DKNG DraftKings Inc

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☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-41379

Nevada			87-2764212
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

222 Berkeley Street, 5th Floor

Boston, MA 02116

(617) 986-6744

Title of each class

Trading symbol

Name of each exchange on which registered

Class A Common Stock, $0.0001 par value

DKNG

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

			Page
PART I. FINANCIAL INFORMATION			2
Item 1. Financial Statements			2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			31
Item 4. Controls and Procedures			31
PART II. —OTHER INFORMATION			32
Item 1. Legal Proceedings			32
Item 1A. Risk Factors			39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			39
Item 3. Defaults Upon Senior Securities			39
Item 4. Mine Safety Disclosures			39
Item 5. Other Information			39
Item 6. Exhibits			40

			March 31, 2023
			(Unaudited)						December 31, 2022
Assets
Current assets:
Cash and cash equivalents			$	1,087,668					$	1,309,172
Cash reserved for users			436,935						469,653
Receivables reserved for users			124,536						160,083
Accounts receivable			41,423						51,097
Prepaid expenses and other current assets			115,194						94,836
Total current assets			1,805,756						2,084,841
Property and equipment, net			62,273						60,102
Intangible assets, net			754,509						776,934
Goodwill			886,373						886,373
Operating lease right-of-use assets			60,804						65,957
Equity method investment			9,961						10,080
Deposits and other non-current assets			159,598						155,865
Total assets			$	3,739,274					$	4,040,152
Liabilities and Stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses			$	508,725					$	517,587
Liabilities to users			670,456						686,173
Operating lease liabilities, current portion			3,975						4,253
Other current liabilities			48,733						38,444
Total current liabilities			1,231,889						1,246,457
Convertible notes, net of issuance costs			1,251,758						1,251,103
Non-current operating lease liabilities			66,466						69,332
Warrant liabilities			27,715						10,680
Long-term income tax liability			69,238						69,858
Other long-term liabilities			74,428						70,029
Total liabilities			$	2,721,494					$	2,717,459
Commitments and contingent liabilities (Note 12)
Stockholders' equity:
Class A common stock, $0.0001 par value; 900,000 shares authorized as of March 31, 2023 and December 31, 2022; 471,723 and 459,265 shares issued and 461,634 and 450,575 outstanding as of March 31, 2023 and December 31, 2022, respectively			$	46					$	45
Class B common stock, $0.0001 par value; 900,000 shares authorized as of March 31, 2023 and December 31, 2022; 393,014 shares issued and outstanding as of March 31, 2023 and December 31, 2022			39						39
Treasury stock, at cost; 10,089 and 8,690 shares as of March 31, 2023 and December 31, 2022, respectively			(359,491)						(332,133)
Additional paid-in capital			6,869,647						6,750,055
Accumulated deficit			(5,528,949)						(5,131,801)
Accumulated other comprehensive income			36,488						36,488
Total stockholders’ equity			$	1,017,780					$	1,322,693
Total liabilities and stockholders’ equity			$	3,739,274					$	4,040,152

			Three months ended March 31,
			2023						2022
Revenue			$	769,652					$	417,205
Cost of revenue			521,740						313,379
Sales and marketing			389,133						321,452
Product and technology			88,088						81,352
General and administrative			160,476						216,606
Loss from operations			(389,785)						(515,584)
Other income (expense):
Interest income			11,795						801
Interest expense			(655)						(653)
(Loss) gain on remeasurement of warrant liabilities			(17,035)						12,681
Other income, net			19						37,882
Loss before income tax provision and loss from equity method investment			(395,661)						(464,873)
Income tax provision			1,368						469
Loss from equity method investment			119						2,351
Net loss attributable to common stockholders			$	(397,148)					$	(467,693)
Loss per share attributable to common stockholders:
Basic and diluted			$	(0.87)					$	(1.14)

			Class A Common Stock												Class B Common Stock												Additional Paid in Capital						Accumulated Deficit						Accumulated Other Comprehensive Income						Treasury Stock Amount						Total Stockholders’ Equity
			Shares						Amount						Shares						Amount
Balances at December 31, 2022			450,575						$	45					393,014						$	39					$	6,750,055					$	(5,131,801)					$	36,488					$	(332,133)					$	1,322,693
Exercise of stock options			701						—						—						—						2,192						—						—						—						2,192
Stock-based compensation expense			—						—						—						—						117,400						—						—						—						117,400
Purchase of treasury stock			(1,399)						—						—						—						—						—						—						(27,358)						(27,358)
Restricted stock unit vesting			11,757						1						—						—						—						—						—						—						1
Net loss			—						—						—						—						—						(397,148)						—						—						(397,148)
Balances at March 31, 2023			461,634						$	46					393,014						$	39					$	6,869,647					$	(5,528,949)					$	36,488					$	(359,491)					$	1,017,780

			Class A Common Stock												Class B Common Stock												Additional Paid in Capital						Accumulated Deficit						Accumulated Other Comprehensive Income						Treasury Stock Amount						Total Stockholders’ Equity
			Shares						Amount						Shares						Amount
Balances at December 31, 2021			407,781						$	41					393,014						$	39					$	5,702,388					$	(3,753,814)					$	36,488					$	(306,614)					$	1,678,528
Exercise of stock options			913						—						—						—						1,770						—						—						—						1,770
Stock-based compensation expense			—						—						—						—						187,077						—						—						—						187,077
Purchase of treasury stock			(793)						—						—						—						—						—						—						(14,083)						(14,083)
Restricted stock unit vesting			9,327						1						—						—						—						—						—						—						1
Net loss			—						—						—						—						—						(467,693)						—						—						(467,693)
Balances at March 31, 2022			417,228						$	42					393,014						$	39					$	5,891,235					$	(4,221,507)					$	36,488					$	(320,697)					$	1,385,600

			Three months ended March 31,
			2023						2022
Operating Activities:
Net loss			$	(397,148)					$	(467,693)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization			48,213						32,225
Non-cash interest expense			157						654
Stock-based compensation expense			117,400						187,077
Loss from equity method investment			119						2,351
Loss (gain) on remeasurement of warrant liabilities			17,035						(12,681)
Loss (gain) on marketable equity securities and other financial assets			136						(37,433)
Deferred income taxes			2,254						256
Other expenses, net			(2,726)						(768)
Change in operating assets and liabilities:
Receivables reserved for users			35,547						(3,997)
Accounts receivable			9,674						(2,347)
Prepaid expenses and other current assets			(10,069)						(30,887)
Deposits and other non-current assets			(3,464)						(493)
Operating leases, net			1,864						(125)
Accounts payable and accrued expenses			(6,292)						(16,087)
Liabilities to users			(15,717)						(8,099)
Long-term income tax liability			(620)						(178)
Other long-term liabilities			2,145						1,507
Net cash flows used in operating activities			$	(201,492)					$	(356,718)
Investing Activities:
Purchases of property and equipment			(7,094)						(8,614)
Cash paid for internally developed software costs			(19,419)						(13,195)
Acquisition of gaming licenses			(1,362)						(267)
Other investing activities, net			311						(989)
Net cash flows used in investing activities			$	(27,564)					$	(23,065)
Financing Activities:
Purchase of treasury stock			(27,358)						(14,083)
Proceeds from exercise of stock options			2,192						1,770
Net cash flows used in financing activities			$	(25,166)					$	(12,313)
Net decrease in cash and cash equivalents and restricted cash			(254,222)						(392,096)
Cash and cash equivalents and restricted cash at the beginning of period			1,778,825						2,629,842
Cash and cash equivalents and restricted cash, end of period			$	1,524,603					$	2,237,746
Disclosure of cash, cash equivalents and restricted cash:
Cash and cash equivalents			$	1,087,668					$	1,772,892
Cash reserved for users			436,935						464,854
Total cash, cash equivalents and restricted cash, end of period			$	1,524,603					$	2,237,746
Supplemental Disclosure of Noncash Investing and Financing Activities:
Investing activities included in changes in accounts payable and accrued expenses			$	(679)					$	7,604
Supplemental Disclosure of Cash Activities:
Decrease in cash reserved for users			$	(32,718)					$	(12,096)
Cash paid for interest			$	—					$	—

See accompanying notes to unaudited condensed consolidated financial statements.

(Amounts in thousands, except loss per share data, unless otherwise noted)

1.Description of Business

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

2.Summary of Significant Accounting Policies and Practices

Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”), and was accounted for using the acquisition method of accounting. These unaudited condensed consolidated financial statements include the accounts and operations of the Company, except that, due to the timing of the consummation of the GNOG Transaction, these unaudited condensed consolidated financial statements exclude the operations of GNOG prior to the GNOG Closing Date.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”), which clarifies the guidance in Accounting Standards Codification Topic 820, Fair Value Measurement (“Topic 820”), when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted. While the Company is continuing to assess the timing of adoption and the potential impacts of ASU 2022-03, it does not expect ASU 2022-03 to have a material effect on the Company’s consolidated financial condition, results of operations or cash flows.

3.Business Combination

Share consideration (1)			$	460,128
Other consideration (2)			143,337
Total consideration			$	603,465

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

(2)Includes (i) $170.9 million of payments made by the Company on behalf of GNOG, including repayment of the outstanding portion of GNOG’s term loan (including the associated prepayment premium) and payment of certain of GNOG’s transaction expenses incurred in connection with the GNOG Transaction and (ii) warrants that were exercisable for shares of GNOG Class A common stock prior to the GNOG Closing Date, which were assumed by DraftKings in connection with the GNOG Transaction and became eligible to be converted into approximately 2.1 million shares of DraftKings Inc.’s Class A common stock in the aggregate. These payments were partially offset by commercial credits received by the Company from Fertitta Entertainment, Inc. (“FEI”), which can be applied by the Company from time to time to offset future amounts otherwise owed by it to FEI or its affiliates under commercial arrangements among such parties, subject to certain limited exceptions.

Cash and cash equivalents			$	66,709
Cash reserved for users			7,633
Receivables reserved for users			2,814
Accounts receivables			7,783
Prepaid expenses and other current assets			64
Property and equipment, net			1,433
Intangible assets, net			315,000
Operating lease right-of-use assets			1,185
Deposits and other non-current assets			47,395
Total identifiable assets acquired			450,016
Liabilities assumed:
Accounts payable and accrued expenses			32,989
Liabilities to users			4,314
Operating lease liabilities			1,185
Other long-term liabilities			78,781
Total liabilities assumed			117,269
Net assets acquired (a)			$	332,747
Purchase consideration (b)			$	603,465
Goodwill (b) – (a)			$	270,718

			Fair Value						Weighted- Average Useful Life
Gaming licenses			$	145,000					12.2 years
Customer relationships			170,000						5.9 years
Total			$	315,000

						Three months ended March 31,
						2023 Actual						2022 Pro Forma
Revenue						$	769,652					$	449,109
Net loss						$	(397,148)					$	(475,774)

4.Intangible Assets

			Weighted-Average Remaining Amortization Period						Gross Carrying Amount						Accumulated Amortization						Net
Amortized intangible assets:
Developed technology			5.1 years						$	422,900					$	(153,462)					$	269,438
Internally developed software			2.4 years						187,017						(80,807)						106,210
Gaming licenses			10.9 years						208,017						(33,747)						174,270
Customer relationships			4.4 years						269,728						(89,127)						180,601
Trademarks, tradenames and other			3.7 years						36,882						(15,518)						21,364
Indefinite-lived intangible assets:
Digital assets, net of impairment			Indefinite-lived						2,626						—						2,626
Total									$	1,127,170					$	(372,661)					$	754,509

			Weighted-Average Remaining Amortization Period						Gross Carrying Amount						Accumulated Amortization						Net
Amortized intangible assets:
Developed technology			5.4 years						$	422,900					$	(140,200)					$	282,700
Internally developed software			2.4 years						168,277						(70,575)						97,702
Gaming licenses			11.0 years						206,655						(29,487)						177,168
Customer relationships			4.6 years						269,728						(75,791)						193,937
Trademarks, tradenames and other			3.8 years						36,193						(13,463)						22,730
Indefinite-lived intangible assets:
Digital assets, net of impairment			Indefinite-lived						2,697						—						2,697
Intangible assets, net									$	1,106,450					$	(329,516)					$	776,934

Amortization expense was $43.1 million and $28.1 million for the three months ended March 31, 2023 and 2022, respectively.

5.Current and Long-term Liabilities

In March 2021, Old DraftKings issued zero-coupon convertible senior notes in an aggregate principal amount of $1,265.0 million, which includes proceeds from the full exercise of the over-allotment option (collectively, the “Convertible Notes”). The Convertible Notes will mature on March 15, 2028 (the “Notes Maturity Date”), subject to earlier conversion, redemption or repurchase. In connection with the issuance of the Convertible Notes, Old DraftKings incurred $17.0 million of lender fees and $1.7 million of debt financing costs, which are being amortized through the Notes Maturity Date. The Convertible Notes represent senior unsecured obligations of Old DraftKings, which are being amortized through the Notes Maturity Date. On May 5, 2022, in connection with the consummation of the GNOG Transaction, (i) DraftKings Inc. agreed to fully and unconditionally guarantee all of Old DraftKings’ obligations under the Convertible Notes and the indenture governing the Convertible Notes and (ii) each Convertible Note which was outstanding as of the consummation of the GNOG Transaction and previously convertible into shares of Old DraftKings Class A common stock became convertible into shares of DraftKings Inc. Class A common stock.

The Convertible Notes are convertible at an initial conversion rate of 10.543 shares of DraftKings Inc.'s Class A common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $94.85 per share of Class A common stock. The conversion rate is subject to adjustment upon the occurrence of certain specified events and includes a make-whole adjustment upon early conversion in connection with a make-whole fundamental change (as defined in the indenture governing the Convertible Notes).

Prior to September 15, 2027, the Convertible Notes will be convertible only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the Notes Maturity Date. Old DraftKings will satisfy any conversion election by paying or delivering, as the case may be, cash, shares of DraftKings Inc.’s Class A common stock or a combination of cash and shares of DraftKings Inc.’s Class A common stock.

In connection with the pricing of the Convertible Notes and the exercise of the over-allotment option to purchase additional notes, Old DraftKings entered into a privately negotiated capped call transaction (the “Capped Call Transactions”). The Capped Call Transactions have a strike price of $94.85 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Convertible Notes. The Capped Call Transactions have an initial cap price of $135.50 per share, subject to certain adjustments. The Capped Call Transactions are expected generally to reduce potential dilution to the Company’s Class A common stock upon any conversion of Convertible Notes. As the Capped Call Transactions qualify for equity classification, the net cost of $124.0 million incurred in connection with the Capped Call Transactions was recorded as a reduction to additional paid-in capital on the Company’s consolidated balance sheet.

As of March 31, 2023, the Company’s convertible debt balance was $1,251.8 million, net of unamortized debt issuance costs of $13.2 million. Amortization of debt issuance costs was $0.7 million for the three months ended March 31, 2023 and $0.7 million for the three months ended March 31, 2022, which are included in the interest expense line-item on the Company's consolidated statements of operations. Although recorded at amortized cost on the Company’s consolidated balance sheets, the estimated fair value of the Convertible Notes was $883.9 million and $786.5 million as of March 31, 2023 and December 31, 2022, respectively, which was calculated using the estimated or actual bids and offers of the Convertible Notes in an over-the-counter market on the last business day of the period, which is a Level 1 fair value measurement.

Taxation of e-commerce is becoming more prevalent and could negatively affect the Company’s business as it pertains to DFS and its contestants. The ultimate impact of indirect taxes on the Company’s business is uncertain, as is the period required to resolve this uncertainty. The Company’s estimated contingent liability for indirect taxes represents the Company’s best estimate of tax liability in jurisdictions in which the Company believes taxation is probable. The Company frequently reevaluates its tax positions for appropriateness.

Indirect tax statutes and regulations are complex and subject to differences in application and interpretation. Tax authorities may impose indirect taxes on Internet-delivered activities based on statutes and regulations which, in some cases, were established prior to the advent of the Internet and do not apply with certainty to the Company’s business. The Company’s estimated contingent liability for indirect taxes may be materially impacted by future audit results, litigation and settlements, should they occur. The Company’s activities by jurisdiction may vary from period to period, which could result in differences in the applicability of indirect taxes from period to period.

As of March 31, 2023 and December 31, 2022, the Company’s estimated contingent liability for indirect taxes was $63.6 million and $60.3 million, respectively. The estimated contingent liability for indirect taxes is recorded within other long-term liabilities on the consolidated balance sheets and general and administrative expenses on the condensed consolidated statements of operations.

In addition, on May 5, 2022, in connection with the consummation of the GNOG Transaction, the Company assumed an additional 5.9 million warrants, each of which entitled the holder to purchase one share of GNOG’s Class A common stock at an exercise price of $11.50 per share (the “GNOG Private Warrants”). Effective as of the consummation of the GNOG Transaction, each of the outstanding GNOG Private Warrants became exercisable, at an exercise price of $31.50, for 0.365 of a share of DraftKings Inc.’s Class A common stock, or approximately 2.1 million shares of DraftKings Inc.’s Class A common stock in the aggregate, on the existing terms and conditions of such GNOG Private Warrants, except as otherwise described in the assignment and assumption agreement relating to the GNOG Private Warrants entered into on the GNOG Closing Date. As of March 31, 2023, there were 5.9 million GNOG Private Warrants outstanding.

			March 31, 2023
			Level 1						Level 2						Level 3						Total
Assets
Cash equivalents:
Money market funds			$	206,939		(1)			$	—					$	—					$	206,939
Other current assets:
Digital assets held for users			—						48,733			(6)			—						48,733
Other non-current assets:
Derivative instruments			—						—						25,287			(4)			25,287
Equity securities			19,075			(2)			13,533			(3)			—						32,608
Total			$	226,014					$	62,266					$	25,287					$	313,567
Liabilities
Digital assets held for users			$	—					$	48,733		(6)			$	—					$	48,733
Warrant liabilities			—						27,715			(5)			—						27,715
Total			$	—					$	76,448					$	—					$	76,448

			December 31, 2022
			Level 1						Level 2						Level 3						Total
Assets
Cash equivalents:
Money market funds			$	304,216		(1)			$	—					$	—					$	304,216
Other current assets:
Digital assets held for users			—						38,444			(6)			—						38,444
Other non-current assets:
Derivative instruments			—						—						26,248			(4)			26,248
Equity securities			18,250			(2)			13,533			(3)			—						31,783
Total			$	322,466					$	51,977					$	26,248					$	400,691
Liabilities
Digital assets held for users			—						$	38,444		(6)			—						$	38,444
Warrant liabilities			$	—					$	10,680		(5)			$	—					10,680
Total			$	—					$	49,124					$	—					$	49,124

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

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

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

(4)Represents the Company’s derivative instruments held in other public and privately held entities. The Company measures the fair value of these derivative instruments using option pricing models and, accordingly, classifies these assets as Level 3. During the three months ended March 31, 2023, there were no new derivative instruments purchased by or issued to the Company. The table below includes a range and an average weighted by relative fair value of the significant unobservable inputs used to measure the fair value of the Level 3 derivative instruments. A change in these significant unobservable inputs might result in a significantly higher or lower fair value measurement at the reporting date.

			March 31, 2023						December 31, 2022
Significant Unobservable Input			Range (Weighted Average)						Range (Weighted Average)
Underlying stock price			$7.63 - $19.80 ($16.95)						$7.30 - $19.80 ($16.53)
Volatility			56.0% - 80.0% (74.8%)						56.0% - 80.0% (74.1%)
Risk-free rate			1.3% - 4.7% (4.2%)						1.3% - 4.3% (4.1%)

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

(6)Represents the asset and liability balance for the digital assets held by the Company for its users, which are classified as Level 2 because the Company measures the fair value of these digital assets using observable inputs for similar transactions.

For the three months ended March 31, 2023 and 2022, the Company recorded $0.1 million and $37.4 million of unrealized gains on its financial assets carried at fair value, respectively. Those unrealized gains are included within other income, net in the condensed consolidated statements of operations.

7.Revenue Recognition

			Three months ended March 31,
			2023						2022
Deferred revenue, beginning of the period			$	133,851					$	91,554
Deferred revenue, end of the period			$	132,213					$	95,402
Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period			$	112,426					$	51,680

			Three months ended March 31,
			2023						2022
Online gaming			$	735,189					$	386,678
Gaming software			8,610						13,495
Other			25,853						17,032
Total Revenue			$	769,652					$	417,205

8.Stock-Based Compensation

			Time-Based												PSP												LTIP												Total						Weighted Average Exercise Price of Options						Weighted Average FMV of RSUs
			Options						RSUs						Options						RSUs						Options						RSUs
Outstanding at December 31, 2022			12,259						15,273						2,273						13,119						11,152						13,864						67,940						$	6.17					$	29.64
Granted			600						9,560						—						1,990						—						113						12,263						25.81						17.24
Exercised options / vested RSUs			(530)						(1,700)						(171)						(1,715)						—						(8,342)						(12,458)						3.13						48.49
Change in awards due to performance-based multiplier			—						—						—						1,142						—						—						1,142						—						60.25
Forfeited			—						(369)						—						(55)						—						(41)						(465)						4.53						25.67
Outstanding at March 31, 2023			12,329						22,764						2,102						14,481						11,152						5,594						68,422						$	6.71					$	21.99

As of March 31, 2023, total unrecognized stock-based compensation expense of $689.8 million related to granted and unvested stock-based compensation arrangements is expected to be recognized over a weighted-average period of 3.1 years. The following table shows stock compensation expense for the three months ended March 31, 2023 and 2022:

			Three months ended March 31, 2023																		Three months ended March 31, 2022
			Options						RSUs						Total						Options						RSUs						Total
Time-based (1)			$	3,844					$	44,807					$	48,651					$	3,864					$	21,786					$	25,650
PSP (2)			—						24,015						24,015						—						43,367						43,367
LTIP (2)			—						44,734						44,734						—						118,060						118,060
Total			$	3,844					$	113,556					$	117,400					$	3,864					$	183,213					$	187,077

9.Income Taxes

			Three months ended March 31,
			2023						2022
Income tax provision			$	1,368					$	469

The effective tax rates for the three months ended March 31, 2023 and 2022 were (0.3)% and (0.1)%, respectively. The difference between the Company’s effective tax rates for the three month periods ended March 31, 2023 and 2022 and the U.S. statutory tax rate of 21% was primarily due to a valuation allowance related to the Company’s deferred tax assets, offset partially by current state tax and current foreign tax. The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance if it is more likely than not that some or all such deferred tax assets will not be realized.

10.Loss Per Share

			Three months ended March 31,
			2023						2022
Net loss attributable to common stockholders			$	(397,148)					$	(467,693)
Basic and diluted weighted-average common shares outstanding			455,081						411,066
Loss per share attributable to common stockholders:
Basic and diluted			$	(0.87)					$	(1.14)

			Three months ended March 31,
			2023						2022
Class A common stock resulting from exercise of all warrants			3,761						1,613
Stock options and RSUs			68,422						53,512
Convertible notes			13,337						13,337
Total			85,520						68,462

11.Related-Party Transactions

The Company provides office space and general operational support to DKFS, LLC, an equity-method affiliate. The operational support is primarily in the form of general and administrative services. As of March 31, 2023 and December 31, 2022, the Company had $0.1 million and $0.2 million, respectively, of receivables from DKFS, LLC related to those services and expenses to be reimbursed to the Company, which are included within non-current assets in the consolidated balance sheets. The Company has committed to invest up to $17.5 million into DBDK Venture Fund I, LP, a Delaware limited partnership and a subsidiary of DKFS, LLC. As of March 31, 2023, the Company had invested a total of $6.7 million of the total commitment.

For the three months ended March 31, 2023 and March 31, 2022, the Company had $0.7 million and $0.6 million in sales, respectively, to entities owned by an immediate family member of a current director of the Company. The Company had an associated accounts receivable balance of $0.3 million and $0.2 million as of March 31, 2023 and December 31, 2022, respectively, included in accounts receivable in its condensed consolidated balance sheets.

In 2022, from time to time, the Company chartered, without mark-up, a private plane owned by an entity controlled by Jason Robins, the Company’s Chief Executive Officer, utilizing aircraft services from Jet Aviation Flight Services, Inc. for the business and personal travel of Mr. Robins and his family. The Company had no direct or indirect interest in such private plane. During the three months ended March 31, 2022, the Company incurred $0.7 million of expense for use of the aircraft under these chartering services. During the three months ended March 31, 2023, the Company incurred no expense for use of the aircraft under these chartering services.

12.Leases, Commitments and Contingencies

The Company primarily leases corporate office facilities, data centers and motor vehicles under operating lease agreements. Some of the Company’s leases include one or more options to renew. For a majority of our leases, we do not assume renewals in our determination of the lease term as the renewals are not deemed to be reasonably assured. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. As of March 31, 2023, the Company’s lease agreements typically have terms not exceeding ten years.

			Three months ended March 31,
			2023						2022
Operating lease cost			$	5,028					$	4,230
Short term lease cost			1,331						1,755
Variable lease cost			1,119						806
Sublease income			(236)						(230)
Total lease cost			$	7,242					$	6,561

			Three months ended March 31,
			2023						2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used by operating leases			$	3,165					$	4,283
Right-of-use assets obtained in exchange for new operating lease liabilities			$	366					$	619

The weighted-average remaining lease term for the Company's operating leases was 8.3 years, and the weighted-average discount rate for the Company's operating leases was 6.5%, in each case as of March 31, 2023. The Company calculated the weighted-average discount rate using incremental borrowing rates, which equal the rates of interest that it would pay to borrow funds on a fully collateralized basis over a similar term.

			Years Ending December 31,
From April 1, 2023 to December 31, 2023			$	5,240
2024			12,252
2025			11,920
2026			11,660
2027			11,518
Thereafter			40,445
Total undiscounted future cash flows			93,035
Less: Imputed interest			(22,594)
Present value of undiscounted future cash flows			$	70,441

Other Contractual Obligations and Contingencies

			Years Ending December 31,
From April 1, 2023 to December 31, 2023			$	326,823
2024			418,437
2025			327,388
2026			188,672
2027			107,988
Thereafter			247,196
Total			$	1,616,504

From time to time, and in the ordinary course of business, the Company may be subject to certain claims, charges and litigation concerning matters arising in connection with the conduct of the Company’s business activities.

On June 14, 2019, Interactive Games LLC filed suit against the Company in the U.S. District Court for the District of Delaware, alleging that our Daily Fantasy Sports product offering infringes two patents and the Company’s Sportsbook product offering infringes two different patents. The Company intends to vigorously defend this case. In the event that a court ultimately determines that the Company is infringing the asserted patents, it may be subject to substantial damages, which may include treble damages and/or an injunction that could require the Company to modify certain features that we currently offer.

The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. The Company also cannot provide an estimate of the possible loss or range of loss. Any adverse outcome in these matters could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of this proceeding will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period.

On July 7, 2021, Winview Inc., a Delaware corporation, filed suit against the Company in the U.S. District Court for the District of New Jersey, which was subsequently amended on July 28, 2021, alleging that our Sportsbook product offering infringes two patents, our Daily Fantasy Sports product offering infringes one patent, and that our Sportsbook product offering and Daily Fantasy Sports product offering infringe another patent. On November 15, 2021, Winview Inc. filed a second amended complaint (the “SAC”), adding as defendants DK Crown Holdings Inc. and Crown Gaming Inc., a Delaware corporation, which are wholly-owned subsidiaries of the Company. The SAC largely repeats the allegations of the first amended complaint.

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

The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. The Company also cannot provide an estimate of the possible loss or range of loss. Any adverse outcome

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of this proceeding will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period.

On July 2, 2021, the first of two substantially similar federal securities law putative class actions was filed in the U.S. District Court for the Southern District of New York against the Company and certain of its officers. The actions alleged violations of Sections 10(b) and 20(a) of the Exchange Act on a behalf of a putative class of persons who purchased or otherwise acquired the Company's stock between December 23, 2019 and June 15, 2021. The allegations related to, among other things, allegedly false and misleading statements and/or failures to disclose information about the Company’s business and prospects, based primarily upon the allegations concerning SBTech that were contained in a report published about the Company on June 15, 2021 by Hindenburg Research (the “Hindenburg Report”). On November 12, 2021, the court consolidated the two actions under the caption In re DraftKings Securities Litigation and appointed a lead plaintiff. The lead plaintiff filed a consolidated amended complaint on January 11, 2022. On January 10, 2023, the court granted the Company's motion to dismiss and final judgment was entered dismissing the action with prejudice.

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

The Company cannot predict with any degree of certainty the outcome of the SEC matter or determine the extent of any potential liabilities. The Company also cannot provide an estimate of the possible loss or range of loss. Any adverse outcome in the SEC matter could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of the SEC matter will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period.

On October 21, 2021, the first of five substantially similar putative shareholder derivative actions was filed in Nevada by alleged shareholders of the Company. The actions purported to assert claims on behalf of the Company against certain current and former officers and/or members of the board of directors of the Company and DEAC. The two actions filed in the U.S. District Court for the District of Nevada were subsequently consolidated, and two of the actions filed in Nevada state District Court in Clark County likewise were consolidated. A substantially identical fifth action was filed in Nevada state District Court in Clark County and was subsequently dismissed voluntarily by the plaintiff. The same plaintiff filed a substantially identical action in Massachusetts Superior Court, which was also dismissed voluntarily by the plaintiff. The Nevada actions purported to assert claims on behalf of the Company for, among other things, breach of fiduciary duty and corporate waste based primarily upon the allegations concerning SBTech that were contained in the Hindenburg Report. The federal court action in Nevada also contended that certain individuals are liable to the Company for any adverse judgment in the federal securities class actions described above under Sections 10(b) and 21D of the Exchange Act. The Nevada actions sought unspecified compensatory damages, changes to corporate governance and internal procedures, equitable and injunctive relief, restitution, costs and attorney’s fees. The Nevada actions were voluntarily dismissed without prejudice by the plaintiffs in state court on February 27, 2023 and in federal court on March 3, 2023.

On August 12, 2022, a putative class action was filed in Nevada state District Court in Clark County against Golden Nugget Online Gaming, Inc. (“GNOG Inc.”), the Company and one of its officers, as well as former officers or directors and the former controlling stockholder of GNOG Inc. and Jefferies LLC. The lawsuit asserts claims on behalf of a putative class of former minority stockholders of GNOG Inc. alleging that certain former officers and directors of GNOG Inc. and its former

On September 9, 2022, two similar putative class actions were filed in the Delaware Court of Chancery against former directors of GNOG Inc. and its former controlling stockholder, one of which also names the Company and Jefferies Financial Group, Inc. as defendants. These pending actions in Delaware assert substantially similar claims on behalf of a putative class of former minority stockholders of GNOG Inc. alleging that certain former officers and directors of GNOG Inc. and its former controlling stockholder (Tilman Fertitta) breached their fiduciary duties to minority stockholders of GNOG Inc. in connection with the GNOG Transaction, and one of the actions also alleges that the Company aided and abetted the alleged breaches of fiduciary duty. On October 12, 2022, the Delaware Court of Chancery consolidated these two actions under the caption In re Golden Nugget Online Gaming, Inc. Stockholders Litigation.

The Company intends to vigorously defend against these claims. The Company cannot predict with any degree of certainty the outcome of these matters or determine the extent of any potential liabilities. The Company also cannot provide an estimate of the possible loss or range of loss. Any adverse outcome in these matters could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of these proceedings will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period.

On August 19, 2021, AG 18, LLC d/b/a/ Arrow Gaming (“Arrow Gaming”) filed a complaint against the Company in the United States District Court for the District of New Jersey alleging that the Company's DFS and Casino product offerings infringe four patents. On October 12, 2021, Arrow Gaming filed an amended complaint to add one additional patent. On December 20, 2021, Arrow Gaming filed a second amended complaint adding new allegations with respect to alleged willful infringement.

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

The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. The Company also cannot provide an estimate of the possible loss or range of loss. Any adverse outcome in these matters could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of this proceeding will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period.

On November 22, 2021, Beteiro, LLC filed a complaint against the Company in the United States District Court for the District of New Jersey alleging that the Company’s Sportsbook and Casino product offerings infringe four patents.

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

The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. The Company also cannot provide an estimate of the possible loss or range of loss. Any adverse outcome in these matters could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of this proceeding will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period.

On December 1, 2021, Diogenes Ltd. & Colossus (IOM) Ltd. (“Colossus”), filed a complaint against the Company in the United States District Court for the District of Delaware alleging that the Company’s Sportsbook product offering infringes seven patents. Colossus amended its complaint on February 7, 2022 to, among other things, add one additional patent.

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

The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. The Company also cannot provide an estimate of the possible loss or range of loss. Any adverse outcome in these matters could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of this proceeding will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period.

Nelson Steiner filed suit against the Company and FanDuel Inc. in Florida state court on November 9, 2015. The action was subsequently transferred to In Re: Daily Fantasy Sports Litigation (Multi-District Litigation) (the “MDL”), and Mr. Steiner’s action was consolidated into the MDL’s amended complaint, which, in February 2016, consolidated numerous actions (primarily purported class actions) filed against the Company, FanDuel, and other related parties in courts across the United States. By June 23, 2022, the MDL was resolved, except for Mr. Steiner’s action, and the court officially closed the MDL docket on July 8, 2022.

Mr. Steiner brings this action as a concerned citizen of the state of Florida alleging that, among other things, defendants’ daily fantasy sports contests are illegal gambling under the state laws of Florida and seeks disgorgement of “gambling losses” purportedly suffered by Florida citizens on behalf of the state. On June 23, 2022, the MDL court remanded Mr. Steiner’s action to the Circuit Court for Pinellas County, Florida. Plaintiff has not yet filed an amended pleading.

The Company intends to vigorously defend this suit. Any adverse outcome in this matter could subject the Company to substantial damages and it could be restricted from offering DFS contests in Florida. The Company cannot provide any assurance as to the outcome of this matter.

The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. The Company also cannot provide an estimate of the possible loss or range of loss. Any adverse outcome in these matters could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of this matter will have a material adverse effect on Company’s financial condition, although the outcome could be material to the Company’s operating results for any particular period, depending, in part, upon the operating results for such period.

On January 9, 2023, Simpson G. Turley, individually and on behalf of all others similarly situated, filed a purported class action against the Company in the United States District Court for the District of Massachusetts. Plaintiff alleges, among other things, that he was a contestant in the Company’s daily fantasy showdown contest for the January 2, 2023, NFL game between the Cincinnati Bengals and the Buffalo Bills (the “Bengals-Bills Game”). The Bengals-Bills Game was postponed and

The Company intends to vigorously defend this case. Any adverse outcome in this matter could subject the Company to substantial damages and/or require alterations to the Company’s business. The Company cannot provide any assurance as to the outcome of this matter.

The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. The Company also cannot provide an estimate of the possible loss or range of loss. Any adverse outcome in this matter could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of this matter will have a material adverse effect on Company’s financial condition, although the outcome could be material to the Company’s operating results for any particular period, depending, in part, upon the operating results for such period.

On March 9, 2023, a putative class action was filed in Massachusetts federal court by alleged purchasers of non-fungible tokens (“NFTs”) on the DraftKings Marketplace (“DK Marketplace”). The complaint asserts claims for violations of federal and state securities laws against the Company and three of its officers on the grounds that, among other things, the NFTs that are sold and traded on the DK Marketplace allegedly constitute securities that were not registered with the SEC in accordance with federal and Massachusetts law, and that the DK Marketplace is a securities exchange that is not registered in accordance with federal and Massachusetts law. Based on these allegations, plaintiff brings claims seeking rescissory damages and other relief on behalf of himself and a putative class of persons who purchased NFTs on the DK Marketplace between August 11, 2021 and the present.

The Company intends to vigorously defend this matter. Any adverse outcome in this matter could subject the Company to substantial damages and/or require alterations to the Company’s business. The Company cannot provide any assurance as to the outcome of this matter.

The Company cannot predict with any degree of certainty the outcome of this matter or determine the extent of any potential liability or damages. The Company also cannot provide an estimate of the possible loss or range of loss. Any adverse outcome in this matter could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of this matter will have a material adverse effect on Company’s financial condition, although the outcome could be material to the Company’s operating results for any particular period, depending, in part, upon the operating results for such period.

The Company is currently under Internal Revenue Service audit for prior tax years, with the primary unresolved issues relating to excise taxation of fantasy sports contests and informational reporting and withholding. The final resolution of that audit, and other audits or litigation, may differ from the amounts recorded in these consolidated financial statements and may materially affect the Company’s consolidated financial statements in the period or periods in which that determination is made.

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” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. You are cautioned that 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.

•our ability to effectively compete in the global entertainment and gaming industries;

•our ability to successfully acquire and integrate new operations;

•our ability to obtain and maintain licenses with gaming authorities;

•our inability to recognize deferred tax assets and tax loss carryforwards;

•market and global conditions and economic factors beyond our control, including the potential adverse effects of the global coronavirus (“COVID-19”) pandemic (or the emergence of additional variants or strains thereof), as well as the potential impact of general economic conditions, including inflation, rising interest rates and instability in the banking system, on our liquidity, operations and personnel;

•significant competition and competitive pressures from other companies worldwide in the industries in which we operate;

•our ability to raise financing in the future;

•our success in retaining or recruiting officers, key employees or directors; and

•litigation and the ability to adequately protect our intellectual property rights.

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.

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 are also highly focused on our responsibility as a steward of this new era in real-money 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 product offerings and technology in order to continuously launch new product 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 cross-product 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 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 sports betting and iGaming and (d) expand our other online 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.

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 to maintain favorable relationships with regulators. 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 profitability 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 increased frequency of customer play and higher hold percentage, as well as scale benefits from investments in our product offerings and technology and general and administrative functions. On a consolidated Adjusted EBITDA basis, we expect to achieve profitability 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”.

The following table sets forth a summary of our financial results for the periods indicated:

			Three months ended March 31,
(amounts in thousands)			2023						2022
Revenue			$	769,652					$	417,205
Net Loss			(397,148)						(467,693)
Adjusted EBITDA (1)			(221,611)						(289,509)

(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.

Revenue increased by $352.4 million in the three months ended March 31, 2023 compared to the three months ended March 31, 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 reduced promotional intensity.

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 Marketplace product 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.

The chart below presents our average MUPs for the three months ended March 31, 2022 and 2023:

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. ARPMUP is a key indicator of our ability to drive usage and monetization of our product offerings. The chart below presents our ARPMUP for the three months ended March 31, 2022 and 2023:

The increase in MUPs for the three months ended March 31, 2023, compared to the same period in 2022, primarily reflects strong unique payer retention and acquisition across our Sportsbook and iGaming products as well as the expansion of our Sportsbook and iGaming products into new states, partially offset by a decline in DFS MUPs.

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

			Three months ended March 31,
(amounts in thousands)			2023						2022
Net loss			$	(397,148)					$	(467,693)
Adjusted for:
Depreciation and amortization (1)			48,213						32,225
Interest income, net			(11,140)						(148)
Income tax provision			1,368						469
Stock-based compensation (2)			117,400						187,077
Transaction-related costs (3)			—						3,774
Litigation, settlement, and related costs (4)			2,563						1,950
Advocacy and other related legal expenses (5)			—						—
Loss (gain) on remeasurement of warrant liabilities			17,035						(12,681)
Other non-recurring costs and non-operating (income) costs (6)			98						(34,482)
Adjusted EBITDA			$	(221,611)					$	(289,509)

(1)The amounts include the amortization of acquired intangible assets of $29.8 million and $19.2 million for the three months ended March 31, 2023 and 2022, 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 evaluation, negotiation and integration costs incurred in connection with pending or completed transactions and offerings, including costs relating to the GNOG Transaction in 2022.

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

(5)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. For the three months ended March 31, 2023 and 2022, we did not incur any such costs. 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.

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

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)			2023						2022						$ Change						% Change
Revenue			$	769,652					$	417,205					$	352,447					84.5		%
Cost of revenue			521,740						313,379						(208,361)						(66.5)		%
Sales and marketing			389,133						321,452						(67,681)						(21.1)		%
Product and technology			88,088						81,352						(6,736)						(8.3)		%
General and administrative			160,476						216,606						56,130						25.9		%
Loss from operations			(389,785)						(515,584)						125,799						24.4		%
Interest income, net			11,140						148						10,992						7,427.0		%
(Loss) gain on remeasurement of warrant liabilities			(17,035)						12,681						(29,716)						234.3		%
Other income, net			19						37,882						(37,863)						100.0		%
Loss before income tax provision and loss from equity method investment			(395,661)						(464,873)						69,212						14.9		%
Income tax provision			1,368						469						(899)						191.7		%
Loss from equity method investment			119						2,351						2,232						94.9		%
Net loss			$	(397,148)					$	(467,693)					$	70,545					15.1		%

Revenue. Revenue increased $352.4 million, or 84.5%, to $769.7 million in the three months ended March 31, 2023, from $417.2 million in the three months ended March 31, 2022. The increase was primarily attributable to our online gaming revenues, which increased $348.5 million, or 90.1%, to $735.2 million in the three months ended March 31, 2023, from $386.7 million in the three months ended March 31, 2022, primarily due to MUPs increasing by 39.2% and ARPMUP increasing by 35.4%, in each case, as compared to the three months ended March 31, 2022. MUPs and ARPMUP increased primarily 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, structural improvement in our Sportsbook hold rate and reduced promotional intensity.

Cost of Revenue. Cost of revenue increased $208.4 million, or 66.5%, to $521.7 million in the three months ended March 31, 2023, from $313.4 million in the three months ended March 31, 2022. 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 Kansas, Maryland, Massachusetts, Ohio and Ontario, Canada and the launch of our iGaming product offering in Ontario, Canada since March 31, 2022. 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 $123.9 million and $22.2 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 7.3 percentage points to 67.8% in the three months ended March 31, 2023, as compared to 75.1% in the three months ended March 31, 2022, reflecting, in part, structural improvement in our Sportsbook hold rate and reduced promotional intensity, 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 $67.7 million, or 21.1%, to $389.1 million in the three months ended March 31, 2023, from $321.5 million in the three months ended March 31, 2022. The increase was primarily attributable to an increase of $42.2 million from activities to acquire and retain players in new jurisdictions that we operate in, such as marketing costs, including advertising and the development of marketing campaigns.

Product and Technology. Product and technology expense increased $6.7 million, or 8.3%, to $88.1 million in the three months ended March 31, 2023, from $81.4 million in the three months ended March 31, 2022. The increase primarily reflects additions to our product operations and engineering headcount.

General and Administrative. General and administrative expense decreased $56.1 million, or 25.9%, to $160.5 million in the three months ended March 31, 2023, from $216.6 million in the three months ended March 31, 2022. This decrease was primarily driven by a reduction in stock-based compensation expense of $66.3 million, partially offset by an increase in cash-based compensation expense due to an increase in headcount.

(Loss) Gain on Remeasurement of Warrant Liabilities. We recorded a loss on remeasurement of warrant liabilities of $17.0 million in the three months ended March 31, 2023, compared to a gain of $12.7 million in the three months ended March 31, 2022 primarily due to changes in the underlying share price of our Class A common stock.

Other Income, Net. We had de minimis other income in the three months ended March 31, 2023, as compared to $37.9 million in the three months ended March 31, 2022. This decrease was primarily attributable to a change in the fair value of certain financial assets.

Net Loss. Net loss decreased by $70.5 million to $397.1 million in the three months ended March 31, 2023, as compared to a net loss of $467.7 million in the three months ended March 31, 2022, for the reasons discussed above.

We had $1.1 billion in cash and cash equivalents as of March 31, 2023 (excluding player cash, which we segregate from our operating cash balances 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. 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.

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 consolidated balance sheet. As of March 31, 2023, the Convertible Notes, net of issuance costs, balance was $1,251.8 million.

Leases. We have lease arrangements for certain corporate office facilities, data centers, and motor vehicles. As of March 31, 2023, the Company had lease obligations of $70.4 million, with $4.0 million payable within 12 months.

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

			Three months ended March 31,
(amounts in thousands)			2023						2022
Net cash used in operating activities			$	(201,492)					$	(356,718)
Net cash used in investing activities			(27,564)						(23,065)
Net cash used in financing activities			(25,166)						(12,313)
Net decrease in cash and cash equivalents and restricted cash			(254,222)						(392,096)
Cash and cash equivalents and restricted cash at beginning of period			1,778,825						2,629,842
Cash and cash equivalents and restricted cash at end of period			$	1,524,603					$	2,237,746