DraftKings Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) and the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as filed with the SEC on February 13, 2026 (the “2025 Annual Report”). Cautionary Statement Regarding Forward-Looking Statements This Report contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 that reflect future plans, estimates, beliefs and expected performance. The forward-looking statements depend upon events, risks and uncertainties that may be outside of our control. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would,” “forecast,” “propose” and similar expressions or the negative of these words, or statements of vision, strategy or outlook, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Our historical results are not necessarily indicative of the results that may be expected for any events in the future as our business and operations are subject to a variety of risks and uncertainties, many of which are beyond our control, and, consequently, our actual results may differ materially from those projected. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors” included elsewhere in this Report. Any statements contained herein that are not statements of historical fact may be forward-looking statements, such as: • factors relating to our business, operations and financial performance, including: • our ability to develop and market new offerings, including prediction markets; • our ability to effectively compete in the global sports and gaming and emerging prediction markets industries; • our ability to successfully acquire and integrate new operations; • our ability to obtain and maintain licenses with gaming authorities; and • our inability to recognize deferred tax assets and tax loss carryforwards; • market and global conditions and economic factors beyond our control, as well as the potential impact of general economic conditions and the potential impact of new and existing laws, regulations or policies, including those related to tariffs, import/export or trade restrictions, volatile inflation and interest rates, on our liquidity, operations and personnel; • significant competition and competitive pressures from other companies worldwide in the industries in which we operate, including in the emerging prediction markets industry; • our ability to raise financing in the future; • the timing, amount or duration of the Company’s stock repurchase program; • our success in retaining or recruiting officers, key employees or directors; and • litigation and the ability to adequately protect our intellectual property rights. In addition to these risks, other factors that could cause or contribute to such differences include those set forth under the caption “Risk Factors” in our 2025 Annual Report. Due to the uncertain nature of these factors, management cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any of these statements to reflect events or circumstances occurring after the date of this Report, except as required by applicable law. New factors may emerge, and it is not possible to predict all factors that may affect our business and prospects. 33 Our Business We are a digital sports and gaming company. We provide users with online and retail sports betting (together, “Sportsbook”), online casino (“iGaming”), daily fantasy sports (“Fantasy”), digital lottery courier (“Lottery”), prediction markets (“Prediction Markets”) and other 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, Fantasy, Lottery and Prediction Markets, as well as our other offerings. We are also highly focused on our responsibility as a steward of gaming. Our ethics guide our decision making, with respect to both the tradition and integrity of sports and our investments in regulatory compliance and consumer protection. We continue to make deliberate and substantial investments in support of our mission and long-term growth. For example, we have invested in our offerings and technology in order to continuously launch new offering innovations; improve marketing, merchandising, and operational efficiency through data science; and deliver a great user experience. We also make significant investments in sales and marketing and incentives to grow and retain our paid user base, including personalized offers and promotions, and promote brand awareness to attract the “skin-in-the-game” sports fan. Together, these investments have enabled us to create a leading offering 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 offerings, (b) launch our offerings in new jurisdictions, (c) create replicable and predictable jurisdiction-level unit economics in Sportsbook and iGaming and (d) expand our offerings. When we launch our Sportsbook and iGaming 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 offerings. Our current technology is highly scalable with relatively minimal incremental spend required to launch our 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 offering of choice for users and to maintain favorable relationships with regulators. We also expect to improve our profitability over time as our revenue and gross profit expand as jurisdictions 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 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. adult population that has access to our offerings and the other factors summarized in the section entitled “Cautionary Statement Regarding Forward-Looking Statements.” Financial Highlights and Trends The following table sets forth a summary of our financial results for the periods indicated: Three Months Ended March 31, (amounts in thousands, except per share amounts) 2026 2025 Revenue $ 1,646,076 $ 1,408,806 Net Income (Loss) 21,070 (33,864) Adjusted EBITDA (1) 167,852 102,630 Basic Earnings (Loss) Per Share 0.04 (0.07) Diluted Earnings (Loss) Per Share 0.03 (0.07) Adjusted Diluted Earnings (Loss) Per Share (2) 0.20 0.12 (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. GAAP. 34 (2) Adjusted Diluted Earnings (Loss) Per Share 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. GAAP. Revenue increased by $237.3 million in the three months ended March 31, 2026 , compared to the three months ended March 31, 2025 , primarily due to the strong performance of our Sportsbook and iGaming 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, Fantasy, Lottery, Prediction Markets or other offerings via our technology. For reported periods longer than one month, we average the MUPs for the months in the reported period. Although the number of unique paid users includes those users that have participated in a real-money, paid engagement using only promotional incentives (which has not been a material number of users to date), which are fungible with other funds deposited into their wallets on our technology, it does not include users who have made a deposit but have not yet had a real-money, paid engagement. MUPs is a key indicator of the scale of our user base and awareness of our brand. We believe that year-over-year growth in MUPs is also generally indicative of the long-term revenue growth potential of our offerings, although MUPs in individual periods may be less indicative of our longer-term expectations. We expect the number of MUPs to grow as we attract, retain and re-engage users in new and existing jurisdictions and expand our offerings to appeal to a wider audience. The charts below present our average MUPs for the three months ended March 31, 2025 and 2026: Average Revenue per MUP (“ARPMUP”). 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 offerings. The charts below present our ARPMUP for the three months ended March 31, 2025 and 2026: 35 MUPs decreased 3.6% in the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily reflecting lower MUPs from Lottery as a result of exiting Texas in 2025. Exc luding the impact of our Lottery offering, MUPs in creased by 0.1 million or 2.1% in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 due to unique payer retention and acquisition across our Sportsbook and iGaming offerings. ARPMUP increased by $23 or 21.3% for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to improvement in our Sportsbook Net Revenue Margin. Sportsbook Handle. We define Sportsbook Handle as the total amount of settled customer wagers on our Sportsbook offering. Sportsbook Handle provides useful information to investors and management as it is a key indicator of volume and customer engagement on our Sportsbook 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 offering 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 our Sportsbook offering and promotional reinvestment. 36 The chart below presents our Sportsbook Handle, Sportsbook Net Revenue Margin, and revenue disaggregation for the three months ended March 31, 2026 and 2025: Three Months Ended March 31, (amounts in thousands) 2026 2025 $ Change % Change Sportsbook Handle $ 14,083,061 $ 13,880,391 $ 202,670 1.5 % Sportsbook Revenue 1,094,874 881,957 212,917 24.1 % Sportsbook Net Revenue Margin 7.8% 6.4% N/A N/A Sportsbook Revenue $ 1,094,874 $ 881,957 $ 212,917 24.1 % iGaming Revenue 461,300 423,471 37,829 8.9 % Other Revenue 89,902 103,378 (13,476) (13.0) % Total Revenue $ 1,646,076 $ 1,408,806 $ 237,270 16.8 % Sportsbook Handle increased by $0.2 billion, or 1.5%, to $14.1 billion in the three months ended March 31, 2026, from $13.9 billion in the three months ended March 31, 2025, reflecting continued customer acquisition and strength in existing user engagement. Sportsbook Net Revenue Margin increased by 1.4 percentage points, to 7.8% in the three months ended March 31, 2026, from 6.4% in the three months ended March 31, 2025, primarily driven by an increase in hold percentage and improved promotional reinvestment. iGaming revenue increased $37.8 million , or 8.9% , to $461.3 million in the three months ended March 31, 2026, from $423.5 million in the three months ended March 31, 2025. The increase is primarily due to improved promotional reinvestment. Other revenue decreased $13.5 million, or 13.0% , to $89.9 million in the three months ended March 31, 2026, from $103.4 million in the three months ended March 31, 2025, primarily due to a reduction in Fantasy entry fees and lower Lottery revenue following our exit from the Texas market. Non-GAAP Information This 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. GAAP. 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, 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; 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 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; 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; other non-recurring and non-operating costs or income; and the tax impact of adjusting items, 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 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 37 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 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: Three Months Ended March 31, (amounts in thousands) 2026 2025 Net income (loss) $ 21,070 $ (33,864) Adjusted for: Depreciation and amortization (1) 71,661 70,116 Interest (income) expense, net 5,739 (4,395) Income tax (benefit) provision 6,369 (5,600) Stock-based compensation (2) 65,215 78,846 Transaction-related costs (3) — — Litigation, settlement, and related costs (4) — — Advocacy and other related legal expenses (5) 26,363 — Loss (gain) on remeasurement of warrant liabilities — (2,495) Other non-recurring costs and non-operating costs (income) (6) (28,565) 22 Adjusted EBITDA $ 167,852 $ 102,630 (1) The amounts include the amortization of acquired intangible assets of $37.6 million and $42.7 million for the three months ended March 31, 2026 and 2025, respectively. (2) 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 the evaluation, negotiation, and consummation of transactions and offerings that are under consideration, pending, or completed, as well as integration costs related to acquisitions. (4) Primarily includes external legal costs related to litigation and litigation settlement costs deemed unrelated to our ordinary-course business operations. (5) Reflects non-recurring and non-ordinary course costs relating to advocacy efforts primarily in pursuit of legalization of DraftKings offerings. For the three months ended March 31, 2026, this spend primarily relates to legislative efforts for legalizing iGaming, supporting a ballot measure for legalizing Sportsbook, and other advocacy activities related to certain states. Advocacy and legal expenses incurred in the ordinary course of business have not been adjusted in this measure. (6) Primarily includes the change in fair value of certain assets and liabilities, including contingent consideration, as well as our equity method share of investee’s gains and losses and other costs relating to non-recurring and non-operating items. 38 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: Three Months Ended March 31, 2026 2025 Diluted earnings (loss) per share attributable to common stockholders $ 0.03 $ (0.07) Adjusted for: Amortization of acquired intangible assets (1) 0.07 0.09 Stock-based compensation (2) 0.13 0.16 Transaction-related costs (3) — — Litigation, settlement, and related costs (4) — — Advocacy and other related legal expenses (5) 0.05 — Loss (gain) on remeasurement of warrant liabilities — (0.01) Other non-recurring and non-operating costs (income) (0.04) — Tax impact of adjusting items (6) (0.05) (0.05) Adjusted Diluted Earnings (Loss) Per Share* $ 0.20 $ 0.12 _____________ * Weighted average diluted number of shares used to calculate Adjusted Diluted Earnings (Loss) Per Share for the three months ended March 31, 2026 and 2025 was 510.6 million and 493.3 million, respectively; totals may not add due to rounding. (1) The amounts include the amortization of acquired intangible assets of $37.6 million and $42.7 million for the three months ended March 31, 2026 and 2025, respectively. (2) 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 the evaluation, negotiation, and consummation of transactions and offerings that are under consideration, pending, or completed, as well as integration costs related to acquisitions. (4) Primarily includes external legal costs related to litigation and litigation settlement costs deemed unrelated to our ordinary-course business operations. (5) Reflects non-recurring and non-ordinary course costs relating to advocacy efforts primarily in pursuit of legalization of DraftKings offerings. For the three months ended March 31, 2026, this spend primarily relates to legislative efforts for legalizing iGaming, supporting a ballot measure for legalizing Sportsbook, and other advocacy activities related to certain states. Advocacy and legal expenses incurred in the ordinary course of business have not been adjusted in this measure. (6) Beginning in the first quarter of 2025, the Company began applying an estimated non-GAAP effective tax rate, which was 23% in 2025 and is 25% as of the first quarter of 2026. 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. 39 Results of Operations Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025 The following table sets forth a summary of our consolidated results of operations for the interim periods indicated, and the changes between periods: Three Months Ended March 31, (amounts in thousands, except percentages) 2026 2025 $ Change % Change Revenue $ 1,646,076 $ 1,408,806 $ 237,270 16.8 % Cost of revenue 949,385 843,803 105,582 12.5 % Sales and marketing 401,734 343,680 58,054 16.9 % Product and technology 123,176 103,260 19,916 19.3 % General and administrative 165,934 164,394 1,540 0.9 % Income (loss) from operations 5,847 (46,331) 52,178 112.6 % Interest income (expense), net (5,739) 4,395 (10,134) n.m. Gain (loss) on remeasurement of warrant liabilities — 2,495 (2,495) n.m. Other gain (loss), net 22,814 22 22,792 n.m. Income (loss) before income tax and equity method investments 22,922 (39,419) 62,341 n.m. Income tax provision (benefit) 6,369 (5,600) 11,969 n.m. (Gain) loss from equity method investments (4,517) 45 (4,562) n.m. Net income (loss) attributable to common stockholders $ 21,070 $ (33,864) $ 54,934 162.2 % n.m. = not meaningful Revenu e. Revenue increased by $237.3 million, or 16.8%, to $1,646.1 million in the three months ended March 31, 2026, from $1,408.8 million in the three months ended March 31, 2025. The increase was primarily attributable to our Sportsbook offering, which increased $212.9 million , or 24.1% , due to an increase in Sportsbook Net Revenue Margin to 7.8% from 6.4%. Our iGaming offering also increased $37.8 million, or 8.9%, due to improved promotional reinvestment. The increase in revenue was partially offset by our other offerings which decreased $13.5 million, or 13.0%, primarily due to a decline in Fantasy entries and lower Lottery revenue following our exit from Texas in 2025. Cost of Revenue . Cost of revenue increased $105.6 million , or 12.5% , to $949.4 million in the three months ended March 31, 2026 , from $843.8 million in the three months ended March 31, 2025 . The increase was primarily due to our revenue growth and a resulting increase in our variable expenses, such as gaming taxes and platform fees, which increased $86.1 million and $14.4 million, respectively. Cost of revenue as a percentage of revenue decreased by 2.2 percentage points to 57.7% in the three months ended March 31, 2026 , as compared to 59.9% in the three months ended March 31, 2025 , primarily attributable to economies of scale as a result of higher Sportsbook Net Revenue Margin. Sales and Marketing. Sales and marketing expense increased $58.1 million, or 16.9%, to $401.7 million in the three months ended March 31, 2026, from $343.7 million in the three months ended March 31, 2025, primarily attributable to higher external marketing costs, including increased customer acquisition costs in connection with recent state launches in Missouri and Arkansas and the recent launch of our Prediction Markets offering. Product and Technology. Product and technology expense increased $19.9 million, or 19.3%, to $123.2 million in the three months ended March 31, 2026, from $103.3 million in the three months ended March 31, 2025, due to increased compensation, including stock-based compensation, for employees in our product and engineering departments. General and Administrative. General and administrative expense increased by $1.5 million, or 0.9%, to $165.9 million in the three months ended March 31, 2026, from $164.4 million in the three months ended March 31, 2025. The increase was primarily driven by a $26.4 million increase in advocacy and other related legal expenses recognized in the three months ended March 31, 2026, partially offset by lower stock-based compensation expense of $22.5 million. Interest Income (Expense), net. We recorded net interest expense of $5.7 million in the three months ended March 31, 2026, compared to $4.4 million of net interest income in the three months ended March 31, 2025. This fluctuation was 40 primarily due to increased interest expense as a result of the Term B Loan that was entered into in March 2025 and the inclusion of interest income on customer deposits in revenue in the three months ended March 31, 2026 rather than in interest income in the three months ended March 31, 2025. Gain (Loss) on Remeasurement of Warrant Liabilities. As all warrants were exercised or expired as of December 31, 2025, there was no remeasurement of warrant liabilities in the three months ended March 31, 2026, compared to a $2.5 million gain in the three months ended March 31, 2025. Other Gain (Loss), net . We recorded a net gain of $22.8 million in the three months ended March 31, 2026, as compared to a nominal gain in the three months ended March 31, 2025. The gain was primarily attributable to the revaluation of contingent consideration for the three months ended March 31, 2026. Income Tax Provision (Benefit). We recorded an income tax expense of $6.4 million in the three months ended March 31, 2026 , as compared to an income tax benefit of $5.6 million in the three months ended March 31, 2025 . Although we have a cumulative three year loss position, based on our recent financial performance and our future projections, we could record a reversal of all, or a portion of the valuation allowance associated with U.S. deferred tax assets in future periods. However, any such change is subject to actual performance and other considerations that may present positive or negative evidence at the time of the assessment. Net Income (Loss). Net income increased by $54.9 million to $21.1 million in the three months ended March 31, 2026, as compared to a net loss of $33.9 million in the three months ended March 31, 2025, for the reasons discussed above. Liquidity and Capital Resources We had $999.4 million in cash and cash equivalents as of March 31, 2026 (excluding restricted cash and cash reserved for users, which we segregate on behalf of our paid users for all jurisdictions and 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. We will continue to evaluate our long-term operating performance and cash needs and believe we are well positioned to continue to fund the operations of our business long-term. 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”). The Convertible Notes mature on March 15, 2028, subject to earlier conversion, redemption or repurchase. In connection with the pricing of the Convertible Notes and the exercise of the option to purchase additional Convertible Notes, we entered into privately negotiated capped call transactions (the “Capped Call Transactions”). The Capped Call Transactions are expected generally to reduce potential dilution to DraftKings Inc.’s Class A common stock upon any conversion of the Convertible Notes. The net cost of $124.0 million incurred to enter into the Capped Call Transactions was recorded as a reduction to additional paid-in capital on the Company’s condensed consolidated balance sheets. As of March 31, 2026, the Convertible Notes, net of issuance costs, balance was $1,259.8 million. Credit Facility. In November 2024, we and certain of our subsidiaries entered into a credit agreement (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 March 31, 2026, $11.9 million in letters of credit were issued under the Revolving Credit Facility, with $488.1 million available for borrowing. Term B Loan . In March 2025, we and certain of our subsidiaries entered into a first amendment to the Credit Agreement, which provides 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”). 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 March 31, 2026, there was $594.0 million in aggregate principal amount of Term B Loan outstanding. Other Purchase Obligations . We have certain non-cancelable contracts with vendors, licensors and others requiring us to make future cash payments. As of March 31, 2026, these purchase obligations were $2.1 billion, with $0.4 billion payable in the remainder of 2026. 41 Stock Repurchase Program. On July 30, 2024, our Board of Directors authorized the repurchase of an aggregate of up to $1.0 billion of our Class A common stock through open market purchases, privately negotiated transactions or other transactions in accordance with applicable securities laws. On November 6, 2025, our Board of Directors approved a $1.0 billion increase to our existing stock repurchase authorization, which brings the aggregate share repurchase authorization to $2.0 billion of our Class A common stock. We repurchased 3.3 million shares and 3.7 million shares for $98.6 million and $142.3 million during the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, we have purchased 20.4 million shares of Class A common stock for $718.2 million since the inception of the stock repurchase program. Cash Flows The following table summarizes our cash flows for the periods indicated: Three Months Ended March 31, (amounts in thousands) 2026 2025 Net cash provided by (used in) operating activities $ (48,437) $ (119,016) Net cash provided by (used in) investing activities (48,210) (39,019) Net cash provided by (used in) financing activities (121,128) 372,823 Net increase (decrease) in cash and cash equivalents, restricted cash, and cash reserved for users (217,775) 214,788 Cash and cash equivalents, restricted cash, and cash reserved for users at beginning of period 1,604,595 1,330,193 Cash and cash equivalents, restricted cash, and cash reserved for users at end of period $ 1,386,820 $ 1,544,981 Operating Activities . Net cash used in operating activities in the three months ended March 31, 2026 was $48.4 million, compared to $119.0 million in the three months ended March 31, 2025, primarily from an improvement in net income (loss), net of non-cash items , of $15.6 million for reasons discussed in Results of Operations above, in addition to $55.0 million less of cash used from changes in operating assets and liabilities, primarily related to timing of player activity, impacting liabilities to users, as well as timing of vendor payments. Investing Activities. Net cash used in investing activities during the three months ended March 31, 2026 increased by $9.2 million to $48.2 million, compared to $39.0 million in the three months ended March 31, 2025, primarily due to an increase of $5.8 million in cash paid for internally developed software costs and an increase of $4.4 million in cash paid for purchases of property plant and equipment . Financing Activities. Net cash used in financing activities during the three months ended March 31, 2026 was $121.1 million compared to $372.8 million net cash provided by financing activities in the three months ended March 31, 2025, primarily driven by a reduction of $588.1 million of cash received from borrowing under the Term B Facility, partially offset by a reduction of $43.6 million in treasury stock purchases under the Stock Repurchase Program, and a reduction of $50.0 million in cash paid for purchases of treasury stock for RSU withhol ding. Commitments and Contingencies Refer to “Note 13 — Commitments and Contingencies” of our unaudited condensed consolidated financial statements included elsewhere in this Report for a summary of our commitments and contingencies as of March 31, 2026. Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with U.S. GAAP. Our discussion and analysis of the financial condition and results of operations are based on these financial statements. The preparation of these financial statements requires the application of accounting policies in addition to certain estimates and judgments by our management. Our estimates and judgments are based on currently available information, historical results and other assumptions we believe are reasonable. Actual results could differ materially from these estimates. During the three months ended March 31, 2026, there were no changes to the critical accounting estimates discussed in the 2025 Annual Report. 42 Item 3. Quantitative and Qualitative Disclosures About Market Risk. There have been no significant changes in our exposure to market risk during the three months ended March 31, 2026. Refer to Item 7A. Quantitative and Qualitative Disclosures about Market Risk in the 2025 Annual Report.