%. Our customers responded well to our improved merchandising of bet types, in particular, our prepackaged same game parlay. Hold percentage was in line with our expectations, which was great to see. And customers were less reliant on promotions as Q2 saw a low overall promo reinvestment rate compared to prior quarters. We had 1.5 million monthly unique payers, which is 30% higher than the prior year period. And our average revenue per monthly unique payer was a record high $103, which is also 30% higher than the prior year period. Our adjusted EBITDA of negative $118 million was $72 million better than the midpoint of our guidance due to several factors. First, we had flow-through of our higher-than-expected revenue. Second, some expenses shifted out of Q2 into the back half of the year, notably marketing as we continue to optimize our overall marketing approach. Please note that this category of expenses will not improve our 2022 full year EBITDA since it was simply due to timing. Finally, we have continued to make great progress on driving cost efficiencies throughout the business, including…

Thank you. [Operator Instructions] Our first question comes from Michael Graham. Your line is open. Michael Graham, your line is open.

Sorry. Cut off for a second. Thank you. Thanks for taking the questions and congrats on the quarter. Tons of great proof points in there. I wanted to focus in on the MUP growth of 30%. And just wondering if you could comment a little bit on the mix between gross adds and retention, sort of what were some of the factors that drove each of those. And I thought it was really great that in your pre-2021 markets, your promotional intensity is coming down so much. Can you just talk a little bit about some of the dynamics there? And are you confident that with less promotional intensity, you're still optimizing your customer growth?

Thanks, Mike. So first, on the MUPs question. We were really happy with MUPs growth. Historically, Q2 is a relatively slower quarter from a sports calendar perspective. This year, it was actually a tough comp because last year, there were over 200 NBA games in May and June. This year, there were only about 40 something. So real big difference there on the schedule side for one of the most popular sports. So definitely we were really happy with 30%, which is one of our strongest quarters of growth in a while. As far as like looking at how we got there and some of your questions on marketing and promotion, we continue to optimize there. And I think that, that -- it's just been always an area of focus for the company. And the more data that we get, the better we can do. We're also continuing to shift more into national marketing, as we've said in the past, once you get to, kind of, mid-30s percent of the population, that starts to make more sense. But, yes, a lot of it's optimization that has been the result of many years of testing and lots of data and analytics. We also started to see some early synergies with GNOG, which is great where we were able to continue to have the same kind of active customer base, while optimizing our marketing across both of those brands. .

Thank you, Jason.

Yes. I would add Mike, as J Rob just said, MUP growth was right on with our expectations. The underlying retention rates that are an important part of the LTV outlook for each customer cohort right on a s well and consistent with what we've disclosed in the past during our Investor Day. So good retention. And we've always had the promotional intensity for existing cohorts, decreases over time as those new – as the promotional offers for brand-new customers is different than what is given to an existing customer and that is all coming to fruition.

All right. Thank you, Jason and Jason.

Thank you.

Thank you. Our next question comes from Shaun Kelley of Bank of America. Your line is open.

Hey, good morning, everyone. Thanks for taking my question. I wanted to ask generally just to kind of probably a little bit clarify. But on the customer acquisition environment, I think it was pretty clear from your comments in the outlook that you're not actually changing your external marketing spend. A lot of that has to do with timing when it comes to the broader guidance that you provided. So just could you sort of clarify that? And maybe just talk to us a little bit more broadly because we have heard from some others that have reported thus far that, the promotional environment actually has rationalized pretty dramatically in the last couple of months, and maybe how that is also playing through your strategic opportunities? Thanks.

Yes. So I think it's a bit of both. We definitely are finding some marketing optimization, both through the shift into national from local as well as some early wins on the GNOG synergy side. So those are things that we view as just pure optimization. Part of also what we look at as optimization is how we time our spending throughout the year. And I think that because of that, there are also some optimizations that have come from shifts that won't actually lower the overall amount of spend. But we'll make it such that the performance is better because we've timed it better. So yes, there is a reduction, but there is also some timing shift. It's a combination of both.

Thank you very much.

You’re welcome.

Thank you. Our next question comes from Jason Bazinet at Citi. Your line is open. Jason Bazinet, your line is open.

Thanks, sorry. I just had a quick question. Are you guys surprised at the resiliency of the consumer? And if you aren't, are there any sort of details that you’re willing to share about what’s happening underneath the hood? In other words, are there any sort of dynamics that are happening between new customer spending and sort of more loyal customers that have been with you for a while? Thanks.

Yes. Great question. I think, I wouldn't say we're surprised. I think gaming has always sort of been known to be resilient. There's been a lot of research done on it in the U.S., in particular on the lottery, but throughout the world. And gaming has always been resilient to a variety of macroeconomic conditions. So, I wouldn't say we're surprised. Of course, like even despite that, we're all not taking that for granted. So, it's nice to see, and we're happy. And I think we're still obviously not taking anything for granted. But I don't think I would go as far to say we're surprised because I'd say that was our baseline expectation going in. And it's consistent with what's been seen through many decades of research across both brick-and-mortar and online. As far as what's going on under the hood, it's really across the board. We're just continuing to see really strong retention numbers. Our average revenue per player, as noted, went up 30% year-over-year. So, it's really kind of across the board. There's nothing in particular I can point towards to say this segment is outperforming that one.

Yes, I would agree. We had at least three different teams try to unpack any trends in consumer behavior versus prior year, versus expectations, looking at bet frequency, average bet size, a variety of other factors. Different teams had different hypotheses. And the net result was, wow, there's no discernible impact.

Well, okay. Thank you very much.

Thank you. Our next question comes from David Katz of Jefferies. Your line is open.

Thanks for taking my questions. Number one, I wanted to just unpack the cost base a little bit. You've obviously done well of trimming some things. When we look at advertising in particular, can you talk a bit about the base of advertising contracts that may be a bit more temporarily fixed or multiyear versus those that you can put your hands on the dials of more immediately and flex in and out as you move forward?

Yeah. So that's disclosed in our Q. You can look that up. We have a list of commitments. We don't break out which ones are marketing versus things like rent, lease agreements and other things. But you could see what our overall long-term commitments are. What I would tell you is the majority of our spend is flexible. We certainly have some deals. We like those deals for the most part. There's a few that, we'll probably optimize out of, and all of them are in relatively short-term contracts for the most part. But the majority of our spend is flexible, and we like it that way. And certainly, with the right strategic deals, we've leaned in. And we think that, that can be something that gives us a true differentiator on the marketing front. But we also like having an opportunity to be flexible and to test and move things around. I will note that, even within deals, we can do that. Marketing partners that we have deals with, we test all sorts of different things. So it's not like the media itself is fixed. We can optimize within that partner. So partners with large footprints, there's a lot of different things we can do. And I expect the performance of the deals to improve as we continue to optimize across the years.

Perfect. And if I can follow-up quickly on how you would sort of gauge the targeted parlay mix at maturity and sort of where we are today? And what that does to your sort of overall hold rate as you approach it?

Well, I think we all don't know what it can get to. I mean, it's been increasing rapidly, as noted on our call. We had about a 1,700 basis point increase year-over-year in terms of percentage of bets made as parlay. So that's a pretty big gain. We're obviously not done. And I think we can hopefully see it continue to go up. Right now, I think a good ceiling – minimum ceiling, I would say, is where handle is, which you can see in the reports from some of the states. But we continue to close that gap, and I think that, they're continuing to increase, too. So it feels like there's a pretty high ceiling there. As far as that does hold – the way you could think of it is it's not even just parlay mix. It's number of legs. Every leg of a parlay is like its own bet. So the percentage that you would take would be taken off of each leg. So the more legs you can get, obviously, more parlays. But more legs you can get on parlays is also another really good thing. And it can increase hold quite a bit. Obviously, it depends on a number of different factors, like the underlying holes of the market, but it definitely can increase hold quite a bit, if you can get more parlays and more legs on those parlays.

Thank you very much.

You're welcome.

Thank you. Our next question comes from Carlo Santarelli of Deutsche Bank. Your line is open.

I wanted to talk a little bit about promotions. We've heard several times that the promotional intensity has waned a little bit. When you look at kind of the data that we all construed, from a year-over-year perspective, and obviously, the data isn’t perfect, I'll be the first to acknowledge that it doesn't necessarily appear that that's the case, whether you're looking at it as a percentage of handle, on an absolute dollar basis or whatnot, in some of the states where it's trackable. So, would you guys kind of maybe comment on what you're actually seeing out there with respect to promotions or if there's things within the promotional numbers that maybe we can't see and different ways people go about enacting the business that's making -- that's giving the impression that promotions are kind of taming, to show the numbers that maybe we can't see in different ways people go about enacting the business that's making -- that's giving the impression that promotions are kind of taming?

I think sometimes, when people say promotions, they're also talking about advertising. And the mix in is part of what sometimes people are saying. As far as actual like customer giveaway promotions, I think New York is a good case study where it's pretty clearly come back. Hard to tell, to your point, on the macro side because depending on the nature of the promotion, it can show up in areas of the state reported numbers in different areas of the P&L. So, it is tough to tell. I can tell you, on our end, we've seen in existing states a decline each year since launch year. That's been consistent. That hasn't been a recent thing since we launched OSB. And we expect that to continue to be the case. And obviously, the mix of new states coming in, I'm sure, for example, if California is up and running before next NFL season, you're going to see an uptick in promotions in that state, and that might drive some overall lifting. So, it, kind of -- there's a lot of moving variables. But the way we like to look at it is in a state, year one should be the highest promotion year. And then it should decline until it reaches a steady state, which we've outlined in our Investor Day, what we expect that to be. And so that's really how we look at it on a state-by-state basis. And when we look at what competitors are doing, to your point, it's hard to tell. We obviously, have a lot of qualitative evidence from our team going and looking at what's in the market. We have a detailed competitive intelligence team that goes through and catalogs everything. But the impact on the actual revenue or other metrics in the P&L, it's tough to tell because there's a lot of moving parts. And the state reports, as we've noted in the past, are not necessarily capturing things consistently operator to operator.

Thank you, Jason. That's helpful. And then if I could, just one follow-up. I think the cash you used in the field was about $260 million. Obviously, you have the operating loss in there. And then I think it was $96 million of cash paid for acquisitions that kind of bridge the majority of that gap along with the software cost and the traditional PPE. The $96 million, is that related to GNOG or is that something incremental?

No, that's absolutely a one-time cash usage in the quarter, Carlo, related to the GNOG acquisition. It was a pay down. And we took the option to prepay a term loan that came with the GNOG asset.

Okay, got it. Because that -- the funding of the acquisition was an all capacity deal, right? That was just something separate? Its an all-stock deal, I apologize.

Yes, it was an all-stock deal. We chose to pay down the term loan just to keep our balance sheet healthier.

Understood. Thanks guys.

Our next question comes from Ed Young of Morgan Stanley. Your line is open.

Taking my question, I want to ask about ARPMUP, which was very strong in the quarter. And I presume that was on stronghold. But you said the hold was in line with your expectations. Were your expectations that it will be up on -- I guess I'm referring to you saying, you've got very good traction to increasing your product mix. So what kind of proportion of the growth was driven by maybe hold and structural gains from product? Thanks.

Yes. It's a great question, and I'm glad you asked, because it gives us a chance to unpack it a little bit. So when we say, it was in line with expectations, what we mean is based on sport outcome. That's typically what we like to share, is, hey -- just because those are things that aren't fundamental to the business. They're more just randomness of sport outcomes. So if we have a quarter where there was a shift positive negative on the sport outcome side, of course, Q3 is the one where that's most likely to happen given only three weeks of NFL having such an outsized impact on the quarter. However, exactly as you said, we did see parlay mix increase. We've been seeing that. That was a year-over-year comparison for a couple of quarters now since we launched our own same-game parlays and started promoting it more heavily back in Q3 of last year. So, we did expect an increase in hold that would result from that. And that was in line with our expectations as well.

I would just add, Ed, two more components of the unpacking of ARPMUP. First, you've got the promotional decline, which is impacting your ARPMUP growth, which I alluded to in the script. And then the other thing is product mix. So, Q2 with -- especially with this year, lapping last year's heavy NBA sport mix in the quarter and this year, the playoffs ending earlier. Just as a reminder, remember the 2020 to 2021 NBA season started late, so it ended late, versus this year, it started more normal, so ended earlier than last year. So what you're seeing also is a little bit of a product mix shift between iGaming and OSB in the quarter.

Useful. Thank you.

Thank you.

Thank you. Our next question comes from Jed Kelly of Oppenheimer. Your line is open.

Question, two, if I may. One, can you just talk about your merchandising strategies around same-day parlay and how you think that compares to some of your other competitors? And then can you give us any update on how your launches in Canada is going? Thank you.

Sure. So we recently launched some new merchandising zones in the app. I think that first step for us is to build the product. And then obviously, as we continue to enhance that product, add more markets, bring more in-house, we also are focusing on how we market it and merchandise it in the app better. Really, for us, it's about having it feel native, not feel like we're pushing something on the customer. We use fun names that are in line with the sorts of things that we would name our daily fantasy contest, that sports fans we think would find enjoyable and at times humorous and just try to give them some personality. And really, it's all database. So we test things to see what works. We're working on updating our data science engine so that those things become fully personalized. They're not yet, but we're working on that. So there's a lot of, I think, behind the scenes work too that really optimizes getting the right thing in front of the right customer at the right time. As far as Canada goes, I think Ontario is kind of what we expected. We always said that we didn't think we'd be able to achieve quite the same share as we believe we will be able to achieve in the US. We have projected 10% to 20% in Ontario as opposed to 20% to 30% in US states. We also always had said pretty consistently that we thought it would be more of a slower grind given the nature of the market where there was just a lot of continuity between the gray market and now versus, I think, US states, which when they open up, it's really more greenfield. So I think that those are some real key differences. And for those reasons, we always sort of felt like, Canada, we can achieve strong share, but probably wouldn't have quite the same ceiling that we believe we have in the US and don't have the same expectation that we would have in the US. That said, we've always had a very strong DFS database there. We have a brand that's fairly well known in Canada. And I think for those reasons, we do feel like we can do well there.

Thank you.

Thank you. Our next question comes from Joe Stauff. [Technical Difficulty] Your line is open.

And then maybe just a follow-up on costs. I wanted to...

You got cut off at the beginning. We missed the first part. Can you start again?

Yes. Sorry about that. I had a question on users and then maybe a follow-up on costs. In the quarter, I wanted to check to see what user growth look like in some of your older states, whether it be New Jersey and so forth. And then on the cost side, I'm wondering, if we look at your historical CAC, I'm wondering what's the right way to think about your increased use of network advertising, and how that could flex it down?

Sure. So first, we continue to see growth across pretty much every state. I know that some of the older states we've had, we've looked and still see growth year-over-year in users there. So that's been really encouraging. This is really exactly what we hope for, that we can dial back on promotions and marketing spend and continue to see user growth. And that's what we're seeing. As far as the CAC optimization question, I think what you're describing is exactly what we've also been talking about for the last couple of years, that early on, there was some inefficiency on the marketing side because you had to localize everything, and the rates are more expensive on a local basis, particularly on things like television. So being able to go to national networks certainly will help us optimize. And the nice thing about that is that it becomes a continuous tailwind because there's more states get added, those same advertisements are reaching people that previously were not able to eligible to play the product. So you don't have to do -- I mean, we obviously will do some local heavy ups at the very start of a state launch. But they'll be shorter imbursed and less intense because we have such a strong national footprint that we're starting to build.

Understood. Thank you.

Thank you. Our next question comes from Daniel Politzer of Wells Fargo. Your line is open.

I have a two-part question on OpEx. Your sales and marketing, I know was meaningfully lower in the quarter, with some shift out. Is there also an opportunity to benefit from lower media costs just given maybe a softening advertising market or as your competitors maybe offload some of their supply of traditional media spend? And then the other part, just in terms of the engineers in terms of the FTEs, where are you in terms of that? And where do you maybe look to get to as you continue to ramp there? Thanks.

Yeah. It's a good question. I think on – I break it down a couple of ways. First, when it comes to television, particularly things like in-game advertising, the leagues, and in some cases, the networks are still putting limitations on the number of spots that can be featured from our category in a given game, for example. So unfortunately, that doesn't really – if you see auto and other sorts of large insurance categories dialing back at all, I don't know if they are or not, but just as an example, that wouldn't really help us as much. But I think as time evolves, we'll have to see where that goes. And in other channels, we do benefit a little bit, but not maybe as much as you would think from things like IDFA. Because, for example, on the app side, what we've really just seen is a shift away from iOS and into Android. So iOS has gotten a little cheaper, which is good because we have more iOS customers. But I think that overall, the market hasn't really changed a whole lot. It's just been more of a shift into Android. So some softening, but not too much. And then probably where the biggest softening on the macro side is, which is television, unfortunately, we're not benefiting from our categories, not benefiting from the – for the reason I described earlier. That said, we continue to be able to optimize, as you noted on the quarter. I think that in some ways, I'm actually very happy that it wasn't just due to rate reductions because it means we're finding meaningful synergies with GNOG and real optimization opportunities. And we'll have to see what happens with rates over time.

And then just on the – the FTEs, in terms of the ramp there?

Sorry. Say one more time?

As you continue to hire the engineers and ramp your full-time employees there, like where are you in terms of that ramp as you think about that?

Yeah. I mean, we're still definitely adding engineers. But as we noted, we are meaningfully slowing fixed cost growth in 2023, which means less hiring in 2022. And certainly in 2023, obviously, heavy hiring, in 2022 would lead to meaningful fixed cost growth in 2023. So we are slowing quite a bit. And I think that is, because we're reaching scale in a number of our different departments, which is great to see. Engineering, we are still hiring, but we've slowed the pace there as well. So I think across the board, we've slowed down and in some departments are really starting to reach full scale.

Thanks.

Thank you. Our next question comes from Joe Greff of JPMorgan. Your line is open.

Hey, guys. Jason Park, I just wanted to follow-up on your comments about taking out a meaningful amount of fixed costs. I guess, that was more of a forward year commentary and elaborating on this year. But of the $2.9 billion of adjusted operating expenses this year, how much of that would you characterize as fixed? Obviously, G&A is going to be a big component of that. You disclosed that. And does that comment about costs coming – fixed costs coming down next year on an absolute basis, is that inclusive of new state launches, such as Maryland, Ohio, Kansas, Puerto Rico, Massachusetts, and potentially California? Thank you.

Yeah. Great question. So yeah, absolutely, looking into 2023, we've been consistent in saying that the fixed cost growth will slow down meaningfully into next year. In terms of more specifics, we are working through our detailed budgeting process now. We'll be in a position to provide more color on what 2023 will look like likely in our November earnings call. On your question around sort of incorporating new state thinking into our fixed cost growth, I would say, we think about new states really down to the contribution profit level, gross profit minus dedicated advertising within each new state. I would say that, new states at this point won't drive additional fixed cost growth.

Thank you.

Thank you. Our next question comes from Chad Beynon of Macquarie. Your line is open.

Just in terms of the competition that you're seeing out there, I know there were a few competitors that kind of had a half baked product last NFL season, and they have at least a strategy in place to attempt to gain market share this year. Do you expect that there will be any market share shifts this fourth quarter into NFL, or do you think the big three, obviously, including you guys, will be kind of stable as we see it? Thanks.

I feel very good about our NFL plan. And I think that, we've kind of gotten used to each year for one reason or another. We hear chatter of this or that competitor that are going to make some big moves. And we feel like we've held pretty well through all of that. And I think we're just continuing to focus on our own plans and making sure that we're being very customer-centric and doing the things that we think will help us have the strongest market share over the long term. And my hope certainly is that, we gain share. I can't really speak for others. I know you were asking about some of our competitors and whether they'd hold or gain or not. I don't know. We're not privy to some of the plans they have. But I think on our end, we feel pretty excited about the plans we have for NFL season. We feel really good about the plans we have for activating around Star as well as continuing to maintain strong engagement, both customer acquisition, driving more parlays, and better bet mix and all the key metrics. And I think, if we execute that plan, then we're hopeful that we'll actually gain some share in the back half of the year.

Thank you very much. Appreciate it.

You’re welcome.

Thank you. Our next question comes from Robin Farley of UBS. Your line is open.

Thanks. I wonder for California, if you could remind us, what you're expecting. What that could be on a full year basis in terms of potential EBITDA loss initially? And then what your expectations are for maybe timing? Assuming a referendum would pass, what timing for that would be? Thanks. : Thank you. It's a good question. Obviously, we're a little ways from – away from there. We got to pass it first. And then I think as far as what the potential impact to the P&L could be next year, both top and bottom line, that's largely dependent on if it passes, of course, but then also timing of launch. So, really hard to say, I think once we have more clarity, hopefully, after the ballot initiative passes, within a little bit of time, there'll start to be some clarity if it passes on when the launch might occur. And at that point, I think we'll feel comfortable providing some estimates. But right now, there's just too many moving variables for us to do that.

Yeah. I would add, Robin, it's not just California. It's the pipeline, including Kansas, Maryland, Ohio, Puerto Rico, and it's knock-on wood, Massachusetts. There is a lead time between the formal utilization of the launch, which is regulation writing and licensing process. But -- so it's always a little hard to tell on exactly what the launch date will be. In terms of the economics of a new state, we did provide some color in our March 2022 Investor Day on what percentage of the population we would expect to acquire over the first six months and the effect of CAC. So that at least helps you understand what the marketing investment would be in the early period were a state to launch in the beginning of an NFL season.

Okay, great. Thank you. And then just one quick follow-up. I think you alluded to in your remarks. Your withhold in the quarter as expected. I don't think it was specifically said in the slides or anything. But I guess in your comments, is that what we should conclude on the hold impact in Q2? Thanks.

Yes. We were very pleased with hold. It was as expected in the quarter.

Great. Thank you.

Thank you. Our next question comes from Bernie McTernan of Needham. Your line is open.

For me. First, just keeping on California. Jason, you sound pretty bullish on the potential for the ballot [ph] initiative to pass last quarter. I just wanted to give you gauge your temperature to see if anything's changed in your thoughts on the probability there. And then for Jason Park, can you just put some context around the $100 million of cost reductions this year? Is that the run rate we should expect for the end of the year? And how long should it take to get to that run rate level? And which line item should we expect to see it then?

So first, on California, I think really nothing has changed. We are where we expected to be. Right now, we're very focused on educating voters about what the benefits to homelessness, mental health, also having a legal and regulated online sports betting market will help keep customers who are betting through a legal sites right now safe. So I think there's quite a few benefits for California. And we're focused on trying to articulate that to the voters. So we'll see where it goes. But we feel just as optimistic as we did a quarter ago, and I continue to believe that we'll get this over the line. But still a long way to the election, so lots can happen. We're certainly not celebrating yet, and things could swing either way. Jason, do you want to take the…

Yeah. In terms -- just to reiterate, we had alluded to about $60 million of 2022 opportunity -- cost opportunity that we talked about back in May and another $40 million in 2022 opportunity that we were able to find in the quarter. So a couple of things, Bernie, A, that $100 million is not on a full year basis. So going into 2023, that would improve just looking at it on a full year basis, I do feel like those are permanent improvements in our cost structure. B, some of those items -- I mean, it was up and down the P&L, ranging from vendors that fit in our COGS, vendors in sales and marketing, product and technology and G&A. And so to the extent that some of the savings were in COGS, you would expect the quantum to increase as revenue increases too as we negotiate better rates on some of those folks. So that's a little bit more color. In terms of specifically where the $100 million came out from COGS versus P&T versus G&A versus S&M, it was really across everything. I would say this was a really dedicated initiative that we drove to the company. It's been a great mindset shift across the employee base to balance top line growth with finding efficiencies. I think there's just a ton of buy-in company-wide that we can do this type of thing without impacting the customer. And so we're really proud of the outcome here, and we'll always be looking for more opportunities like that.

Great. Thank you both.

You’re welcome.

Thank you. Our next question comes from Brandt Montour of Barclays. Your line is open.

Hi. Thanks for taking my question. So just on GNOG, a few months in now after gaining full control of that asset. I was just wondering if you guys have an updated view on where you think your market share can get on that on the combined iGaming business?

Yes. I think a lot of that obviously remains to be seen. But right now, we feel it's very consistent with what we've shared in the past and our Investor Day presentations. And perhaps there's a little upside there. But I think it's early to -- for us to sit here and say it's going to be better than what we've previously shared. So I think that's a good number to go off of. And we feel like that's the right target for now. And you're right. We've had it for a quarter. It's still a very short period of time. We haven't migrated the platform yet. We haven't really been able to see the realization of some of the revenue synergies that we believe will occur from that. So we're cautiously optimistic that we can improve even beyond what we've said in the past. But we're still too early to be saying, we think, it's going to be any different than what we said previously.

Great. Thanks so much.

No problem.

Thank you. Our next question comes from Jason Bender of JMP Securities. Your line is open.

Hi. It’s Jordan. Thanks for taking my question. The guidance raise for the full year was slightly less than the beat in the quarter. Outside of the marketplace revenues, is there kind of anything to call out in that guidance raise? Thanks.

Well, I think, there's a couple of things. One, really, the OSB and iGaming business are actually up. So we are increasing the outlook there. Marketplace, the primary reason that changed is as we got closer to launching Reignmakers. We updated our assessment of the way revenue needs to be recognized given that the games are played throughout the quarter -- excuse me, throughout the season. So not only does that shift some Q3 into Q4. It also shifts from H2 into 2023. Importantly, those cash flows are received in year. So that is consistent with what we thought in the past. But from a GAAP accounting standpoint, some of the revenue will need to be recognized at later points in the season. That was the primary driver of why we didn't 100% flow through to beat. Last time, we hadn't quite completed our assessment of revenue recognition, and the update was baked into this one. But I do want to reemphasize that we actually took up the forecast for OSB and iGaming.

Great. Thank you.

Thank you. Okay. This does conclude the conference portion of the call. I'd like to turn the call back over to Jason Robins, CEO, for any closing remarks.

Thank you all for joining us on today's call. We had an excellent second quarter. We continue to be excited about 2022. And we look forward to speaking with you over the next few weeks. I hope you all stay safe and well and are enjoying your summers. Thank you.

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect.