DraftKings Inc. (DKNG) Earnings Call Transcript & Summary

All right, everyone. I think we're going to get started for our next session. Thank you for joining us. We have DraftKings here. We're very excited to have you. Welcome to our conference, Jason Park, the CFO. Thank you, Jason.

Thank you, Robert. Good to be here.

Can you hear me okay?

Yes, I hear you loud and clear. How about you?

Awesome. Good. So thank you for being here.

So Jason, Robins just highlighted the company celebrated its 10-year anniversary. And while it may feel a lot longer, DraftKings has only been a public company for just over 2 years now. So clearly, aside from the global pandemic that we're hopefully coming through now, what have been the biggest surprises over this period as a public company?

That's a great question, Robert. And first off, thanks for having us. We're excited to be here. As we -- as I think about over the last 2 years, really, it's been fairly according to plan. If you think about TAM, I think the TAM development with from a legalization perspective has been right on track. We've always thought iGaming would take a little bit longer. Market structure, we've always said we're probably going to be looking at less than a handful of truly national competitors who are vertically integrated from a technology perspective. Payback periods always sort of under that 3-year period. So largely consistent with how we thought about it after the first few states have launched. Perhaps the one positive surprise was just like the continued growth of revenue per capita, revenue sort of per adult within a state just with TAM implications. I think our earlier states took a little bit of warming up, maybe 12, 18 months. And you're still seeing astronomical growth rates, more of a later state, the consumers are sort of bum-rushing into the product category as soon as the green flag gets waived. But even in those later stage, just the continued growth and just this excitement that Americans love to bet on sports. I mean not necessarily negative because as I mentioned, I think we had always believed that iGaming would be a follower to OSB legalization. But I think we're hopeful that more states will be pushing forward with iGaming legislation.

Okay. So with the clear investor sentiment shift away from longer-term growth stories right now, does that impact how you invest now for the future especially as the online sports betting and iGaming becomes legal across more states, there clearly is an opportunity to invest going forward. So how do you think about that balance?

Yes. I mean absolutely, we understand the changes in the macro environment and the larger discount placed on companies who are not yet free cash flow positive. I think when you think about DraftKings, our primary use of capital is the marketing. We have not changed how we think about payback periods for our customer acquisition. That is working really well, that the gross profit generation, the customer and revenue retention is all there. So we're still sticking to the playbook on that front. I would say that we had been vocal that our fixed costs from a people and a vendor at the corporate level that we needed to pull forward quite a few capabilities into the 2020 and 2021 time period. We wanted to meet and exceed the capabilities of our sort of most notable competitors. And we had done that. But at the same time, we had signaled that we would have meaningful slower growth in our fixed costs starting in 2023. I do think that as a response to sort of the macro backdrop that we pulled forward some of that cost sort of efficiency opportunity realization into Q1. And we're continuing to focus on that. So just putting in a little bit of extra management attention and elbow grease into capturing that earlier in the year rather than what probably would have been a more typical summer process of multiyear planning rolling into a 2023 budgeting cycle in August and September. I think we, like I said, put a little bit more elbow grease into that earlier in the year. And that was good. That was a big part of the $75 million EBITDA guidance improvement that we provided 2 weeks ago.

Okay. Good. So let's talk about the TAM. So we estimate the U.S. OSB TAM largely in line with your own estimate of $17 billion. How would you characterize the confidence that you have in your projection and then even potential areas for upside given the momentum that we've seen, and you touched on earlier some of your older and even newer states?

Yes. And just from like a TAM definition, we always talk about 100% legalized TAM, and we have that at $26 billion. Then we apply our reviewed legalization outlook to get us to the $17 billion, which is in line with your -- maybe call it like the legalized TAM outlook. I feel great about that. That is a combination of that legalization outlook, which has just been at a very consistent clip of about 10% in the U.S. population, legalizing and launching per year since [indiscernible] was overturned. So I think that feels great. I think the -- as I mentioned earlier, the continued growth rate after a state legalizes supports that TAM. And I'm optimistic that there's -- I'm getting some notifications here. Probably more upside from a continued game innovation and game innovation can drive frequency of engagement. It can also address sort of an overall participation rate. So what percentage of adults actually engage in this product category? I'm optimistic that we've got room to run on that front. When you look at participation rates relative to other countries, developed countries around the world that have online gaming, we've got even more room that would indicate potential higher TAM in the U.S. than what we put out there.

Okay. And then switching over -- a similar question but on the iGaming front. As part of your TAM forecast, you have a 30% legalization rate there. So just curious how you think -- how conservative is that longer-term iGaming legalization rate that leads you to your iGaming after legalization TAM of $14 billion there?

Yes. I think where we are right now, we continue to feel like 30% is a good number to build off of our -- build for sort of our long-range plan. You're right. And like I said, we've always thought that it would be a follower in that, that it would take a little bit longer for iGaming to come. But there's enough momentum already. Connecticut was a great, great state last year that utilized and launched iGaming. And I think as states legalize OSB and recognize the benefits of having that regulated platform, I'm optimistic that those states have only launched OSB will follow with iGaming. And I think another thing to watch is the neighboring state effect. And as one state looks across the border and sees the other state having good benefits of having that product offering, we should see some dominoes fall in a bit of a regional and geographic method.

And to be clearer, you don't specifically call out this -- back to the OSB side, but which states are included in your TAM when you're giving your forecast? So just curious if you can address how the possibility of California now becoming live as early as '23. Should we think about that as having a meaningful impact to your TAM forecast?

Yes. I mean the -- well, first, you're right. We don't go so far as to say which specific states would legalize and launch in any given year. I'll tell you, I tried to do that in my early days at DraftKings. And every prediction was way off, like I think I would have had Massachusetts going a year or 2 ago. And there was no way that Tennessee was in my sort of 5-year outlook. So I do think a better way to think about it is sort of what percentage of the population legalizes or launches every year, which is like I mentioned earlier, a fairly steady cadence 4 years into this. And absolutely, California is a tremendous opportunity, huge state, sort of like a top -- if it was a country, a top 10 GDP country in the world. And on that note, we passed the first milestone a couple of weeks ago, which was getting the requisite number of signatures will go to, hopefully, a perfunctory sort of validation of signature phase in the next month or so. And then we're on the ballot in November. And then it will be up to those businesses of California to 50.001% of California residents want this and it's good to go. I'd imagine that there will be like most states, a phase of regulatory process, technology licensing, personnel licensing before Californians can actually place their first bet. But right now, we're cautiously optimistic. It's huge. And it's worth noting, Robert, that, that's a situation where the -- I'm not a Californian. But the whole bill is written on the ballot, so tax rate, number of operators. We're talking about 10% tax rate, a finite number of operators, which is -- which sets you up for a very healthy market structure and gross margin profile for that state.

That's definitely an important piece. So when we think about the competition, there's clearly many players now that are chasing these large TAMs both on the OSB and iGaming side. It seems like the market share, there's a clear top 3, top 4 players. How sustainable would you characterize DraftKings market share right now? And let's start there and then a follow-up on that.

I would describe it as very defendable with upside. I do think it's a bit of a misunderstood -- the market structure may be misunderstood even in the question itself. It takes a minute for people to say, "Wow, this really is fairly consolidated already," with the top 3 operators accounting for north of 70%, 75% of the total market. And there is a long tail of single-digit market share operators. I think it's worth noting that when you look at those top 3, you've got 2 DFS operators, who have that very large DFS database that just provides a meaningful CAC advantage every time a state launches. We have a huge database in California. It's worth noting that these are all 3 are vertically integrated on the tech stack, which makes for a better customer experience and certainly for us, very high customer retention rate. So I think there's some characteristics of the top 3 that define what leadership looks like.

So you mentioned the longer tail as they battle out the remaining share. How do you expect to see a shakeout of those smaller players? Just people looking to get out of the business, sell, shut down if they need additional funding? Like how do you see it all kind of shaking out?

It's hard for me to say what each of those companies plans to do. I will tell you that we're confident in our plan. It's working. We're -- we've got great share, improving share. I think from a -- whether we are a consolidator or not, we've got our plates full this year with just focusing on our core business, integrating the Golden Nugget acquisition. And that's where we're focused right now. So hard for me to get in the boardrooms of that long-tail single-digit market share segment.

Fair enough. So some of your competitors are saying that they haven't seen any pullback in their own market share after decreasing some of the marketing spend. So I'm just curious, how do you think about planning on new acquisition -- new customer acquisitions? And is this an opportunity actually to lean in as others might be pulling back?

I think the -- our playbook is our playbook, which is we have very real-time insight into the LTV profile of every customer we acquire. And as long as that LTV profile is -- our CACs are sort of in line with that 3-year payback. We'll invest to acquire that player. And in terms of other competitors who say they're pulling back and are maintaining share, I think the proof will be in the pudding. Let's see how that how that pans out. I mean market share is not just acquisition to market share. But you need strong, great customer experience, which includes many things, product, customer support and overall healthy brand. Like I mentioned, we're very proud of our customer and revenue retention that we disclosed in our Investor Day back in March. And so I think we have to keep an eye on whether other players are able to retain as well.

So this is, I guess, a similar question asked differently. But just share your confidence in that payback period on the CAC that you're seeing and whether you've seen any sort of shift over the past couple of months or how to think about the opportunity going forward?

Yes. I think we are -- this is a heavily monitored and managed metric within DraftKings, which is to look at the gross profit and sort of 3-year forward gross profit profile as well as states that have already been live for more than 3 years. So we have empirical data on all this. We are -- it's a heavily monitored and managed metric, which is what is -- how is the gross profit generation of all of our cohorts. Two for -- importantly, this is managed by state, by product by quarter. So we -- and really day-to-day by state, by product, by marketing events. So we can -- we get very real-time feedback on the CACs and real-time insight into LTV profiles. And so in a 1-product state versus a 2-product state, in a high-tax state versus a low-tax state, your LTV profile looks different in each of those permutations. So your CACs must adjust accordingly.

So just as a good follow-up to that point, on the high-tax state. Can you share anything specifically on New York and how you're approaching that differently than the rest of your states that you've launched in so far?

Yes. I mean it's exactly -- it's -- in New York, it's a tough gross margin state. I mean that's no secret. Most punitive tax rate in the country right now, tough deductibility for promotional investment. So that feeds directly into the gross profit profile of each New York customer we acquire. And therefore, we have to adjust our tax down -- our permissible tax down to maintain that 3-year payback. It is worth noting that in Q1 -- I mean, New York just launched in January, we -- 2 things. One, whenever a state launches, that first quarter or so is what we refer to as the golden cohort. Those customers have a different profile than customers we acquire in the third quarter or the sixth quarter or so on. So we know enough about what -- the LTVs are higher for the customers you acquire, a rate when a state opens. So that was part of how we thought about Q1 investment. And back in January, we also built in a probability of a 2022 tax reduction in New York, which did not happen so that we had to take that out of our gross profit view of New Yorkers, which lowered the permissible CAC even more.

Got it. So just maybe more broadly speaking, how much of your recently increased '22 EBITDA guidance is due to some of these core efficiencies? Or is it more because of the less competitive industry environment?

Well, I would describe the $60 million -- $50 million in Q1, so sort of $60 million of the $75 million improvement in EBITDA to a variety of factors. For sure, it was what I referred to earlier as sort of management putting some elbow grease into some efficiency opportunities. That was anything from select corporate vendor, rate renegotiations. It was -- which hit some in COGS, some in just fixed cost. I would describe a meaningful chunk from a shift from more expensive local marketing, TV marketing in certain states international, which was a byproduct of some tests that we were running in Q3, some A/B testing, where we were taking certain DMAs and holding out local TV and test markets, where we did both. And the results indicated a clear opportunity to pull back on some of that more expensive local, which, again, was always part of the plan. And now that we're over that 30% of the U.S. population, we felt confident to take that out in sort of mid to late Q1. We felt good about that. So I think those are the big sources of the improvement.

You teed me right up for the next question. As you think about that mix between local and national as something that we, on the media investing side, the companies are also trying to figure out, what is that right balance for you going forward as you've reached this scale point? And the mix between national, if you're leaning in there, are you really going to pull back on the local side? Or is that a sustainable level of spend there, too?

Yes. I think what we're seeing now with the test results I just mentioned and the success we're having with that transition from local to national, I think that will improve -- increase the mix of national versus more expensive local and regional over time. It is worth noting because I would want our owners and investors to know that local will still be a part of the marketing mix in the early days of a state. So when a state launches, as I mentioned, that golden cohort is so important that you do want to get those folks in the door when a state launches. So local will never go away completely, but we're experiencing that transition now.

Okay. So when we think about the longer-term EBITDA guidance that you guys have provided and updated, how flexible can you or do you expect to be to hit that target on the expense side? Is that kind of your North Star? Or how do we think about the balance between spending for the long term to reach that point?

If I understand the question correctly, I mean -- well, let me -- I'll answer what I think you're asking. Look, we've got -- we have a very disciplined 5-year and 3-year planning process that we go through. We're actually now running it quarterly versus semiannually before. And so we've got a ton of conviction in what our fixed cost structure needs to look like as legalization begins to taper off and the TAM begins to mature. And what I'm referring to is a by department, by division look at where resources need to be added, where we might be overstaffed today, where we're perfectly sized today, what that -- what the cost structure needs to look like at a very granular level. So I think we've got a ton of conviction and we're marching on the path. That leads back to the comment I made earlier that we had been signaling that fixed costs would slow meaningfully in 2023 and we'll ring the cash register a little bit earlier in 2022 because of the macro. But we're just marching on that plan. I think on the contribution profit side, there's a meaningful amount of flexibility. The marketing deployment is quite real time, especially on the digital side of marketing, investment, where, as I mentioned, if the LTVs are coming in [ funky ], and certain media mix -- part of your media mix in a certain state, you can turn on a dime. And importantly, like this is all within the playbook of a 3-year gross profit payback. So I'm not even talking about the ton of flexibility if we wanted to dial that to 2.95 years or 2.9 years. That's another lever of flexibility that we have at our disposal.

Got it. Curious, as we're all kind of trying to figure out what was pull forward over the past couple of years or not, is there anything that you can share on your own data about user spending, the different betting metrics that maybe started to normalize post the pandemic as we kind of come out of this hopefully?

It's a great question. I've been asked were we a stay-at-home beneficiary. And man, have we tried to unpack this. And I really do not think that the stay-at-home COVID phenomenon sort of pulled forward consumer demand. I think this was an industry that had been living in the illegal market for centuries, that got regulated on a state-by-state basis and the conversion happened. But all of the player metrics that we've analyzed and we've analyzed to death, it's hard to parse apart anything that said that there was a pull forward in that frequency or average bet size. Perhaps I never thought that Korean baseball and Ping Pong would be so big in Q2 of 2020. But I think I would not describe what we saw in 2020 or 2021 as a pull forward. Similarly, Robert, when we try to parse apart the inflationary effects on our customer, we're not seeing anything. I think our consumer in this part of their monthly cost bar is very resilient.

Okay. When we think about breaking down your actual business a little bit further, can you shed some light on how much parlays have helped start to maybe more recently drive handle and hold? And what share of the handle comes from parlays this year? How you see the opportunity to grow that going forward?

Yes. Bet mix is a big priority for us. And bet mix -- if I take a step back, hold percentage, we're probably right at parity with the broad industry, excluding FanDuel. FanDuel has really high hold. And we've run the diagnostics on why that is. And bet mix and parlay mix is really the silver bullet here. We -- not to make excuses, but we only completed our in-house bet engine migration in sort of Q3-ish last year. And because of the third-party rent to that engine, we couldn't offer Same Game Parlays. But we were -- we had that available for the kickoff of NFL 2021. So we've had not even a year with that product versus FanDuel has had 4 years with it. And I don't think it will take us 3 years to catch up to them. But once we get the parlay mix where we want it to be, I think we'll see more equilibrium on that front. And it is absolutely a focus for us right now. I'd also add just -- I mean, not to go down a rabbit hole. But what does that mean, increased focus? It is -- we've invested in product and tech. Part of our product and tech investment is on Same Game Parlays. And it's not so much the offering of Same Game Parlays. But there's a lot of data science and customization at a player level to serve up parlays -- Same Game Parlays to the customers that we think have proclivity to engage with that type of bet. And then on the marketing side, we've got to do more to introduce Same Game Parlay of the night and get our customers excited and conditioned around that fund wagering opportunity.

So I think you touched on this a little bit earlier, but just to come back to it. In the states where both OSB and iGaming are legal, can you just maybe expand upon how different the economics are in those types of states versus where you're just legal on one of those?

Yes. The economics are meaningfully different, like exactly. It's what I talked about earlier, Robert, where we look at LTVs and a byproduct by state basis and any state where OSB and iGaming are live. And we understand the percentage of customers to engage with both product offerings, the LTVs are higher. So your willingness, your CAC allowance is correspondingly higher. And don't forget about DFS, right? Like DFS is an important part of that, too.

Makes sense. Makes sense. So you mentioned Golden Nugget before. Now that, that's closed, I think that the target that you've thrown out is $300 million in synergies. Anything that you can share in addition on either timing of it or the breakdown of the revenue versus the cost synergies?

Yes. So first off, the $300 million is sort of equivalent to the long-term iGaming revenue that we have in our Investor Day. We felt like that was the best way to say apples-to-apples, what is the synergy of the GNOG acquisition? And before I jump into it, just for those who may be new to the story, the core of the investment thesis on the Golden Nugget Online Gaming acquisition was a recognition that there was -- call it, half of the iGaming target customer base that looks really different than the core DraftKings customer. More female, older, more slot machine-oriented that -- we had made good headway with the DraftKings brand. But a recognition that we needed another brand to attack that fairly different customer segment. So that's the core of the thesis. The synergies are going to come from a few different areas. So for sure, just turbocharging the marketing behind the Golden Nugget brand, utilizing the scale and capabilities of DraftKings' marketing know-how, which should have top line and potentially sort of efficiency opportunity on overall advertising spend. I get really excited about the gross margin synergies from a cost of goods sold. Golden Nugget is very outsourced in their games, their game library, their iGaming aggregator. We have all of that in-house. We have -- so just being able to -- the engineers will not, like I say, just sort of plop the Golden Nugget brand onto our iGaming aggregator. It's a lot more work than that. But -- and then G&A, we'll look at that like we look at any employee of our company. On the gross margin part and the tech migration, we have not yet indicated the timing of when that will be complete. The engineering team is in Houston. We're working collaboratively to road map that out. And in short order, we'll be able to sort of provide people with an expected timing of when those gross margin synergies will come through.

Okay. That's helpful. You mentioned the tech integration for Golden Nugget. But also for SBTech completing that integration. So are there other areas in your tech stack that you're still focused on to further strengthen your hand? Or do you feel like that piece of it is now pretty much complete?

Those are certainly the big part. There's a handful of smaller parts of our tech stack that we continue to rent. And we are constantly evaluating build by rent decisions for those parts of our tech stack. But the big parts are certainly done. We absolutely feel like we have everything we need. And then it's really just a gross margin optimization question and maybe a little bit of control your destiny on the build by rent. But there are a couple of game providers that we could extract some economic value by building into our house. So it's a fairly easy math equation, which is, well, what are the rental fees versus the onetime and ongoing engineering and trading costs do-it-yourself. I'd suspect that more parts of our outsourced or rented parts of our tech stack will come in. But they will be relative to a bet engine, fairly small.

Okay. So coming back to some of the guidance that you provided. You mentioned that 10 states are set to be contribution profit -- positive this year, '22. Can you just talk about the speed to get there for some of the newer states and how that compares to some of the older states? Just help us kind of get under the hood there a little bit.

Yes. So within any given state, we operate on that sort of 2 to 3-year gross profit payback and then 2 to 3 years for a state to turn contribution profit positive. Contribution profit, defined as gross profit minus any marketing that is deployed in that state. Yes, we -- what we have seen is if you look at our 2021 vintage states versus our 2019 or early 2020 vintage states, the percentage of the population that engages is faster in our more recent states, which I think is completely intuitive, which is -- meaning that Americans are just way more aware of this product category. And when [indiscernible] state finally says go, they're raring to do it because they're buddy or their friend in other states been betting on sports for 2 or 3 years. And now they finally get to do it, too. So you're seeing that bum-rush out of the gate a little bit stronger than what we saw back in '19 or '20. Implications to path to profitability at a state level certainly could mean a faster path to profitability within the state. It could also mean that the TAM for that state is bigger, in which case, you'd still be at that sort of 2 to 3-year time frame? A little bit too early to tell because I think we've really started to feel that phenomenon in late 2021.

Okay. Not sure this is a fair question, but I'm going to ask it. So any...

Can I add one more thing, Robert? Sorry.

Yes, please.

I do think it's important just to recognize that this is still pretty early. Our weighted -- population-weighted age of our 17 states is under 2 years, right? So like this is -- it's still pretty early. And as soon as our population-weighted average hits something closer to that 3-year mark and way more of them are in the free cash flow positive part of that life cycle of that state, it's just -- it's a really pretty profile.

So that's kind of where I was going. Like is there any thought about breaking out explicitly for investors to help better understand how that earlier stage is dragging things down and really clouding the profit picture of some of the older states?

Yes. It's something we can certainly think about. It's something that we do think about. And we'll take that into consideration. We try to provide the information needed without tipping our hand too much competitively in our quarterly and then our periodic Investor Days. But we'll certainly continue to think about that to help people see it underneath the covers.

And so I think another question that investors have been struggling with to some degree is, how do you expect full year adjusted EBITDA, like the timing of when that breakeven point really is? I know it's a tough question given all the new state launches. But how would you best answer or explain that to investors today?

Well, exactly. I think calling the exact quarter when we turn black is hard given the legislative cycle. And even for Ohio, Maryland, Kansas, Puerto Rico that have legalized, not being able to perfectly call the launch day and whether that launch day is before week 1 of NFL or when, it is a little bit hard. What we have said is under a normal legalization cadence, we would expect to be profitable in Q4 2023.

Okay. And another clear question that I'm sure you've gotten many times from investors more recently is the confidence about having to avoid additional capital to raise to help fund the business. So how would you share your confidence that is not something that DraftKings needs to do today?

It's absolutely -- I fully understand that this is top of mind. And if I was not deep in the name and I looked at $2.11 billion at the beginning of this year with $875 million EBITDA guide, which is now an $800 million EBITDA guide and a few things that sit between EBITDA and free cash flow, like capitalized software, you might say, "Well, gosh, that feels tight." But I am highly confident. We -- like I mentioned, we very rigorously do multiyear plans and do multiple scenarios on operational metrics as well as legalization paths. And we feel great. I mean what I would convey is 3 things. One, back to my earlier point that fixed cost growth is going to slow meaningfully in 2023. I reiterate that at least 10 states are turning contribution profit positive in 2022, which means that they're generating meaningful free cash flow in 2023 and beyond. And I would also comment that all of our scenarios assume that California goes. And so when we say we have sufficient liquidity, all of that is baked into that.

Okay. That's very helpful. So one of the reasons that we decided to pick up DraftKings is how we view the entire ecosystem where sports betting is just converging within the broader media ecosystem. So I'm curious, how do you see that convergence play out over time? Like what is DraftKings role within this broader ecosystem?

Yes. I mean I think we absolutely expect to have a greater presence in a broader media universe in the future. There's a lot of synergies in the core gaming business in terms of user acquisition and engagement. So we're excited to grow it out over the future years.

And maybe if I can try to take that a step further. Are there longer-term thoughts or plans about even acquiring sports rights or partnering with media networks to help kind of bid on future types of packages? Like how do you guys approach that type of potential investment situation?

Yes. I think a world where DraftKings is buying Tier 1 sports broadcasting rights is not a world that I think about a lot. So said differently, I think that's not -- I don't think you'll see DraftKings being a live sports or Tier 1 sports distributor. I do think that outside of the things that you've seen already, which is us just buying ad spots and doing integrated link outs from all the places where everybody on this call checks their sports scores, that's another step forward. And I think we've had a lot of success with deeper integrations into broadcasting like in the doldrums of COVID in Q2 of 2020, when the match was played and we were all finally seeing a live sporting event after 3 years. And that was pretty innovative at the time, seeing live odds on whether Tom Brady was going to make or miss his next putt. Those types of things are very exciting. And I think we're still at the tip of the iceberg in the U.S. on that type of integration.

Okay. Great. So maybe just to kind of try to wrap this all up together. If we jump ahead a few years from now, after a lot of the legalization has happened and some of the investment that needs to happen to get there, how different do you expect DraftKings to actually look? And maybe as the follow-up there, like what are some of the bigger surprises that you would expect or that you don't think investors are giving you full credit for today?

Yes. I think the first part, which you just sort of assume what happen is where we're focused, which is just continue to knock the dominoes down on legalization, ensure we've got good healthy bills being passed and just continuing to roll out a perfect go-to-market plan in each state that launches. That is our focus. I think if you ask me to use my right side of my brain, I think DraftKings has more verticals. I think we'll -- our DFS, OSB, iGaming verticals will be supplemented with other verticals that are -- that our analysis indicates our customers want from us. And whether that be in the short-term NFTs and gamified NFTs or other things down the road, I would expect to see much larger LTVs because of more products on the platform besides the 3 that we're all thinking about today. I would -- I think the competitive dynamic and the market structure will continue to rationalize. And as we discussed earlier in the discussion, perhaps some of those small single-digit market share players continue -- more of them continue to throw in the towel. I think those are the big things.

That's great. I think we might have time for 1 or 2 quick questions from the audience? If anyone wants to shout them out, and I can try to repeat them for Jason.

[indiscernible]

Jason, I don't know if you got a chance to hear that, but I can try...

Not at all.

Trying to repeat. So the question was about the pullback in OpEx and the macro impact that you're seeing. And to try to, I guess, parse out whether the macro impact is having more on the customer side of it or the expense side? Did I get that right?

[indiscernible]

So why would you be pulling back on the OpEx in '23, what we're talking about, if you're not seeing any impact on the consumer pulling back?

[indiscernible]

Yes. I mean it makes sense. Hopefully, I'm conveying it all right. But basically, the question is pulling back on the macro for '22, if you're not seeing it on the customer standpoint, any sort of pullback? Like how do you put those 2 things together in terms of the macro pullback that you referenced earlier?

Yes. I think I understand the question. I think -- so in terms of what we did in Q1 and what we're continuing to do is we had a plan where we would meaningfully slow down our fixed cost growth in 2023, right? We have just finished a couple of years of 50% growth in our fixed cost structure. And we were communicating that, that growth rate would slow meaningfully in 2023. What I'm letting everybody know is that with the environment and the inherent cost of capital changes and just sort of the urging of our owners to combine with what the viewpoint of liquidity concerns that we do not feel, we just felt like it was the right time to say, "Hey, we need to listen. And we've got this plan to slow down cost growth in 2023." But if we can do a couple of those things now, that's something we should do in response to the external environment. And I had mentioned some of those areas, local to national spend, just some vendor renegotiation. By nature, these are not silver bullet opportunities. It's more of a sort of drag the rake and pick up some nickels and dimes. But they take meaningful amounts of management intention and work to do it. And we run the cash register with $15 million in Q1. That represents $60 million on a full year basis. And we are still dragging that rake right now. It's something I'm focused on and we'll update folks as that bears more fruit.

Awesome. With that, Jason, thank you for being here. Thank you for all your time, and thank you, everyone, for joining us.

Thank you. Thanks for hosting.