What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-03 compared with 2023-11-03 · 209 added, 326 removed, 428 unchanged (56% of the section changed)

3 unchanged sentences

(Amounts in thousands, except par value)

September 30, 2023

March 31, 2024

(Unaudited) December 31, 2023

1 unchanged sentence

Cash and cash equivalents $ 1,192,662 $ 1,270,503

Restricted cash 12,454 11,700

Cash reserved for users 278,141 341,290

26 unchanged sentences

Class A common stock, $ 0.0001 par value;

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

477,198 and 459,265 shares issued and 465,906 and 450,575 outstanding as of September 30, 2023 and December 31, 2022, respectively

900,000 shares authorized as of March 31, 2024 and December 31, 2023;

488,750 and 484,598 shares issued and 476,067 and 472,697 outstanding as of March 31, 2024 and December 31, 2023, respectively

Class B common stock, $ 0.0001 par value;

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

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

900,000 shares authorized as of March 31, 2024 and December 31, 2023;

393,014 shares issued and outstanding as of March 31, 2024 and December 31, 2023

Treasury stock, at cost;

11,292 and 8,690 shares as of September 30, 2023 and December 31, 2022, respectively

12,683 and 11,901 shares as of March 31, 2024 and December 31, 2023, respectively

( 445,681 ) ( 412,182 )

8 unchanged sentences

(Amounts in thousands, except loss per share data)

Three months ended September 30, Nine months ended September 30,

2023 2022 2023 2022

Three months ended March 31,

Revenue $ 1,174,996 $ 769,652

7 unchanged sentences

Interest expense ( 649 ) ( 655 )

(Loss) gain on remeasurement of warrant liabilities ( 7,751 ) ( 6,797 ) ( 44,827 ) 20,199

Other income (expense), net ( 1,217 ) 8,257 ( 1,153 ) 40,566

Loss before income tax provision and loss from equity method investment ( 281,804 ) ( 447,267 ) ( 753,761 ) ( 1,210,391 )

Income tax provision (benefit) 1,291 3,177 3,310 ( 77,580 )

Loss from equity method investment 8 50 450 2,479

Loss on remeasurement of warrant liabilities ( 18,094 ) ( 17,035 )

Other (loss) gain, net ( 735 ) 19

Loss before income tax (benefit) provision and (income) loss from equity method investment ( 143,249 ) ( 395,661 )

Income tax (benefit) provision ( 351 ) 1,368

(Income) loss from equity method investment ( 330 ) 119

Net loss attributable to common stockholders $ ( 142,568 ) $ ( 397,148 )

14 unchanged sentences

Stock-based compensation expense — — — — 117,702 — — — 117,702

Exercise of warrants 1,002 — — — 46,181 — — — 46,181

Purchase of treasury stock ( 782 ) — — — — — — ( 33,499 ) ( 33,499 )

2 unchanged sentences

Balances at March 31, 2024 476,067 $ 46 393,014 $ 39 $ 7,316,598 $ ( 6,076,511 ) $ 36,488 $ ( 445,681 ) $ 830,979

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

Exercise of stock options 1,359 — — — 5,506 — — — 5,506

Stock-based compensation expense — — — — 78,353 — — — 78,353

Shares issued for exercise of warrants 11 — — — 342 — — — 342

Purchase of treasury stock ( 617 ) — — — — — — ( 18,167 ) ( 18,167 )

Restricted stock unit vesting 1,896 — — — — — — — —

Net loss — — — — — ( 283,103 ) — — ( 283,103 )

Balances at September 30, 2023 465,906 $ 46 393,014 $ 39 $ 7,045,655 $ ( 5,889,322 ) $ 36,488 $ ( 391,484 ) $ 801,422

Class A Common Stock Class B Common Stock Additional

11 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 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 — — — — — — — —

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

Exercise of stock options 69 — — — 224 — — — 224

Stock-based compensation expense — — — — 126,038 — — — 126,038

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

Purchase of treasury stock ( 267 ) — — — — — — ( 4,536 ) ( 4,536 )

Restricted stock unit vesting 840 — — — — — — — —

Net loss — — — — — ( 450,494 ) — — ( 450,494 )

Balances at September 30, 2022 448,664 $ 45 393,014 $ 39 $ 6,616,274 $ ( 4,889,104 ) $ 36,488 $ ( 328,626 ) $ 1,435,116

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(Amounts in thousands)

Nine months ended September 30,

Operating Activities:

Net loss $ ( 757,521 ) $ ( 1,135,290 )

Three months ended March 31,

Cash Flows from Operating Activities:

Net loss attributable to common shareholders $ ( 142,568 ) $ ( 397,148 )

Adjustments to reconcile net loss to net cash flows used in operating activities:

Depreciation and amortization 53,180 48,213

Non-cash interest (income) expense, net ( 554 ) 985

Non-cash interest expense, net 59 157

Stock-based compensation expense 93,535 117,400

Loss from equity method investment 450 2,479

Loss (gain) on remeasurement of warrant liabilities 44,827 ( 20,199 )

Loss (gain) on marketable equity securities and other financial assets 75 ( 32,483 )

Loss on remeasurement of warrant liabilities 18,094 17,035

(Gain) loss from equity method investment ( 330 ) 119

Loss on marketable equity securities and other financial assets, net — 136

Deferred income taxes 540 2,254

Other expenses, net 627 ( 2,726 )

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

Change in operating assets and liabilities:

Receivables reserved for users 35,809 35,547

8 unchanged sentences

Net cash flows used in operating activities $ ( 70,395 ) $ ( 201,492 )

Investing Activities:

Cash Flows from Investing Activities:

Purchases of property and equipment ( 3,025 ) ( 7,094 )

1 unchanged sentence

Acquisition of gaming licenses ( 11,594 ) ( 1,362 )

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 ( 1,915 ) 311

Net cash flows used in investing activities $ ( 39,199 ) $ ( 27,564 )

Financing Activities:

Proceeds from shares issued for warrants — 44

Cash Flow from Financing Activities:

Purchase of treasury stock ( 33,499 ) ( 27,358 )

1 unchanged sentence

Net cash flows used in financing activities $ ( 30,642 ) $ ( 25,166 )

Net decrease in cash and cash equivalents and restricted cash ( 191,245 ) ( 665,836 )

Cash and cash equivalents and restricted cash at the beginning of period 1,778,825 2,629,842

Cash and cash equivalents and restricted cash, end of period $ 1,587,580 $ 1,964,006

Disclosure of cash, cash equivalents and restricted cash:

Net decrease in cash and cash equivalents, restricted cash, and cash reserved for users ( 140,236 ) ( 254,222 )

Cash and cash equivalents, restricted cash, and cash reserved for users at the beginning of period 1,623,493 1,778,825

Cash and cash equivalents, restricted cash, and cash reserved for users at the end of period $ 1,483,257 $ 1,524,603

Disclosure of cash and cash equivalents, restricted cash, and cash reserved for users

Cash and cash equivalents $ 1,192,662 $ 1,087,668

Restricted cash 12,454 —

Cash reserved for users 278,141 436,935

Total cash, cash equivalents and restricted cash, end of period $ 1,587,580 $ 1,964,006

Cash and cash equivalents, restricted cash, and cash reserved for users at the end of period $ 1,483,257 $ 1,524,603

Supplemental Disclosure of Noncash Investing and Financing Activities:

Equity consideration issued for acquisitions $ — $ 460,128

Investing activities included in changes in accounts payable and accrued expenses $ ( 408 ) $ 12,835

Investing activities included in accounts payable and accrued expenses $ 688 $ ( 679 )

Decrease of warrant liabilities from cashless exercise of warrants $ 46,181 $ —

Supplemental Disclosure of Cash Activities:

Increase in cash reserved for users $ 6,331 $ 104,405

Decrease in cash reserved for users $ ( 63,149 ) $ ( 32,718 )

Cash paid for interest $ — $ —

4 unchanged sentences

Description of Business

We are a digital sports entertainment and gaming company that provides users with online sports betting (“Sportsbook”), online casino (“iGaming”) and daily fantasy sports (“DFS”) product offerings, as well as retail sportsbook, media and other consumer product offerings.

We are a digital sports entertainment and gaming company.

We provide users with online sports betting (“Sportsbook”), online casino (“iGaming”) and daily fantasy sports (“DFS”) product offerings, as well as retail sportsbook, media and other consumer product offerings.

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, a law that prohibited most states from authorizing and regulating sports betting.

As of September 30, 2023, 36 U.S.

As of March 31, 2024, 35 U.S.

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

Of those 37 legal jurisdictions, 32 have legalized online sports betting.

Of those 31 jurisdictions, 27 are live, and DraftKings operates in 22 of them.

All 32 of those jurisdictions are live, and DraftKings operates in 25 of them.

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

As of September 30, 2023, we operate our Sportsbook product offering in Arizona, Colorado, Connecticut, Illinois, Indiana, Iowa, Kansas, Kentucky, 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, Kentucky, Louisiana, Michigan, Mississippi, New Hampshire, New Jersey and Washington.

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

As of March 31, 2024, we operate our Sportsbook product offering in Arizona, Colorado, Connecticut, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, Vermont, Virginia, West Virginia, Wyoming and Ontario, Canada, and we operate retail sportsbooks in Arizona, Colorado, Connecticut, Illinois, Iowa, Kansas, Kentucky, Louisiana, Michigan, Mississippi, New Hampshire, New Jersey and Washington.

As of March 31, 2024, 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.

On May 5, 2022 (the “GNOG Closing Date”), DraftKings Inc.

(formerly New Duke Holdco, Inc.) consummated the acquisition of Golden Nugget Online Gaming, Inc., a Delaware corporation (together with its subsidiaries unless the context requires otherwise, “GNOG”), pursuant to a definitive agreement and plan of merger, dated August 9, 2021 (the “GNOG Merger Agreement”), in an all-stock transaction (the “GNOG Transaction”).

In connection with the GNOG Transaction, DraftKings Inc.

undertook a holding company reorganization whereby (i) each share of DraftKings Holdings Inc.

(formerly DraftKings Inc.), a Nevada corporation (“Old DraftKings”), Class A common stock and Class B common stock was converted on a one -for-one basis into a share of DraftKings Inc.

Class A common stock and Class B common stock, respectively, and (ii) DraftKings Inc.

became the going-forward public company and the direct parent company of both Old DraftKings and GNOG.

DraftKings Inc.

is the registrant filing this Quarterly Report on Form 10-Q as the successor registrant for Old DraftKings.

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

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

Pending Acquisition of JackPocket Inc.

(“Jackpocket”)

On February 11, 2024, the Company entered into a definitive agreement (the “Merger Agreement”) to acquire Jackpocket for total consideration of $ 750 million, with approximately 55 percent of the consideration payable in cash funded from the Company’s existing cash and cash equivalents balance, and approximately 45 percent of the consideration payable in the Company’s Class A common stock, subject to customary purchase price adjustments and the collar mechanism described below (the “Jackpocket Transaction”).

Under the terms of the Merger Agreement and subject to the terms and conditions set forth therein, the stock consideration will be subject to a collar pursuant to which a variable number of shares of DraftKings’ Class A common stock will be issued to Jackpocket stockholders in order to deliver a value of $ 337.5 million, so long as the 30 -trading-day volume weighted average price of DraftKings’ Class A common stock as of the second trading day immediately preceding the closing of the Jackpocket Transaction (the “Closing Stock Price”) remains between $ 31.68 and $ 42.86 .

In the event that DraftKings’ Closing Stock Price is above $ 42.86 or below $ 31.68 , Jackpocket stockholders will receive a fixed number of approximately 7,874,806 shares and 10,654,149 shares, respectively, of DraftKings’ Class A common stock, subject to adjustment in certain limited circumstances to the minimum extent necessary to maintain a tax-free transaction.

The consummation of the Jackpocket Transaction is subject to the receipt of required regulatory approvals and other customary closing conditions.

Summary of Significant Accounting Policies and Practices

8 unchanged sentences

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 , 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.

All intercompany accounts and transactions are eliminated upon consolidation.

Certain amounts, which are not material, in the prior year’s consolidated financial statements have been reclassified to conform to the current year's presentation.

The Company regularly reviews its operating segments and the approach used by the chief operating decision maker (“CODM”) to evaluate performance and allocate resources.

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

(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 CODM's regular review of consolidated financial information for the 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.

Recently Issued Accounting Pronouncements Not Yet Adopted

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 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.

While the Company is continuing to assess the timing of adoption and the potential impacts of ASU 2022-03, it does not expect ASU 2022-03 to have a material effect on the Company’s consolidated financial condition, results of operations or cash flows.

Business Combination

Acquisition of Golden Nugget Online Gaming, Inc.

On May 5, 2022, DraftKings consummated the GNOG Transaction, and, under the terms of the GNOG Merger Agreement and subject to certain exclusions contained therein, GNOG stockholders received a fixed ratio of 0.365 shares of DraftKings Inc.’s Class A common stock for each share of GNOG that they held on the GNOG Closing Date.

DraftKings Inc.

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

Purchase Price Accounting for the GNOG Transaction

On the GNOG Closing Date, the Company acquired 100 % of the equity interests of GNOG pursuant to the GNOG Merger Agreement.

The following is a summary of the consideration issued on the GNOG Closing Date:

Share consideration (1)

Other consideration (2)

Total consideration $ 603,465

(1) Includes the issuance of approximately 29.3 million shares of DraftKings Inc.’s Class A common stock issued at a price of $ 15.73 .

(2) Includes (i) $ 170.9 million of payments made by the Company on behalf of GNOG, including repayment of the outstanding portion of GNOG’s term loan (including the associated prepayment premium) and payment of certain of GNOG’s transaction expenses incurred in connection with the GNOG Transaction and (ii) warrants that were exercisable for shares of GNOG Class A common stock prior to the GNOG Closing Date, which were assumed by DraftKings in connection with the GNOG Transaction and became eligible to be converted into approximately 2.1 million shares of DraftKings Inc.’s Class A common stock in the aggregate.

These payments were partially offset by commercial credits received by the Company from Fertitta Entertainment, Inc.

(“FEI”), which can be applied by the Company from time to time to offset future amounts otherwise owed by it to FEI or its affiliates under commercial arrangements among such parties, subject to certain limited exceptions.

The following table summarizes the consideration issued or paid in connection with the GNOG Transaction and the fair value of the assets acquired and liabilities assumed in connection with the consummation of the GNOG Transaction on the GNOG Closing Date:

Cash and cash equivalents $ 66,709

Cash reserved for users 7,633

Receivables reserved for users 2,814

Accounts receivables 7,783

Prepaid expenses and other current assets 64

Property and equipment, net 1,433

Intangible assets, net 315,000

Operating lease right-of-use assets 1,185

Deposits and other non-current assets 47,395

Total identifiable assets acquired 450,016

Liabilities assumed:

Accounts payable and accrued expenses 32,989

Liabilities to users 4,314

Operating lease liabilities 1,185

Other long-term liabilities 78,781

Total liabilities assumed 117,269

Net assets acquired (a) $ 332,747

Purchase consideration (b) $ 603,465

Goodwill (b) – (a) $ 270,718

Goodwill represents the excess of the gross consideration transferred over the difference between the fair value of the underlying net assets acquired and the underlying liabilities assumed.

Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill.

Intangible assets not recognized apart from goodwill consist primarily of benefits from securing buyer-specific synergies that increase revenue and profits and are not otherwise available to a market participant, as well as acquiring a talented workforce and cost savings opportunities.

Goodwill associated with the GNOG Transaction was assigned as of the GNOG Closing Date to the Company’s B2C reporting unit.

Goodwill recognized is partially deductible for tax purposes, and the amount of deductible goodwill was determined to be $ 160.7 million.

Intangible Assets

Fair Value Weighted-

Gaming licenses $ 145,000 12.2 years

Customer relationships 170,000 5.9 years

Total $ 315,000

Loan Receivable

The Company acquired a long-term receivable in the amount of $ 30.1 million in connection with the GNOG Transaction, which originally resulted from a $ 30.0 million mezzanine loan (the “Danville GN Casino Loan”) by GNOG to certain parties before the GNOG Closing Date to develop and construct a “Golden Nugget”-branded casino in Danville, Illinois that, pending regulatory approvals, would enable GNOG to obtain market access to the State of Illinois.

There has been no significant deterioration of credit quality since the origination date of the Danville GN Casino Loan.

The receivable related to the Danville GN Casino Loan is classified within deposits and other non-current assets on the Company’s consolidated balance sheet.

Unaudited Pro-Forma Information

The financial information in the table below summarizes the combined results of operations of Old DraftKings and GNOG, on an actual and a pro forma basis, as applicable, as though the companies had been combined as of January 1, 2021.

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 September 30, Nine months ended September 30,

2023 Actual 2022 Pro Forma 2023 Actual 2022 Pro Forma

Revenue $ 789,957 $ 501,938 $ 2,434,536 $ 1,429,463

Net loss $ ( 283,103 ) $ ( 450,494 ) $ ( 757,521 ) $ ( 1,137,037 )

The foregoing pro forma financial information is based on estimates and assumptions, which the Company believes are reasonable.

The pro forma financial information includes adjustments primarily related to purchase accounting adjustments.

Acquisition costs and other non-recurring charges incurred are included in the period of assumed acquisition.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , designed to improve reportable segment disclosures.

The guidance expands the disclosures required for reportable segments in our annual and interim consolidated financial statements, primarily through enhanced disclosures about significant segment expenses.

The standard will be effective for us beginning with our annual reporting for fiscal year 2024 and interim periods thereafter, with early adoption permitted.

We are currently evaluating the impact of this standard on our segment disclosures.

In December 2023, the FASB issued ASU 2023-08, Accounting for and Disclosure of Crypto Assets (Topic 820) , a new standard designed to enhance decision-useful information about such assets and to better reflect the underlying economics of cryptocurrency transactions.

The standard will be effective for us beginning with our annual reporting for fiscal year 2025 and interim periods thereafter, with early adoption permitted.

We are currently evaluating the impact of this standard on our digital assets’ accounting and disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes—Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”).

ASU 2023-09 modifies the rules on income tax disclosures to enhance the transparency and decision-usefulness of income tax disclosures, particularly in the rate reconciliation table and disclosures about income taxes paid.

The amendments are intended to address investors’ requests for income tax disclosures that provide more information to help them better understand an entity’s exposure to potential changes in tax laws and the ensuing risks and opportunities and to assess income tax information that affects cash flow forecasts and capital allocation decisions.

The guidance also eliminates certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities.

ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024.

All entities are required to apply the guidance prospectively but have the option to apply it retrospectively.

Early adoption is permitted.

The Company is continuing to assess the timing of adoption and the potential impacts of ASU 2023-09.

Intangible Assets

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

As of March 31, 2024, intangible assets, net consists of the following:

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

5 unchanged sentences

Trademarks, tradenames and other 3.3 years 38,819 ( 22,407 ) 16,412

$ 1,224,750 $ ( 545,284 ) $ 679,466

Indefinite-lived intangible assets:

Digital assets, net of impairment Indefinite-lived 3,900 — 3,900

Digital assets, net of impairment Indefinite-lived 2,884 N/A 2,884

Total $ 1,227,634 $ ( 545,284 ) $ 682,350

The Company had the following intangible assets, net as of December 31, 2022:

As of December 31, 2023, intangible assets, net consists of the following:

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

5 unchanged sentences

Trademarks, tradenames and other 3.3 years 37,674 ( 20,751 ) 16,923

$ 1,185,706 $ ( 497,970 ) $ 687,736

Indefinite-lived intangible assets:

Digital assets, net of impairment Indefinite-lived 2,697 — 2,697

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

Amortization expense was $ 45.1 million and $ 131.2 million for the three and nine months ended September 30, 2023, respectively, and $ 40.6 million and $ 106.8 million for the three and nine months ended September 30, 2022, respectively.

Digital assets, net of impairment Indefinite-lived 2,884 N/A 2,884

Total $ 1,188,590 $ ( 497,970 ) $ 690,620

Amortization expense was $ 47.3 million and $ 43.1 million for the three months ended March 31, 2024 and 2023, 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 September 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 September 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 September 30, 2023.

As of September 30, 2023, the Company has been issued $ 175.0 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.

As of March 31, 2024 , 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, 2024 totaled $ 122.7 million.

The Company is also subject to certain affirmative and negative covenants, including the restriction of dividends, under the Credit Agreement which the Company is in compliance with as of March 31, 2024 .

One such covenant involves maintaining compensating cash balances.

The compensating balances may be withdrawn but the availability of the line of credit is dependent upon maintenance of such compensating balances.

The performance of the Company’s obligations under the Credit Agreement are secured by a first-priority security interest on substantially all of its assets.

Convertible Notes and Capped Call Transactions

In March 2021, Old DraftKings issued zero-coupon convertible senior notes in an aggregate principal amount of $ 1,265.0 million, which includes proceeds from the full exercise of the over-allotment option (collectively, the “Convertible Notes”).

In March 2021, DraftKings Holdings Inc.

(formerly DraftKings Inc.), a Nevada corporation (“Old DraftKings”) issued zero-coupon convertible senior notes in an aggregate principal amount of $ 1,265.0 million, which includes proceeds from the full exercise of the over-allotment option (collectively, the “Convertible Notes”).

The Convertible Notes will mature on March 15, 2028 (the “Notes Maturity Date”), subject to earlier conversion, redemption or repurchase.

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.

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

agreed to fully and unconditionally guarantee all of Old DraftKings’ obligations under the Convertible Notes and the indenture governing the Convertible Notes and (ii) each Convertible Note which was outstanding as of the consummation of the GNOG Transaction and previously convertible into shares of Old DraftKings Class A common stock became convertible into shares of DraftKings Inc.

Class A common stock.

The Convertible Notes are convertible at an initial conversion rate of 10.543 shares of DraftKings Inc.'s Class A common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $ 94.85 per share of Class A common stock.

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

The Convertible Notes are convertible at an initial conversion rate of 10.543 shares of DraftKings Inc.’s Class A common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $ 94.85 per share of DraftKings Inc.’s Class A common stock.

The conversion rate is subject to adjustment upon the occurrence of certain specified events and includes a make-whole adjustment upon early conversion in connection with a make-whole fundamental change (as defined in the indenture governing the Convertible Notes).

Prior to September 15, 2027, the Convertible Notes will be convertible only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the Notes Maturity Date.

Since the issuance of the Convertible Notes, there have been no changes to the initial conversion price.

Prior to September 15, 2027, the Convertible Notes will be convertible by the holder only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the Notes Maturity Date.

Old DraftKings will satisfy any conversion election by paying or delivering, as the case may be, cash, shares of DraftKings Inc.’s Class A common stock or a combination of cash and shares of DraftKings Inc.’s Class A common stock.

In connection with the pricing of the Convertible Notes and the exercise of the over-allotment option to purchase additional notes, Old DraftKings entered into a privately negotiated capped call transaction (the “Capped Call Transactions”).

As of March 31, 2024, no conditions were met to allow for the conversion of the Convertible Notes by any holder.

The Capped Call Transactions have a strike price of $ 94.85 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Convertible Notes.

The Capped Call Transactions have an initial cap price of $ 135.50 per share, subject to certain adjustments.

The Capped Call Transactions are expected generally to reduce potential dilution to the Company’s Class A common stock upon any conversion of Convertible Notes.

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 September 30, 2023, the Company’s convertible debt balance was $ 1,253.1 million, net of unamortized debt issuance costs of $ 11.9 million.

Amortization of debt issuance costs was $ 0.7 million and $ 2.0 million for the three and nine months ended September 30, 2023, respectively, and $ 0.7 million and $ 2.0 million for the three and nine months ended September 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 $ 963.8 million and $ 786.5 million as of September 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.

The Capped Call Transactions are expected generally to reduce potential dilution to DraftKings Inc.’s Class A common stock upon any conversion of Convertible Notes.

As the transaction qualifies 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, 2024, the Company’s convertible debt balance was $ 1,254.4 million, net of unamortized debt issuance costs of $ 10.6 million.

The amortization of debt issuance costs was $ 0.6 million for the three months ended March 31, 2024 and $ 0.7 million for the three months ended March 31, 2023, 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 $ 1,096.0 million and $ 1,025.6 million as of March 31, 2024 and December 31, 2023, 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

Taxation of e-commerce is becoming more prevalent and could negatively affect the Company’s business as it pertains to DFS and its contestants.

Taxation of e-commerce is becoming more prevalent and could negatively affect the Company’s business as it primarily pertains to DFS and its contestants.

The ultimate impact of indirect taxes on the Company’s business is uncertain, as is the period required to resolve this uncertainty.

The Company’s estimated contingent liability for indirect taxes represents the Company’s best estimate of tax liability in jurisdictions in which the Company believes taxation is probable.

The Company’s estimated contingent liability for indirect taxes represents the

Company’s best estimate of tax liability in jurisdictions in which the Company believes taxation is probable.

The Company frequently reevaluates its tax positions for appropriateness.

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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 September 30, 2023 and December 31, 2022, the Company’s estimated contingent liability for indirect taxes was $ 68.3 million and $ 60.3 million, respectively.

As of March 31, 2024 and December 31, 2023, the Company’s estimated contingent liability for indirect taxes was $ 74.9 million and $ 71.2 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.

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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 September 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.

As of March 31, 2024, there were no Public Warrants outstanding and 0.4 million Private Warrants outstanding.

On May 5, 2022 (the “GNOG Closing Date”), DraftKings Inc.

(formerly New Duke Holdco, Inc.) consummated the acquisition of Golden Nugget Online Gaming, Inc., a Delaware corporation, pursuant to a definitive agreement and plan of merger, dated August 9, 2021, in an all-stock transaction (the “GNOG Transaction”).

On the GNOG Closing Date, 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.

and Computershare Inc.

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Class A common stock on the existing terms and conditions, except as otherwise described in the Old DraftKings Warrant Assignment Agreement.

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”).

In addition, on the GNOG Closing Date, 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 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 September 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 September 30, 2023, the fair value of the Company’s warrant liability was $ 53.7 million .

Due to fair value changes during the three and nine months ended September 30, 2023, the Company recorded losses on the remeasurement of its warrant liabilities of $ 7.8 million and $ 44.8 million, respectively.

The Company recorded a loss on the remeasurement of its warrant liability of $ 6.8 million for the three months ended September 30, 2022 and a gain on the remeasurement of its warrant liability of $ 20.2 million for the nine months ended September 30, 2022, respectively.

During the three and nine months ended September 30, 2023, 0.1 million Private Warrants were exercised and no GNOG Private Warrants were exercised.

As of March 31, 2024, there were 2.9 million GNOG Private Warrants outstanding.

The Company classifies the Public Warrants, the Private Warrants and the GNOG Private Warrants pursuant to Accounting Standards Codification 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 March 31, 2024, the fair value of the Company’s warrant liability was $ 35.5 million.

Due to fair value changes during the three months ended March 31, 2024 and 2023, the Company recorded losses on the remeasurement of its warrant liabilities of $ 18.1 million and $ 17.0 million, respectively.

During the three months ended March 31, 2024, 1.0 million Private Warrants were exercised and 2.9 million GNOG Private Warrants were exercised.

These exercises resulted in the issuance of 1.0 million shares of DraftKings Inc.

Class A common stock as some were exercised on a cashless basis.

Fair Value Measurements

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• 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 September 30, 2023 and December 31, 2022 based on the three-tier fair value hierarchy:

September 30, 2023

The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value as of March 31, 2024 and December 31, 2023 based on the three-tier fair value hierarchy:

March 31, 2024

Level 1 Level 2 Level 3 Total

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Total $ 178,092 $ 67,454 $ 19,999 $ 265,545

Other current liabilities:

Digital assets held for users $ — $ 53,921 (2)

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Total $ 250,055 $ 60,157 $ 19,999 $ 330,211

Other current liabilities:

Digital assets held for users $ — $ 46,624 (2)

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Total $ — $ 110,192 $ — $ 110,192

(1) Represents the Company’s money market funds, which are classified as Level 1 because the Company measures the fair value of these assets using quoted market prices.

(2) Represents the Company’s marketable equity securities, which are classified as Level 1 because the Company measures the fair value of these assets using quoted market prices.

(3) Represents the Company’s non-marketable equity securities, which are classified as Level 2 because the Company measures the fair value of these assets using observable inputs for similar investments of the same issuer.

(1) Represents the Company’s money market funds, which are classified as Level 1 because the Company measures these assets to fair value using quoted market prices.

(2) 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 these digital assets to fair value using latest transaction price for similar transactions.

(3) Represents the Company’s non-marketable equity securities, which are classified as Level 2 because the Company measures these assets to fair value using observable inputs for similar investments of the same issuer.

The Company has elected the remeasurement alternative for these assets.

(4) Represents the Company’s derivative instruments held in other public and privately held entities.

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

During the nine months ended September 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.

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

There were no new Level 3 derivative instruments sold, purchased by or issued to the Company during the three months ended March 31, 2024.

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

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

September 30, 2023

Changes to fair value of these instruments are recorded in Other (loss) income, net on the consolidated statements of operations and loss (gain) on marketable equity securities and other financial assets, net in the consolidated statement of cash flows.

March 31, 2024

December 31, 2023

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

Significant Unobservable Input of Level 3 Investments Range (Weighted Average) Range (Weighted Average)

Underlying stock price $ 12.79 - $ 19.80 ($ 19.41 )

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1.3 % - 4.2 % ( 4.0 %)

(5) The Company measures the fair value of its warrant liabilities using a binomial lattice model or a Black-Scholes model, where appropriate, with the significant assumptions being observable inputs and, accordingly, classifies these liabilities as Level 2.

(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 and nine months ended September 30, 2023, the Company recorded zero unrealized gains or losses and $ 0.1 million of unrealized gains on its financial assets carried at fair value, respectively.

For the three and nine months ended September 30, 2022, the Company recorded $ 0.7 million and $ 32.5 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.

(5) The Company measures its Private Warrants and the GNOG Private Warrants to fair value using a binomial lattice model or a Black-Scholes model, where appropriate, with the significant assumptions being observable inputs and, accordingly, classifies these liabilities as Level 2.

Key assumptions used in the valuation of the Private Warrants and GNOG Private Warrants include term, risk free rate and volatility.

Revenue Recognition

Deferred Revenue

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

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

The deferred revenue balances were as follows:

Three months ended September 30, Nine months ended September 30,

2023 2022 2023 2022

Three months ended March 31,

Deferred revenue, beginning of the period $ 174,212 $ 133,851

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These obligations are primarily related to incentive programs and wagered amounts associated with unsettled or pending outcomes that fluctuate based on volume of activity.

Such obligations are recognized as liabilities when awarded to users and are recognized as revenue when those liabilities are later resolved.

Such obligations are recognized as liabilities when awarded to users and are recognized as revenue when those liabilities are later resolved, often within the following year.

Revenue Disaggregation

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

Three months ended September 30, Nine months ended September 30,

2023 2022 2023 2022

Disaggregation of revenue for the three months ended March 31, 2024 and 2023 is as follows:

Three months ended March 31,

Online gaming $ 1,152,186 $ 735,189

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Total Revenue $ 1,174,996 $ 769,652

Online gaming includes Sportsbook, iGaming and DFS, which have certain similar attributes and patterns of recognition.

Sources of other revenue primarily include media and other consumer product offerings.

The opening and closing balances of the Company's accounts receivable from contracts with customers were $ 51.1 million and $ 27.8 million for the nine months ended September 30, 2023, respectively, and $ 45.9 million and $ 41.0 million for the nine months ended September 30, 2022, respectively.

Online gaming includes online Sportsbook, iGaming, and DFS, which have certain similar attributes and patterns of recognition.

Other revenue primarily includes media, retail sportsbooks and other consumer product offerings.

The opening and closing balances of the Company's accounts receivable from contracts with customers were $ 47.5 million and $ 53.3 million for the three months ended March 31, 2024, respectively, and $ 51.1 million and $ 41.4 million for the three months ended March 31, 2023 , respectively.

Stock-Based Compensation

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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 nine months ended September 30, 2023:

The following table shows restricted stock unit (“RSU”) and stock option activity for the three months ended March 31, 2024:

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

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Forfeited — ( 558 ) — ( 201 ) — ( 73 ) ( 832 ) — 24.86

Outstanding at September 30, 2023 11,422 19,433 1,727 13,892 10,506 5,344 62,324 $ 6.68 $ 22.35

As of September 30, 2023, total unrecognized stock-based compensation expense of $ 602.4 million related to granted and unvested stock-based compensation arrangements is expected to be recognized over a weighted-average period of 2.7 years.

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

Three months ended September 30, 2023 Three months ended September 30, 2022

Options RSUs Total Options RSUs Total

Time-based (1)

$ 1,849 $ 39,936 $ 41,785 $ 3,577 $ 25,924 $ 29,501

— 21,876 21,876 — 11,368 11,368

— 14,692 14,692 — 85,169 85,169

Total $ 1,849 $ 76,504 $ 78,353 $ 3,577 $ 122,461 $ 126,038

Nine months ended September 30, 2023 Nine months ended September 30, 2022

Outstanding at March 31, 2024 10,160 20,351 1,389 14,550 10,276 921 57,647 $ 7.56 $ 26.34

As of March 31, 2024, total unrecognized stock-based compensation expense of $ 784.7 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 months ended March 31, 2024 and 2023:

Three months ended March 31, 2024 Three months ended March 31, 2023

Options RSUs Total Options RSUs Total

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(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 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 nine months ended September 30, 2023 and 2022 is as follows:

Three months ended September 30, Nine months ended September 30,

2023 2022 2023 2022

Income tax provision (benefit) $ 1,291 $ 3,177 $ 3,310 $ ( 77,580 )

The effective tax rates for the three months ended September 30, 2023 and 2022 were ( 0.5 )% and ( 0.7 )%, respectively, and the effective tax rates for the nine months ended September 30, 2023 and 2022 were ( 0.4 )% and 6.4 %, respectively.

The difference between the Company’s effective tax rates for the three and nine month periods ended September 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’s provision (benefit) for income taxes for the three months ended March 31, 2024 and 2023 is as follows:

Three months ended March 31,

Income tax (benefit) provision $ ( 351 ) $ 1,368

The effective tax rates for the three months ended March 31, 2024 and 2023 were 0.3 % and ( 0.3 )%, respectively.

The difference between the Company’s effective tax rates for the three months ended March 31, 2024 and 2023 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.

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.

The Company's provision for income taxes during interim reporting periods has historically been calculated by applying an estimate of the annual effective tax rate for the full year to ordinary pre-tax income (loss), excluding unusual or infrequently occurring discrete items, for the reporting period.

As small changes in the estimated ordinary income (loss) may result in a significant change in the estimated annual effective tax rate, the Company computed its provision for US Federal and state income taxes based on the actual effective tax rate for the three months ended March 31, 2024.

Loss Per Share

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 September 30, Nine months ended September 30,

2023 2022 2023 2022

Net loss attributable to common stockholders $ ( 283,103 ) $ ( 450,494 ) $ ( 757,521 ) $ ( 1,135,290 )

Three months ended March 31,

Net loss $ ( 142,568 ) $ ( 397,148 )

Basic and diluted weighted-average common shares outstanding 474,228 455,081

Loss per share attributable to common stockholders:

Loss per share attributable to common stockholders (in dollars):

Basic and diluted $ ( 0.30 ) $ ( 0.87 )

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

There were no preferred or other dividends declared for the three months ended March 31, 2024.

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

September 30, 2023 September 30, 2022

March 31, 2024 March 31, 2023

Class A common stock resulting from exercise of all warrants 1,449 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 nine months ended September 30, 2023, the Company incurred no fees payable to the Financial Advisor.

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

Receivables from Equity Method Investment

Receivables from Equity Method Investments

The Company provides office space and general operational support to DKFS, LLC, an equity-method affiliate.

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

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

There were no receivables related to these services as of March 31, 2024 or December 31, 2023.

The Company has also 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, 2024, the Company had invested a total of $ 8.3 million of the total commitment.

Transactions with a Former Director and their Immediate Family Members

For the three and nine months ended September 30, 2023, the Company had $ 0.2 million and $ 1.4 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 September 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.

for the business and personal travel of Mr.

Robins and his family.

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

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

During the three and nine months ended September 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.

For the three months ended March 31, 2024 and March 31, 2023, the Company had zero sales and $ 0.7 million in sales, respectively, to entities owned by an immediate family member of a former director of the Company.

On each of March 30, 2024 and 2023, the Company renewed a one-year lease of an aircraft from an entity controlled by Mr.

Robins, pursuant to which Mr.

Robins’ entity leased the aircraft to the Company for $ 0.6 million for a one-year period (the “Original Aircraft Lease”).

Robins’ entity leased the aircraft to the Company for $ 0.6 million for a one-year period (the “Aircraft Leases”).

The Company covered all operating, maintenance and other expenses associated with the aircraft.

The Original Aircraft Lease expired in accordance with its terms on March 30, 2023, and DraftKings entered into a new one-year lease of such aircraft from an entity controlled by Mr.

Robins for $ 0.6 million and otherwise on terms and conditions substantially the same as the Original Aircraft Lease, effective upon the expiration thereof (collectively with the Original Aircraft Lease, the “Aircraft Leases”).

The audit and compensation committees of the Company’s Board of Directors approved this arrangement, as well as the Aircraft Leases, based on, among other things, the requirements of the overall security program that Mr.

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 and nine months ended September 30, 2023, the Company incurred $ 0.1 million and $ 0.5 million of expense under the Aircraft Leases, respectively.

During each of the three months ended March 31, 2024 and March 31, 2023, the Company incurred $ 0.1 million of expense under the Aircraft Leases.

Leases, Commitments and Contingencies

The Company primarily leases corporate office facilities, data centers and motor vehicles under operating lease agreements.

The Company leases corporate office facilities, data centers, and motor vehicles under operating lease agreements.

Some of the Company’s leases include one or more options to renew.

For a majority of our leases, we do not assume renewals in our determination of the lease term as the renewals are not deemed to be reasonably assured.

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

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

For a majority of the Company’s leases, it does not assume renewals in its determination of the lease term as the renewals are not deemed to be reasonably assured.

The Company’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.

As of March 31, 2024, 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 September 30, Nine months ended September 30,

2023 2022 2023 2022

The components of lease expense are as follows:

Three months ended March 31,

Operating lease cost $ 4,828 $ 5,028

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Total lease cost $ 6,687 $ 7,242

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

Nine months ended September 30,

Supplemental cash flow and other information for the three months ended March 31, 2024 and 2023 related to operating leases was as follows:

Three months ended March 31,

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

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Right-of-use assets obtained in exchange for new operating lease liabilities $ 720 $ 366

The weighted-average remaining lease term for the Company's operating leases was 7.5 years, and the weighted-average discount rate for the Company's operating leases was 6.5 %, in each case as of September 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.

The weighted-average remaining lease term and weighted-average discount rate for the Company’s operating leases were 7.1 years and 6.5 % as of March 31, 2024.

The Company calculated the weighted-average discount rates 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.

Maturities of lease liabilities are as follows:

Years Ending December 31,

From October 1, 2023 to December 31, 2023 $ 3,711

From April 1, 2024 to December 31, 2024 $ 12,821

Thereafter 39,654

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Other Contractual Obligations and Contingencies

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:

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:

Years Ending December 31,

From October 1, 2023 to December 31, 2023 $ 126,691

From April 1, 2024 to December 31, 2024 $ 368,569

Thereafter 181,979

Total $ 1,329,435

As of March 31, 2024, the Company has been issued $ 235.0 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.

Contingencies

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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.

The Company intends to vigorously defend this case.

In the event that a court ultimately determines that the Company is infringing the asserted patents, it may be subject to substantial damages, which may include treble damages and/or an injunction that could require the Company to modify certain features that we currently offer.

The Company cannot predict with any degree of certainty the outcome of the suit 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 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 our operating results for such period.

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.

On April 9, 2024, Interactive Games LLC dismissed the lawsuit without prejudice.

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

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filed a second amended complaint (the “SAC”), adding as defendants DK Crown Holdings Inc.

and Crown Gaming Inc., a Delaware corporation, which are wholly-owned subsidiaries of the Company.

(“DK DE”) and Crown Gaming Inc., a Delaware corporation, which are wholly-owned subsidiaries of the Company.

The SAC largely repeats the allegations of the first amended complaint.

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Securities Matters Arising From the Hindenburg Report and Related Matters

On July 2, 2021, the first of two substantially similar federal securities law putative class actions was filed in the U.S.

District Court for the Southern District of New York against the Company and certain of its officers.

The actions alleged violations of Sections 10(b) and 20(a) of the Exchange Act on a behalf of a putative class of persons who purchased or otherwise acquired the Company's stock between December 23, 2019 and June 15, 2021.

The allegations related to, among other things, allegedly false and misleading statements and/or failures to disclose information about the Company’s business and prospects, based primarily upon the allegations concerning SBTech that were contained in a report published about the Company on June 15, 2021 by Hindenburg Research (the “Hindenburg Report”).

On November 12, 2021, the court consolidated the two actions under the caption In re DraftKings Securities Litigation and appointed a lead plaintiff.

The lead plaintiff filed a consolidated amended complaint on January 11, 2022.

On January 10, 2023, the court granted the Company's motion to dismiss and final judgment was entered dismissing the action with prejudice.

Beginning on July 9, 2021, the Company received subpoenas from the SEC seeking documents concerning, among other things, certain of the allegations raised in the Hindenburg Report, as well as the Company’s adherence to and disclosures regarding its compliance policies and procedures, and related matters.

Beginning on July 9, 2021, the Company received subpoenas from the SEC seeking documents concerning, among other things, allegations concerning SBTech that were contained in a report published about the Company on June 15, 2021 by Hindenburg Research, as well as the Company’s adherence to and disclosures regarding its compliance policies and procedures, and related matters.

The Company intends to comply with the related requests and is cooperating with the SEC’s ongoing inquiry.

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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.

Shareholder Derivative Litigation Related to Allegations in the Hindenburg Report

On October 21, 2021, the first of five substantially similar putative shareholder derivative actions was filed in Nevada by alleged shareholders of the Company.

The actions purported to assert claims on behalf of the Company against certain current and former officers and/or members of the Board of Directors of the Company and DEAC.

The two actions filed in the U.S.

District Court for the District of Nevada were subsequently consolidated, and two of the actions filed in Nevada state District Court in Clark County likewise were consolidated.

A substantially identical fifth action was filed in Nevada state District Court in Clark County and was subsequently dismissed voluntarily by the plaintiff.

The same plaintiff filed a substantially identical action in Massachusetts Superior Court, which was also dismissed voluntarily by the plaintiff.

The Nevada actions purported to assert claims on behalf of the Company for, among other things, breach of fiduciary duty and corporate waste based primarily upon the allegations concerning SBTech that were contained in the Hindenburg Report.

The federal court action in Nevada also contended that certain individuals are liable to the Company for any adverse judgment in the federal securities class actions described above under Sections 10(b) and 21D of the Exchange Act.

The Nevada actions sought unspecified compensatory damages, changes to corporate governance and internal procedures, equitable and injunctive relief, restitution, costs and attorney’s fees.

The Nevada actions were voluntarily dismissed without prejudice by the plaintiffs in state court on February 27, 2023 and in federal court on March 3, 2023.

Matters Related to the GNOG Transaction

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Stockholders Litigation.

The Company intends to vigorously defend against these claims.

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

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.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of these 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.

At a mediation held on January 24, 2024, the parties reached an agreement in principle to settle the Delaware action, which was reflected in a written settlement agreement, dated March 1, 2024, which remains, subject to, among other things, court approval.

The estimated loss was accrued as of December 31, 2023 in the accounts payable and accrued expenses line-item on the consolidated balance sheet.

The Company intends to vigorously defend the Nevada action.

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

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

Any adverse outcome in the Nevada action 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 Nevada action 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.

AG 18, LLC d/b/a/ Arrow Gaming

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

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

On 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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The Company intends to vigorously defend this suit.

Any adverse outcome in this matter could subject the Company to substantial damages and it could be restricted from offering DFS contests in Florida.

Any adverse outcome in this matter could be subject the Company to substantial damages and it could be restricted from offering DFS contests in Florida.

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

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

The Company intends to vigorously defend this case.

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 the suit 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.

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.

On March 29, 2024, the court granted DraftKings’ motion to dismiss plaintiffs’ complaint with prejudice.

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.

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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.

On December 8, 2023, plaintiffs Melissa Scanlon and Shane Harris, individually and on behalf of others similarly situated, filed a purported class action lawsuit against DraftKings in Middlesex County Superior Court of Massachusetts.

On March 26, 2024, the case was transferred to the Business Litigation Session of the Massachusetts Superior Court.

Among other things, Plaintiffs allege that the Company’s promotion that offered new customers an opportunity to earn up to 1,000 in site credits, and related advertisements, were:

(1) unfair or deceptive practices in violation of Massachusetts General Laws (“M.G.L.”) c.

93A, §§ 2, 9;

and (2) untrue and misleading advertising in violation of M.G.L.

The Plaintiffs are seeking, among other things, injunctive relief, actual damages, double or treble damages, and attorneys’ fees.

The Company intends to vigorously defend this case.

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 the suit 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.

On April 17, 2024, plaintiff Samantha Guery, individually and on behalf of all others similarly situated, filed a purported class action lawsuit against DraftKings in the United States District Court for the Southern District of New York.

Among other things, Plaintiff alleges that the Company’s promotion that offered new customers an opportunity to place their first wager “risk free” was (1) “deceptive, unlawful, fraudulent, and unfair” in violation of New York General Business Law Section 349;

and (2) false advertising under New York General Business Law Section 350.

The plaintiffs are seeking, among other things, injunctive relief, actual damages, punitive damages, treble damages, and attorneys’ fees.

The Company intends to vigorously defend this case.

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 the suit 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.

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