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Item 7. Management’s Discussion and Analysis

2025-02-14 compared with 2024-02-16 · 176 added, 79 removed, 236 unchanged (52% of the section changed)

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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.

On May 5, 2022, we acquired GNOG in an all-stock transaction to enable us to leverage Golden Nugget’s established brand to broaden our reach into new customer segments and enhance the combined company’s iGaming product offering through our vertically-integrated technology stack and GNOG’s unique capabilities, including live dealer.

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

Our mission is to make life more exciting by responsibly creating the world’s favorite real-money games and betting experiences.

We accomplish this by creating an environment where our users can find enjoyment and fulfillment through Sportsbook, iGaming and DFS, as well as media and other online consumer product offerings.

We accomplish this by creating an environment where our users can find enjoyment and fulfillment through Sportsbook, iGaming, DFS, digital lottery courier, as well as our other product offerings.

We are also highly focused on our responsibility as a steward of this new era in real-money gaming.

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Together, these investments have enabled us to create a leading product built on scalable technology, while attracting a user base that has resulted in the rapid growth of our business.

Our priorities are to (a) continue to invest in our product offerings, (b) launch our product offerings in new jurisdictions, (c) create replicable and predictable state-level unit economics in Sportsbook and iGaming and (d) expand our other consumer product offerings.

When we launch our Sportsbook and iGaming product offerings in a new jurisdiction, we invest heavily in user acquisition, retention and cross-selling until the new jurisdiction provides a critical mass of users engaged across our product offerings.

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Our path to profitability on an annual basis is based on the acceleration of positive contribution profit growth driven by increased revenue and gross profit generation from ongoing efficient customer acquisition enabled by the transition from local to regional to national advertising, strong customer retention, improved monetization from frequency and higher hold percentage, as well as scale benefits from investments in our product and technology and general and administrative functions.

On a consolidated Adjusted EBITDA basis, we expect to achieve profitability on an annual basis when total contribution profit

exceeds the fixed costs of our business, which depends, in part, on the percentage of the U.S.

In any given period, we expect to achieve profitability on a consolidated Adjusted EBITDA basis when total contribution profit exceeds the fixed costs of our business, which depends, in part, on the percentage of the U.S.

adult population that has access to our product offerings and the other factors summarized in the section entitled “Cautionary Statement Regarding Forward-Looking Statements”.

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Year Ended December 31,

(amounts in thousands) 2023 2022 2021

(amounts in thousands, except per share amounts) 2024 2023 2022

Revenue $ 4,767,699 $ 3,665,393 $ 2,240,461

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181,307 (151,035) (721,781)

Basic and Diluted Loss Per Share (1.05) (1.73) (3.16)

Adjusted Earnings (Loss) Per Share (2)

0.24 (0.41) (1.77)

(1) Adjusted EBITDA is a non-GAAP financial measure.

See “Non-GAAP Information” below for additional information about this measure and a reconciliation of this measure to the most directly comparable financial measure calculated in accordance with U.S.

Revenue increased by $1,424.9 million in 2023, compared to 2022, primarily due to the strong performance of our Sportsbook and iGaming product offerings as a result of robust customer acquisition and retention, the successful launches of those product offerings in additional jurisdictions, and improved promotional reinvestment for Sportsbook and iGaming.

(2) Adjusted Earnings (Loss) Per Share is a non-GAAP financial measure.

Revenue increased by $1,102.3 million in 2024, compared to 2023, primarily due to the strong performance of our Sportsbook and iGaming product offerings as a result of continued healthy customer engagement, efficient acquisition of new customers, the expansion of the Company’s Sportsbook product offering into new jurisdictions, higher structural Sportsbook hold percentage, improved promotional reinvestment for Sportsbook and iGaming, and the impact of our acquisition of Jackpocket Inc.

(“Jackpocket”), which was completed on May 22, 2024 (the “Jackpocket Transaction”).

Key Performance Indicators

Monthly Unique Payers (“MUPs”) .

We define MUPs as the number of unique paid users per month who had one or more real-money, paid engagements across one or more of our Sportsbook, iGaming, DFS, or other consumer product offerings via our technology.

We define MUPs as the number of unique paid users per month who had one or more real-money, paid engagements across one or more of our Sportsbook, iGaming, DFS, digital lottery courier or other product offerings via our technology.

For reported periods longer than one month, we average the MUPs for the months in the reported period.

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Average Revenue per MUP (“ARPMUP”).

We define and calculate ARPMUP as the average monthly revenue, excluding revenue from gaming software services, for a reporting period, divided by the average number of MUPs for the same period.

We define and calculate ARPMUP as the average monthly revenue for a reporting period, divided by the average number of MUPs for the same period.

ARPMUP is a key indicator of our ability to drive usage and monetization of our product offerings.

The chart below presents our ARPMUP for 2022 , 2023 and 2024 :

The increase in MUPs for 2023, compared to 2022, primarily reflects strong unique payer retention and acquisition across our Sportsbook and iGaming product offerings as well as the expansion of our Sportsbook and iGaming product offerings into new jurisdictions, partially offset by a decline in DFS MUPs.

ARPMUP increased in 2023 compared to 2022, primarily due to structural improvement in our Sportsbook hold rate and improved promotional reinvestment for Sportsbook and iGaming.

The increase in MUPs for 2024, compared to 2023, primarily reflects strong unique payer retention and acquisition across our Sportsbook and iGaming product offerings, as well as the expansion of our Sportsbook product offering into new jurisdictions and the impact of the Jackpocket Transaction.

Excluding the impact of the Jackpocket Transaction, MUPs increased 0.6 million or 23.5% to 3.3 million for 2024, compared to 2023.

ARPMUP decreased in 2024, compared to 2023, primarily due to lower ARPMUP for Jackpocket customers, compared to DraftKings’ existing product offerings prior to the Jackpocket Transaction, which was partially offset by structural improvement in our Sportsbook hold and improved promotional reinvestment for Sportsbook and iGaming.

Excluding the impact of the Jackpocket Transaction, ARPMUP increased $5, or 4.5% to $118 for 2024 compared to 2023.

Sportsbook Handle.

We define Sportsbook Handle as the total amount of settled customer wagers on our Sportsbook product offering.

Sportsbook Handle provides useful information to investors and management as it is a key indicator of volume and customer engagement on our Sportsbook product offering that is not impacted by variability of sport outcomes and provides important insight into underlying growth trends.

We do not utilize handle information to track performance of our iGaming products because iGaming is generally not subject to the same variability in outcomes.

Sportsbook Net Revenue Margin.

We define Sportsbook Net Revenue Margin as Sportsbook revenue as a percentage of Sportsbook Handle.

This provides useful information to investors and management as it is a key indicator in measuring the combined impact of our overall margin on Sportsbook product offering and promotional reinvestment.

The chart below presents our Sportsbook Handle, Sportsbook Net Revenue Margin, and revenue disaggregation for 2024, 2023, and 2022:

Year Ended December 31,

(amounts in thousands) 2024 2023 2022

Sportsbook Handle $ 48,061,148 $ 37,436,016 $ 23,374,156

Sportsbook Revenue 2,902,857 2,106,403 1,032,785

Sportsbook Net Revenue Margin 6.0 % 5.6 % 4.4 %

Sportsbook Revenue 2,902,857 2,106,403 1,032,785

iGaming Revenue 1,507,808 1,216,749 821,847

Other Revenue 357,034 342,241 385,829

Total Revenue $ 4,767,699 $ 3,665,393 $ 2,240,461

The increase in Sportsbook Handle of $10.6 billion, or 28.4% in 2024, compared to 2023, and $14.1 billion, or 60.2% in 2023, compared to 2022, is primarily due to MUPs increasing in 2024 as compared to 2023, and in 2023, as compared to 2022.

The increase in MUPs was due to strong player retention and acquisition across our Sportsbook product offering and the expansion of our Sportsbook product offering into new jurisdictions.

The increase in Sportsbook Net Revenue Margin of 0.4 percentage points in 2024, compared to 2023, and 1.2 percentage points in 2023, compared to 2022, is primarily due to structural improvement in our Sportsbook hold percentage and improved promotional reinvestment.

iGaming revenue increased $291.1 million , or 23.9% , in 2024, compared to 2023, and $394.9 million , or 48.1% , in 2023, compared to 2022 due to an increase in MUPs and an increase in ARPMUP for the product offering.

Other revenue increased $14.8 million , or 4.3% , in 2024, compared to 2023, primarily due to the acquisition of Jackpocket, offset by a reduction in revenue related to our DFS product offering as competition increased and customers shifted to Sportsbook as well as a reduction of gaming software revenue related to winding down external SBTech customers.

Other revenue decreased $43.6 million , or 11.3% , in 2023, compared to 2022, primarily due to our DFS product offering as competition increased and customers shifted to Sportsbook, as well as a reduction of gaming software revenue related to winding down external SBTech customers.

Non-GAAP Information

This Annual Report includes Adjusted EBITDA, which is a non-GAAP financial measure that we use to supplement our results presented in accordance with U.S.

We believe Adjusted EBITDA is useful in evaluating our operating performance, similar to measures reported by our publicly-listed U.S.

competitors, and regularly used by security analysts, institutional investors and other interested parties in analyzing operating performance and prospects.

Adjusted EBITDA is not intended to be a substitute for any U.S.

This Annual Report includes Adjusted EBITDA and Adjusted Earnings (Loss) Per Share, which are non-GAAP financial measures that we use to supplement our results presented in accordance with U.S.

We believe Adjusted EBITDA and Adjusted Earnings (Loss) Per Share are useful in evaluating our operating performance, similar to measures reported by our publicly-listed U.S.

competitors, and regularly used by security analysts, institutional investors and other interested parties in

analyzing operating performance and prospects.

Adjusted EBITDA and Adjusted Earnings (Loss) Per Share are not intended to be a substitute for any U.S.

GAAP financial measure.

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and other non-recurring and non-operating costs or income, as described in the reconciliation below.

We define and calculate Adjusted Earnings (Loss) Per Share as basic or diluted earnings (loss) per share attributable to common stockholders adjusted for the impact of amortization of acquired intangible assets;

discrete tax benefits attributed to acquisitions;

stock-based compensation;

transaction-related costs;

litigation, settlement and related costs;

advocacy and other related legal expenses;

gain or loss on remeasurement of warrant liabilities;

and other non-recurring and non-operating costs or income, as described in the reconciliation below.

We include non-GAAP financial measures because they are used by management to evaluate our core operating performance and trends and to make decisions regarding the allocation of capital and new investments.

Adjusted EBITDA excludes certain expenses that are required in accordance with U.S.

Adjusted EBITDA and Adjusted Earnings (Loss) Per Share exclude certain expenses that are required in accordance with U.S.

GAAP because they are non-recurring items (for example, in the case of transaction-related costs and advocacy and other related legal expenses), non-cash expenditures (for example, in the case of depreciation and amortization, remeasurement of warrant liabilities and stock-based compensation), or non-operating items which are not related to our underlying business performance (for example, in the case of interest income and expense and litigation, settlement and related costs).

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Income tax (benefit) provision (2)

(86,341) 10,170 (67,866)

Stock-based compensation (3)

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Loss (gain) on remeasurement of warrant liabilities 4,945 57,543 (29,396)

Other non-recurring, special project and non-operating (income) costs (6)

Other non-recurring and non-operating costs (income) (7)

38,385 1,190 (16,764)

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(1) The amounts include the amortization of acquired intangible assets of $159.8 million, $117.3 million, and $106.1 million for 2024, 2023, and 2022, respectively.

(2) The Company recorded a discrete income tax benefit of $87.3 million and $70.1 million during 2024 and 2022, respectively, which was attributable to non-recurring partial releases of the Company’s U.S.

valuation allowance as a result of the purchase accounting for the Jackpocket Transaction and the Simplebet Transaction in 2024 and the GNOG Transaction in 2022.

(3) Reflects stock-based compensation expenses resulting from the issuance of awards under incentive plans.

(3) Includes capital markets advisory, consulting, accounting and legal expenses related to evaluation, negotiation and integration costs incurred in connection with pending or completed transactions and offerings, including costs relating to the GNOG Transaction in 2022 and 2021.

(4) Includes capital markets advisory, consulting, accounting and legal expenses related to the evaluation, negotiation, and consummation of transactions and offerings that are under consideration, pending, or completed, as well as integration costs related to acquisitions.

(5) Primarily includes external legal costs related to litigation and litigation settlement costs deemed unrelated to our core business operations.

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This adjustment excludes (i) costs relating to advocacy efforts and other legal expenses in jurisdictions where we do not operate that are incurred in the ordinary course of business and (ii) costs relating to advocacy efforts and other legal expenses incurred in jurisdictions where related legislation has been passed and we currently operate.

For 2022, those costs primarily related to our support of Proposition 27 in California.

For 2021, those costs primarily related to our support of Proposition 27 in California and our support of the sports betting ballot initiative in Florida.

(6) Primarily includes the change in fair value of certain financial assets, as well as our equity method share of investee’s losses and other costs relating to non-recurring and non-operating items.

Due to the timing of the consummation of the GNOG Transaction, the above periods, to the extent applicable, exclude GNOG’s operations prior to the GNOG Closing Date of May 5, 2022.

(7) Includes the change in fair value of certain financial assets, as well as our equity method share of investee’s losses and other costs relating to non-recurring and non-operating items.

For 2024, this amount includes a $12.9 million loss related to the changes in fair value of certain financial instruments as well as $27.8 million in expenses related to the discontinuance of our Reignmakers product offering, $7.5 million in expenses related to the termination of a market access agreement, and a $5.8 million loss on the sale of Vegas Sports Information Network, LLC ("VSIN"), offset by $20.9 million received related to gaming tax refunds as a result of audits and appeals related to prior periods.

Adjusted Earnings (Loss) Per Share

The table below presents the Company’s Adjusted Earnings (Loss) Per Share reconciled to its basic loss per share attributable to common stockholders, which is the most directly comparable financial measure calculated in accordance with GAAP, for the periods indicated:

Year Ended December 31,

2024 2023 2022

Basic loss per share attributable to common stockholders $ (1.05) $ (1.73) $ (3.16)

Adjusted for:

Amortization of acquired intangible assets (1)

0.33 0.25 0.24

Discrete tax benefit attributed to acquisitions (2)

(0.18) — (0.16)

Stock-based compensation (3)

0.79 0.86 1.33

Transaction-related costs (4)

0.05 0.01 0.03

Litigation, settlement, and related costs (5)

0.17 0.07 0.02

Advocacy and other related legal expenses (6)

Loss (gain) on remeasurement of warrant liabilities 0.01 0.12 (0.07)

Other non-recurring and non-operating costs (income) (7)

0.08 — (0.04)

Adjusted Earnings (Loss) Per Share* $ 0.24 $ (0.41) $ (1.77)

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* Weighted average number of shares used to calculate Adjusted Earnings (Loss) Per Share for the years ended December 31, 2024, 2023, and 2022 was 482.0 million, 462.6 million, and 436.5 million, respectively;

totals may not sum due to rounding.

(1) The amounts include the amortization of acquired intangible assets of $159.8 million, $117.3 million, and $106.1 million for 2024, 2023, and 2022, respectively.

valuation allowance as a result of the purchase accounting for the Jackpocket Transaction and the Simplebet Transaction in 2024 and the GNOG Transaction in 2022.

(3) Reflects stock-based compensation expenses resulting from the issuance of awards under incentive plans.

(5) Primarily includes external legal costs related to litigation and litigation settlement costs deemed unrelated to our core business operations.

(6) Reflects non-recurring and non-ordinary course costs relating to advocacy efforts and other legal expenses in jurisdictions where we do not operate certain product offerings and are actively seeking licensure, or similar approval, for those product offerings.

(7) Includes the change in fair value of certain financial assets, as well as our equity method share of investee’s losses and other costs relating to non-recurring and non-operating items.

a $5.8 million loss on the sale of VSIN, offset by $20.9 million received related to gaming tax refunds as a result of audits and appeals related to prior periods.

Key Factors Affecting Our Results

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We grow our business by attracting new paid users to our product offerings and increasing their level of engagement with our product offerings over time.

To effectively attract and retain paid users and to re-engage former paid users, we invest in a

variety of marketing channels in combination with personalized customer promotions, most of which can be used across all of our product offerings (such as free contest entries or bets or matching deposits).

To effectively attract and retain paid users and to re-engage former paid users, we invest in a variety of marketing channels in combination with personalized customer promotions, most of which can be used across all of our product offerings (such as free contest entries or bets or matching deposits).

These investments and personalized promotions are intended to increase consumer awareness and drive engagement.

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Our revenue is impacted by variations in the hold percentage (the ratio of net win to total amount wagered) on bets placed on, or the actual outcome of, games or events on which users bet.

Although our product offerings generally perform within a defined statistical range of outcomes, actual outcomes may vary for any given period, and a single large bet or the result of a significant sporting event can have a sizeable impact on our short-term financial performance.

Although our product offerings generally perform within a defined statistical range of outcomes, actual outcomes

may vary for any given period, and a single large bet or the result of a significant sporting event can have a sizeable impact on our short-term financial performance.

Our hold is also affected by factors that are beyond our control, such as a user’s experience and behavior, the mix of games played, the financial resources of users and the volume of bets placed.

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The following table sets forth a summary of our consolidated results of operations for the years indicated, and the changes between periods.

Due to the timing of the consummation of the GNOG Transaction, the below periods exclude GNOG’s operations prior to the GNOG Closing Date of May 5, 2022.

Year Ended December 31,

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Loss from operations (608,999) (789,225) 180,226 (22.8) %

Interest income (expense), net 55,739 18,702 37,037 198.0 %

(Loss) gain on remeasurement of warrant liabilities (57,543) 29,396 (86,939) (295.8) %

Other (loss) income, net (224) 20,700 (20,924) (101.1) %

Interest income, net 44,300 55,739 (11,439) (20.5) %

Loss on remeasurement of warrant liabilities (4,945) (57,543) 52,598 (91.4) %

Other loss, net (23,514) (224) (23,290) NM

Loss before income tax (benefit) provision and loss from equity method investment (593,158) (791,253) 198,095 (25.0) %

Income tax (benefit) provision 10,170 (67,866) 78,036 115.0 %

Loss (gain) from equity method investment 719 2,895 (2,176) (75.2) %

Income tax (benefit) provision (86,341) 10,170 (96,511) NM

Loss from equity method investment 468 719 (251) (34.9) %

Net Loss $ (507,285) $ (802,142) $ 294,857 (36.8) %

* Percentage changes that are considered not meaningful are denoted with NM.

Revenue increased $1,102.3 million, or 30.1%, to $4,767.7 million in 2024, from $3,665.4 million in 2023.

The increase was primarily attributable to our online gaming revenues, which increased $1,450.5 million, or 68.9%, to $3,557.2 million in 2023 primarily due to MUPs increasing by 39.5% as compared to 2022.

The increase in MUPs was due to strong player retention and acquisition across our Sportsbook and iGaming product offerings, as well as the expansion of our Sportsbook and iGaming product offerings into new jurisdictions.

Online gaming revenues also increased due to structural improvement in our Sportsbook hold rate and improved promotional reinvestment for our Sportsbook and iGaming product offerings, which contributed to ARPMUP growth of 17.7% compared to 2022.

The increase was primarily attributable to our Sportsbook and iGaming product offerings which increased $1,087.5 million , or 32.7% , to $4,410.7 million in 2024 due to MUPs increasing by 39.3% as compared to 2023, partially offset by ARPMUP decreasing by 6.2% .

The increase in MUPs was due to strong player retention and acquisition across our Sportsbook and iGaming product offerings, the expansion of our Sportsbook product offering into new jurisdictions, including the launch of our Sportsbook product offering in Ohio, Massachusetts, Kentucky and Maine throughout 2023, as well as in Vermont, North Carolina and Washington, D.C.

in 2024, and the Jackpocket Transaction.

The decrease in ARPMUP was due to lower ARPMUP for Jackpocket customers compared to customers for DraftKings’ existing product offerings prior to the Jackpocket Transaction, partially offset by structural improvement in our Sportsbook hold percentage, an improved Sportsbook Net Revenue Margin, and improved promotional reinvestment for Sportsbook and iGaming.

Cost of Revenue.

Cost of revenue increased $658.4 million, or 28.7%, to $2,950.6 million in 2024, from $2,292.2 million in 2023.

Our online gaming product offerings accounted for substantially all of this increase, reflecting growth in revenue from our expanded product and jurisdictional footprint, including the launch of our Sportsbook product offering in Kentucky, Maine, Maryland, Massachusetts, and Ohio in 2023.

In particular, the cost of revenue increase was primarily attributable to an increase in our variable expenses, such as product taxes and payment processing fees, which increased $516.1 million and

$107.3 million, respectively.

The remaining increase was primarily attributable to an increase in our variable platform costs and revenue share arrangements resulting from additional customer activity.

Cost of revenue as a percentage of revenue decreased by 3.7 percentage points to 62.5% in 2023 from 66.2% in 2022, reflecting, in part, structural improvement in our Sportsbook hold rate and improved promotional reinvestment for our Sportsbook and iGaming product offerings, partially offset by a change in revenue mix from our more mature DFS product offering to our Sportsbook and iGaming product offerings, which, in general, produce revenue at a higher cost per revenue dollar relative to our more mature DFS product offering.

The increase was due, in part, to revenue growth from our expanded product and jurisdictional footprint.

In particular, the cost of revenue increase was primarily attributable to an increase in gaming taxes of $402.0 million, partially due to the increase in our online sportsbook tax rate in Illinois in July 2024, and increases in other variable expenses such as processing fees, platform costs, and revenue share arrangements which increased $188.1 million, due to additional customer activity .

The remaining increase was primarily attributable to an increase in the amortization of intangible assets of $68.6 million .

Cost of revenue as a percentage of revenue decreased by 0.6 percentage points to 61.9% in 2024 from 62.5% in 2023, reflecting, in part, structural improvement in our Sportsbook hold percentage, an improved Sportsbook Net Revenue Margin, and improved promotional reinvestment for our Sportsbook and iGaming product offerings, partially offset by a change in

revenue mix from our more mature DFS product offering to our Sportsbook and iGaming product offerings, which, in general, produce revenue at a higher cost per revenue dollar relative to our more mature DFS product offering.

Sales and Marketing.

Sales and marketing expense increased $64.2 million, or 5.3%, to $1,264.9 million in 2024, from $1,200.7 million in 2023.

The increase was primarily attributable to an increase of $19.5 million in advertising costs spent to acquire users, partially offset by a reduction in compensation expense.

The increase was primarily attributable to an increase of $65.2 million in advertising costs spent to acquire significantly more new users in 2024 compared to 2023.

Product and Technology.

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General and Administrative.

General and administrative expense decreased $157.2 million, or 20.6%, to $606.6 million in 2023 from $763.7 million in 2022.

This decrease was primarily driven by a decrease in stock-based compensation expense of $174.1 million, a reduction in transaction-related costs of $14.3 million and a reduction in advocacy expense of $16.6 million partially offset by an increase in non-core litigation costs of $27.5 million and in cash-based compensation expense due to an increase in headcount.

Gain on Remeasurement of Warrant Liabilities.

We recorded a loss on remeasurement of warrant liabilities of $57.5 million in 2023, compared to a gain of $29.4 million in 2022 primarily due to changes in the underlying share price of our Class A common stock.

Other Income, net .

Other income (loss), net was a loss of $0.2 million in 2023, as compared to income of $20.7 million in 2022.

This decrease was primarily attributable to an increase in the fair value of certain financial assets recorded in 2022.

General and administrative expense increased $157.5 million, or 26.0%, to $764.1 million in 2024 from $606.6 million in 2023.

This increase was primarily driven by an increase in transaction-related costs of $23.3 million , an increase in non-core litigation cost of $46.7 million , an increase in advocacy expenses of $16.0 million, $27.8 million in expense related to the discontinuance of Reignmakers product offering, and $7.5 million in expenses related to the termination of a market access agreement .

Interest Income, net.

Interest income, net decreased $11.4 million, or 20.5%, to $44.3 million in 2024 from $55.7 million in 2023.

This decrease was primarily due to a decrease in interest income as a result of lower cash equivalent balances and interest rates.

Loss on Remeasurement of Warrant Liabilities.

We recorded a loss on remeasurement of warrant liabilities of $4.9 million in 2024, compared to a loss of $57.5 million in 2023 primarily due to changes in the underlying share price of our Class A common stock.

Other Loss, net .

Other loss, net was a loss of $23.5 million in 2024, as compared to loss of $0.2 million in 2023.

This increase was primarily attributable to a $5.8 million loss on the sale of VSIN, and a $12.9 million decrease in the fair value of certain financial assets.

Income Tax (Benefit) Provision .

We recorded an income tax provision of $10.2 million in 2023, as compared to an income tax benefit of $67.9 million in 2022.

This change was primarily due to a discretely recorded income tax benefit of $70.1 million, which was attributable to non-recurring partial releases of the Company’s U.S.

valuation allowance as a result of the GNOG purchase price allocation in 2022.

We recorded an income tax benefit of $86.3 million in 2024, as compared to an income tax expense of $10.2 million in 2023.

This change was primarily due to an income tax benefit of $87.3 million, which was attributable to non-recurring partial releases of the Company's U.S.

valuation allowance as a result of the purchase accounting for our business combinations in 2024.

Net loss improved by $294.9 million to $507.3 million in 2024 from $802.1 million in 2023 for the reasons discussed above.

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Quarterly Performance Trend and Seasonality

Our user engagement and financial performance is seasonal in nature, as indicated by the following chart, which presents our average MUPs and ARPMUP for the last eight quarters, and the explanations that follow.

Our user engagement and financial performance is seasonal in nature, as indicated by the following charts, which present our average MUPs, ARPMUP, Sportsbook Handle and Sportsbook Net Revenue Margin for the last eight quarters, and the explanations that follow.

(amounts in thousands) Q1‘23 Q2‘23 Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 Q4’24

Sportsbook Handle $ 8,841,827 $ 7,359,142 $ 8,291,936 $ 12,943,111 $ 12,001,424 $ 10,793,014 $ 10,365,068 $ 14,901,643

Sportsbook Revenue 402,010 516,326 427,261 760,806 734,055 686,889 656,920 824,993

Sportsbook Net Revenue Margin 4.5 % 7.0 % 5.2 % 5.9 % 6.1 % 6.4 % 6.3 % 5.5 %

Sportsbook Revenue 402,010 516,326 427,261 760,806 734,055 686,889 656,920 824,993

iGaming Revenue 280,729 288,251 296,240 351,529 369,997 350,552 361,460 425,799

Other Revenue 86,913 70,350 66,456 118,522 70,944 67,000 77,110 141,980

Total Revenue $ 769,652 $ 874,927 $ 789,957 $ 1,230,857 $ 1,174,996 $ 1,104,441 $ 1,095,490 $ 1,392,772

Our business experiences the effects of seasonality based on the relative popularity of certain sports.

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Historically, MLB play has attracted a more dedicated but smaller user base to our product offerings.

The timing of the MLB season in combination with these factors has tended to result in lower MUPs in our second quarter, but a higher ARPMUP.

The suspension, postponement, rescheduling, shortening and cancellation of major sports seasons and sporting events may materially impact our results of operations by, for example, reducing our customers’ use of, and spending on, our Sportsbook and DFS product offerings.

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Liquidity and Capital Resources

We had $1.3 billion in cash and cash equivalents as of December 31, 2023 (excluding restricted cash and cash reserved for users, which we segregate on behalf of our paid users for all jurisdictions and product offerings).

We had $788.3 million in cash and cash equivalents as of December 31, 2024 (excluding restricted cash and cash reserved for users, which we segregate on behalf of our paid users for all jurisdictions and product offerings).

We believe our cash on hand is sufficient to meet our current working capital and capital expenditure requirements for a period of at least twelve months.

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Our material cash requirements include the following contractual and other obligations:

Convertible Debt.

In March 2021, we issued zero-coupon convertible senior notes in an aggregate principal amount of $1,265.0 million (the “Convertible Notes”).

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As of December 31, 2024, the Convertible Notes, net of issuance costs, balance was $1,256.4 million .

Revolving Credit Facility.

In November 2024, we and certain of our subsidiaries entered into a credit agreement (the “New Credit Agreement”) with various financial institutions, as lenders, and Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, providing for a senior secured revolving credit facility of up to $500.0 million (the “New Revolving Credit Facility”).

The New Revolving Credit Facility provides for revolving loans, swing line borrowings and letters of credit and has a maturity date of November 7, 2029.

As of December 31, 2024, $10.0 million in letters of credit were issued under the New Credit Agreement, with $490.0 million available for borrowing.

We have lease arrangements for certain corporate office facilities, data centers and motor vehicles.

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The following table summarizes our cash flows for the periods indicated.

Due to the timing of the consummation of the GNOG Transaction, the below periods exclude GNOG’s operations prior to the GNOG Closing Date of May 5, 2022.

Year Ended December 31,

(in thousands) 2023 2022 2021

Net cash (used in) operating activities $ (1,751) $ (625,519) $ (419,508)

(amounts in thousands) 2024 2023 2022

Net cash provided by (used in) operating activities $ 417,767 $ (1,751) $ (625,519)

Net cash used in investing activities (566,601) (90,360) (208,766)

Net cash (used in) provided by financing activities (63,221) (16,732) 1,138,813

Effect of foreign exchange rates on cash and cash equivalents, restricted cash, and cash reserved for users — — 583

Net (decrease) increase in cash and cash equivalents, restricted cash, and cash reserved for users (155,332) (851,017) 524,866

Net cash used in by financing activities (144,466) (63,221) (16,732)

Net decrease in cash and cash equivalents, restricted cash, and cash reserved for users (293,300) (155,332) (851,017)

Cash and cash equivalents, restricted cash, and cash reserved for users at beginning of period 1,623,493 1,778,825 2,629,842

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Operating Activities .

Net cash used in operating activities in 2023 was $1.8 million, compared to $625.5 million in 2022, primarily reflecting an improvement in net loss, net of non-cash items, of $610.6 million for the reasons described above, slightly offset by changes in operating assets and liabilities.

Net cash provided by operating activities in 2024 was $417.8 million, compared to $1.8 million used in operating activities in 2023, primarily reflecting an improvement in net loss, net of non-cash items, of $219.3 million for the reasons described above, and $200.2 million from changes in operating assets and liabilities primarily due to a decrease in receivables reserved for users arising from the improved settlement timing of payments from payment processors when compared to the prior year.

Investing Activities .

Net cash used in investing activities in 2023 decreased by $118.4 million to $90.4 million from $208.8 million in 2022, mainly reflecting $24.4 million of proceeds from the sale of marketable equity securities and other financial assets in 2023 and a reduction of $96.5 million from cash paid for acquisitions, net of cash acquired, related to the GNOG Transaction in 2022, partially offset by an increase in cash paid for internally developed software.

Net cash used in investing activities in 2024 increased by $476.2 million to $566.6 million from $90.4 million in 2023, mainly reflecting $441.5 million in cash paid for acquisitions, net of cash acquired, related to business combinations completed in 2024, and an increase in cash paid for internally developed software costs of $15.3 million.

Financing Activities.

Net cash used in financing activities in 2023 increased by $46.5 million to $63.2 million from $16.7 million in 2022, primarily reflecting an increase in purchases of treasury stock of $54.5 million related to the satisfaction of withholding taxes due upon the vesting of restricted stock units, offset by an increase in proceeds from the exercise of stock options.

Net cash used in financing activities in 2024 increased by $81.3 million to $144.5 million from $63.2 million in 2023, primarily reflecting an increase in purchases of treasury stock of $22.8 million related to the satisfaction of withholding taxes due upon the vesting of restricted stock units and an increase in purchases of treasury stock of $48.1 million related to the Company’s stock repurchase program.

2023 Compared to 2022

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We consider an accounting judgment, estimate or assumption to be critical when (a) the estimate or assumption is complex in nature or requires a high degree of judgment and (b) the use of different judgments, estimates and assumptions could have a material impact on our consolidated financial statements.

Our significant accounting policies are described in Note 2 of the consolidated financial statements included elsewhere in this Annual Report.

Our significant accounting policies are

described in Note 2 of the consolidated financial statements included elsewhere in this Annual Report.

Our critical accounting estimates are described below:

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Goodwill is tested for impairment at the reporting unit level, which is the same or one level below an operating segment.

In accordance with ASC Topic 350 Intangibles - Goodwill and Other, our business is classified into one reporting unit.

In accordance with ASC Topic 350 Intangibles - Goodwill and Other (“ASC 350”), our business is classified into one reporting unit.

Prior to October 1, 2023, the Company had three reporting units to which goodwill was allocated.

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We perform our impairment testing annually and when circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

We performed our annual impairment assessment of goodwill as of October 1, 2023, which included consideration of the change in reporting units, and concluded that goodwill was not impaired.

We performed our annual impairment assessment of goodwill as of October 1, 2024, using Step 0 and concluded that goodwill was not impaired as the fair value of our reporting unit is significantly in excess of our carrying value.

Business Combinations

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We must also refine these estimates over a one-year measurement period, to reflect any new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date.

If we are required to retroactively adjust provisional amounts that we have recorded for the fair value of assets and liabilities in connection with an acquisition, these adjustments could materially impact our results of operations and financial position.

If we are required to retroactively adjust provisional amounts that we have recorded for the fair value of assets and liabilities in connection with an acquisition, these adjustments could materially

impact our results of operations and financial position.

Estimates and assumptions that we must make in estimating the fair value of future acquired technology, user lists and other identifiable intangible assets include future cash flows that we expect to generate from the acquired assets.

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The allocation of the consideration to the assets acquired and liabilities assumed is based on various estimates.

On May 22, 2024, we completed our acquisition of 100% of the equity interest of Jackpocket Inc., pursuant to the terms of the Jackpocket Merger Agreement (as defined below).

On December 3, 2024, we completed our acquisition of 100% of the equity interest of Simplebet Inc., pursuant to the terms of the Simplebet Merger Agreement (as defined below).

The transactions were accounted for under ASC 805.

In accordance with the acquisition method, we recorded the fair value of assets acquired and liabilities assumed.

The allocation of the consideration to the assets acquired and liabilities assumed is based on various estimates.

Contingent Consideration

We recorded contingent consideration resulting from our business combinations at their fair value at the acquisition date.

Each reporting period thereafter and until settlement, we revalue the remaining obligations and record an increase or decrease in their fair value as an adjustment in our statement of operations.

We measure our contingent consideration at fair value using significant unobservable inputs classified within Level 3 of the fair value hierarchy.

The fair value of contingent consideration was generally calculated using customary valuation models based on probability-weighted outcomes of meeting certain future performance targets and forecasted results.

The significant unobservable inputs used in the fair value measurements are the projections of future financial results in relation to the business, revenue volatility, equity volatility, operational leverage ratio, as well as management judgment regarding the probability of achieving a future performance target.

Significant increases or decreases to any of these inputs in isolation would result in a significantly higher or lower liability, with a higher liability capped by the contractual maximum of the contingent consideration.

Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate at the acquisition date and amount paid will be recorded in our results of operations.

Stock-based Compensation

Our historical and outstanding stock-based compensation awards, including the issuances of options and other stock awards under our equity compensation plans, have typically included service-based or performance-based vesting conditions.

The fair value of stock option awards with only service and/or performance conditions is estimated on the grant or offering date using the Black-Scholes option-pricing model.

The Black-Scholes option-pricing model requires inputs such as the risk-free interest rate, expected term and expected volatility.

These inputs are subjective and generally require significant judgment.

The fair value of RSUs is measured on the grant date based on the closing fair market value of our common stock.

The resulting cost is recognized over the period during which an employee is required to provide service in exchange for the awards, usually the vesting period.

For awards with only service-based vesting conditions, we record compensation cost for these awards using the straight-line method less an assumed forfeiture rate.

For awards with performance-based or market-based vesting conditions, we recognize compensation cost on a tranche-by-tranche basis (the accelerated attribution method), based on the probability of achieving the performance criteria.

Stock-based compensation expense is measured based on the grant-date fair value of the stock-based awards and is recognized over the requisite service period of the awards.

Prior to the DEAC Business Combination, our management and board of directors considered various objectives and subjective factors to determine the fair value of DK DE's common stock as of each grant date, including the value determined by a third-party valuation firm.

These factors included, among other things, financial performance, capital structure, forecasted operating results and market performance analyses of similar companies in our industry.

Following the DEAC Business Combination, the fair value of our Class A common stock is determined based on the quoted market price.

To estimate the fair value of stock option awards, the Black-Scholes model is used to determine the fair value of grants with market-based conditions.

The Black-Scholes model requires management to make a number of key assumptions, including risk-free interest rate, expected term, and expected volatility.

The risk-free interest rate is estimated using the rate of return on U.S.

treasury notes with a life that approximates the expected term.

The expected term assumption used in the Black-Scholes model represents the period of time that the options are expected to be outstanding and is estimated using the midpoint between the requisite service period and the contractual term of the option.

Expected volatility is based on an average volatility for a representative sample of comparable public companies, including the Company’s own.

For awards with performance-based or market-based vesting conditions, we recognize compensation cost over the expected performance achievement period based on the probability of achieving the performance criteria.

The assumptions underlying these valuations and management’s assessment of achieving the performance criteria represent management’s best estimates, which involve inherent uncertainties and the application of management judgment.

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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-K

Item 7. Management’s Discussion and Analysis