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DraftKings’ potential tax revenues ‘really feel like a good build for California’: CEO

DraftKings CEO Jason Robins sits down with Yahoo Finance Live to break down the sports betting platform's Q1 earnings, expanding into more states and territories as gambling is legalized, the outlook on California, and inflation.

Video Transcript

SEANA SMITH: Draftkings reporting strong earnings for its first quarter of 2022-- revenue jumping 34% to $417 million. The online sports betting company also raising its guidance for the year. Here to discuss this is DraftKings CEO Jason Robins. Jason, it's great to see you again.

Congratulations on the strong quarter. Taking a look at some of these other numbers too-- monthly unique players growing to two million, average revenue per monthly unique payer growing to $67, beating the Street's estimate. What's driving this increase that we're seeing in your business?

JASON ROBINS: I think it's just really very strong cohort performance, along with a real influx in new customers. And this is the phase of the market we're in. New states are opening up. We're seeing more and more customers come into the market.

And we also feel like with the strides we've made over the last couple of years on the product and technology side, we have a product that's even better than it was a year or two ago at retaining and monetizing customers. So I think all that's coming together and really leading to growth across all of our KPIs.

SEANA SMITH: Jason, speaking of bringing in new users, you just completed your acquisition of Golden Nugget's online gaming business, a $1.5 billion deal for you. Talk to us just about the opportunity here and what this deal means for your audience reach.

JASON ROBINS: And just to clarify, at the time we announced, it was $1.5 billion. But it was not a fixed price deal. It was a share-based deal. It was 100% stock. So I think it was about 29 million shares. So you know, I think that's just one thing to clarify.

As far as what the deal means for the business, one, we're really excited about the team that's coming on board. Thomas, Warren, the whole team is great and really knows the i-gaming business well. Tillman Fertitta is, obviously, a great addition to the shareholder register. He's been very helpful in terms of advice.

And obviously, he knows how to create value. And having him on the team is going to be helpful too. And then from a strategic standpoint, it really fills an important need we had. While DraftKings has been a very strong sports brand, we've actually done very well in igaming with customers that we acquire on sports and cross-sell, we've only done relative to our expectations in penetrating the non-sports fan casino-first audience.

So when we looked at Golden Nugget's demographics, when we looked at their data, it was very clear that they do extraordinarily well with that segment. So their brand will be very complementary to ours. And additionally, it should be great from a financial standpoint-- we're going to see about $300 million of synergies long-term once we've realized all the integration plans and everything is sort of coming aligned. So really just checked a number of boxes up and down the board.

SEANA SMITH: Jason, one thing that you mentioned in your earnings call this morning that got investors' attention where your plans to enter Ontario, something that investors would likely be very excited about. What's the timeline of this?

JASON ROBINS: Right now, we're working with the regulators to get licensed and see regulatory approvals. So it's something that we're hopeful soon, but we're not in a position, given it's not entirely within our control to put an exact date on it at this point.

SEANA SMITH: Well, speaking of expansion plans, we know California very important not only to your company but for the broader gaming business as well. Are you confident that there will be something on the ballot come the fall, and also that we will likely see legalization in the state?

JASON ROBINS: Definitely feel very confident there'll be something on the ballot in the fall. We believe that we've reached the number of signatures required once validated, which formally has not happened yet. But we believe we are there. So we feel very good about being on the ballot in the fall. As far as will it pass-- right now, we're seeing great polling numbers.

There seems to be a lot of enthusiasm. The bill is set to generate hundreds of millions of dollars of tax revenue per year per third parties. And also, that revenue will be directed towards very important things that California needs revenue assistance with, like homelessness and mental health. So it really feels like it's a great bill for California. And our hope is that the voters recognize that and choose to vote for it in the fall.

SEANA SMITH: Jason, what about inflation? Are you seeing any impact from inflation on users' betting habits?

JASON ROBINS: No. In fact, one of the things that I've been surprised is that a lot of people don't realize that this isn't just something we're seeing now, which we are. We're seeing absolutely zero impact to our customer cohorts due to any sort of inflationary pressures or otherwise, any other macroeconomic factors. Not only are we seeing that, that's historically always been the case with gaming.

Gaming has generally been very well-performing during economic downturns, recessions, inflationary periods, and the like. So this is not a new thing. This is something that's been well known about the industry for quite some time. And we're certainly seeing the same thing materialize in our numbers.

And I think as a result, once people sort of do the research and figure that out, I think we're going to be seen as an attractive stock to own in an inflationary period. I think right now, though, people are less focused on that and more focused on Fed response and what that means for growth equity and equity in general.

But I think once the market's kind of digested all that and people start looking at, what stocks do I think and what companies do. I think will perform well during inflationary periods, I believe that we will be on that list because facts support and our data supports that we're going to do very well during an economic period of inflation or a recession.

SEANA SMITH: Well, Jason, you had strong numbers for the latest quarter, yet the stock reacting negatively today-- obviously, losing some ground with the broader market. But you've called out some of those sellers in the past. You took to Twitter a couple of months ago saying that you want to make sure that they regret this decision to sell the stock more than any other decision they've ever made in their entire life. What are they getting wrong? What are they missing?

JASON ROBINS: Well, I mean, all I said if you read it is that we're working to do that. I'll let others decide whether they think that they made a mistake or not. And over the long-term, I think we'll see.

But certainly, that is what every day we come and do. And I have never seen a team more motivated, more focused than I see ours now. So I like our chances. But in the end, we have to prove it. And I get that. And talk is cheap.

So I put that out there. But now, we're in full execution mode. And I'm not going to say anything else until we've proven it.

SEANA SMITH: All right, Jason Robins, CEO of DraftKings, always great to have you. Thanks so much for taking the time.

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