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Item 7. Management’s Discussion and Analysis

2026-02-13 compared with 2025-02-14 · 127 added, 139 removed, 273 unchanged (49% of the section changed)

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Business” and the accompanying consolidated financial statements and related notes included elsewhere in this Annual Report.

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

consummated its acquisition of Golden Nugget Online Gaming, Inc.

(together with its subsidiaries unless the context requires otherwise, “GNOG”), pursuant to a definitive agreement and plan of merger, dated August 9, 2021 (the “GNOG Merger Agreement”), in an all-stock transaction (the “GNOG Transaction”).

DraftKings’ consolidated financial statements exclude GNOG’s operations prior to the GNOG Closing Date, unless indicated otherwise.

In connection with the GNOG Transaction, DraftKings Inc.

became the going-forward public company and the direct parent company of both DraftKings Holdings Inc.

(formerly DraftKings Inc.), a Nevada corporation (“Old DraftKings”), and GNOG, and DraftKings Inc.

is the registrant filing this Annual Report as the successor registrant for Old DraftKings.

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

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

We are a digital sports entertainment and gaming company.

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, DFS, digital lottery courier, as well as our other product offerings.

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

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

We accomplish this by creating an environment where our users can find enjoyment and fulfillment through Sportsbook, iGaming, DFS, digital lottery courier and prediction markets, 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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We continue to make deliberate and substantial investments in support of our mission and long-term growth.

For example, we have invested in our products and technology in order to continuously launch new product innovations;

For example, we have invested in our product offerings and technology in order to continuously launch new product innovations;

improve marketing, merchandising, and operational efficiency through data science;

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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 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.

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

Our current technology is highly scalable with relatively minimal incremental spend required to launch our product offerings in new jurisdictions.

We will continue to manage our fixed-cost base in conjunction with our market entry plans and focus our variable spend on marketing, user experience and support and regulatory compliance to become the product of choice for users and maintain favorable relationships with regulators.

We also expect to improve our profitability on an annual basis over time as our revenue and gross profit expand as states mature, and our variable marketing expenses and fixed costs stabilize or grow at a slower rate.

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.

We also expect to improve our profitability over time as our revenue and gross profit expand as states mature, and our variable marketing expenses and fixed costs stabilize or grow at a slower rate.

Our path to increase 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, strong user retention, improved monetization from frequency and higher Net Revenue Margin, as well as scale benefits from investments in our product offerings and technology and general and administrative functions.

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.

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Revenue $ 6,054,525 $ 4,767,699 $ 3,665,393

Net Loss (507,285) (802,142) (1,377,987)

Net Income (Loss) 3,710 (507,285) (802,142)

Adjusted EBITDA (1)

619,987 181,307 (151,035)

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

Adjusted Earnings (Loss) Per Share (2)

Basic Earnings (Loss) Per Share 0.01 (1.05) (1.73)

Diluted Earnings (Loss) Per Share (0.01) (1.05) (1.73)

Adjusted Diluted Earnings (Loss) Per Share (2)

0.66 0.24 (0.41)

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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.

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

(2) Adjusted Diluted 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”).

Revenue increased by $1,286.8 million in 2025, compared to 2024, primarily due to the strong performance of our Sportsbook and iGaming product offerings as a result of continued healthy user engagement, efficient acquisition of new customers and higher net revenue margin.

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, 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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The chart below presents our ARPMUP for 2023 , 2024 and 2025 :

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.

The increase in MUPs for 2025, compared to 2024, primarily reflects strong unique payer retention and acquisition across our Sportsbook and iGaming product offerings.

Excluding the impact of the Jackpocket Transaction, MUPs increased 0.2 million, or 6.7%, to 3.5 million for 2025 , compared to 2024 .

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.

ARPMUP increased in 2025, compared to 2024, primarily due to increased net revenue margin across both Sportsbook and iGaming.

Excluding the impact of the Jackpocket Transaction, ARPMUP increased $23, or 19.1%, to $141 for 2025 compared to 2024 .

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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.

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The increase in Sportsbook Handle of $5.5 billion, or 11.4%, in 2025, compared to 2024, and $10.6 billion, or 28.4%, in 2024, compared to 2023, is primarily due to MUPs increasing in 2025 as compared to 2024, and in 2024 as compared to 2023 .

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.

The increase in MUPs was due to strong player retention and acquisition across our Sportsbook product offering.

The increase in Sportsbook Net Revenue Margin of 1.1 percentage points in 2025, compared to 2024, and 0.4 percentage points in 2024, compared to 2023, is due to improvement in our Sportsbook hold percentage and improved promotional reinvestment.

iGaming revenue increased $296.8 million , or 19.7% , in 2025 , compared to 2024 , and $291.1 million , or 23.9% , in 2024 , compared to 2023, due to an increase in MUPs and ARPMUP for the product offering.

Other revenue increased $65.8 million , or 18.4% , in 2025 , compared to 2024 , primarily due to the acquisition of Jackpocket in May 2024 and an increase in revenue from our fantasy product offerings, which includes DFS and Pick6.

Other revenue increased $14.8 million , or 4.3% , in 2024 , compared to 2023 , primarily due to our acquisition of Jackpocket in May 2024 offset by a reduction of gaming software revenue related to the winding down of external customers.

Non-GAAP Information

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.

This Annual Report includes Adjusted EBITDA and Adjusted Diluted 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 Diluted 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 Diluted Earnings (Loss) Per Share are not intended to be substitutes for any U.S.

GAAP financial measure.

As calculated, it may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.

We define and calculate Adjusted EBITDA as net loss before the impact of interest income or expense (net), income tax provision or benefit, and depreciation and amortization, and further adjusted for the following items:

As calculated, they may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.

We define and calculate Adjusted EBITDA as net income (loss) before the impact of interest income or expense (net), income tax provision or benefit, and depreciation and amortization, and further adjusted for the following items:

stock-based compensation;

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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;

We define and calculate Adjusted Diluted Earnings (Loss) Per Share as 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;

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

Adjusted EBITDA and Adjusted Diluted 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).

Adjusted EBITDA

The table below presents our net loss, which is the most directly comparable financial measure calculated in accordance with U.S.

The table below presents our net income (loss), which is the most directly comparable financial measure calculated in accordance with U.S.

GAAP, reconciled to Adjusted EBITDA for the periods indicated:

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(amounts in thousands) 2025 2024 2023

Net Loss $ (507,285) $ (802,142) $ (1,377,987)

Net income (loss) $ 3,710 $ (507,285) $ (802,142)

Adjusted for:

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(1) The amounts include the amortization of acquired intangible assets of $149.3 million, $159.8 million and $117.3 million for 2025, 2024 and 2023, 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.

(2) In 2025, the Company recorded a discrete income tax benefit of $14.6 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 Railbird.

In 2024, the Company recorded a discrete 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 the Jackpocket Transaction.

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

(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.

(5) Primarily includes external legal costs related to litigation and litigation settlement costs deemed unrelated to our ordinary-course 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.

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.

(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:

(7) This primarily includes the change in fair value of certain assets and liabilities, including a $38.0 million gain related to contingent consideration in 2025, as well as our equity method share of investee’s gains and losses and other costs relating to non-recurring and non-operating items.

For 2024, this amount also includes $27.8 million in expense 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, offset by $20.9 million related to gaming tax credits as a result of audits and appeals related to prior periods.

Adjusted Diluted Earnings (Loss) Per Share

The table below presents the Company’s Adjusted Diluted Earnings (Loss) Per Share reconciled to its diluted earnings (loss) per share attributable to common stockholders, which is the most directly comparable financial measure calculated in accordance with U.S.

GAAP, for the periods indicated:

Year Ended December 31,

2025 2024 2023

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

Diluted earnings (loss) per share attributable to common stockholders $ (0.01) $ (1.05) $ (1.73)

Adjusted for:

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Litigation, settlement, and related costs (5)

0.17 0.07 0.02

Advocacy and other related legal expenses (6)

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(0.06) 0.08 0.00

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

Tax impact of adjusting items (8)

Adjusted Diluted Earnings (Loss) Per Share* $ 0.66 $ 0.24 $ (0.41)

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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;

* Weighted average diluted number of shares used to calculate Adjusted Diluted Earnings (Loss) Per Share for the years ended December 31, 2025, 2024, and 2023 was 495.9 million, 482.0 million and 462.6 million, respectively;

totals may not sum due to rounding.

(1) The amounts include the amortization of acquired intangible assets of $149.3 million, $159.8 million and $117.3 million for 2025, 2024 and 2023, 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.

(2) In 2025, the Company recorded a discrete income tax benefit of $14.6 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 Railbird.

In 2024, the Company recorded a discrete 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 the Jackpocket Transaction.

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

(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.

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

(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.

For 2024, this amount also includes $27.8 million in expense 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, offset by $20.9 million related to gaming tax credits as a result of audits and appeals related to prior periods.

(8) Beginning in the first quarter of 2025, the Company began applying an estimated non-GAAP effective tax rate, which is 23% as of December 31, 2025.

The non-GAAP effective tax rate reflects the non-GAAP tax provision commensurate with the Company’s level of non-GAAP profitability, which was determined after adjusting for the non-GAAP adjustments presented above and excluding the impact of changes in the valuation allowance.

Key Factors Affecting Our Results

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Industry Opportunity and Competitive Landscape

We operate within the global entertainment and gaming industries, which are comprised of diverse product offerings that compete for consumers’ time and disposable income.

We primarily operate within the global entertainment, gaming, and prediction markets industries which are comprised of diverse product offerings that compete for consumers’ time and disposable income.

Our short-to-medium term focus is on the North American regulated gaming industry, particularly the opportunity in online sportsbook and iGaming.

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Of those 41 legal jurisdictions, 33 have legalized online sports betting.

Of those 33 jurisdictions, 32 are live, and DraftKings operates in 26 of them.

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

All 33 jurisdictions are live, and DraftKings operates in 27 of them.

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

The process of securing the necessary licenses or partnerships to operate in each jurisdiction may take longer than we anticipate.

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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.

As a result of variability in these factors, actual hold rates on our product offerings may differ from the theoretical win rates we have estimated and could result in the winnings of our gaming users exceeding those anticipated.

As a result of variability in these factors, actual hold rates on our product offerings may differ from the theoretical win rates we have

estimated and could result in the winnings of our gaming users exceeding those anticipated.

We seek to mitigate these risks through data science and analytics and rules built into our technology, as well as active management of our amounts at risk at a point in time, but we may not always be able to do so successfully, particularly over short periods, which can result in financial losses as well as revenue volatility.

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Loss from operations (15,817) (608,999) 593,182 97.4 %

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 (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 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.

Interest income (expense), net (19,941) 44,300 (64,241) n.m.

Gain (loss) on remeasurement of warrant liabilities 4,747 (4,945) 9,692 n.m.

Other gain (loss), net 38,024 (23,514) 61,538 n.m.

Income (loss) before income tax (benefit) provision and loss from equity method investment 7,013 (593,158) 600,171 n.m.

Income tax provision (benefit) 4,274 (86,341) (90,615) n.m.

(Gain) loss from equity method investments (971) 468 1,439 n.m.

Net income (loss) $ 3,710 $ (507,285) $ 510,995 100.7 %

* Percentage changes that are considered not meaningful are denoted with n.m.

Revenue increased $1.3 billion, or 27.0%, to $6.1 billion in 2025, from $4.8 billion in 2024.

The increase was primarily attributable to our Sportsbook and iGaming product offerings which increased $1.2 billion, or 27.7% , to $5.6 billion in 2025 due to MUPs increasing by 7.9% and ARPMUP increasing by 17.9% as compared to 2024.

The increase in MUPs was primarily due to strong player retention and acquisition across our Sportsbook and iGaming product offerings.

The increase in ARPMUP was primarily due to an increase in Sportsbook Net Revenue Margin from 6.0% in 2024 to 7.1% in 2025, as a result of increased Sportsbook hold percentage and improved promotional reinvestment, as well as improved handle and net revenue margin in 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.

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.

Cost of revenue increased $606.4 million, or 20.6%, to $3.6 billion in 2025, from $3.0 billion in 2024.

The increase was due, in part, to revenue growth as outlined above and a resulting increase in our variable expenses, primarily gaming taxes and payment processing fees, which increased $473.4 million and $65.4 million, respectively.

Cost of revenue as a percentage of revenue decreased by 3.1% percentage points to 58.7% in 2025 from 61.9% in 2024, primarily driven by lower payment processing fees as a percentage of total revenue and improved promotional reinvestment across our Sportsbook and iGaming product offerings, partially offset by higher gaming tax rates in certain jurisdictions.

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 $65.2 million in advertising costs spent to acquire significantly more new users in 2024 compared to 2023.

Sales and marketing expense increased $115.0 million, or 9.1%, to $1.4 billion in 2025, from $1.3 billion in 2024.

The increase was primarily attributable to an increase in advertising costs of $75.2 million.

Product and Technology.

Product and technology expense increased $42.0 million, or 11.8%, to $397.1 million in 2024 from $355.2 million in 2023.

The increase primarily reflects an increase of $34.0 million in compensation expense due to increases in our product operations and engineering headcount.

Product and technology expense increased $62.8 million, or 15.8%, to $459.9 million in 2025 from $397.1 million in 2024, primarily due to increased headcount in our product and engineering departments.

General and Administrative.

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 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.

General and administrative expense decreased $90.5 million, or 11.8%, to $673.6 million in 2025 from $764.1 million in 2024.

The decrease was primarily driven by non-recurring expenses recognized in the prior year, including $27.8 million related to the discontinuance of our Reignmakers product offering, and an $81.2 million reduction in non-ordinary course litigation, settlement and related costs.

Interest Income (Expense), net.

Interest income (expense), net decreased $64.2 million to $19.9 million of net interest expense in 2025 from $44.3 million of net interest income in 2024, primarily due to interest expense from the Term B Loan (as defined below) of $30.7 million, fluctuations in cash balances and interest rates during the respective periods, and the inclusion of $25.6 million of interest income on customer deposits in revenue in 2025.

Gain (Loss) on Remeasurement of Warrant Liabilities.

We recorded a gain on remeasurement of warrant liabilities of $4.7 million in 2025, compared to a loss of $4.9 million in 2024, primarily due to changes in the underlying share price of our Class A common stock.

Other Gain (Loss), net .

We recorded a gain of $38.0 million in 2025, as compared to loss of $23.5 million in 2024.

The gain in 2025 was attributable to the revaluation of certain contingent consideration arrangements.

The loss in 2024 was primarily attributable to a $5.8 million loss on the sale of Vegas Sports Information Network, LLC and a $12.9 million decrease in the fair value of certain financial assets.

Income Tax Provision (Benefit) .

We recorded an income tax provision of $4.3 million in 2025, as compared to an income tax benefit of $86.3 million in 2024.

This change was primarily due to an income tax benefit of $87.3 million in 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 our business combinations.

Net Income (Loss).

Net income (loss) improved by $511.0 million to $3.7 million net income in 2025 from a net loss of $507.3 million in 2024, for the reasons discussed above.

2024 Compared to 2023

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

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.

However, our product offerings that do not rely on sports seasons and sporting events, such as iGaming, may partially offset such an adverse impact on revenue.

Liquidity and Capital Resources

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 had $1.1 billion in cash and cash equivalents as of December 31, 2025 (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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As of December 31, 2025, the Convertible Notes, net of issuance costs, balance was $1,259.1 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.

Credit Facility.

In November 2024, we and certain of our subsidiaries entered into a credit agreement (as amended, the “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 “Revolving Credit Facility”).

The 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, 2025, $10.0 million in letters of credit were issued under the Revolving Credit Facility, with $490.0 million available for borrowing.

In March 2025, we and certain of our subsidiaries entered into a first amendment to the Credit Agreement, providing for a new class of incremental term loans under the Credit Agreement in an aggregate principal amount of

$600.0 million (the “Term B Facility” and, such term loans, the “Term B Loan”), with a maturity date of March 4, 2032.

The Term B Facility requires principal payments in the amount of 1.00% per annum of the original aggregate principal amount of the Term B Loan payable in quarterly installments.

The Term B Loan bears interest at the Company’s election at either (i) in the case of Term SOFR Loans, Term SOFR plus an applicable margin of 1.75% per annum, or (ii) in the case of ABR Term Loans, ABR plus an applicable margin of 0.75% per annum (with each of the capitalized terms used in clauses (i) and (ii) as defined in the Credit Agreement).

As of December 31, 2025, there was $595.5 million outstanding under the Term B Facility.

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

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We have certain non-cancelable contracts with vendors, licensors and others requiring us to make future cash payments.

As of December 31, 2024, these purchase obligations wer e $726.0 million, with $375.2 million payable within twelve months.

As of December 31, 2025, these purchase obligations wer e $2.3 billion, with $527.4 million payable within twelve months.

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

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Net cash provided by (used in) operating activities $ 662,855 $ 417,767 $ (1,751)

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

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)

Net cash provided by (used in) investing activities (165,997) (566,601) (90,360)

Net cash provided by (used in) financing activities (222,456) (144,466) (63,221)

Net increase (decrease) in cash and cash equivalents, restricted cash, and cash reserved for users 274,402 (293,300) (155,332)

Cash and cash equivalents, restricted cash, and cash reserved for users at beginning of period 1,330,193 1,623,493 1,778,825

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Operating Activities .

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.

Net cash provided by operating activities in 2025 was $662.9 million, compared to $417.8 million provided by operating activities in 2024, primarily reflecting an improvement in net income (loss), net of non-cash items, of $482.8 million for the reasons discussed in “Results of Operations” above, and $237.7 million of cash used from changes in operating assets and liabilities, primarily related to timing of player activity, impacting receivables reserved for users and liabilities to users, as well as timing of vendor payments.

Investing Activities .

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.

Net cash used in investing activities in 2025 decreased by $400.6 million to $166.0 million from $566.6 million in 2024, mainly reflecting a decrease in cash paid for acquisitions of $425.1 million in cash paid for acquisitions, net of cash acquired, related to larger cash flow outflows from business combinations completed in 2024, including the acquisition of Jackpocket.

Financing Activities.

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.

Net cash used in financing activities in 2025 increased by $78.0 million to $222.5 million from $144.5 million in 2024 , primarily reflecting an increase in purchases of treasury stock of $154.9 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 $523.5 million related to the Company’s stock repurchase program offset by proceeds received from the Term B Loan of $588.1 million.

2024 Compared to 2023

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Our consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting principles (“U.S.

Preparation of the financial statements requires our management to make judgments, estimates and assumptions that impact the reported amount of revenue and expenses, assets and liabilities and the disclosure of contingent assets and liabilities.

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 (“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.

On October 1, 2023, the Company reassessed its reporting units and determined it operated as a single reporting unit.

In accordance with ASC 350, because such reassessment redefined previously determined reporting units, all goodwill was reassigned to the consolidated reporting unit.

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

Prior to the fourth quarter of 2025, the Company operated as a single reporting unit for purposes of goodwill allocation and impairment assessment.

Upon the acquisition of Railbird and the launch of our new prediction markets product offering in the fourth quarter of 2025, the Company reassessed its reporting structure and determined that prediction markets is a standalone reporting unit, and we therefore now operate as two reporting units to which goodwill is allocated.

We review and evaluate our goodwill and indefinite life intangible assets for potential impairment at a minimum annually, in the fourth quarter, or more frequently if circumstances indicate that impairment is possible.

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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, 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.

We performed our annual impairment assessment of goodwill as of October 1, 2025, using Step 0 and concluded that goodwill was not impaired as the fair value of our reporting units 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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If our estimates of the economic lives change, depreciation or amortization expenses could be accelerated or slowed, which could materially impact our results of operations.

On the GNOG Closing Date of May 5, 2022, we completed our acquisition of 100% of the equity interests of GNOG pursuant to the GNOG Merger Agreement.

The GNOG Transaction was 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.

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).

On October 21, 2025, we completed our acquisition of 100% of the equity interest of Railbird Technologies Inc.

pursuant to the terms of the Railbird Merger Agreement (as defined below).

The transactions were accounted for under ASC 805.

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Contingent Consideration

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

We recorded contingent consideration resulting from certain business combinations, including Simplebet and Railbird, 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.

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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.

The significant unobservable inputs used in the fair value measurements generally include the projections of future financial results in relation to the business, including market based assumptions, 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.

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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.

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

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

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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.

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.

As a result, if factors, probabilities or expected outcomes change and our management uses significantly different assumptions or estimates, our stock-based compensation expense for future periods could be materially different.

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