DraftKings Results Presentation Deck
Non-GAAP Financial Measures
This presentation includes Adjusted EBITDA, Adjusted Gross Profit, Adjusted Gross Margin, and Contribution Profit, which are non-GAAP financial measures that DraftKings uses
to supplement its results presented in accordance with U.S. GAAP. The Company believes Adjusted EBITDA, Adjusted Gross Profit, Adjusted Gross Margin, and Contribution
Profit are useful in evaluating its operating performance, similar to measures reported by its 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, Adjusted Gross Profit, Adjusted Gross Margin, and Contribution
Profit are not intended to be substitutes for any U.S. GAAP financial measures, and, as calculated, may not be comparable to other similarly titled measures of performance of
other companies in other industries or within the same industry.
We define and calculate Adjusted EBITDA as net loss before the impact of interest income or expense (net), income tax provision or benefit, and depreciation and amortization,
and further adjusted for the following items: stock-based compensation, transaction-related costs, litigation, settlement and related costs, advocacy and other related legal
expenses, gain or loss on remeasurement of warrant liabilities and other non-recurring and non-operating costs or income. We define and calculate Adjusted Gross Profit as
gross profit before the impact of amortization of acquired intangible assets, depreciation and amortization, and stock-based compensation. We define Adjusted Gross Margin as
Adjusted Gross Profit divided by net revenue. We define and calculate Contribution Profit as Adjusted Gross Profit less External Marketing.
DraftKings includes non-GAAP financial measures because they are used by management to evaluate the Company's core operating performance and trends and to make
strategic decisions regarding the allocation of capital and new investments. Adjusted EBITDA, Adjusted Gross Profit, Adjusted Gross Margin, and Contribution Profit exclude
certain expenses that are required in accordance with U.S. GAAP because they are non-recurring items (for example, in the case of transaction-related costs and advocacy and
other related legal expenses), non-cash expenditures (for example, in the case of depreciation and amortization, remeasurement of warrant liabilities and stock-based
compensation), or non-operating items which are not related to the Company's underlying business performance (for example, in the case of interest income and expense and
litigation, settlement and related costs).
Information reconciling forward-looking fiscal year 2023 Adjusted EBITDA and Contribution Profit to their most directly comparable U.S. GAAP financial measures, net income
(loss) and gross profit, respectively, is unavailable to DraftKings without unreasonable effort due to, among other things, certain items required for such reconciliations being
outside of DraftKings' control and/or not being able to be reasonably predicted. Preparation of such reconciliations would require a forward-looking balance sheet, statement of
income and statement of cash flow, prepared in accordance with U.S. GAAP, and such forward-looking financial statements are unavailable to the Company without
unreasonable effort. DraftKings provides a range for its Adjusted EBITDA and Contribution Profit forecasts that it believes will be achieved; however, the Company cannot
provide any assurance that it can predict all of the components of the Adjusted EBITDA or Contribution Profit calculations. DraftKings provides a forecast for Adjusted EBITDA
and Contribution Profit because it believes that Adjusted EBITDA and Contribution Profit, when viewed with DraftKings' results calculated in accordance with U.S. GAAP, provide
useful information for the reasons noted above. However, Adjusted EBITDA and Contribution Profit are not measures of financial performance or liquidity under U.S. GAAP and,
accordingly, should not be considered as alternatives to net income (loss), gross profit, cash flow from operating activities or as indicators of operating performance or liquidity.
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