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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________ to ___________.
Commission file number 001-41379
 Picture1.jpg
DRAFTKINGS INC.
(Exact name of registrant as specified in its charter)
Nevada87-2764212
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
222 Berkeley Street, 5th Floor
Boston, MA 02116
(Address of principal executive offices) (Zip Code)
(617) 986-6744
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report).
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class    Trading symbol    Name of each exchange on which registered
Class A Common Stock, $0.0001 par valueDKNGThe 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 ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐ 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 6, 2024 there were 487,627,739 shares of the registrant’s Class A common stock, par value $0.0001 per share, and 393,013,951 shares of the registrant’s Class B common stock, par value $0.0001 per share, outstanding.


DraftKings Inc.
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 2024
Table of Contents




1

PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements.
DRAFTKINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value)
September 30, 2024
(Unaudited)December 31, 2023
Assets
Current assets:
Cash and cash equivalents$877,822 $1,270,503 
Restricted cash13,807 11,700 
Cash reserved for users264,886 341,290 
Receivables reserved for users341,817 301,770 
Accounts receivable64,358 47,539 
Prepaid expenses and other current assets81,207 98,565 
Total current assets1,643,897 2,071,367 
Property and equipment, net52,924 60,695 
Intangible assets, net891,910 690,620 
Goodwill1,456,009 886,373 
Operating lease right-of-use assets83,292 93,985 
Equity method investments12,598 10,280 
Deposits and other non-current assets132,346 131,546 
Total assets$4,272,976 $3,944,866 
Liabilities and Stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses$700,720 $639,599 
Liabilities to users930,614 851,898 
Operating lease liabilities, current portion11,277 11,499 
Other current liabilities4,124 46,624 
Total current liabilities1,646,735 1,549,620 
Convertible notes, net of issuance costs1,255,757 1,253,760 
Non-current operating lease liabilities75,762 80,827 
Warrant liabilities25,439 63,568 
Long-term income tax liabilities73,835 72,810 
Other long-term liabilities119,332 83,975 
Total liabilities$3,196,860 $3,104,560 
Commitments and contingent liabilities (Note 5 and 12)
Stockholders’ equity:
Class A common stock, $0.0001 par value; 900,000 shares authorized as of September 30, 2024 and December 31, 2023; 501,081 and 484,598 shares issued and 487,169 and 472,697 outstanding as of September 30, 2024 and December 31, 2023, respectively
$47 $46 
Class B common stock, $0.0001 par value; 900,000 shares authorized as of September 30, 2024 and December 31, 2023; 393,014 shares issued and outstanding as of September 30, 2024 and December 31, 2023
39 39 
Treasury stock, at cost; 13,912 and 11,901 shares as of September 30, 2024 and December 31, 2023, respectively
(490,352)(412,182)
Additional paid-in capital7,836,271 7,149,858 
Accumulated deficit(6,306,377)(5,933,943)
Accumulated other comprehensive income36,488 36,488 
Total stockholders’ equity$1,076,116 $840,306 
Total liabilities and stockholders’ equity$4,272,976 $3,944,866 
See accompanying notes to unaudited condensed consolidated financial statements.
2

DRAFTKINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share data)
Three months ended September 30,Nine months ended September 30,
2024202320242023
Revenue$1,095,490 $789,957 $3,374,927 $2,434,536 
Cost of revenue742,434 543,454 2,115,917 1,575,517 
Sales and marketing339,943 313,323 896,318 909,943 
Product and technology103,581 89,005 285,051 266,999 
General and administrative208,126 130,761 547,461 427,493 
Loss from operations(298,594)(286,586)(469,820)(745,416)
Other income (expense):
Interest income9,200 14,420 38,479 39,626 
Interest expense(872)(670)(2,199)(1,991)
Gain (loss) on remeasurement of warrant liabilities21 (7,751)(8,282)(44,827)
Other (loss) gain, net(4,620)(1,217)(5,801)(1,153)
Loss before income tax (benefit) provision and loss from equity method investment(294,865)(281,804)(447,623)(753,761)
Income tax (benefit) provision(1,287)1,291 (75,208)3,310 
Loss from equity method investment 110 8 19 450 
Net loss attributable to common stockholders$(293,688)$(283,103)$(372,434)$(757,521)
Loss per share attributable to common stockholders:
Basic and diluted$(0.60)$(0.61)$(0.78)$(1.64)
See accompanying notes to unaudited condensed consolidated financial statements.
3

DRAFTKINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
(Amounts in thousands)

Class A Common StockClass B Common StockAdditional
Paid in Capital		Accumulated
Deficit		Accumulated 
Other
Comprehensive
Income		Treasury Stock AmountTotal Stockholders’
Equity
SharesAmountSharesAmount
Balances at December 31, 2023472,697 $46 393,014 $39 $7,149,858 $(5,933,943)$36,488 $(412,182)$840,306 
Exercise of stock options630— — — 2,857 — — — 2,857 
Stock-based compensation — — — — 117,702 — — — 117,702 
Exercise of warrants1,002 — — — 46,181 — — — 46,181 
Purchase of treasury stock(782)— — — — — — (33,499)(33,499)
Restricted stock unit vesting2,520— — — — — — — — 
Net income (loss)— — — — (142,568)— — (142,568)
Balances at March 31, 2024476,067 $46 393,014 $39 $7,316,598 $(6,076,511)$36,488 $(445,681)$830,979 
Exercise of stock options257 — — — 2,586 — — — 2,586 
Stock-based compensation — — — — 93,681 — — — 93,681 
Exercise of warrants6 — — — 217 — — — 217 
Purchase of treasury stock(631)— — — — — — (24,413)(24,413)
Restricted stock unit vesting1,970 — — — — — — — — 
Shares issued in connection with business combinations7,7571 — — 331,556 — — — 331,557 
Net income (loss)— — — — — 63,822 — — 63,822 
Balances at June 30, 2024485,426 $47 393,014 $39 $7,744,638 $(6,012,689)$36,488 $(470,094)$1,298,429 
Exercise of stock options529— — — 1,355 — — — 1,355 
Stock-based compensation — — — — 90,260 — — — 90,260 
Exercise of warrants1 — — — 18 — — — 18 
Purchase of treasury stock(598)— — — — — — (20,258)(20,258)
Restricted stock unit vesting1,811— — — — — — — — 
Shares issued in connection with business combinations— — — — — — — — — 
Net income (loss)— — — — — (293,688)— — (293,688)
Balances at September 30, 2024487,169 $47 393,014 $39 $7,836,271 $(6,306,377)$36,488 $(490,352)$1,076,116 
4

Class A Common StockClass B Common StockAdditional
Paid in Capital		Accumulated
Deficit		Accumulated 
Other
Comprehensive
Income		Treasury Stock AmountTotal Stockholders'
Equity
SharesAmountSharesAmount
Balances at December 31, 2022450,575 $45 393,014 $39 $6,750,055 $(5,131,801)$36,488 $(332,133)$1,322,693 
Exercise of stock options701— — — 2,192 — — — 2,192 
Stock-based compensation — — — — 117,400 — — — 117,400 
Purchase of treasury stock(1,399)— — — — — — (27,358)(27,358)
Restricted stock unit vesting11,757 1 — — — — — — 1 
Net income (loss)— — — — — (397,148)— — (397,148)
Balances at March 31, 2023461,634 $46 393,014 $39 $6,869,647 $(5,528,949)$36,488 $(359,491)$1,017,780 
Exercise of stock options284 — — — 1,144 — — — 1,144 
Stock-based compensation — — — — 89,193 — — — 89,193 
Shares issued for exercise of warrants62 — — — 1,470 — — — 1,470 
Purchase of treasury stock(587)— — — — — — (13,826)(13,826)
Restricted stock unit vesting1,864 — — — — — — — — 
Net income (loss)— — — — — (77,270)— — (77,270)
Balances at June 30, 2023463,257 $46 393,014 $39 $6,961,454 $(5,606,219)$36,488 $(373,317)$1,018,491 
Exercise of stock options1,359 — — — 5,506 — — — 5,506 
Stock-based compensation — — — — 78,353 — — — 78,353 
Shares issued for exercise of warrants11 — — — 342 — — — 342 
Purchase of treasury stock(617)— — — — — — (18,167)(18,167)
Restricted stock unit vesting1,896 — — — — — — — — 
Net income (loss)— — — — — (283,103)— — (283,103)
Balances at September 30, 2023465,906 $46 393,014 $39 $7,045,655 $(5,889,322)$36,488 $(391,484)$801,422 


See accompanying notes to unaudited condensed consolidated financial statements.

5

DRAFTKINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
Nine months ended September 30,
20242023
Cash Flows from Operating Activities:
Net loss attributable to common shareholders$(372,434)$(757,521)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization204,755 146,722 
Non-cash interest (income) expense, net27 (554)
Stock-based compensation271,307 284,946 
Loss on remeasurement of warrant liabilities8,282 44,827 
(Gain) loss from equity method investment19 450 
Loss on marketable equity securities and other financial assets, net— 75 
Loss on sale of Vegas Sports Information Network, LLC 5,817 — 
Deferred income taxes(80,604)4,527 
Other income (expenses), net4,632 (1,944)
Change in operating assets and liabilities, net of effect of acquisitions:
Receivables reserved for users(30,955)(49,402)
Accounts receivable(13,792)24,174 
Prepaid expenses and other current assets(20,704)(20,757)
Deposits and other non-current assets446 (3,983)
Operating leases, net145 1,907 
Accounts payable and accrued expenses44,635 79,047 
Liabilities to users61,839 170,161 
Long-term income tax liability1,025 (1,605)
Other long-term liabilities8,138 5,112 
Net cash flows provided by (used in) operating activities$92,578 $(73,818)
Cash Flows from Investing Activities:
Purchases of property and equipment(8,148)(19,885)
Cash paid for internally developed software costs(71,059)(60,006)
Acquisition of gaming licenses(14,820)(10,971)
Proceeds from marketable equity securities and other financial assets— 24,425 
Cash paid for acquisition, net of cash acquired(392,501)— 
Other investing activities, net(1,656)(481)
Net cash flows used in investing activities$(488,184)$(66,918)
Cash Flow from Financing Activities:
Proceeds from exercise of warrants— — 
Purchase of treasury stock(78,170)(59,351)
Proceeds from exercise of stock options6,798 8,842 
Net cash flows used in financing activities$(71,372)$(50,509)
Net decrease in cash and cash equivalents, restricted cash, and cash reserved for users(466,978)(191,245)
Cash and cash equivalents, restricted cash, and cash reserved for users at the beginning of period1,623,493 1,778,825 
Cash and cash equivalents, restricted cash, and cash reserved for users at the end of period$1,156,515 $1,587,580 
Disclosure of cash and cash equivalents, restricted cash, and cash reserved for users
Cash and cash equivalents$877,822 $1,111,596 
Restricted cash13,807 — 
Cash reserved for users264,886 475,984 
Cash and cash equivalents, restricted cash, and cash reserved for users at the end of period$1,156,515 $1,587,580 
Supplemental Disclosure of Noncash Investing and Financing Activities:
Investing activities included in accounts payable and accrued expenses$1,788 $(408)
Equity consideration issued in connection with acquisitions$331,557 $— 
Decrease of warrant liabilities from cashless exercise of warrants$46,416 $1,812 
Supplemental Disclosure of Cash Activities:
(Decrease) increase in cash reserved for users$(76,404)$6,331 
See accompanying notes to unaudited condensed consolidated financial statements.
6

DRAFTKINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data, unless otherwise noted)
1.Description of Business
We are a digital sports entertainment and gaming company. We provide users with online sports betting (“Sportsbook”), online casino (“iGaming”) and daily fantasy sports (“DFS”) product offerings, as well as retail sportsbook, media, digital lottery and other consumer product offerings. We are also involved in the design and development of sports betting and casino gaming software for online and retail sportsbooks and iGaming operators.
In May 2018, the Supreme Court (the “Court”) struck down on constitutional grounds the Professional and Amateur Sports Protection Act of 1992, a law that prohibited most states from authorizing and regulating sports betting. As of September 30, 2024, 38 U.S. states, the District of Columbia and Puerto Rico have some form of authorized sports betting. Of those 40 jurisdictions, 32 have legalized online sports betting. All 32 of those jurisdictions are live, and DraftKings operates in 26 of them. As of September 30, 2024, the U.S. jurisdictions with statutes legalizing iGaming are Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, Rhode Island and West Virginia.

As of September 30, 2024, we operate our Sportsbook product offering in Arizona, Colorado, Connecticut, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, Vermont, Virginia, Washington, D.C., West Virginia, Wyoming and Ontario, Canada, and we operate retail sportsbooks in Arizona, Colorado, Connecticut, Illinois, Iowa, Kansas, Kentucky, Louisiana, Michigan, Mississippi, New Hampshire, New Jersey, Washington and Wisconsin. As of September 30, 2024, we operate our iGaming product offering in Connecticut, Michigan, New Jersey, Pennsylvania, West Virginia and Ontario, Canada. The Company also has arrangements in place with land-based casinos, and other partners, to expand operations into additional states upon the passing of relevant legislation, the issuance of related regulations and the receipt of required licenses.
2.Summary of Significant Accounting Policies and Practices
Basis of Presentation and Principles of Consolidation
 These unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim reporting. As such, certain notes or other information that are normally required by U.S. GAAP have been omitted if they substantially duplicate the disclosures contained in the Company’s annual audited consolidated financial statements. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and related notes as of and for the fiscal year ended December 31, 2023, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on February 16, 2024 (the “2023 Annual Report”). These condensed consolidated financial statements are unaudited; however, in the opinion of management, they include all normal and recurring adjustments necessary for a fair presentation of the Company’s condensed consolidated financial statements for the periods presented. Results of operations reported for interim periods are not necessarily indicative of results for the entire year, due to seasonal fluctuations in the Company’s revenue as a result of the timing of various sports seasons, sporting events and other factors.

All intercompany accounts and transactions are eliminated upon consolidation. Certain amounts, which are not material, in the prior year’s consolidated financial statements have been reclassified to conform to the current year's presentation.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, designed to improve reportable segment disclosures. The guidance expands the disclosures required for reportable segments in our annual and interim consolidated financial statements, primarily through enhanced disclosures about significant segment expenses. The standard will be effective for us beginning with our annual reporting for fiscal year 2024 and interim periods thereafter, with early adoption permitted. We are currently evaluating the impact of this standard on our segment disclosures.

In December 2023, the FASB issued ASU 2023-08, Accounting for and Disclosure of Crypto Assets (Topic 820), a new standard designed to enhance decision-useful information about such assets and to better reflect the underlying economics of
7

cryptocurrency transactions. The standard will be effective for fiscal year 2025 including interim periods therein, with early adoption permitted. We are currently evaluating the impact of this standard on our digital assets’ accounting and disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes—Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 modifies the rules on income tax disclosures to enhance the transparency and decision-usefulness of income tax disclosures, particularly in the rate reconciliation table and disclosures about income taxes paid. The amendments are intended to address investors’ requests for income tax disclosures that provide more information to help them better understand an entity’s exposure to potential changes in tax laws and the ensuing risks and opportunities and to assess income tax information that affects cash flow forecasts and capital allocation decisions. The guidance also eliminates certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024. All entities are required to apply the guidance prospectively but have the option to apply it retrospectively. Early adoption is permitted. The Company is continuing to assess the timing of adoption and the potential impacts of ASU 2023-09.

3.Business Combinations
Acquisition of Jackpocket Inc. (“Jackpocket”)
On February 11, 2024, the Company entered into a definitive agreement (the “Jackpocket Merger Agreement”) to acquire Jackpocket, a digital lottery app in the United States (the “Jackpocket Transaction”).
On May 22, 2024 (the “Jackpocket Closing Date”), DraftKings consummated the Jackpocket Transaction, and, under the terms of the Jackpocket Merger Agreement and subject to certain exclusions contained therein, Jackpocket stockholders received approximately $450.9 million of cash consideration and approximately $320.8 million of equity consideration.
The acquisition of Jackpocket allows DraftKings to participate in the U.S. lottery vertical with expected ancillary benefits to its Sportsbook and iGaming product offerings by enhancing customer lifetime value and customer acquisition capabilities.
Operating results for Jackpocket on and after the Jackpocket Closing Date are included in the Company’s unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2024. Because the Company is integrating Jackpocket’s operations into its consolidated operating activities, the amount of revenue and earnings attributable to the Jackpocket business from the Jackpocket Closing Date through September 30, 2024, which is included within revenue and net income (loss) attributable to common stockholders in the Company’s unaudited condensed consolidated statements of operations, is impracticable to determine.
Preliminary Purchase Price Accounting for the Jackpocket Transaction

On the Jackpocket Closing Date, the Company acquired 100% of the equity interests of Jackpocket pursuant to the Jackpocket Merger Agreement. The following is a summary of the consideration issued or paid on the Jackpocket Closing Date:

Cash consideration$450,924 
Equity consideration (1)
320,783 
Total consideration$771,707 

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

8

The purchase price allocation for Jackpocket set forth herein is preliminary and subject to change within the measurement period, which will not extend beyond one year from the Jackpocket Closing Date. Measurement period adjustments will be recognized in the reporting period in which the adjustment amounts are determined and may include adjustments pertaining to intangible assets acquired and tax liabilities assumed, including the calculation of deferred tax assets and liabilities. Any such adjustments may be material.
The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed in connection with the consummation of the Jackpocket Transaction on the Jackpocket Closing Date. The values set forth below are preliminary, pending finalization of valuation analyses:

Cash and cash equivalents$45,999 
Cash reserved for users23,349 
Receivables reserved for users9,092 
Prepaid expenses and other current assets4,151 
Property and equipment1,523 
Intangible assets269,736 
Operating lease right-of-use assets2,579 
Deposits and other non-current assets136 
Total identifiable assets acquired$356,565 
Liabilities assumed:
Accounts payable and accrued expenses$33,961 
Liabilities to users16,877 
Operating lease liabilities2,580 
Other long-term liabilities80,463 
Total liabilities assumed$133,881 
Net assets acquired (a)$222,684 
Purchase consideration (b)$771,707 
Goodwill (b) – (a)$549,023 

Goodwill represents the excess of the gross consideration transferred over the difference between the fair value of the underlying net assets acquired and the underlying liabilities assumed. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of benefits from securing buyer-specific synergies that increase revenue and profits and are not otherwise available to a market participant, as well as acquiring a talented workforce and cost savings opportunities. Goodwill recognized is not deductible for tax purposes. Goodwill associated with the Jackpocket Transaction is assigned as of the Jackpocket Closing Date to the Company’s consolidated reporting unit. As Jackpocket’s financial results are not material to the Company’s consolidated financial statements, the Company has elected to not include pro forma results.

Intangible Assets
Fair ValueWeighted-
Average
Useful Life
Customer Relationships$174,000 8.0 years
Developed Technology67,000 5.0 years
Trade Name27,000 7.0 years
Market Access1,736 2.9 years
Total$269,736 

Transaction Costs

9

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

Acquisition of Sports IQ Analytics Inc. (“SIQ”)
On May 7, 2024, the Company acquired 100% of the equity interests of SIQ for a mix of cash and shares of DraftKings Inc.’s Class A common stock (the “SIQ Transaction”). The acquisition of SIQ allows DraftKings to bring further pricing and trading capabilities in-house in an effort to drive margin expansion and product differentiation. The acquired assets and assumed liabilities of SIQ were recorded at their estimated fair values. Goodwill associated with the SIQ Transaction is assigned as of the acquisition date to the Company’s consolidated reporting unit. The purchase price allocation for the SIQ Transaction is preliminary as of September 30, 2024. Goodwill recognized is not deductible for tax purposes and transaction costs were not significant. As SIQ’s financial results are not material to the Company’s consolidated financial statements, the Company has elected to not include pro forma results.

4.Intangible Assets
Intangible Assets
As of September 30, 2024, intangible assets, net consists of the following:
Weighted-Average Remaining Amortization PeriodGross Carrying AmountAccumulated AmortizationNet
Amortized intangible assets:
Developed technology4.2 years$513,064 $(237,936)$275,128 
Internally developed software2.3 years306,271 (149,359)156,912 
Gaming licenses8.5 years221,317 (63,376)157,941 
Customer relationships6.1 years442,528 (176,502)266,026 
Trademarks, tradenames and other6.1 years46,223 (13,204)33,019 
$1,529,403 $(640,377)$889,026 
Indefinite-lived intangible assets:
Digital assets, net of impairmentIndefinite-lived2,884 N/A2,884 
Total$1,532,287 $(640,377)$891,910 
As of December 31, 2023, intangible assets, net consists of the following:
Weighted-Average Remaining Amortization PeriodGross Carrying AmountAccumulated AmortizationNet
Amortized intangible assets:
Developed technology4.4 years$422,900 $(193,247)$229,653 
Internally developed software2.3 years236,644 (108,169)128,475 
Gaming licenses10.6 years218,760 (47,941)170,819 
Customer relationships4.1 years269,728 (127,862)141,866 
Trademarks, tradenames and other3.3 years37,674 (20,751)16,923 
$1,185,706 $(497,970)$687,736 
Indefinite-lived intangible assets:
Digital assets, net of impairmentIndefinite-lived2,884 N/A2,884 
Total$1,188,590 $(497,970)$690,620 

Amortization expense was $84.6 million and $188.2 million for the three and nine months ended September 30, 2024, respectively, and $45.1 million and $131.2 million for the three and nine months ended September 30, 2023, respectively.
10

The table below reflects expected amortization expense for the next five years of intangible assets recorded as of September 30, 2024:
Year ending December 31,Estimated Amortization
October 1, 2024 to December 31, 2024$65,662 
2025217,796 
2026180,233 
2027151,030 
202892,068 
Goodwill
The changes in the carrying amount of goodwill for the nine months ended September 30, 2024 are:
Total
Balance as of December 31, 2023$886,373 
Goodwill resulting from acquisitions569,636 
Balance as of September 30, 2024$1,456,009 

No impairment of goodwill was recorded in the three or nine months ended September 30, 2024. As of September 30, 2024, the Company had no accumulated goodwill impairment losses.

5.Current and Long-term Liabilities
Old Revolving Line of Credit and New Revolving Credit Facility
On December 20, 2022, the Company entered into a loan and security agreement with Banc of California (formerly Pacific Western Bank) and Citizens Bank, as lenders (as amended, the “Old Credit Agreement”), which provided the Company with a revolving line of credit of up to $125.0 million (the “Old Revolving Line of Credit”). The Old Credit Agreement maturity date was extended from December 20, 2024 to December 20, 2025, effective July 31, 2024.

Borrowings under the Old Credit Agreement bore interest at a variable annual rate equal to the greater of (i) 1.00% above the prime rate then in effect and (ii) 5.00%, and the Old Credit Agreement required monthly, interest-only payments on any outstanding borrowings. In addition, the Company was required to pay quarterly in arrear a commitment fee equal to 0.25% per annum of the unused portion of the Old Revolving Line of Credit. As of September 30, 2024, the Old Credit Agreement provided the Old Revolving Line of Credit of up to $125.0 million, and there was no principal outstanding under the Old Credit Agreement. Net borrowing capacity available from the Old Revolving Line of Credit as of September 30, 2024 totaled $122.7 million. The Company was also subject to certain affirmative and negative covenants, including the restriction of dividends, under the Old Credit Agreement which the Company was in compliance with as of September 30, 2024. One such covenant involved maintaining compensating cash balances. The compensating balances were able to be withdrawn but the availability of the line of credit was dependent upon maintenance of such compensating balances. The performance of the Company’s obligations under the Old Credit Agreement were secured by a first-priority security interest on substantially all of its assets.

On November 7, 2024, the Company entered into a credit agreement (the “New Credit Agreement”) with various financial institutions, as lenders, and Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, providing for a senior secured revolving credit facility of up to $500.0 million (the “New Revolving Credit Facility”). The New Revolving Credit Facility has a maturity date of November 7, 2029. In conjunction with the New Credit Agreement and New Revolving Credit Facility, the Old Credit Agreement and Old Revolving Line of Credit were terminated.

Revolving loans under the New Revolving Credit Facility bear interest at the Company’s election at either (i) Term SOFR (as defined in the New Credit Agreement), plus an applicable margin ranging from 1.75% to 2.25% depending on the Company’s Net First Lien Leverage Ratio (as defined in the New Credit Agreement) or (ii) a base rate that is equal to the greatest of (a) the federal funds rate plus 0.50%, (b) the prime rate and (c) Term SOFR for a one month interest period plus 1.00%, in each case plus an additional applicable margin ranging from 0.75% to 1.25% depending on the Company’s Net First Lien Leverage Ratio. In addition, the Company is required to pay a commitment fee quarterly in arrear ranging from 0.25% to
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0.375% per annum of the unused portion of the New Revolving Credit Facility depending on the Company’s Net First Lien Leverage Ratio.

The performance of the Company’s obligations under the New Credit Agreement is secured by a first-priority security interest on substantially all of its assets. The New Credit Agreement contains customary representations and warranties and affirmative and negative covenants, including dividend restrictions and a financial covenant that the Company is required to maintain a Net First Lien Leverage Ratio not to exceed 4.50:1.00, which is tested only if revolving loans outstanding under the New Revolving Credit Facility are in excess of 40% of the commitments under the New Revolving Credit Facility.

Convertible Notes and Capped Call Transactions
In March 2021, DraftKings Holdings Inc. (formerly DraftKings Inc.), a Nevada corporation (“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.

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 DraftKings Inc.’s 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). Since the issuance of the Convertible Notes, there have been no changes to the initial conversion price.

Prior to September 15, 2027, the Convertible Notes will be convertible by the holder 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. As of September 30, 2024, no conditions were met to allow for the conversion of the Convertible Notes by any holder.

In connection with the pricing of the Convertible Notes and the exercise of the over-allotment option to purchase additional notes, Old DraftKings entered into a privately negotiated capped call transaction (“Capped Call Transactions”). 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 DraftKings Inc.’s Class A common stock upon any conversion of Convertible Notes. As the transaction qualifies for equity classification, the net cost of $124.0 million incurred in connection with the Capped Call Transactions was recorded as a reduction to additional paid-in capital on the Company’s consolidated balance sheet.

As of September 30, 2024, the Company’s convertible debt balance was $1,255.8 million, net of unamortized debt issuance costs of $9.2 million. The amortization of debt issuance costs was $0.7 million and $2.0 million for the three and nine months ended September 30, 2024, respectively, and $0.7 million and $2.0 million for the three and nine months ended September 30, 2023, respectively, which are included in the interest expense line-item on the Company’s consolidated statements of operations. Although recorded at amortized cost on the Company’s consolidated balance sheets, the estimated fair value of the Convertible Notes was $1,104.2 million and $1,025.6 million as of September 30, 2024 and December 31, 2023, respectively, which was calculated using the estimated or actual bids and offers of the Convertible Notes in an over-the-counter market on the last business day of the period, which is a Level 1 fair value measurement.

Indirect Taxes
Taxation of e-commerce is becoming more prevalent and could negatively affect the Company’s business as it primarily 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.
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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 September 30, 2024 and December 31, 2023, the Company’s estimated contingent liability for indirect taxes was $82.8 million and $71.2 million, respectively. The estimated contingent liability for indirect taxes is recorded within other long-term liabilities on the condensed consolidated balance sheets and general and administrative expenses on the condensed consolidated statements of operations.
Warrant Liabilities
As part of the initial public offering of Diamond Eagle Acquisition Corp. (“DEAC”) on May 14, 2019 (the “IPO”), DEAC issued 13.3 million warrants each of which entitles the holder to purchase one share of DraftKings Inc.’s Class A common stock at an exercise price of $11.50 per share (the “Public Warrants”). Simultaneously with the closing of the IPO, DEAC completed the private sale of 6.3 million warrants to DEAC’s sponsor (the “Private Warrants”), each of which entitles the holder to purchase one share of DraftKings Inc.’s Class A common stock at an exercise price of $11.50 per share. As of September 30, 2024, there were no Public Warrants outstanding and 0.4 million Private Warrants outstanding. On May 5, 2022 (the “GNOG Closing Date”), DraftKings Inc. (formerly New Duke Holdco, Inc.) consummated the acquisition of Golden Nugget Online Gaming, Inc., a Delaware corporation, pursuant to a definitive agreement and plan of merger, dated August 9, 2021, in an all-stock transaction (the “GNOG Transaction”). On the GNOG Closing Date, in connection with the consummation of the GNOG Transaction, Old DraftKings entered into an assignment and assumption agreement (the “Old DraftKings Warrant Assignment Agreement”) with DraftKings Inc., Computershare Trust Company, N.A. and Computershare Inc. (together, “Computershare”), pursuant to which Old DraftKings assigned to DraftKings Inc. all of its rights, interests and obligations under the warrant agreement, dated as of May 10, 2019 (the “Old DraftKings Warrant Agreement”), by and between DEAC and Continental Stock Transfer & Trust Company, as warrant agent, as assumed by Old DraftKings and assigned to Computershare by that certain assignment and assumption agreement, dated as of April 23, 2020, governing Old DraftKings’ outstanding Private Warrants, on the terms and conditions set forth in the Old DraftKings Warrant Assignment Agreement. In connection with the consummation of the GNOG Transaction and pursuant to the Old DraftKings Warrant Assignment Agreement, each of the outstanding Private Warrants became exercisable for one share of DraftKings Inc. Class A common stock on the existing terms and conditions, except as otherwise described in the Old DraftKings Warrant Assignment Agreement.

In addition, on the GNOG Closing Date, 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 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 September 30, 2024, there were 2.9 million GNOG Private Warrants outstanding, convertible into approximately 1.1 million shares of DraftKings Inc.’s Class A common stock.

The Company classifies the Public Warrants, the Private Warrants and the GNOG Private Warrants pursuant to Accounting Standards Codification Topic 815, Derivatives and Hedging, as derivative liabilities with subsequent changes in their respective fair values recognized in its consolidated statement of operations at each reporting date. As of September 30, 2024, the fair value of the Company’s warrant liability was $25.4 million.

Due to fair value changes, the Company recorded a nominal gain on the remeasurement of its warrant liabilities for the three months ended September 30, 2024 and a loss of $7.8 million for the three months ended September 30, 2023. During the nine months ended September 30, 2024 and 2023, the Company recorded losses on the remeasurement of its warrant liabilities of $8.3 million and $44.8 million, respectively.

During the three and nine months ended September 30, 2024, 0.0 million and 1.0 million Private Warrants were exercised, respectively. There were no GNOG Private Warrants exercised during the three months ended September 30, 2024, and 2.9 million GNOG Private Warrants were exercised during the nine months ended September 30, 2024. These GNOG Private Warrants exercises resulted in the issuance of approximately 1.1 million shares of DraftKings Inc. Class A common stock as all were exercised on a cashless basis.
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6.Fair Value Measurements
Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value and nonrecurring fair value measurements are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
 
•Level 1 — Quoted prices in active markets for identical assets or liabilities.

•Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

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

September 30, 2024
Level 1Level 2Level 3Total
Assets
Other current assets:
Digital assets held for users$— $4,124 
(2)
$— $4,124 
Other non-current assets:
Derivative instruments— — 19,999 
(4)
19,999 
Equity securities— 13,533 
(3)
— 13,533 
Total$— $17,657 $19,999 $37,656 
Liabilities
Other current liabilities:
Digital assets held for users$— $4,124 
(2)
$— $4,124 
Warrant liabilities— 25,439 
(5)
— 25,439 
Other long-term liabilities— — 24,741 
(6)
24,741 
Total$— $29,563 $24,741 $54,304 

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December 31, 2023
Level 1Level 2Level 3Total
Assets
Cash equivalents:
Money market funds$250,055 
(1)
$— $— $250,055 
Other current assets:
Digital assets held for users— 46,624
(2)
— 46,624 
Other non-current assets:
Derivative instruments— — 19,999 
(4)
19,999 
Equity securities— 13,533 
(3)
— 13,533 
Total$250,055 $60,157 $19,999 $330,211 
Liabilities
Other current liabilities:
Digital assets held for users$— $46,624 
(2)
$— $46,624 
Warrant liabilities— 63,568 
(5)
— 63,568 
Total$— $110,192 $— $110,192 

(1)Represents the Company’s money market funds, which are classified as Level 1 because the Company measures these assets to fair value using quoted market prices.
(2)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 these digital assets to fair value using latest transaction price for similar transactions.
(3)Represents the Company’s non-marketable equity securities, which are classified as Level 2 because the Company measures these assets to fair value 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 these derivative instruments to fair value using option pricing models and, accordingly, classifies these assets as Level 3. There were no new Level 3 derivative instruments sold, purchased by or issued to the Company during the nine months ended September 30, 2024. The table below includes a range and an average weighted by relative fair value of the significant unobservable inputs used to measure these Level 3 derivative instruments to fair value. A change in these significant unobservable inputs might result in a significantly higher or lower fair value measurement at the reporting date. Changes to fair value of these instruments are recorded in Other (loss) income, net on the consolidated statements of operations and loss (gain) on marketable equity securities and other financial assets, net in the consolidated statement of cash flows.
September 30, 2024
December 31, 2023
Significant Unobservable Input of Level 3 InvestmentsRange (Weighted Average)Range (Weighted Average)
Underlying stock price
$12.79 - $19.80 ($19.41)
$12.79 - $19.80 ($19.41)
Volatility
75.0% - 80.0% (79.7%)
75.0% - 80.0% (79.7%)
Risk-free rate
1.3% - 4.2% (4.0%)
1.3% - 4.2% (4.0%)
(5)The Company measures its Private Warrants and the GNOG Private Warrants to fair value 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. Key assumptions used in the valuation of the Private Warrants and GNOG Private Warrants include term, risk free rate and volatility.
(6)Represents the contingent consideration issuable to former SIQ securityholders in connection with the SIQ Transaction upon the achievement of certain performance targets. The Company measures this contingent consideration at fair value using a Monte Carlo simulation in an option pricing framework and, accordingly, classifies these liabilities as Level 3. The significant unobservable inputs used to measure the fair value include a revenue risk premium of 5.1%, revenue volatility of 17.3%, operational leverage ratio of 70.0%, as well as management judgment regarding the probability of achieving a future performance target. A change in these significant unobservable inputs might result in a significantly higher or lower fair value measurement at the reporting date. Changes to fair value of these instruments are recorded in Other (loss) gain, net on the consolidated statements of operations.
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7.Revenue Recognition
Deferred Revenue

The Company includes deferred revenue within accounts payable and accrued expenses and liabilities to users in the condensed consolidated balance sheets. The deferred revenue balances were as follows:
Three months ended September 30,Nine months ended September 30,
2024202320242023
Deferred revenue, beginning of the period$117,490 $105,478 $174,212 $133,851 
Deferred revenue, end of the period$179,019 $239,225 $179,019 $239,225 
Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period$81,146 $85,122 $169,402 $133,054 

Deferred revenue primarily represents contract liabilities related to the Company’s obligation to transfer future value in relation to in period transactions in which the Company has received consideration. These obligations are primarily related to incentive programs and wagered amounts associated with unsettled or pending outcomes that fluctuate based on volume of activity. Such obligations are recognized as liabilities when awarded to users and are recognized as revenue when those liabilities are later resolved, often within the following year.

Revenue Disaggregation

Disaggregation of revenue for the three and nine months ended September 30, 2024 and 2023 is as follows:
Three months ended September 30,Nine months ended September 30,
2024202320242023
Online gaming$1,084,215 $768,265 $3,323,728 $2,353,293 
Gaming software1,575 6,304 11,424 23,495 
Other9,700 15,388 39,775 57,748 
Total Revenue$1,095,490 $789,957 $3,374,927 $2,434,536 

Online gaming includes online Sportsbook, iGaming, digital lottery, and DFS, which have certain similar attributes and patterns of recognition. Other revenue primarily includes media, retail sportsbooks and other consumer product offerings. The opening and closing balances of the Company’s accounts receivable from contracts with customers were $47.5 million and $64.4 million for the nine months ended September 30, 2024, respectively, and $51.1 million and $27.8 million for the nine months ended September 30, 2023, respectively.

8.Stock-Based Compensation
The Company has historically issued three types of stock-based compensation: time-based awards, long-term incentive plan (“LTIP”) awards and performance-based stock compensation plan (“PSP”) awards. Time-based awards are equity awards that tie vesting to length of service with the Company and generally vest over a four-year period in annual and/or quarterly installments. LTIP awards are performance-based equity awards that are used to establish longer-term performance objectives and incentivize management to meet those objectives. PSP awards are performance-based equity awards which establish performance objectives related to one or two particular fiscal years. LTIP awards generally vest when revenue and/or Adjusted EBITDA targets are achieved amongst other conditions, while PSP awards generally vest upon achievement of revenue and/or Adjusted EBITDA targets and have a range of payouts amongst other conditions. All stock-based compensation awards expire seven to ten years after the grant date thereof.

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The following table shows restricted stock unit (“RSU”) and stock option activity for the nine months ended September 30, 2024:
Time-BasedPSPLTIPTotalWeighted Average Exercise Price of OptionsWeighted Average FMV
of
RSUs
OptionsRSUsOptionsRSUsOptionsRSUs
Outstanding at December 31, 202310,360 17,881 1,389 13,809 10,506 1,255 55,200 $7.10 $21.01 
Granted561 7,190 — 1,449 — — 9,200 26.22 42.64 
Exercised options / vested RSUs(1,184)(6,040)(2)— (230)(261)(7,717)2.56 26.18 
Change in awards due to performance-based multiplier— — — — — — — — — 
Forfeited(5)(1,373)— (748)— (134)(2,260)15.79 22.94 
Outstanding at September 30, 20249,732 17,658 1,387 14,510 10,276 860 54,423 $7.75 $27.81 

As of September 30, 2024, total unrecognized stock-based compensation expense of $691.2 million related to granted and unvested stock-based compensation arrangements is expected to be recognized over a weighted-average period of 2.5 years. The following tables shows stock compensation expense for the three and nine months ended September 30, 2024 and 2023:

Three Months Ended September 30, 2024Three Months Ended September 30, 2023
OptionsRSUsTotalOptionsRSUsTotal
Time-based (1)
$1,632 $45,073 $46,705 $1,849 $39,936 $41,785 
PSP (2)
— 38,814 38,814 — 21,876 21,876 
LTIP (2)
— 2,033 2,033 — 14,692 14,692 
Total$1,632 $85,920 $87,552 $1,849 $76,504 $78,353 

Nine Months Ended September 30, 2024Nine Months Ended September 30, 2023
OptionsRSUsTotalOptionsRSUsTotal
Time-based (1)
$11,610 $127,870 $139,480 $8,239 $123,495 $131,734 
PSP (2)
— 128,615 128,615 — 81,763 81,763 
LTIP (2)
— 3,212 3,212 — 71,449 71,449 
Total$11,610 $259,697 $271,307 $8,239 $276,707 $284,946 

(1) Time-based awards vest and are expensed over a defined service period.
(2) PSP and LTIP awards vest based on defined performance criteria and are expensed based on the probability of achieving such criteria.

9.Income Taxes
The Company’s (benefit) provision for income taxes for the three and nine months ended September 30, 2024 and 2023 is as follows:
Three months ended September 30,Nine months ended September 30,
2024202320242023
Income tax (benefit) provision$(1,287)$1,291 $(75,208)$3,310 

The effective tax rates for the three months ended September 30, 2024 and 2023 were 0.4% and (0.5)%, respectively, and the effective tax rates for the nine months ended September 30, 2024 and 2023 were 16.8% and (0.4)%, respectively. The difference between the Company’s effective tax rates for the three and nine month periods in 2024 and 2023 and the U.S. statutory tax rate of 21% was primarily due to a valuation allowance related to the Company’s deferred tax assets, offset partially by current state tax and current foreign tax. Additionally, the Company recorded a discrete income tax benefit of $75.8 million during the second quarter of 2024, which was attributable to non-recurring partial releases of the Company’