Jason Park: Hey, Carlos. It’s Jason Park. Yeah. So great question on the flow-through, and I’ll start sort of on the bottom end of the income statement, and Jason had already alluded to improving or declining external marketing costs within the 2024 time period. And what I’d also add is, we’re going to — we’ve had a great 18 months of just exerting excellent discipline on our fixed costs. We’ll continue to do that. Then into the cost of goods sold part, we guided to a 200 basis point to 300 basis point improvement in gross margin rate primarily as the promo reinvestment continues to improve and we do. We do have multiple initiatives throughout the cost of goods sold structure, whether those primarily around vendor related negotiations and continuing to achieve scale through volume discounts.
And those are embedded within our gross margin rate guidance as well, and I think provide a long runway of continued improvement, both at the gross margin level and the EBITDA margin line.
Jason Robins: Yeah. And I think as Jason mentioned, definitely the largest driver of gross margin improvement is continued just maturity of the base, which brings promotion rate down. But certainly, in addition to some negotiations, we also just have existing contracts with volume thresholds that we expect over time trip that will bring gross margins down. That’s one of the benefits of having scale.
Carlo Santarelli: Yeah, Jason. And that’s kind of where I was going with that. Like what — is that time frame in the next year or two or is that kind of just ongoing enrolling?
Jason Robins: I think it’s ongoing, really. I mean, at a certain point, you cap out, but I would imagine that Google gets better rates on vendors for things than we do. So I think just as you get bigger, you continue to be able to get leverage in those areas because you can afford to pay more even if it’s less on a percentage revenue basis. And that’s generally how all these things work is that as volume goes up, the rate comes down and — so yeah, I do think it’s just kind of an ongoing thing. We have a team that focuses on this pretty much all year around and is continually looking for ways to optimize the COGS structure.
Carlo Santarelli: Great. Thank you, both
Operator: One moment for our next question. Our next question comes from David Katz with Jefferies. Your line is open.
David Katz: Hi. Good morning, everyone. Thanks for taking my questions. I’d like to talk about something that just has never come up until now, which is your cash flow statement. If we start to think about what next year brings with the ’24 guidance, and I think in the prepared remarks, you talked about keeping CapEx at a similar $120 million level. You do start to pile up, you start to accumulate some cash. And I’d love to get a sense for how you think about managing around that. Obviously, you want to keep yourself positioned for a state like Florida or California or whatever may happen. But can you just maybe give us a little more color on how you’re thinking about that?
Jason Robins: Yeah. It’s a great question. And it’s something we’ve actually been spending increasing time going through looking at all different options, including organic investments we can make opportunities for capital structure optimization, buybacks, looking at just basically how do we deliver the maximum value over the long term to shareholders. So that is a great question. It’s something that we feel fortunate that we now really are in a position to have real value creation from optimally making those decisions to now. We’ve been, as you said, focused on getting to this point. But definitely feel very good about our trajectory on the cash flow side. And we’ll have more to say as we think it through, but definitely a great question and something that we’re actively discussing here.
David Katz: Okay. Thank you.
Operator: One moment for our next question. Our next question comes from Joe Stauff with Susquehanna. Your line is open.
Joseph Stauff: Thank you. Good morning, guys. Two questions, I was just wondering, in your guide for ’24. Jason, you had mentioned, I guess, within the two — the gross margin improvement, you had an assumption for an improvement in structural hold. What is that? And then wondering if you could just comment on the level of adult penetration and user growth that you’re getting in mass and Ohio, obviously, you get to 7% pretty quick. Is it fair to assume that, that’s now higher, just call it, two months into the U.S. sports calendar?
Jason Robins: So great questions. On the hold side, we forecasted basically that we continue on the same level of structural hold rate we’re on today. Obviously, there’s some opportunities, we think, to potentially increase that. But right now, that’s what we have line of sight to. So that’s what we put in. And I’m sorry, what was the second question?
Joseph Stauff: Yeah. Just a comment on trying to estimate adult penetration, how many more customers are out there, user growth, et cetera. And you had given Ohio and mass in terms of where you’ve been, you got to 7% pretty quickly. And I’m wondering where that is now.
Jason Robins: Yeah. It’s another great question. I mean we haven’t found a ceiling yet in the older states. We continue to acquire customers. Even in a state like New Jersey, which is our first state that we launched and obviously is bordering a lot of other states that have since launch, we continue to have healthy customer acquisition. So hard to say where the ceiling is. We’re well into the double-digits in terms of adult population penetration in some of our older states. So I think it really has a lot to do with how we continue to evolve the product. If we continue to make the product more appealing to a wider audience and continue to find ways to innovate to reach more customers than – I think it can continue to go up over a long period of time. But certainly, at this point, we have not found the ceiling yet.
