What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-02 compared with 2024-05-03 · 260 added, 112 removed, 525 unchanged (41% of the section changed)

3 unchanged sentences

(Amounts in thousands, except par value)

March 31, 2024

June 30, 2024

(Unaudited) December 31, 2023

24 unchanged sentences

Warrant liabilities 25,477 63,568

Long-term income tax liability 71,283 72,810

Long-term income tax liabilities 71,639 72,810

Other long-term liabilities 115,649 83,975

Total liabilities $ 2,919,753 $ 3,104,560

Commitments and contingent liabilities (Note 11)

Commitments and contingent liabilities (Note 5 and 12)

Stockholders' equity:

Class A common stock, $ 0.0001 par value;

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

900,000 shares authorized as of June 30, 2024 and December 31, 2023;

498,740 and 484,598 shares issued and 485,426 and 472,697 outstanding as of June 30, 2024 and December 31, 2023, respectively

Class B common stock, $ 0.0001 par value;

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

900,000 shares authorized as of June 30, 2024 and December 31, 2023;

393,014 shares issued and outstanding as of June 30, 2024 and December 31, 2023

Treasury stock, at cost;

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

13,314 and 11,901 shares as of June 30, 2024 and December 31, 2023, respectively

( 470,094 ) ( 412,182 )

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except loss per share data)

Three months ended March 31,

(Amounts in thousands, except per share data)

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

2024 2023 2024 2023

Revenue $ 1,104,441 $ 874,927 $ 2,279,437 $ 1,644,579

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Interest expense ( 678 ) ( 666 ) ( 1,327 ) ( 1,321 )

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

Gain (loss) on remeasurement of warrant liabilities 9,791 ( 20,041 ) ( 8,303 ) ( 37,076 )

Other (loss) gain, net ( 446 ) 45 ( 1,181 ) 64

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

Loss before income tax (benefit) provision and loss (income) from equity method investment ( 9,509 ) ( 76,296 ) ( 152,758 ) ( 471,957 )

Income tax (benefit) provision ( 73,570 ) 651 ( 73,921 ) 2,019

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

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

Loss per share attributable to common stockholders:

Basic and diluted $ ( 0.30 ) $ ( 0.87 )

Loss (income) from equity method investment 239 323 ( 91 ) 442

Net income (loss) attributable to common stockholders $ 63,822 $ ( 77,270 ) $ ( 78,746 ) $ ( 474,418 )

Earnings (loss) per share attributable to common stockholders:

Basic $ 0.13 $ ( 0.17 ) $ ( 0.17 ) $ ( 1.03 )

Diluted $ 0.10 $ ( 0.17 ) $ ( 0.17 ) $ ( 1.03 )

See accompanying notes to unaudited condensed consolidated financial statements.

4 unchanged sentences

Paid in Capital Accumulated

Deficit Accumulated Other

Deficit Accumulated

Comprehensive

Income Treasury Stock Amount Total Stockholders’ Equity

Income Treasury Stock Amount Total Stockholders'

Shares Amount Shares Amount

5 unchanged sentences

Restricted stock unit vesting 2,520 — — — — — — — —

Net loss — — — — — ( 142,568 ) — — ( 142,568 )

Net income (loss) — — — — ( 142,568 ) — — ( 142,568 )

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 257 — — — 2,586 — — — 2,586

Stock-based compensation expense — — — — 93,681 — — — 93,681

Exercise of warrants 6 — — — 217 — — — 217

Purchase of treasury stock ( 631 ) — — — — — — ( 24,413 ) ( 24,413 )

Restricted stock unit vesting 1,970 — — — — — — — —

Shares issued in connection with business combinations 7,757 1 — — 331,556 — — — 331,557

Net income (loss) — — — — — 63,822 — — 63,822

Balances at June 30, 2024 485,426 $ 47 393,014 $ 39 $ 7,744,638 $ ( 6,012,689 ) $ 36,488 $ ( 470,094 ) $ 1,298,429

Class A Common Stock Class B Common Stock Additional

Paid in Capital Accumulated

Deficit Accumulated Other

Deficit Accumulated

Comprehensive

Income Treasury Stock Amount Total Stockholders’ Equity

Income Treasury Stock Amount Total Stockholders'

Shares Amount Shares Amount

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Restricted stock unit vesting 11,757 1 — — — — — — 1

Net loss — — — — — ( 397,148 ) — — ( 397,148 )

Net income (loss) — — — — — ( 397,148 ) — — ( 397,148 )

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 income (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

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,

Cash Flows from Operating Activities:

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Depreciation and amortization 114,803 96,477

Non-cash interest expense, net 59 157

Non-cash interest income, net ( 1,471 ) ( 378 )

Stock-based compensation expense 183,755 206,593

3 unchanged sentences

Deferred income taxes ( 79,762 ) 1,993

Other expenses, net 627 ( 2,726 )

Change in operating assets and liabilities:

Other income (expenses), net 1,920 ( 3,349 )

Change in operating assets and liabilities, net of effect of acquisitions:

Receivables reserved for users 73,531 50,930

12 unchanged sentences

Acquisition of gaming licenses ( 12,695 ) ( 1,959 )

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

Cash paid for acquisition, net of cash acquired ( 392,013 ) —

Other investing activities, net ( 2,308 ) ( 482 )

1 unchanged sentence

Cash Flow from Financing Activities:

Proceeds from exercise of warrants — —

Purchase of treasury stock ( 57,912 ) ( 41,184 )

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Investing activities included in accounts payable and accrued expenses $ 1,709 $ 637

Equity consideration issued in connection with acquisitions $ 331,557 $ —

Decrease of warrant liabilities from cashless exercise of warrants $ 46,398 $ 1,470

Supplemental Disclosure of Cash Activities:

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

Cash paid for interest $ — $ —

(Decrease) increase in cash reserved for users $ ( 96,530 ) $ 88,556

See accompanying notes to unaudited condensed consolidated financial statements.

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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 March 31, 2024, 35 U.S.

As of June 30, 2024, 35 U.S.

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

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

As of June 30, 2024, the U.S.

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

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.

As of June 30, 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 June 30, 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.

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

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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.

cryptocurrency transactions.

The standard will be effective for fiscal year 2025 including interim periods therein, with early adoption permitted.

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

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

Business Combinations

Acquisition of Jackpocket Inc.

( “ Jackpocket ” )

On February 11, 2024, the Company entered into a definitive agreement (the “ Jackpocket Merger Agreement”) to acquire Jackpocket, a digital lottery app in the United States (the “Jackpocket Transaction”).

On May 22, 2024 (the “Jackpocket Closing Date”), DraftKings consummated the Jackpocket Transaction, and, under the terms of the Jackpocket Merger Agreement and subject to certain exclusions contained therein, Jackpocket stockholders received approximately $ 450.9 million of cash consideration and approximately $ 320.8 million of equity consideration.

The acquisition of Jackpocket allows DraftKings to participate in the U.S.

lottery vertical with expected ancillary benefits to its Sportsbook and iGaming product offerings by enhancing customer lifetime value and customer acquisition capabilities.

Operating results for Jackpocket on and after the Jackpocket Closing Date are included in the Company’s unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2024.

Because the Company is integrating Jackpocket's operations into its consolidated operating activities, the amount of revenue and earnings attributable to the Jackpocket business from the Jackpocket Closing Date through June 30, 2024, which is included within revenue and net income (loss) attributable to common stockholders in the Company’s unaudited condensed consolidated statements of operations, is impracticable to determine.

Preliminary Purchase Price Accounting for the Jackpocket Transaction

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

The following is a summary of the consideration issued or paid on the Jackpocket Closing Date:

Cash consideration $ 450,924

Equity consideration (1)

Total consideration $ 771,707

(1) Includes the issuance of approximately 7.5 million shares of DraftKings Inc.’s Class A common stock issued at $ 41.90 per share and $ 6.2 million of options exercisable for shares of DraftKings Inc.'s Class A common stock, which were issued to certain Jackpocket employee optionholders in exchange for their vested Jackpocket options.

The purchase price allocation for Jackpocket set forth herein is preliminary and subject to change within the measurement period, which will not extend beyond one year from the Jackpocket Closing Date.

Measurement period adjustments will be recognized in the reporting period in which the adjustment amounts are determined and may include adjustments pertaining to intangible assets acquired and tax liabilities assumed, including the calculation of deferred tax assets and liabilities.

Any such adjustments may be material.

The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed in connection with the consummation of the Jackpocket Transaction on the Jackpocket Closing Date.

The values set forth below are preliminary, pending finalization of valuation analyses:

Cash and cash equivalents $ 45,999

Cash reserved for users 23,349

Receivables reserved for users 9,092

Prepaid expenses and other current assets 4,151

Property and equipment 1,523

Intangible assets 269,736

Operating lease right-of-use assets 2,579

Deposits and other non-current assets 136

Total identifiable assets acquired $ 356,565

Liabilities assumed:

Accounts payable and accrued expenses $ 33,961

Liabilities to users 16,877

Operating lease liabilities 2,580

Other long-term liabilities 80,463

Total liabilities assumed $ 133,881

Net assets acquired (a) $ 222,684

Purchase consideration (b) $ 771,707

Goodwill (b) – (a) $ 549,023

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 recognized is not deductible for tax purposes.

Goodwill associated with the Jackpocket Transaction is assigned as of the Jackpocket Closing Date to the Company’s consolidated reporting unit.

As Jackpocket's financial results are not material to the Company’s consolidated financial statements, the Company has elected to not include pro forma results.

Intangible Assets

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

Fair Value Weighted-

Customer Relationships $ 174,000 8.0 years

Developed Technology 67,000 5.0 years

Trade Name 27,000 7.0 years

Market Access 1,736 2.9 years

Total $ 269,736

Transaction Costs

For the three and six months ended June 30, 2024, the Company incurred $ 10.4 million and $ 15.3 million in advisory, legal, accounting and management fees in connection with the Jackpocket Transaction, respectively, which are included in general and administrative expenses on the Company’s unaudited condensed consolidated statements of operations.

Acquisition of Sports IQ Analytics Inc.

On May 7, 2024, the Company acquired 100 % of the equity interests of SIQ for a mix of cash and shares of DraftKings Inc.’s Class A common stock (the “SIQ Transaction”).

The acquisition of SIQ allows DraftKings to bring further pricing and trading capabilities in-house in an effort to drive margin expansion and product differentiation.

The acquired assets and assumed liabilities of SIQ were recorded at their estimated fair values.

Goodwill associated with the SIQ Transaction is assigned as of the acquisition date to the Company’s consolidated reporting unit.

The purchase price allocation for the SIQ Transaction is preliminary as of June 30, 2024.

Goodwill recognized is not deductible for tax purposes and transaction costs were not significant.

As SIQ's financial results are not material to the Company’s consolidated financial statements, the Company has elected to not include pro forma results.

Intangible Assets

As of June 30, 2024, intangible assets, net consists of the following:

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

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Customer relationships 4.1 years 269,728 ( 127,862 ) 141,866

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

Trademarks and tradenames 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 2,884 N/A 2,884

Digital assets 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.

Amortization expense was $ 56.3 million and $ 103.6 million for the three and six months ended June 30, 2024, respectively, and $ 43.0 million and $ 86.2 million for the three and six months ended June 30, 2023, respectively.

The table below reflects expected amortization expense for the next five years of intangible assets recorded as of June 30, 2024:

Year ending December 31, Estimated Amortization

July 1, 2024 to December 31, 2024 $ 126,133

The changes in the carrying amount of goodwill for the year ended December 31, 2023 and the six months ended June 30, 2024 are:

Balance as of December 31, 2022 $ 886,373

Changes in Goodwill —

Balance as of December 31, 2023 $ 886,373

Goodwill resulting from acquisitions 569,636

Balance as of June 30, 2024 $ 1,456,009

No impairment of goodwill was recorded in the three or six months ended June 30, 2024.

As of June 30, 2024, the Company had no accumulated goodwill impairment losses.

Current and Long-term Liabilities

Revolving Line of Credit

On December 20, 2022, the Company entered into a loan and security agreement with Pacific Western Bank and Citizens Bank, as lenders (as amended, the “Credit Agreement”), which provides the Company with a revolving line of credit of up to $ 125.0 million (the “Revolving Line of Credit”).

The Credit Agreement has a maturity date of December 20, 2024 and replaced the Company’s amended and restated loan and security agreement entered into with Pacific Western Bank in October 2016, which provided a revolving line of credit of up to $ 60.0 million and was terminated in connection with the Company’s entry into the Credit Agreement.

On December 20, 2022, the Company entered into a loan and security agreement with Banc of California (formerly Pacific Western Bank) and Citizens Bank, as lenders (as amended, the “Credit Agreement”), which provides the Company with a revolving line of credit of up to $ 125.0 million (the “Revolving Line of Credit”).

The Credit Agreement maturity date was extended from December 20, 2024 to December 20, 2025, effective July 31, 2024.

The Credit Agreement replaced the Company’s amended and restated loan and security agreement entered into with Pacific Western Bank in October 2016, which provided a revolving line of credit of up to $ 60.0 million and was terminated in connection with the Company’s entry into the Credit Agreement.

Borrowings under the Credit Agreement bear interest at a variable annual rate equal to the greater of (i) 1.00 % above the prime rate then in effect and (ii) 5.00 %, and the Credit Agreement requires monthly, interest-only payments on any outstanding borrowings.

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, 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 .

As of June 30, 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 June 30, 2024 totaled $ 122.7 million.

One such covenant involves maintaining compensating cash balances.

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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.

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

As of June 30, 2024, no conditions were met to allow for the conversion of the Convertible Notes by any holder.

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 (“Capped Call Transactions”).

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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.

As of June 30, 2024, the Company’s convertible debt balance was $ 1,255.1 million, net of unamortized debt issuance costs of $ 9.9 million.

The amortization of debt issuance costs was $ 0.7 million and $ 1.3 million for the three and six months ended June 30, 2024, respectively, and $ 0.7 million and $ 1.3 million for the three and six months ended June 30, 2023, respectively, 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 $ 1,046.4 million and $ 1,025.6 million as of June 30, 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

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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 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.

As of June 30, 2024 and December 31, 2023, the Company’s estimated contingent liability for indirect taxes was $ 80.3 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 March 31, 2024, there were no Public Warrants outstanding and 0.4 million Private Warrants outstanding.

As of June 30, 2024, there were no Public Warrants outstanding and 0.4 million Private Warrants outstanding.

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

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

As of June 30, 2024, there were 2.9 million GNOG Private Warrants outstanding, convertible into approximately 1.1 million shares of DraftKings Inc.'s Class A common stock.

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.

As of June 30, 2024, the fair value of the Company’s warrant liability was $ 25.5 million.

Due to fair value changes, the Company recorded a gain on the remeasurement of its warrant liabilities of $ 9.8 million for the three months ended June 30, 2024 and a loss of $ 20.0 million for the three months ended June 30, 2023.

During the six months ended June 30, 2024 and 2023, the Company recorded losses on the remeasurement of its warrant liabilities of $ 8.3 million and $ 37.1 million, respectively.

During the three and six months ended June 30, 2024, 0.1 million and 1.0 million Private Warrants were exercised, respectively.

There were no GNOG Private Warrants exercised during the three months ended June 30, 2024, and 2.9 million GNOG Private Warrants were exercised during the six months ended June 30, 2024.

These GNOG Private Warrants exercises resulted in the issuance of approximately 1.1 million shares of DraftKings Inc.

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

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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 March 31, 2024 and December 31, 2023 based on the three-tier fair value hierarchy:

March 31, 2024

The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value as of June 30, 2024 and December 31, 2023 based on the three-tier fair value hierarchy:

June 30, 2024

Level 1 Level 2 Level 3 Total

Cash equivalents:

Money market funds $ 178,092 (1)

$ — $ — $ 178,092

Other current assets:

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Warrant liabilities — 25,477 (5)

Other long-term liabilities 21,130 (6)

Total $ — $ 93,555 $ — $ 114,685

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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.

There were no new Level 3 derivative instruments sold, purchased by or issued to the Company during the six months ended June 30, 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.

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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

June 30, 2024

December 31, 2023

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

(6) Represents the contingent consideration issuable to former SIQ securityholders in connection with the SIQ Transaction upon the achievement of certain performance targets.

The Company measures this contingent consideration at fair value using a Monte Carlo simulation in an option pricing framework and, accordingly, classifies these liabilities as Level 3.

The significant unobservable inputs used to measure the fair value include a revenue risk premium of 5.1 %, revenue volatility of 17.3 %, operational leverage ratio of 70.0 %, as well as management judgment regarding the probability of achieving a future performance target.

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

Changes to fair value of these instruments are recorded in Other (loss) gain, net on the consolidated statements of operations.

Revenue Recognition

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The deferred revenue balances were as follows:

Three months ended March 31,

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

2024 2023 2024 2023

Deferred revenue, beginning of the period $ 128,869 $ 132,213 $ 174,212 $ 133,851

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Revenue Disaggregation

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

Three months ended March 31,

Disaggregation of revenue for the three and six months ended June 30, 2024 and 2023 is as follows:

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

2024 2023 2024 2023

Online gaming $ 1,087,327 $ 849,839 $ 2,239,513 $ 1,585,028

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Total Revenue $ 1,104,441 $ 874,927 $ 2,279,437 $ 1,644,579

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

Online gaming includes online Sportsbook, iGaming, digital lottery, 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.

The opening and closing balances of the Company's accounts receivable from contracts with customers were $ 47.5 million and $ 65.0 million for the six months ended June 30, 2024, respectively, and $ 160.1 million and $ 109.2 million for the six months ended June 30, 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 three months ended March 31, 2024:

The following table shows restricted stock unit (“RSU”) and stock option activity for the six months ended June 30, 2024:

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

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Forfeited — ( 864 ) — ( 271 ) — ( 93 ) ( 1,228 ) — 24.20

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

Outstanding at June 30, 2024 10,266 19,072 1,387 14,899 10,276 901 56,801 $ 7.63 $ 27.22

As of June 30, 2024, total unrecognized stock-based compensation expense of $ 750.6 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 six months ended June 30, 2024 and 2023:

Three Months Ended June 30, 2024 Three Months Ended June 30, 2023

Options RSUs Total Options RSUs Total

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Total $ 7,934 $ 82,286 $ 90,220 $ 2,546 $ 86,647 $ 89,193

Six Months Ended June 30, 2024 Six Months Ended June 30, 2023

Options RSUs Total Options RSUs Total

Time-based (1)

$ 9,978 $ 82,797 $ 92,775 $ 6,390 $ 83,559 $ 89,949

— 89,801 89,801 — 59,887 59,887

— 1,179 1,179 — 56,757 56,757

Total $ 9,978 $ 173,777 $ 183,755 $ 6,390 $ 200,203 $ 206,593

(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.

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,

The Company’s (benefit) provision for income taxes for the three and six months ended June 30, 2024 and 2023 is as follows:

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

2024 2023 2024 2023

Income tax (benefit) provision $ ( 73,570 ) $ 651 $ ( 73,921 ) $ 2,019

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.

The effective tax rates for the three months ended June 30, 2024 and 2023 were 773.6 % and ( 0.9 )%, respectively, and the effective tax rates for the six months ended June 30, 2024 and 2023 were 48.4 % and ( 0.4 )%, respectively.

The difference between the Company’s effective tax rates for the three and six month periods in 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 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 (in dollars):

Basic and diluted $ ( 0.30 ) $ ( 0.87 )

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:

March 31, 2024 March 31, 2023

Additionally, the Company recorded a discrete income tax benefit of $ 75.8 million during the second quarter of 2024, which was attributable to non-recurring partial releases of the Company's U.S.

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

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 of the deferred tax assets will not be realized.

Earnings (Loss) Per Share

The table below reconciles basic and diluted earnings per share of the Company's Class A common stock for the periods presented:

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

2024 2023 2024 2023

Net income (loss) attributable to common stockholders – basic $ 63,822 $ ( 77,270 ) $ ( 78,746 ) $ ( 474,418 )

Gain on remeasurement of warrant liabilities ( 9,791 ) — — —

Net income (loss) attributable to common stockholders – diluted $ 54,031 $ ( 77,270 ) $ ( 78,746 ) $ ( 474,418 )

Weighted-average Class A common stock outstanding – basic 479,307 462,432 476,788 458,910

Weighted-average diluted impact of options and RSUs (1)

Weighted-average diluted impact of convertible notes (2)

Weighted-average diluted impact of warrant liabilities (1)

Weighted-average Class A common stock outstanding – diluted 518,785 462,432 476,788 458,910

Anti-dilutive securities excluded from the calculation of diluted earnings per share 282 N/A N/A N/A

Basic earnings per share attributable to common stockholders:

$ 0.13 $ ( 0.17 ) $ ( 0.17 ) $ ( 1.03 )

Diluted earnings per share attributable to common stockholders:

$ 0.10 $ ( 0.17 ) $ ( 0.17 ) $ ( 1.03 )

(1) Calculated using the treasury stock method

(2) Calculated using the if-converted method

There were no preferred or other dividends declared for the three and six months ended June 30, 2024.

The below table includes the total securities potentially dilutive for the six month period ending June 30, 2024 and the three and six month period ending June 30, 2023 which have been excluded from the computation of diluted earnings (loss) per share as their effect is anti-dilutive.

June 30, 2024 June 30, 2023

Class A common stock resulting from exercise of all warrants 1,441 3,648

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

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

There were no receivables related to these services as of June 30, 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.

As of June 30, 2024, the Company had invested a total of $ 8.4 million of the total commitment.

Transactions with a Former Director and their Immediate Family Members

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.

For the three and six months ended June 30, 2024, the Company had no sales to entities owned by an immediate family member of a former director of the Company.

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 no associated accounts receivable balance as of June 30, 2024 or December 31, 2023.

On each of March 30, 2024 and 2023, the Company renewed 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 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.

During the three and six months ended June 30, 2024, the Company incurred $ 0.1 million and $ 0.3 million of expense under the Aircraft Leases as well as $ 0.3 million for upgrades related to the aircraft.

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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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 .

As of June 30, 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 expense are as follows:

Three months ended March 31,

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

2024 2023 2024 2023

Operating lease cost $ 5,042 $ 3,490 $ 9,870 $ 8,519

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Total lease cost $ 5,464 $ 5,503 $ 12,151 $ 12,744

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,

Supplemental cash flow and other information for the six months ended June 30, 2024 and 2023 related to operating leases was as follows:

Six months ended June 30,

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 $ 2,579 $ 366

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 weighted-average remaining lease term and weighted-average discount rate for the Company’s operating leases were 6.9 years and 6.5 % as of June 30, 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.

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Years Ending December 31,

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

From July 1, 2024 to December 31, 2024 $ 8,655

Thereafter 39,685

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Years Ending December 31,

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

From July 1, 2024 to December 31, 2024 $ 249,782

Thereafter 181,979

Total $ 1,235,823

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.

As of June 30, 2024 , the Company has been issued $ 265.0 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.

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Stockholders Litigation.

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.

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.

On July 9, 2024, the Delaware Court entered its Order and Final Judgment approving the settlement and dismissing the action.

The deadline to file an appeal is August 8, 2024.

If no appeal is filed on or before that date, the Order and Final Judgment dismissing the action becomes final.

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

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

Securities Matters Related to DraftKings Marketplace

Securities Matters Arising From DraftKings Marketplace and Related Matters

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”).

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The Company intends to vigorously defend this matter.

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.

Beginning in July 2023, the Company received a subpoena from the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts and the United States Securities and Exchange Commission seeking documents and/or requesting answers to interrogatories concerning, among other things, DK Marketplace NFTs that are sold on DK Marketplace, the blockchain on which the NFTs were minted and digital assets and validator nodes associated with that blockchain, and related matters.

We intend to comply with these requests.

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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 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.

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On June 10, 2024, Plaintiff Matthew McAfee, individually and on behalf of all others similarly situated, filed a purported class action lawsuit against DraftKings in the Hamilton County Superior Court, State of Indiana.

Among other things, Plaintiff alleges that those customers who had winning bets placed and accepted on the October 24, 2023 Lakers versus Nuggets basketball game that were subsequently canceled by DraftKings for obvious error were not timely canceled and should have been paid.

Plaintiff brings claims for:

(1) Indiana Deceptive Consumer Sales Act – Incurable Deceptive Act;

(2) Indiana Deceptive Consumer Sales Act – Uncured Deceptive Act;

and (3) breach of contract.

Plaintiff seeks, among other things, actual and statutory damages, treble and exemplary damages, interest, and attorney fees and costs.

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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The final resolution of that audit, and other audits or litigation, may differ from the amounts recorded in these consolidated financial statements and may materially affect the Company’s consolidated financial statements in the period or periods in which that determination is made.

Subsequent Events

Stock Repurchase Authorization

On July 30, 2024, the Company’s Board of Directors authorized the repurchase of an aggregate of up to $ 1.0 billion of DraftKings Inc.’s Class A common stock (the “Stock Repurchase Program”).

DraftKings may make repurchases of its Class A common stock through open market purchases, privately negotiated transactions or other transactions in accordance with applicable securities laws, subject to market conditions and other factors.

The Company’s Stock Repurchase Program does not require it to acquire any specific number or amount of Class A common stock and may be terminated at any time.

The Company may enter into Rule 10b5-1 plans from time to time to facilitate repurchases of its Class A common stock in connection with its Stock Repurchase Program.

Discontinuance of Reignmakers and NFT Marketplace

Effective July 30, 2024, the Company discontinued Reignmakers and our NFT Marketplace.

The Company is not yet able to reliably estimate the financial impact of the discontinuation.

The Company does not believe, based on currently available information, that the discontinuation of Reignmakers and our NFT Marketplace 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.

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