What changed in this filing

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Item 1. Financial Statements

2023-08-04 compared with 2023-05-05 · 163 added, 109 removed, 578 unchanged (32% of the section changed)

3 unchanged sentences

(Amounts in thousands, except par value)

March 31, 2023

June 30, 2023

(Unaudited) December 31, 2022

29 unchanged sentences

Class A common stock, $ 0.0001 par value;

900,000 shares authorized as of March 31, 2023 and December 31, 2022;

471,723 and 459,265 shares issued and 461,634 and 450,575 outstanding as of March 31, 2023 and December 31, 2022, respectively

900,000 shares authorized as of June 30, 2023 and December 31, 2022;

473,933 and 459,265 shares issued and 463,257 and 450,575 outstanding as of June 30, 2023 and December 31, 2022, respectively

Class B common stock, $ 0.0001 par value;

900,000 shares authorized as of March 31, 2023 and December 31, 2022;

393,014 shares issued and outstanding as of March 31, 2023 and December 31, 2022

900,000 shares authorized as of June 30, 2023 and December 31, 2022;

393,014 shares issued and outstanding as of June 30, 2023 and December 31, 2022

Treasury stock, at cost;

10,089 and 8,690 shares as of March 31, 2023 and December 31, 2022, respectively

10,676 and 8,690 shares as of June 30, 2023 and December 31, 2022, respectively

( 373,317 ) ( 332,133 )

8 unchanged sentences

(Amounts in thousands, except loss per share data)

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Revenue $ 874,927 $ 466,185 $ 1,644,579 $ 883,390

8 unchanged sentences

(Loss) gain on remeasurement of warrant liabilities ( 20,041 ) 14,315 ( 37,076 ) 26,996

Other income, net 19 37,882

Other income (expense), net 45 ( 5,573 ) 64 32,309

Loss before income tax provision and loss from equity method investment ( 76,296 ) ( 298,251 ) ( 471,957 ) ( 763,124 )

Income tax provision 1,368 469

Income tax provision (benefit) 651 ( 81,226 ) 2,019 ( 80,757 )

Loss from equity method investment 323 78 442 2,429

19 unchanged sentences

Balances at March 31, 2023 461,634 $ 46 393,014 $ 39 $ 6,869,647 $ ( 5,528,949 ) $ 36,488 $ ( 359,491 ) $ 1,017,780

Exercise of stock options 284 — — — 1,144 — — — 1,144

Stock-based compensation expense — — — — 89,193 — — — 89,193

Shares issued for exercise of warrants 62 — — — 1,470 — — — 1,470

Purchase of treasury stock ( 587 ) — — — — — — ( 13,826 ) ( 13,826 )

Restricted stock unit vesting 1,864 — — — — — — — —

Net loss — — — — — ( 77,270 ) — — ( 77,270 )

Balances at June 30, 2023 463,257 $ 46 393,014 $ 39 $ 6,961,454 $ ( 5,606,219 ) $ 36,488 $ ( 373,317 ) $ 1,018,491

Class A Common Stock Class B Common Stock Additional

11 unchanged sentences

Balances at March 31, 2022 417,228 $ 42 393,014 $ 39 $ 5,891,235 $ ( 4,221,507 ) $ 36,488 $ ( 320,697 ) $ 1,385,600

Exercise of stock options 902 — — — 3,131 — — — 3,131

Stock-based compensation expense — — — — 135,521 — — — 135,521

Equity consideration issued for acquisition 29,252 3 — — 460,125 — — — 460,128

Shares issued for exercise of warrants — — — — — — — — —

Purchase of treasury stock ( 254 ) — — — — — — ( 3,393 ) ( 3,393 )

Restricted stock unit vesting 894 — — — — — — — —

Foreign currency translation — — — — — — — — —

Net loss — — — — — ( 217,103 ) — — ( 217,103 )

Balances at June 30, 2022 448,022 $ 45 393,014 $ 39 $ 6,490,012 $ ( 4,438,610 ) $ 36,488 $ ( 324,090 ) $ 1,763,884

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(Amounts in thousands)

Three months ended March 31,

Six months ended June 30,

Operating Activities:

2 unchanged sentences

Depreciation and amortization 96,477 74,540

Non-cash interest expense 157 654

Non-cash interest (income) expense, net ( 378 ) 931

Stock-based compensation expense 206,593 322,598

4 unchanged sentences

Other expenses, net ( 3,349 ) ( 2,667 )

Change in operating assets and liabilities:

Change in operating assets and liabilities, net of business combinations:

Receivables reserved for users 50,930 ( 2,057 )

12 unchanged sentences

Acquisition of gaming licenses ( 1,959 ) ( 3,388 )

Proceeds from marketable equity securities and other financial assets 24,425 —

Cash paid for acquisition, net of cash acquired — ( 96,507 )

Other investing activities, net ( 482 ) ( 3,697 )

1 unchanged sentence

Financing Activities:

Proceeds from shares issued for warrants — 44

Purchase of treasury stock ( 41,184 ) ( 17,476 )

9 unchanged sentences

Supplemental Disclosure of Noncash Investing and Financing Activities:

Equity consideration issued for acquisitions $ — $ 460

Investing activities included in changes in accounts payable and accrued expenses $ 637 $ 9,425

Decrease of warrant liabilities from cashless exercise of warrants $ 1,470 $ —

Supplemental Disclosure of Cash Activities:

8 unchanged sentences

We are also involved in the design and development of sports betting and casino gaming software for online and retail sportsbooks and iGaming operators.

In May 2018, the Supreme Court (the “Court”) struck down on constitutional grounds the Professional and Amateur Sports Protection Act of 1992 (“PASPA”), a law that prohibited most states from authorizing and regulating sports betting.

In May 2018, the Supreme Court (the “Court”) struck down on constitutional grounds the Professional and Amateur Sports Protection Act of 1992, a law that prohibited most states from authorizing and regulating sports betting.

Since the Court’s decision, many states have legalized sports betting.

As of March 31, 2023, 33 U.S.

As of June 30, 2023, 34 U.S.

states, the District of Columbia and Puerto Rico have legalized some form of sports betting.

1 unchanged sentence

Of those 28 jurisdictions, 25 are live, and DraftKings operates in 21 of them.

jurisdictions with statutes legalizing iGaming are Connecticut, Delaware, Michigan, New Jersey, Pennsylvania and West Virginia.

As of March 31, 2023, we operate our Sportsbook product offering in Arizona, Colorado, Connecticut, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Tennessee, Virginia, West Virginia, Wyoming and Ontario, Canada, and we operate retail sportsbooks in Colorado, Connecticut, Illinois, Iowa, Kansas, Louisiana, Michigan, Mississippi, New Hampshire, New Jersey and Washington.

As of March 31, 2023, we operate our iGaming product offering in Connecticut, Michigan, New Jersey, Pennsylvania, West Virginia and Ontario, Canada.

jurisdictions with statutes legalizing iGaming are Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, Rhode Island and West Virginia.

As of June 30, 2023, we operate our Sportsbook product offering in Arizona, Colorado, Connecticut, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Tennessee, Virginia, West Virginia, Wyoming and Ontario, Canada, and we operate retail sportsbooks in Colorado, Connecticut, Illinois, Iowa, Kansas, Louisiana, Michigan, Mississippi, New Hampshire, New Jersey and Washington.

As of June 30, 2023, we operate our iGaming product offering in Connecticut, Michigan, New Jersey, Pennsylvania, West Virginia and Ontario, Canada.

The Company also has arrangements in place with land-based casinos to expand operations into additional states upon the passing of relevant legislation, the issuance of related regulations and the receipt of required licenses.

9 unchanged sentences

Unless otherwise indicated or the context otherwise requires, the terms “DraftKings”, the “Company”, “we”, “us” and “our” refer to DraftKings Inc.

(or, in respect of periods prior to the GNOG Closing Date, Old DraftKings), together with its consolidated subsidiaries.

(or, with respect to periods prior to the GNOG Closing Date, Old DraftKings), together with its consolidated subsidiaries.

Summary of Significant Accounting Policies and Practices

7 unchanged sentences

however, in the opinion of management, they include all normal and recurring adjustments necessary for a fair presentation of the Company’s condensed consolidated financial statements for the periods presented.

Results of operations reported for interim periods are not necessarily indicative of results for the entire year, due to seasonal fluctuations in the Company’s revenue as a result of timing of various sports seasons, sporting events and other factors.

Results of operations reported for interim periods are not necessarily indicative of results for the entire year, due to seasonal fluctuations in the Company’s revenue as a result of the timing of various sports seasons, sporting events and other factors.

The Company consummated the GNOG Transaction on the GNOG Closing Date.

In the GNOG Transaction, the Company was determined to be the accounting acquirer and, as such, the acquisition is considered a business combination under

Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”), and was accounted for using the acquisition method of accounting.

Accounting Standards Codification (“ASC”) Topic 805, Business Combinations , and was accounted for using the acquisition method of accounting.

These unaudited condensed consolidated financial statements include the accounts and operations of the Company, except that, due to the timing of the consummation of the GNOG Transaction, these unaudited condensed consolidated financial statements exclude the operations of GNOG prior to the GNOG Closing Date.

3 unchanged sentences

As a result of the Company’s acquisition of DK Crown Holdings Inc.

(formerly DraftKings Inc.), a Delaware corporation (“DK DE”), and SBTech (Global) Limited (“SBTech”) and the consummation of the transactions contemplated by the business combination agreement, dated December 22, 2019 (as amended), in April 2020, the Company began to identify two distinct operating segments:

(formerly DraftKings Inc.), a Delaware corporation, and SBTech (Global) Limited (“SBTech”) and the consummation of the transactions contemplated by the business combination agreement, dated December 22, 2019 (as amended), in April 2020, the Company began to identify two distinct operating segments:

a business-to-consumer (“B2C”) segment, which included its Sportsbook, iGaming and DFS product offerings, as well as media and other consumer product offerings, and a business-to-business (“B2B”) segment, which had principal activities involving the design and development of gaming software.

However, beginning in the fourth quarter of 2022, as a result of the Company’s integration of the technology and expertise of SBTech, the Company began to view the B2B segment primarily as a cost center of the B2C segment and, therefore, began to operate its business and report its results as a single operating segment.

The Company’s determination that it operates as a single segment is consistent with the financial information regularly reviewed by the CODM for purposes of evaluating performance, allocating resources and planning and forecasting for future periods.

The Company’s CODM allocates resources and assesses financial performance on a consolidated basis.

The Company’s determination that it operates as a single segment is consistent with the CODM's regular review of consolidated financial information for purposes of evaluating performance, allocating resources and planning and forecasting for future periods.

Prior periods have been reclassified to conform with the new segment presentation.

1 unchanged sentence

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”), which clarifies the guidance in Accounting Standards Codification Topic 820, Fair Value Measurement (“Topic 820”), when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820.

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”), which clarifies the guidance in ASC Topic 820, Fair Value Measurement (“Topic 820”), when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820.

ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted.

5 unchanged sentences

issued approximately 29.3 million shares of its Class A common stock in connection with the consummation of the GNOG Transaction.

Operating results for GNOG are included in the Company’s consolidated statements of operations for the three months ended March 31, 2023 .

Operating results for GNOG following the GNOG Closing Date are included in the Company’s consolidated statements of operations for the three and six months ended June 30, 2023 and 2022 .

Purchase Price Accounting for the GNOG Transaction

45 unchanged sentences

The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the GNOG Transaction had been consummated as of the beginning of the periods presented or of results that may occur in the future.

Three months ended March 31,

2023 Actual 2022 Pro Forma

Three months ended June 30, Six months ended June 30,

2023 Actual 2022 Pro Forma 2023 Actual 2022 Pro Forma

Revenue $ 874,927 $ 478,416 $ 1,644,579 $ 927,525

5 unchanged sentences

Intangible Assets

The Company has the following intangible assets, net as of March 31, 2023:

The Company has the following intangible assets, net as of June 30, 2023:

Weighted-Average Remaining Amortization Period Gross Carrying Amount Accumulated Amortization Net

19 unchanged sentences

Intangible assets, net $ 1,106,450 $ ( 329,516 ) $ 776,934

Amortization expense was $ 43.1 million and $ 28.1 million for the three months ended March 31, 2023 and 2022, respectively.

Amortization expense was $ 43.0 million and $ 86.2 million for the three and six months ended June 30, 2023, respectively, and $ 38.1 million and $ 66.2 million for the three and six months ended June 30, 2022, respectively.

Current and Long-term Liabilities

4 unchanged sentences

In addition, the Company is required to pay quarterly in arrears a commitment fee equal to 0.25 % per annum of the unused portion of the Revolving Line of Credit.

As of March 31, 2023, the Credit Agreement provided a revolving line of credit of up to $ 125.0 million, and there was no principal outstanding under the Credit Agreement.

Net borrowing capacity available from the Credit Agreement as of March 31, 2023 totaled $ 122.7 million.

The Company is also subject to certain affirmative and negative covenants under the Credit Agreement, with which the Company was in compliance with as of March 31, 2023.

As of March 31, 2023, the Company has been issued $ 125.0 million in surety bonds at a combined annual premium cost of 0.5 %, which are held for certain regulators’ use and benefit in order for the Company to satisfy state license requirements.

As of June 30, 2023, the Credit Agreement provided a revolving line of credit of up to $ 125.0 million, and there was no principal outstanding under the Credit Agreement.

Net borrowing capacity available from the Credit Agreement as of June 30, 2023 totaled $ 122.7 million.

The Company is also subject to certain affirmative and negative covenants under the Credit Agreement, which the Company was in compliance with as of June 30, 2023.

As of June 30, 2023, the Company has been issued $ 140.0 million in surety bonds at a combined annual premium cost of 0.4 %, which are held for certain regulators’ use and benefit in order for the Company to satisfy state license requirements.

There have been no claims against such bonds and the likelihood of future claims is remote.

3 unchanged sentences

In connection with the issuance of the Convertible Notes, Old DraftKings incurred $ 17.0 million of lender fees and $ 1.7 million of debt financing costs, which are being amortized through the Notes Maturity Date.

The Convertible Notes represent senior unsecured obligations of Old DraftKings, which are being amortized through the Notes Maturity Date.

The Convertible Notes represent senior unsecured obligations of Old DraftKings.

On May 5, 2022, in connection with the consummation of the GNOG Transaction, (i) DraftKings Inc.

10 unchanged sentences

As the Capped Call Transactions qualify for equity classification, the net cost of $ 124.0 million incurred in connection with the Capped Call Transactions was recorded as a reduction to additional paid-in capital on the Company’s consolidated balance sheet.

As of March 31, 2023, the Company’s convertible debt balance was $ 1,251.8 million, net of unamortized debt issuance costs of $ 13.2 million.

Amortization of debt issuance costs was $ 0.7 million for the three months ended March 31, 2023 and $ 0.7 million for the three months ended March 31, 2022, which are included in the interest expense line-item on the Company's consolidated statements of operations.

Although recorded at amortized cost on the Company’s consolidated balance sheets, the estimated fair value of the Convertible Notes was $ 883.9 million and $ 786.5 million as of March 31, 2023 and December 31, 2022, respectively, which was calculated using the estimated or actual bids and offers of the Convertible Notes in an over-the-counter market on the last business day of the period, which is a Level 1 fair value measurement.

As of June 30, 2023, the Company’s convertible debt balance was $ 1,252.4 million, net of unamortized debt issuance costs of $ 12.6 million.

Amortization of debt issuance costs was $ 0.7 million and $ 1.3 million for the three and six months ended June 30, 2023, respectively, and $ 0.7 million and $ 1.3 million for the three and six months ended June 30, 2022, which are included in the interest expense line-item on the Company's consolidated statements of operations.

Although recorded at amortized cost on the Company’s consolidated balance sheets, the estimated fair value of the Convertible Notes was $ 946.7 million and $ 786.5 million as of June 30, 2023 and December 31, 2022, respectively, which was calculated using the estimated or actual bids and offers of the Convertible Notes in an over-the-counter market on the last business day of the period, which is a Level 1 fair value measurement.

Indirect Taxes

7 unchanged sentences

The Company’s activities by jurisdiction may vary from period to period, which could result in differences in the applicability of indirect taxes from period to period.

As of March 31, 2023 and December 31, 2022, the Company’s estimated contingent liability for indirect taxes was $ 63.6 million and $ 60.3 million, respectively.

The estimated contingent liability for indirect taxes is recorded within other long-term liabilities on the consolidated balance sheets and general and administrative expenses on the condensed consolidated statements of operations.

As of June 30, 2023 and December 31, 2022, the Company’s estimated contingent liability for indirect taxes was $ 67.3 million and $ 60.3 million, respectively.

The estimated contingent liability for indirect taxes is recorded within other long-term liabilities on the condensed consolidated balance sheets and general and administrative expenses on the condensed consolidated statements of operations.

Warrant Liabilities

2 unchanged sentences

Simultaneously with the closing of the IPO, DEAC completed the private sale of 6.3 million warrants to DEAC’s sponsor (the “Private Warrants”), each of which entitles the holder to purchase one share of DraftKings Inc.’s Class A common stock at an exercise price of $ 11.50 per share.

As of March 31, 2023 and 2022, there were no Public Warrants outstanding and 1.6 million Private Warrants outstanding.

As of June 30, 2023, there were no Public Warrants outstanding and 1.5 million Private Warrants outstanding.

On May 5, 2022, in connection with the consummation of the GNOG Transaction, Old DraftKings entered into an assignment and assumption agreement (the “Old DraftKings Warrant Assignment Agreement”) with DraftKings Inc., Computershare Trust Company, N.A.

5 unchanged sentences

In addition, on May 5, 2022, in connection with the consummation of the GNOG Transaction, the Company assumed an additional 5.9 million warrants, each of which entitled the holder to purchase one share of GNOG’s Class A common stock at an exercise price of $ 11.50 per share (the “GNOG Private Warrants”).

Effective as of the consummation of the GNOG Transaction, each of the outstanding GNOG Private Warrants became exercisable, at an exercise price of $ 31.50 , for 0.365 of a share of DraftKings Inc.’s Class A common stock, or approximately 2.1 million shares of DraftKings Inc.’s Class A common stock in the aggregate, on the existing terms and conditions of such GNOG Private Warrants, except as otherwise described in the assignment and assumption agreement relating to the GNOG Private Warrants entered into on the GNOG Closing Date.

As of March 31, 2023, there were 5.9 million GNOG Private Warrants outstanding.

The Company classifies the Public Warrants, the Private Warrants and the GNOG Private Warrants pursuant to ASC 815 as derivative liabilities with subsequent changes in their respective fair values recognized in its consolidated statement of operations at each reporting date.

As of March 31, 2023, the fair value of the Company’s warrant liability was $ 27.7 million.

Due to fair value changes throughout the three months ended March 31, 2023 and 2022, the Company recorded a loss on remeasurement of warrant liabilities of $ 17.0 million and a gain on remeasurement of $ 12.7 million, respectively.

During the three months ended March 31, 2023, no Private Warrants or GNOG Private Warrants were exercised.

Effective as of the consummation of the GNOG Transaction, each of the outstanding GNOG Private Warrants became exercisable for 0.365 of a share of DraftKings Inc.'s Class A common stock, or approximately 2.1 million shares of DraftKings Inc.’s Class A common stock in the aggregate, on the existing terms and conditions of such GNOG Private Warrants, except as otherwise described in the assignment and assumption agreement relating to the GNOG Private Warrants entered into on the GNOG Closing Date.

As of June 30, 2023, there were 5.9 million GNOG Private Warrants outstanding.

The Company classifies the Public Warrants, the Private Warrants and the GNOG Private Warrants pursuant to ASC Topic 815, Derivatives and Hedging, as derivative liabilities with subsequent changes in their respective fair values recognized in its consolidated statement of operations at each reporting date.

As of June 30, 2023, the fair value of the Company’s warrant liability was $ 46.3 million.

Due to fair value changes during the three and six months ended June 30, 2023, the Company recorded losses on the remeasurement of its warrant liabilities of $ 20.0 million and $ 37.1 million, respectively.

The Company recorded gains on remeasurement of its warrant liability of $ 14.3 million and $ 27.0 million for the three and six months ended June 30, 2022, respectively.

During the three and six months ended June 30, 2023, approximately 0.1 million Private Warrants were exercised and no GNOG Private Warrants were exercised.

Fair Value Measurements

6 unchanged sentences

• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value as of March 31, 2023 and December 31, 2022 based on the three-tier fair value hierarchy:

March 31, 2023

The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value as of June 30, 2023 and December 31, 2022 based on the three-tier fair value hierarchy:

June 30, 2023

Level 1 Level 2 Level 3 Total

31 unchanged sentences

The Company measures the fair value of these derivative instruments using option pricing models and, accordingly, classifies these assets as Level 3.

During the three months ended March 31, 2023, there were no new derivative instruments purchased by or issued to the Company.

During the six months ended June 30, 2023, we sold Level 3 derivative instruments with a fair value at December 31, 2022 of $ 6.2 million for proceeds of $ 5.3 million and there were no new Level 3 derivative instruments purchased by or issued to the Company.

The table below includes a range and an average weighted by relative fair value of the significant unobservable inputs used to measure the fair value of the Level 3 derivative instruments.

A change in these significant unobservable inputs might result in a significantly higher or lower fair value measurement at the reporting date.

March 31, 2023 December 31, 2022

June 30, 2023

December 31, 2022

Significant Unobservable Input Range (Weighted Average) Range (Weighted Average)

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(6) Represents the asset and liability balance for the digital assets held by the Company for its users, which are classified as Level 2 because the Company measures the fair value of these digital assets using observable inputs for similar transactions.

For the three months ended March 31, 2023 and 2022, the Company recorded $ 0.1 million and $ 37.4 million of unrealized gains on its financial assets carried at fair value, respectively.

Those unrealized gains are included within other income, net in the condensed consolidated statements of operations.

For the three and six months ended June 30, 2023, the Company recorded zero and $ 0.1 million of unrealized gains on its financial assets carried at fair value, respectively.

During the three and six months ended June 30, 2022, the Company recorded $ 5.6 million of unrealized losses and $ 31.8 million of unrealized gains, respectively, which primarily resulted from those financial assets categorized as Level 3.

Those unrealized gains and losses are included within other income, net in the condensed consolidated statements of operations.

Revenue Recognition

Deferred Revenue

The Company includes deferred revenue within accounts payable and accrued expenses and liabilities to users in the condensed consolidated balance sheets.

The Company includes deferred revenue within accounts payable and accrued expenses and within liabilities to users in the condensed consolidated balance sheets.

The deferred revenue balances were as follows:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Deferred revenue, beginning of the period $ 132,213 $ 95,402 $ 133,851 $ 91,554

4 unchanged sentences

Revenue Disaggregation

Disaggregation of revenue for the three months ended March 31, 2023 and 2022 is as follows:

Three months ended March 31,

Disaggregation of revenue for the three and six months ended June 30, 2023 and 2022 is as follows:

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Online gaming $ 849,839 $ 434,123 $ 1,585,028 $ 820,801

10 unchanged sentences

PSP awards are performance-based equity awards which establish performance objectives related to one or two particular fiscal years.

LTIP awards generally vest when revenue or Adjusted EBITDA targets are achieved amongst other conditions, while PSP awards generally vest upon achievement of revenue and Adjusted EBITDA targets and have a range of payouts amongst other conditions.

LTIP awards generally vest when revenue and/or Adjusted EBITDA targets are achieved amongst other conditions, while PSP awards generally vest upon achievement of revenue and Adjusted EBITDA targets and have a range of payouts amongst other conditions.

All stock-based compensation awards expire seven to ten years after the grant date thereof.

The following table shows restricted stock unit (“RSU”) and stock option activity for the three months ended March 31, 2023:

The following table shows restricted stock unit (“RSU”) and stock option activity for the six months ended June 30, 2023:

Time-Based PSP LTIP Total Weighted Average Exercise Price of Options Weighted Average FMV

5 unchanged sentences

Forfeited ( 285 ) ( 888 ) — ( 127 ) — ( 108 ) ( 1,408 ) 25.31 22.54

Outstanding at March 31, 2023 12,329 22,764 2,102 14,481 11,152 5,594 68,422 $ 6.71 $ 21.99

As of March 31, 2023, total unrecognized stock-based compensation expense of $ 689.8 million related to granted and unvested stock-based compensation arrangements is expected to be recognized over a weighted-average period of 3.1 years.

The following table shows stock compensation expense for the three months ended March 31, 2023 and 2022:

Three months ended March 31, 2023 Three months ended March 31, 2022

Outstanding at June 30, 2023 11,760 20,917 2,102 14,429 11,152 5,649 66,009 $ 6.53 $ 22.03

As of June 30, 2023, total unrecognized stock-based compensation expense of $ 670.4 million related to granted and unvested stock-based compensation arrangements is expected to be recognized over a weighted-average period of 2.8 years.

The following tables shows stock compensation expense for the three and six months ended June 30, 2023 and 2022:

Three months ended June 30, 2023 Three months ended June 30, 2022

Options RSUs Total Options RSUs Total

4 unchanged sentences

Total $ 2,546 $ 86,647 $ 89,193 $ 3,830 $ 131,691 $ 135,521

Six months ended June 30, 2023 Six months ended June 30, 2022

Options RSUs Total Options RSUs Total

Time-based (1)

$ 6,390 $ 83,559 $ 89,949 $ 7,694 $ 48,769 $ 56,463

— 59,887 59,887 — 57,131 57,131

— 56,757 56,757 — 209,004 209,004

Total $ 6,390 $ 200,203 $ 206,593 $ 7,694 $ 314,904 $ 322,598

(1) Time-based awards vest and are expensed over a defined service period.

(2) PSP and LTIP awards vest based on defined performance criteria and are expensed based on the probability of achieving such criteria.

During the three months ended March 31, 2022, the Company recorded a cumulative catch-up adjustment of $ 20.7 million in additional stock-based compensation expense related to its updated expectation on achieving higher revenue targets than originally estimated for certain PSP awards which have a range of payouts.

The Company’s provision for income taxes for the three months ended March 31, 2023 and 2022 is as follows:

Three months ended March 31,

Income tax provision $ 1,368 $ 469

The effective tax rates for the three months ended March 31, 2023 and 2022 were ( 0.3 )% and ( 0.1 )%, respectively.

The difference between the Company’s effective tax rates for the three month periods ended March 31, 2023 and 2022 and the U.S.

During the three months ended March 31, 2022, the Company recorded a cumulative catch-up adjustment of $ 20.7 million in additional stock-based compensation expense related to its updated expectation of achieving higher revenue targets than originally estimated for certain PSP awards which have a range of payouts.

The Company’s provision (benefit) for income taxes for the three and six months ended June 30, 2023 and 2022 is as follows:

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Income tax provision (benefit) $ 651 $ ( 81,226 ) $ 2,019 $ ( 80,757 )

The effective tax rates for the three months ended June 30, 2023 and 2022 were ( 0.9 )% and 27.2 %, respectively, and the effective tax rates for the six months ended June 30, 2023 and 2022 were ( 0.4 )% and 10.6 %, respectively.

The difference between the Company’s effective tax rates for the three and six month periods ended June 30, 2023 and 2022 and the U.S.

statutory tax rate of 21% was primarily due to a valuation allowance related to the Company’s deferred tax assets, offset partially by current state tax and current foreign tax.

Additionally, the Company recorded a discrete income tax benefit of $ 76.8

million during the second quarter of 2022 which was attributable to non-recurring partial releases of the Company’s U.S.

valuation allowance as a result of the purchase accounting for GNOG.

The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance if it is more likely than not that some or all such deferred tax assets will not be realized.

1 unchanged sentence

The computation of loss per share and weighted-average shares of the Company's Class A common stock outstanding for the periods presented are as follows:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Net loss attributable to common stockholders $ ( 77,270 ) $ ( 217,103 ) $ ( 474,418 ) $ ( 684,796 )

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Basic and diluted $ ( 0.17 ) $ ( 0.50 ) $ ( 1.03 ) $ ( 1.61 )

There were no preferred or other dividends declared for the three months ended March 31, 2023.

There were no preferred or other dividends declared for the three and six months ended June 30, 2023.

For the periods presented, the following securities were not required to be included in the computation of diluted shares outstanding:

Three months ended March 31,

June 30, 2023 June 30, 2022

Class A common stock resulting from exercise of all warrants 3,648 3,761

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Related-Party Transactions

Financial Advisor

On May 7, 2021, DraftKings entered into a master engagement letter (as amended, the “Master Engagement Letter”), with Raine Securities LLC (the “Financial Advisor”), an affiliate of Raine.

John Salter, who served as a member of our Board of Directors until April 2022, is a partner of Raine.

Pursuant to the Master Engagement Letter, Raine Securities will act as a financial advisor to DraftKings in connection with certain proposed transactions, and DraftKings will pay Raine Securities certain fees and expenses from time to time on the terms and conditions described in the related statements of work.

For the three and six months ended June 30, 2023, the Company incurred no fees payable to the Financial Advisor.

During the three and six months ended June 30, 2022, the Company incurred $ 8.5 million of fees payable to the Financial Advisor.

Receivables from Equity Method Investment

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The operational support is primarily in the form of general and administrative services.

As of March 31, 2023 and December 31, 2022, the Company had $ 0.1 million and $ 0.2 million, respectively, of receivables from DKFS, LLC related to those services and expenses to be reimbursed to the Company, which are included within non-current assets in the consolidated balance sheets.

As of June 30, 2023 and December 31, 2022, the Company had no receivables and $ 0.2 million of receivables, respectively, from DKFS, LLC related to those services and expenses to be reimbursed to the Company, which are included within non-current assets in its condensed consolidated balance sheets.

The Company has committed to invest up to $ 17.5 million into DBDK Venture Fund I, LP, a Delaware limited partnership and a subsidiary of DKFS, LLC.

As of March 31, 2023, the Company had invested a total of $ 6.7 million of the total commitment.

Transactions with a Shareholder and their Immediate Family Members

For the three months ended March 31, 2023 and March 31, 2022, the Company had $ 0.7 million and $ 0.6 million in sales, respectively, to entities owned by an immediate family member of a current director of the Company.

The Company had an associated accounts receivable balance of $ 0.3 million and $ 0.2 million a s of March 31, 2023 and December 31, 2022, respectively, included in accounts receivable in its condensed consolidated balance sheets.

As of June 30, 2023, the Company had invested a total of $ 6.7 million of the total commitment.

Transactions with a Former Director and their Immediate Family Members

For the three and six months ended June 30, 2023, the Company had $ 0.5 million and $ 1.2 million in sales, respectively, to entities owned by an immediate family member of a former director of the Company.

The Company had an associated accounts receivable balance of $ 0.1 million and $ 0.2 million a s of June 30, 2023 and December 31, 2022, respectively, included in accounts receivable in its condensed consolidated balance sheets.

In 2022, from time to time, the Company chartered, without mark-up, a private plane owned by an entity controlled by Jason Robins, the Company’s Chief Executive Officer, utilizing aircraft services from Jet Aviation Flight Services, Inc.

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The Company had no direct or indirect interest in such private plane.

During the three months ended March 31, 2022, the Company incurred $ 0.7 million of expense for use of the aircraft under these chartering services.

During the three months ended March 31, 2023, the Company incurred no expense for use of the aircraft under these chartering services.

During the three and six months ended June 30, 2023, the Company incurred no expense for use of the aircraft under these chartering services.

During the three and six months ended June 30, 2022, the Company incurred no expense and a $ 0.7 million expense for use of the aircraft under these chartering services, respectively.

On March 30, 2022, the Company entered into a one-year lease of an aircraft from an entity controlled by Mr.

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Robins and his family fly private and the committees' assessment that such an arrangement is more efficient and flexible and better ensures safety, confidentiality and privacy.

During the three months ended March 31, 2023, the Company incurred $ 0.1 million of expense under the Original Aircraft Lease.

During the three and six months ended June 30, 2023, the Company incurred $ 0.1 million and $ 0.3 million of expense under the Aircraft Leases, respectively.

Leases, Commitments and Contingencies

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Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.

As of March 31, 2023, the Company’s lease agreements typically have terms not exceeding ten years .

As of June 30, 2023, the Company’s lease agreements typically have terms not exceeding ten years .

Payments under the Company’s lease arrangements may be fixed or variable, and variable lease payments primarily represent costs related to common area maintenance and utilities.

The components of lease cost are as follows:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Operating lease cost $ 3,490 $ 5,679 $ 8,519 $ 9,909

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Total lease cost $ 5,503 $ 7,845 $ 12,744 $ 14,406

Supplemental cash flow and other information for the three months ended March 31, 2023 and 2022 related to operating leases was as follows:

Three months ended March 31,

Supplemental cash flow and other information for the six months ended June 30, 2023 and 2022 related to operating leases was as follows:

Six months ended June 30,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows used by operating leases $ 3,165 $ 4,283

Operating cash flows used for operating leases $ 6,123 $ 8,489

Right-of-use assets obtained in exchange for new operating lease liabilities $ 366 $ 21,338

The weighted-average remaining lease term for the Company's operating leases was 8.3 years, and the weighted-average discount rate for the Company's operating leases was 6.5 %, in each case as of March 31, 2023.

The weighted-average remaining lease term for the Company's operating leases was 7.8 years, and the weighted-average discount rate for the Company's operating leases was 6.5 %, in each case as of June 30, 2023.

The Company calculated the weighted-average discount rate using incremental borrowing rates, which equal the rates of interest that it would pay to borrow funds on a fully collateralized basis over a similar term.

Maturity of lease liabilities are as follows:

Maturities of lease liabilities are as follows:

Years Ending December 31,

From April 1, 2023 to December 31, 2023 $ 5,240

From July 1, 2023 to December 31, 2023 $ 1,510

Thereafter 40,364

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Other Contractual Obligations and Contingencies

The Company is a party to several non-cancelable contracts with vendors where the Company is obligated to make future minimum payments under the terms of these contracts as follows:

The Company is party to several non-cancelable contracts with vendors where the Company is obligated to make future minimum payments under the terms of these contracts as follows:

Years Ending December 31,

From April 1, 2023 to December 31, 2023 $ 326,823

From July 1, 2023 to December 31, 2023 $ 235,243

Thereafter 265,030

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On June 14, 2019, Interactive Games LLC filed suit against the Company in the U.S.

District Court for the District of Delaware, alleging that our Daily Fantasy Sports product offering infringes two patents and the Company’s Sportsbook product offering infringes two different patents.

District Court for the District of Delaware, alleging that our Daily Fantasy Sports product offering infringes two patents and the Company’s Sportsbook product

offering infringes two different patents.

The Company intends to vigorously defend this case.

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Any adverse outcome in these matters could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of this proceeding will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period.

On July 7, 2021, Winview Inc., a Delaware corporation, filed suit against the Company in the U.S.

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The Company also cannot provide an estimate of the possible loss or range of loss.

Any adverse outcome

in these matters could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Any adverse outcome in these matters could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

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The Company also cannot provide an estimate of the possible loss or range of loss.

Any adverse outcome in the SEC matter could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Any adverse outcome in

the SEC matter could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of the SEC matter will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period.

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On August 12, 2022, a putative class action was filed in Nevada state District Court in Clark County against Golden Nugget Online Gaming, Inc.

(“GNOG Inc.”), the Company and one of its officers, as well as former officers or directors and the former controlling stockholder of GNOG Inc.

(“GNOG Inc.”), the Company and one of its officers and two affiliates, as well as former officers or directors and the former controlling stockholder of GNOG Inc.

and Jefferies LLC.

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alleging that certain former officers and directors of GNOG Inc.

and its former

controlling stockholder (Tilman Fertitta and/or Fertitta Entertainment, Inc.) breached their fiduciary duties to minority stockholders of GNOG Inc.

and its former controlling stockholder (Tilman Fertitta and/or Fertitta Entertainment, Inc.) breached their fiduciary duties to minority stockholders of GNOG Inc.

in connection with the GNOG Transaction, and the other defendants aided and abetted the alleged breaches of fiduciary duty.

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On October 12, 2021, Arrow Gaming filed an amended complaint to add one additional patent.

On December 20, 2021, Arrow Gaming filed a second amended complaint adding new allegations with respect to alleged willful infringement.

December 20, 2021, Arrow Gaming filed a second amended complaint adding new allegations with respect to alleged willful infringement.

The Company intends to vigorously defend this case.

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Plaintiff alleges, among other things, that he was a contestant in the Company’s daily fantasy showdown contest for the January 2, 2023 NFL game between the Cincinnati Bengals and the Buffalo Bills (the “Bengals-Bills Game”).

The Bengals-Bills Game was postponed and

eventually cancelled due to Damar Hamlin collapsing during the game.

The Bengals-Bills Game was postponed and eventually cancelled due to Damar Hamlin collapsing during the game.

Plaintiff alleges that he was winning prizes in multiple showdown contests at the point in time that the Bengals-Bills Game was cancelled (with 5:58 remaining in the first quarter).

Plaintiff alleges that, instead of paying out the prize money, the Company refunded entry fees to contestants that entered showdown or flash draft fantasy contests.

Plaintiff asserts claims for breach of contract, unfair and deceptive acts and practices, false advertising, and unjust enrichment.

Among other things, Plaintiffs seeks statutory damages, monetary damages, punitive damages, attorney fees and interest.

On May 8, 2023, plaintiff Turley and a new plaintiff (Erik Ramos) filed a First Amended Class Action Complaint.

The plaintiffs assert claims for breach of contract, unfair and deceptive acts and practices, false advertising, and unjust enrichment.

Among other things, plaintiffs seek statutory damages, monetary damages, punitive damages, attorney fees and interest.

The Company intends to vigorously defend this case.

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Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of this matter will have a material adverse effect on Company’s financial condition, although the outcome could be material to the Company’s operating results for any particular period, depending, in part, upon the operating results for such period.

Matter Related to DraftKings Marketplace

Securities Matters Related to DraftKings Marketplace

On March 9, 2023, a putative class action was filed in Massachusetts federal court by alleged purchasers of non-fungible tokens (“NFTs”) on the DraftKings Marketplace (“DK Marketplace”).

The complaint asserts claims for violations of federal and state securities laws against the Company and three of its officers on the grounds that, among other things, the NFTs that are sold and traded on the DK Marketplace allegedly constitute securities that were not registered with the SEC in accordance with federal and Massachusetts law, and that the DK Marketplace is a securities exchange that is not registered in accordance with federal and Massachusetts law.

The complaint asserts claims for violations of federal and state securities laws against the Company and three of its officers on the grounds that, among other things, the NFTs that

are sold and traded on the DK Marketplace allegedly constitute securities that were not registered with the SEC in accordance with federal and Massachusetts law, and that the DK Marketplace is a securities exchange that is not registered in accordance with federal and Massachusetts law.

Based on these allegations, plaintiff brings claims seeking rescissory damages and other relief on behalf of himself and a putative class of persons who purchased NFTs on the DK Marketplace between August 11, 2021 and the present.

The Company intends to vigorously defend this matter.

Any adverse outcome in this matter could subject the Company to substantial damages and/or require alterations to the Company’s business.

The Company cannot provide any assurance as to the outcome of this matter.

The Company cannot predict with any degree of certainty the outcome of this matter or determine the extent of any potential liability or damages.

On July 17, 2023, the Company received a subpoena from the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts seeking documents and requesting answers to interrogatories concerning, among other things, DK Marketplace and NFTs that are sold on DK Marketplace, and related matters.

We intend to comply with these requests.

The Company cannot predict with any degree of certainty the outcome of these matters or determine the extent of any potential liability or damages.

The Company also cannot provide an estimate of the possible loss or range of loss.

Any adverse outcome in this matter could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Any adverse outcome in these matters could expose the Company to substantial damages, penalties and/or require alterations to the Company’s business that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of these matters will have a material adverse effect on Company’s financial condition, although the outcome could be material to the Company’s operating results for any particular period, depending, in part, upon the operating results for such period.

Shareholder Derivative Litigation Related to DraftKings Marketplace

On May 31, 2023, a putative shareholder derivative action was filed in Nevada state court by an alleged shareholder of the Company.

The action asserts claims on behalf of the Company against certain senior officers and members of the Board of Directors of the Company for breach of fiduciary duty and unjust enrichment based primarily on allegations that the defendants caused or allowed the Company to disseminate misleading and inaccurate information to its shareholders in connection with NFTs that are sold and traded on the DK Marketplace.

The action also alleges that certain individuals are liable for trading in Company stock at artificially inflated prices.

The action seeks unspecified compensatory damages, changes to corporate governance and internal procedures, restitution, disgorgement, costs and attorney’s fees, and other unspecified relief.

The Company cannot predict with any degree of certainty the outcome of this matter or determine the extent of any potential liabilities.

The Company also cannot provide an estimate of the possible loss or range of loss.

Because this action alleges claims on behalf of the Company and purports to seek a judgment in favor of the Company, the Company does not believe, based on currently available information, that the outcome of the proceedings will have a material adverse effect on the Company’s financial condition, although the outcome could be material to the Company’s operating results for any particular period, depending, in part, upon the operating results for such period.

Internal Revenue Service

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements