Flutter Entertainment - Earnings Call - H2 2024
March 4, 2025
Transcript
Operator (participant)
Good afternoon and Welcome to Flutter's Q4 and Fiscal Year 2024 Earnings Call, hosted by CEO Peter Jackson and CFO Rob Coldrake. Please note this conference call is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during that time, simply press star followed by the number one on your telephone keypad. We kindly ask that you please limit your questions to two. I will now hand you over to Paul Tymms, Flutter Director of Investor Relations, to begin today's call.
Paul Tymms (Director of Investor Relations)
Hi everyone, and welcome to Flutter's Q4 Results Call. With me today are Flutter's CEO Peter Jackson and CFO Rob Coldrake. After this short intro, Peter will open with a summary of our operational progress, and then Rob will run through the Q4 financials and our new guidance for 2025. We will then open the lines for Q&A. Some of the information we are providing today, including our 2025 guidance, constitutes forward-looking statements that involve risk, uncertainties, and other factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors are detailed in our earnings press release and our SEC filings. In addition, all forward-looking statements are based on current expectations, and we undertake no obligation to update any forward-looking statement except as required by law. Also, in our remarks or responses to questions, we will discuss non-GAAP financial measures.
Reconciliations are included in the results materials we have released today, available in the Investors section of our website. I will now hand you over to Peter.
Peter Jackson (CEO)
Thank you, Paul. I'm delighted to provide an update on what has been a fantastic year for Flutter. Our strategic positioning provides a compelling investment opportunity. This includes access to significant growth markets and a scaled and diversified portfolio of local hero brands who win in their local markets, who are accessing our unique differentiator, the Flutter Edge. In 2024, we capitalized on these opportunities as we strengthened our leadership position in the U.S. market, while globally our local brands solidified their number one positions and took share in key markets including the U.K. and Italy. We also grew into new markets with very successful FanDuel launches in North Carolina and Vermont, along with the addition of MaxBet in our international business. We've achieved this by leveraging the Flutter Edge to deliver the best product for players.
Our pricing capabilities give our players access to the leading same-game parlay products across multiple geographies, driving both engagement and continued expansion of our market-leading structural gross revenue margin. Our iGaming product proposition is going from strength to strength with the creation of Flutter Studios, which we believe will better harness our games development capabilities, and which complements the addition of further tier-one supplier content. Altogether, this translated into excellent financial performance, with revenue growth of 19% and Adjusted EBITDA of $482 million, or 26% higher in 2024. With leverage now within our medium-term guidance range after declining by nearly a turn in 2024, we will truly see the benefits of being an "and" business in 2025. Firstly, we expect FanDuel's fantastic product pipeline will drive continued organic investment in player acquisition to sustain our leadership position in the U.S.
Secondly, in the newly formed international division, we expect to add the Snai and NSX acquisitions in the first half, further enhancing the scale and diversification of the group in high-growth markets. And thirdly, we'll get a full-year benefit of the share repurchase program, with up to $1 billion of repurchases expected across 2025. Turning now to our performance in Q4. In the U.S., we exited the year in a position of unparalleled strength, with a sportsbook GGR market share of 43% and an iGaming GGR market share of 26%. This means we closed the year as the clear number one online sportsbook operator in the U.S., a position we have consistently maintained. And we have now also overtaken other multi-brand competitors to become the number one iGaming operator.
This market leadership position has been delivered and maintained through our laser focus on product innovation, combined with a disciplined customer acquisition strategy. The strong performance in the quarter was somewhat masked by the well-documented adverse sports results, as we saw some of the most customer-friendly NFL results on record. While these short-term results led to a change in outlook for 2024, the transitory nature of these impacts, which are part of operating a sportsbook, has no bearing on the long-term position of the business, as we have absolute confidence in our leading pricing and risk management capabilities, and in the structural growth and net revenue margin targets which we outlined at the Investor Day. I've been really pleased with the strength and trajectory of the U.S. business.
Existing player cohort growth remains encouraging, and the opportunity to acquire new customers remains very compelling, with payback periods of less than 18 months and well below our two-year threshold for investment. Our focus on product innovation helped to drive our structural gross revenue margin to 14.5% in the quarter. parlay penetration continues to increase, with NFL up 500 basis points from the high base, as our market-leading same-game parlay products continue to resonate very well with our customers. Our product pipeline is stronger than ever, with a number of new sportsbook features launched in Q4 leveraging our market-leading pricing capabilities. These included increased betting markets across all major sports, a new live activity tracker for NFL, which has seen good early adoption rates, and greater ability for customers to tailor the generosity they receive, with more to come during 2025.
We also continue to trial our revolutionary new Your Way product, with all states having access to this new customizable way of betting NFL in the quarter, and we are now in the process of rolling out Your Way to NBA markets. Although it's really early stages, the engagement we've seen from customers has been very pleasing. And iGaming product innovation has also delivered us to our number one position. Launches included sports-themed games such as NBA Super Slam, which we expect will help drive sportsbook cross-sell, and exclusive titles like Samurai 888 Kenji. We now access exclusive games that appeal to our direct iGaming customers in particular, as we laid out at the Investor Day. We improved our iGaming reward proposition with the introduction of a new jackpot functionality on our daily prize mechanic, FanDuel Reward Machine, as well as trialing our new FanDuel Rewards Club Loyalty Program.
Combined, these features help to deliver exceptionally strong AMP growth, up 37%. Our fundamental drivers are taking good momentum into the new financial year. The NFL season ended with a great Super Bowl, and as we look into 2025, I feel very confident about FanDuel's prospects. From a regulatory perspective, the U.S. continues to be a dynamic market. Our new state opportunities continue to push AMP expansion for both sportsbook and iGaming. We also note the recent developments on prediction markets and opportunities that may arise for us there. We are also monitoring proposals for state gaming tax increases within the regulated sports betting market, and we're working closely with advisors and regulators alongside our peers to ensure the impacts such changes can have on the regulated market are well understood.
Irrespective of what means states may use to manage their budget deficits, as the largest operator in North America, we believe that we are in the best position within the sector to mitigate impacts should they arise. Outside of the U.S., we had a strong quarter with revenue growth of 14%, where access to our Flutter Edge capabilities is driving share gains across the portfolio. In UKI, we had another excellent year, and we've now grown our market share by 4 percentage points over the last two years. Product delivery continues to be key to that success. In the quarter, Paddy Power's expanded Super Sub products drove increased parlay penetration and, in turn, structural gross revenue margin improvements. An engaging English Premier League has also driven high levels of player demand.
Our iGaming proposition continues to improve, with expanded free-to-play content such as the Sky Vegas Guaranteed Prize Machine and a broader range of tier-one gaming content. In Italy, Sisal's poker players now have access to PokerStars' shared liquidity pool, quickly resulting in record prize pools and showing the direct benefits of access to the Flutter Edge. Sisal's compelling omnichannel offering helped drive a 33% increase in Italian AMPs during Q4, with omnichannel players generating over one and a half times more online revenue compared to online-only players. Given its large omnichannel presence, we look forward to welcoming Snaitech into the group in the Q2. Positive momentum continues across our key consolidating investment markets, demonstrating the benefits of our diversified portfolio and our capacity to invest for long-term growth.
This is demonstrated well in India, where we continue to invest through the impact of tax changes introduced in October 2023, which temporarily impacted growth rates. The underlying can now be seen, with AMP growth of 72% on a year-over-two-year basis. In Australia, player-driven momentum in sports remains a positive tailwind against the known softer racing market, with underlying trends playing out in line with our expectations during the quarter. Finally, and in summary, we believe that the group is very well positioned for 2025 and also to deliver our 2027 goals that we set out at our Investor Day. We have excellent momentum in our global businesses, and we are delivering against our Play Well ambitions. FanDuel has made a strong start to the year, and we expect to materially expand our player base due to our market-leading products.
The reorganization of our ex-U.S. businesses into our new international division will enhance our strategic focus on winning in our local markets, while our cost transformation programs will ensure we maximize shareholder value. I will now hand over to Rob to take you through the financials and our guidance.
Rob Coldrake (CFO)
Thanks, Peter, and hello everyone. It's great to be talking to you today about another strong quarter. The group delivered revenue and Adjusted EBITDA growth of 14% and 4% respectively, despite the impact of the customer-friendly sports results in the U.S. The group generated net income of $156 million, which is after the combined non-cash expense of $346 million, the amortization of the acquired intangibles, and the fair value movement on the Fox option. Earnings per share increased by $5.59-45% in Q4, benefiting from the recognition of a tax credit on historic U.S. losses and an impairment charge in the prior year comparative period. Adjusted EPS, which now excludes certain fair value movements, primarily the impact of the revaluation of the Fox option, increased 67% due to the tax credit. Turning now to the financial performance for each of the segments.
In the U.S., revenue was 14% higher with adjusted EBITDA of $163 million. This included continued strong iGaming growth of 43%, driven by the product improvements Peter outlined, driving excellent player growth and engagement during the quarter. Sportsbook revenue growth of 8% reflected the adverse impact of sports results, as well as a moderation in handle growth to 12%. As anticipated, the sequential handle trend was lower than Q2 and Q3 due to various factors, including the timing of state launches in the current and prior year, a greater number of NFL games in Q4 2023, and the continued migration of our customers to higher revenue margin products, which are typically also lower handle wagers. We estimate customer-friendly sports results cost approximately $550 million in revenue and $360 million in adjusted EBITDA in Q4. This is before factoring in one-off cost mitigations and any recycling benefits.
I will summarize our estimate of the net impact on 2024 when I walk through our 2025 guidance. From a cost perspective, we continue to deliver excellent operating leverage despite the impact of sports results on revenue, the incremental taxes year over year in Illinois, and the opportunity to continue to invest in customer acquisition. Outside of the U.S., revenue grew 14%, while adjusted EBITDA increased 6%. UKI had an excellent quarter with revenue growth of 20%, driven by a strong performance in both sportsbook and iGaming, which were 31% up and 16% up respectively. Sportsbook revenue was aided by the positive year-over-year swing in sports results at 390 basis points, combined with a further 110 basis points expansion in our structural gross revenue margin as players engaged with our expanded same-game parlay offering.
In International, constant currency revenue growth of 23% was driven by a 22% increase from existing consolidated and investee markets, and MaxBet also contributed 8 percentage points to the year-over-year growth. Sisal had an exceptional quarter in Italy, highlighted by online revenue growth of 41% as we took a share in the market and benefited from a favorable swing in sports results. India, Turkey, Georgia, and Brazil all performed strongly in the quarter, demonstrating the benefits of our diversified portfolio. In Australia, revenue was 8% lower, reflecting softness in the racing market, although AMP growth has been encouraging at 7%. Cash flow growth in the quarter was underpinned by the growth in our business, with net cash from operating activity up 67% and free cash flow growth of 175%.
Cash flow also benefited from the comps versus prior year, which included increased CapEx relating to the acquisition of our new U.S. office in LA and increased transaction costs associated with our U.S. listing. Cash flow conversion over the year as a whole was excellent, with free cash flow of $941 million, a $0.6 billion increase year over year despite the $428 million headwind relating to settlement of derivatives in 2023 and 2024. The significant expansion in group-adjusted EBITDA of $482 million over the last year and FX movements drove a $635 million reduction in our net debt over the equivalent period to bring leverage within our medium-term target range at 2.2 times. This anticipated reduction unlocks the capacity to repurchase up to $1 billion in shares across 2025, in tandem with the acquisitions of Snai and NSX, totaling approximately $2.7 billion.
Moving now to the 2025 guidance we have published today, which includes trading up to the end of February. In the U.S., we expect existing state revenue and Adjusted EBITDA midpoints of $7.72 billion and $1.4 billion respectively. This represents year-over-year growth of 33% and 176% and growth at the midpoints of our Investor Day commentary after adjusting for sports results in the 2024 base. Normalizing 2024 for sports results, U.S. net revenue would have been around $6.3 billion and Adjusted EBITDA approximately $800 million. This includes adjustments of one-off costs we called out as mitigation in Q4, as well as our estimate of the benefit of recycling in the quarter. 2025 has started really well. Underlying trends are in line with our expectations, with an acceleration in staking trends from Q4 levels as we lap a more like-for-like calendar period.
Sports results for the year to date have been roughly neutral, with a great Super Bowl result offsetting adverse sports results in January. I'll now take you through some comments on phasing for the existing state guidance. In the first half of 2025, it's worth remembering that the shape of 2024 was impacted by adverse sports results in Q1 and positive sports results in Q2, and therefore phasing year over year will look different. We therefore expect revenue in Q1 to be roughly 24% or 25% of total revenue for the year, and Q1 Adjusted EBITDA to be around 20% of 2025 Adjusted EBITDA. Around 60% of our U.S. Adjusted EBITDA is expected to arise in the second half of 2025, with Q4 remaining our largest quarter of the year.
New states and territory launches are expected to result in negative revenue of $40 million and an adjusted EBITDA cost of $90 million, reflective of a Q4 launch in Missouri and some pre-launch investment cost in Alberta ahead of an anticipated Q1 2026 launch. Moving on to group ex-U.S guidance, we expect revenue and adjusted EBITDA midpoints of $8.25 billion and $1.85 billion respectively, excluding M&A. On a nominal basis, this is in line with 2024, but equates to growth of 6% and 10% for revenue and adjusted EBITDA respectively after adjusting for foreign currency movements and the gross sports results benefit in 2024 and is in line with our expectations. Foreign currency exchange rates have moved against the dollar over the last few months to create a 3% year-over-year headwind at revenue and adjusted EBITDA of approximately $220 million and $50 million respectively.
Quarterly phasing should be brought in line with 2024 after allowing for the Euros in Q2 and Q3, along with very favorable sports results in Q2. Revenue growth is reflective of continued momentum in international and an encouraging outlook in Australia. As anticipated, growth in UKI is moderating from the high levels reported during 2024 as we comp against positive sports results, the European Soccer Championships in 2024, absorbing the impacts of the government White Paper finally being implemented, and as we migrate Sky Bet onto our global platform. Overall, ex-U.S. guidance also reflects the initial benefits of our cost efficiency program, and we remain on track to deliver over $300 million in annualized cost savings by 2027. 2025 is an important year for these programs, and we are very pleased with our progress to date.
We expect to migrate Sky Bet customers to a single UKI platform across the summer and complete the program by the end of the year. Sisal players now have access to PokerStars' Poker Liquidity Pool, and we expect Italian players to be accessing a combined platform later this year. From Q1 2025, we will combine UKI, international, and Australia into one new combined international segment. This means the group ex-U.S. Adjusted EBITDA midpoint guidance is split between $2.08 billion for the new international segment and $230 million of unallocated corporate overhead. Finally, we have also guided on some additional income statement and cash flow items that you can find in today's release. With that, Peter and I are happy to take your questions, and I'll hand you back to Regina to manage the call.
Operator (participant)
At this time, I'd like to remind everyone in order to ask a question, press star followed by the number one on your telephone keypad, and we kindly ask that you limit your questions to two. Our first question will come from the line of Ed Young with Morgan Stanley. Please go ahead.
Ed Young (Equity Research Analyst)
Thank you. My first question is on U.S. guidance. You've given a lot of detail there, so thank you. I wonder if you could pick up on the $90 million of investment losses in new states. Can you just talk through the timing movement on Missouri and Alberta, and if there are any other underlying changes within the guide, and perhaps more broadly, could you comment on the customer acquisition environment, and then the second question is on prediction markets. Peter, you mentioned it very briefly there. Just listen to your main pair describe them as more of an opportunity than anything else. Is that how you see it?
Rob Coldrake (CFO)
Okay. And shall I pick up on the first question there with regards to the new states? So as mentioned, yeah, we're expecting to launch Missouri in Q4, potentially around November, and we're expecting Alberta not to be until Q1 2026. As we've said previously, 1% of the population we think roughly equates to around $35 million in contribution costs in terms of a state launch in the first six months. So that ends up being around $80 million for Missouri, as most of those investment costs specifically incurred upfront, as we've said before. And then in Alberta, we're expecting around $10 million for a kind of pre-live investment towards the end of this year. So that gets you to the $90 million.
Peter Jackson (CEO)
Yeah. I think you asked about customer acquisition more broadly. We've been very pleased with the way in which we've been able to continue to lean into the market. And I mentioned earlier the extent to which we continue to see good opportunities to acquire customers that we exited 2024 with a bigger business than we anticipated. And I don't see any reason that we can't continue to push on and build as big a business as we can. With regards to your second question, Ed, we are monitoring the situation with these sports futures contracts closely. The regulation's very fluid. I think we understand that the CFTC is due to hold a roundtable on sports-related event contracts the next month or so, and we expect to get some clarity thereafter.
It could be an interesting opportunity, but I think it's worth recognizing that the products themselves lack the richness of a true sportsbook offering. I think about the Your Way products and the stuff we were doing around the Super Bowl for that. It's a very compelling, very broad set of parlay products, and we need to remember that the prediction products are very vanilla in comparison.
Ed Young (Equity Research Analyst)
Thank you.
Operator (participant)
Our next question comes from the line of Clark Lampen with BTIG. Please go ahead.
Clark Lampen (Managing Director and BTIG Digital Gaming Analyst)
Thanks very much. Good evening, Peter. I wanted to follow up on customer acquisition trends. Just very quickly, did you see any major delta in acquisition trends between, say, iGaming First customers and Core Sportsbook? And as it relates to iGaming product in sort of 2025 and beyond, you talked about the launch of a rewards program and integration of new jackpot features into the product. I don't know if it's too early to comment, but I'm curious if you could give us, on the product and rewards program, maybe a feel for what the expected benefits might be from those integrations over time?
Peter Jackson (CEO)
It's afternoon, Clark. It certainly is afternoon where I am. Look, from a customer acquisition perspective, we've made the point earlier about this, we are with the trends. We're seeing very strong growth in iGaming. You can see that in the AMP numbers year over year when you look at the Q4, and that's what's behind the very strong revenue performance we saw in the quarter. It is a function of the fantastic things we're doing from a product perspective. The Reward Machine jackpots, which were live in October, I think have been very important. The FanDuel Casino Rewards Club, which is a flagship loyalty program, we did a beta launch in December to a subset of our customers. There's a lot going on.
There's a bunch of things that we've been doing over the course of this year, which I'm sure you've seen, as we've seen where we're giving customers access to some exclusive content, which I know the team are very excited about as well. So I'm delighted with what we're doing, both to drive the direct casino acquisition, but also to continue to support the cross-sell into the sportsbook as well.
Clark Lampen (Managing Director and BTIG Digital Gaming Analyst)
Thank you. If I may, I have a very brief follow-up just on Italian lottery. Peter, you've previously expressed some interest in bidding for a second lottery contract. I'm curious if that's still an opportunity that's in focus, or has that materialized maybe the way that you might have expected?
Peter Jackson (CEO)
I think you're referencing, I mean, look, in Italy, there is an opportunity to bid for the Lotto contract. It's a very different type of product to the SuperEnalotto that we already run in Italy. We've been very pleased by the way in which we've been able to run the SuperEnalotto product. I think Sisal has done a brilliant job in terms of activating that, driving cross-sell into the online channel and driving benefits from that. There is an opportunity to bid for the Lotto. We are pulling our thoughts together on that. We've got a couple of weeks to decide what we're going to do. But look, I think the extent to which we can make a good financial return on it, you'd expect us to lean into it.
It is different to the sort of lottery products that we see in the U.S. The more opportunities to drive from it. Rob, you've got a bit more experience. I don't know whether you want to just reference it.
Rob Coldrake (CFO)
Yeah. So I think the SuperEnalotto products that we've got at the moment has been performing fantastically well for the Sisal business. It's got a huge customer base. When you look at the Lotto product, it's quite different to SuperEnalotto. There's more of a regional bias to it. SuperEnalotto tends to be a national game for us. But you look at the Lotto, there's 21 million Italian people playing every week, which is over 40% of the population. That says a lot. So we think there's huge opportunity there if the numbers make sense, if something we're looking quite close to.
Clark Lampen (Managing Director and BTIG Digital Gaming Analyst)
Thank you.
Operator (participant)
Our next question comes from the line of Brandt Montour with Barclays. Please go ahead.
Brant Montour (Director of Equity Research)
Hello, everybody. Thanks for taking my question. So Your Way is rolled out to a big portion of the system. I know it's been a very light touch with what you've put out there so far versus what you have aspirations to put out there eventually through that product. What has the early learnings been with what you've put out? Give us an update on that product, please.
Peter Jackson (CEO)
I can talk a little bit about some of what we saw in the Super Bowl, where the product was available. We didn't particularly market it aggressively. We saw around one in 20 customers use the product at the Super Bowl. I think around 90% of the bets that people placed were bets that they couldn't have done without utilizing the customization that's available within the Your Way product. So we're seeing, and I think around 25% of the customers have placed parlay bets with more than 10 legs. So we're seeing really strong engagement with it. People are really enjoying the extent to which they can customize and find bets that they couldn't have done otherwise. We're excited to see what we can do with this product as we continue to evolve it. You need to remember we're solving two very complex things with Your Way.
One is the sort of enormous expansion of markets that become available for customers and finding ways of merchandising and simplifying that back to customers so we can give them what they want to bet on quickly. And then secondly, managing all the risk associated with that. And I think the team have done a great job in tracking that, but we've just been very thoughtful and careful in terms of how we roll this out to the customer base.
Brant Montour (Director of Equity Research)
Thanks for that, Peter. And just to follow up on hold, you gave structural hold calculation for the Q4, 14.5%. Maybe you could talk about how you're thinking about hold for 2025, given that Q4 number that you hit isn't far away from the 15% that you guys had sort of put out as a target for 2027, recognizing there's some seasonality to it?
Rob Coldrake (CFO)
Yeah. Thanks, Brandt. Listen, we're not guiding specifically on hold for 2025, but what I would say is we laid out some targets structurally at the Capital Markets Day back in September. We're making really good progress towards that. You can see that in the published data in 2024. We feel like we've got off to a very good start in Q1 this year, and we're very much tracking in progress with those longer-term targets that we set out. So we're feeling quite sanguine about where the margins are at the moment.
Ed Young (Equity Research Analyst)
Okay. Great. Thanks, everyone.
Operator (participant)
Our next question comes from the line of Bernie McTernan with Needham. Please go ahead.
Bernie McTernan (Senior Internet Analyst)
Great. Thanks for taking the question. One to ask on tax rates, just dealing with Illinois in the second half of 2024, what did you actually see on a gross impact and net impact, and was there any change in the competitive environment in the state because of the higher tax rates?
Rob Coldrake (CFO)
Yeah. So let me pick that one up, Bernie. So as we previously mentioned with Illinois, we said there was going to be circa $50 million impact in 2024, and that would be $40 million after mitigation. It's broadly ended up resulting in a result for us that's in line with that. We previously said for 2025, we're expecting to be able to mitigate sort of circa 50% gross impact. And yeah, that's still where we're thinking. So broadly, it's played out as we expected.
Bernie McTernan (Senior Internet Analyst)
Understood. And maybe just on the other side of regulation, thinking about potential iGaming legalization, would just love any updated thoughts here in terms of potential momentum in states?
Peter Jackson (CEO)
The beginning of the year is always the time when we get a better read on what's going to happen over the course of the year. We don't want to sort of dream spending at this stage, but we're excited that we'll be launching in Missouri in the Q4. You remember the investor day, we talked about the fact we anticipate getting a couple of percentage points of sports betting in each of the three years and one new iGaming state. I think we remain confident that can happen.
Bernie McTernan (Senior Internet Analyst)
Great. Thank you both.
Operator (participant)
Our next question comes from the line of Jordan Bender with Citizens. Please go ahead.
Jordan Bender (Senior Equity Research Analyst)
Good afternoon, everyone. We're getting questions around handle growth slowing in the U.S. and then continuing into January. I believe parlay handle growth comps are incredibly tough in the fourth Q and the start of the year. Anything else you could point us to to help us bridge from what we're kind of seeing today to your implied handle growth for the full year? And then the second question unrelated, I'm seeing if you can expand on the broader strategy across South and Latin America. The region is pretty untapped by any Flutter brand. So is the strategy there to kind of build your presence and brand in Brazil before potentially laying the groundwork to kind of further expand throughout the region? Thank you.
Peter Jackson (CEO)
Hi, Jordan. Why don't I just quickly deal with that Latin America question? We're excited to be working with NSX, and we hope to get the deal closed next quarter. I think we've got a terrific team, and the opportunity to be able to bring the Flutter Edge to bear there with our products, expertise, technology, and sort of other scale benefits, I think will be very exciting. As and when we find other opportunities across Latin America, we'll take them. You need to remember we're an and business, so we're investing very heavily in organic customer acquisition, rate paybacks, sort of 18 months, whether that's in iGaming or sports here in the U.S. and other markets around the world, India, etc. We're also going to continue to do M&A, and we've got this $1 billion of share repurchase this year.
So M&A will continue to be an important part of our strategy, but we have to make sure that it's the right opportunities for us in terms of delivering the right financial returns and us being able to bring the benefits from the Flutter regime.
Rob Coldrake (CFO)
Yeah. Picking up on your handle question, Jordan. So Q4 handle trends were broadly as we'd anticipated, so 12% up in Q4. We're expecting Q4 to be lower than the previous quarters, partly due to the impact of state launches and some phasing around NFL games. But you look at Q4 specifically, it had one less NFL round, and it also lapped Kentucky, which moderated kind of the sequential growth. As I mentioned in my remarks, we also talked about some recycling benefit, but that's not enough to kind of offset the above. 2025 started really well, as we stated, and Q1 has improved year on year as we lap this kind of like-for-like calendar period. So we're quite pleased. I think the last point worth mentioning is we don't really kind of obsess about handle.
It can be inflated by promotions and parlay penetration, which we're obviously keen to keep moving the dial on. Tends to be a bit of a headwind to handle at times as well, but we're pleased with where we're trending.
Ed Young (Equity Research Analyst)
I appreciate the commentary. Thank you.
Operator (participant)
Our next question comes from the line of Paul Ruddy with Davy. Please go ahead.
Paul Ruddy (Research Analyst)
Hi. Good evening, guys. Just two questions for me. Just firstly on the Italy acquisition in Snai, just could you give any little bit more detail maybe on the timing of that coming in? And just the second part of it looks like that business may have lost some share in the second half of 2024. Just how quickly do you think when you absorb that business, you can kind of start to turn that around and get growth back? And then just as a quick follow-on from that, just if you can give any broad guidance on the expected contribution from the two acquisitions in 2025 on a half-year basis.
Rob Coldrake (CFO)
Yeah. Thanks, Paul. So I can pick up on that. So we're still on track for Q2, I hope, with the SNAI completion. As you noted in the Italian market share data, with our Sisal brand, we've been doing very well. So we've been taking the share. So we're keen to get the SNAI deal completed and give them access to our product capabilities and the Flutter Edge, and also get on with delivering some of these synergies, which we're confident we'll be able to start realizing those quickly. With regards to the numbers around the acquisitions, as previously stated, in Brazil, we think that NSX, they'll be up to $100 million of EBITDA losses this year. Also hoping for completion of NSX at some point in Q2, and SNAI has previously guided as well.
But feeling very good about both acquisitions and keen to get into the building on both and start making a difference.
Paul Ruddy (Research Analyst)
Okay. Great. And if I could just ask a second, just to unpick the handle growth question for the U.S. a little bit more, is it right to think about a kind of a lower handle growth environment now as we go through 2025, as people, as you look to more of those recreational high-margin products that are maybe lower bet size and higher margin, maybe some upside on hold percentages and lower handle growth? Or how should we think that through? Is there kind of any broad guardrails you think about to handle growth?
Rob Coldrake (CFO)
I think to come back to the point that I just mentioned, Paul, which is we don't obsess about handle. We're quite happy with where handle's trending, but you can artificially inflate that with promotions and other things. And actually, if you look at the underlying momentum that we've got within the business in revenue, which is the key KPI that we look at, it's very strong. We're very pleased with it. So I said in Q4, there were reasons that sequentially why the trend was slightly lower, but because we've kicked off this year, we're really happy with where the business is trending.
Paul Ruddy (Research Analyst)
Okay. That's great. Thanks, guys.
Rob Coldrake (CFO)
Thanks, Paul.
Operator (participant)
Our next question will come from the line of Dan Politzer with Wells Fargo. Please go ahead.
Dan Politzer (Director of Equity Research)
Hi, Peter and Rob. Thanks for taking my questions. First, I know you guys gave a lot of great detail on the US. If I look at your kind of normalized revenue EBITDA for 2023 and for 2024 and 2025, it looks like flow-through is in the low 40s. Is there any way to kind of give us a little bit additional color, whether it relates to gross margins and being able to get some additional upside there relative to the prior year, or even leveraging kind of some of the fixed OpEx buckets? Any additional detail would be helpful. Thanks.
Peter Jackson (CEO)
Dan, is that any question you had, or?
Dan Politzer (Director of Equity Research)
No. My follow-up is just another one on the Italian lottery. Any puts and takes as you think about that concession, whether joining the existing concessionaire versus maybe competing against that incumbent in the bidding process? Just how you're kind of thinking about that at a high level would be great.
Peter Jackson (CEO)
We're not going to talk about our bidding strategy. It's commercially sensitive. You can rest assured we'll be very disciplined, and to the extent that we go ahead, we will put on as good a show as we can.
Rob Coldrake (CFO)
Yeah. So in terms of your drop-through question, I mean, there's a number of dynamics playing into this as we previously talked about. But you've got the existing states, which are maturing, and with the maturity of those states, you might see some lower handle, but you're going to see higher net revenue as the parlay penetration increases. One thing that's important to say is actually we are delivering operating leverage across all lines, and you can see that in P&L in Q4, and we expect that trend to continue into 2025. We're clearly making progress on cost of sales and marketing towards those targets that we set out in 2027. I think the last point is, I said we don't obsess about handle. We don't obsess about drop-through either. Sometimes it isn't the best metric to look at.
We prefer to focus on revenue and EBITDA and those targets that we laid out at the capital markets thing.
Peter Jackson (CEO)
Got it. Thank you so much.
Thanks, Dan.
Operator (participant)
Our next question comes from the line of Jed Kelly with Oppenheimer. Please go ahead.
Jed Kelly (Managing Director of Equity Research)
Hey. Great. Thanks for taking my question. Just circling back on handle, because we've been getting a lot of questions on it. Just when we look at it, where your iGaming growth is really strong, we are seeing some handle acceleration. So is that some of your better higher value players choosing to play iGaming over sports betting, or is there anything else out there? And then just on the Your Way parlay, just to roll that broader, just to get a broader rollout, are you concentrating more on the merchandising, or is it more still on the risk management? Thank you.
Peter Jackson (CEO)
Hi, Jed. I think I can talk a little bit about the Your Way products. And I mean, I think I can make a comment on iGaming, and I'm sure Rob will have some follow-up there. But yeah, on the Your Way product, we've got to get the merchandising right from a customer perspective. And so the user experience of having a vastly increased array of products could become overwhelming, and we have to make sure it isn't. And so I think the team are doing a really nice job on some of the user experience that we've made available. But it's no good taking bets on an array of new products if you actually haven't got the pricing risk management right at the same time. And so you've got to solve all of these problems simultaneously.
It's very complex, but I think the team are doing a brilliant job, and we're really excited to see where we can take this product. It's worth remembering, I remember being in Australia when we launched the multi-revolution as it was then in 2016, and here we are nine years later facilitating and developing the products. I'm sure Your Way is something which is going to be similar. Rob, I don't know whether you want to talk about the iGaming.
Rob Coldrake (CFO)
Yeah. I mean, in terms of your first question, Jed, we're not seeing that at all in terms of trend where it's going to take away from sports. But I think as Peter outlined earlier, we've had some fantastic product developments in iGaming, which are really kind of driving the performance of iGaming forward. We're really pleased with that. We're also continuing to see excellent paybacks in both sportsbook and iGaming, arguably even better in iGaming. The question for us is how much we keep really kind of investing behind that. We've got Asaf, who's our casino director at FanDuel, constantly asking me to invest more. So it's a good challenge to have, but we're really pleased with the performance of both. So there's definitely not a drag on sportsbook from iGaming.
Jed Kelly (Managing Director of Equity Research)
Thank you.
Operator (participant)
Our next question will come from the line of Barry Jonas with Truist Securities. Please go ahead.
Barry Jonas (Managing Director)
Hey, guys. Thanks for taking my questions. Given the Illinois mitigation efforts you've seen to date and you expect this year, can you kind of offer any general guidelines around the mitigation targets we could see as more states talk about increases? Is 50% sort of a good baseline target? Should it come to that? Thanks.
Peter Jackson (CEO)
I think, yeah, it's a good starting point. I mean, we need to remember that as the largest operator in the market by a long way, I think we're in the best place to mitigate this. But I think as a rule of thumb, it's not a bad starting point.
Barry Jonas (Managing Director)
Great. That's really helpful. Then just a general follow-up. Do you think there was anything structurally different about the NFL this past year that led to abnormal holds? And I guess, did you learn anything from the season that you could take with you in the future? Thanks.
Peter Jackson (CEO)
More favorites than would normally have happened. I think that's a simple answer.
Barry Jonas (Managing Director)
All right. Thanks so much, guys. Appreciate it.
Operator (participant)
In the interest of time, we ask that callers limit themselves to one question. Our next question will come from the line of Jeffrey Stantial with Stifel. Please go ahead.
Jeffrey Stantial (Managing Director)
Hey, great. Good afternoon, everyone. Thanks for taking our question. Peter, can you just talk a bit on the trajectory of promotional reinvestment in the U.S. heading into 2025? Do you expect reinvestment as a percentage of handle to drift higher as you allocate or share back a portion of your structural hold rate expansion back with players? And if that is the case, can you just add some color on how you think about derivative market share impact as your reinvestment strategy starts to bifurcate from peers who do seem to be managing promos either flat or lower in 2025? Thanks.
Peter Jackson (CEO)
The thing that we do, which is true for acquisition as well as deployment of generosity, is we're very disciplined in terms of how we allocate it and spend it. So we want to see a good return. We talk about the two-year paybacks from a marketing acquisition perspective, and we're 18 months. It's true for deployments of generosity as well. Making sure it gets to the right customer and drives the right outcome is how we're really focused in the business. And that's how the team is set up to think about deployment of our very big financing for us.
Jeffrey Stantial (Managing Director)
Great. Thanks.
Operator (participant)
Our next question comes from the line of Joseph Stauff with Susquehanna. Please go ahead.
Joseph Stauff (Equity Research Analyst)
Hi. Thanks, Peter, Rob. Just wondering how you think about the impact of Your Way, both on structural hold in the U.S. as well as your ability to kind of accelerate, say, handle growth. Just curious about, do you see that as more accretive to your structural hold, or what?
Peter Jackson (CEO)
I think the types of benefits we'll drive from your way are likely to be, as you say, higher holds. I think we should get better engagement, increased customer frequency. I mean, we might get all of them. We're excited to see what happens with it.
Operator (participant)
Our next question comes from the line of Robert Fishman with MoffettNathanson. Please go ahead.
Robert Fishman (Senior Research Analyst)
Thank you. Good afternoon. I'm curious if you guys are seeing any signs of consumer weakness in your older vintage U.S. states for either sports betting or iGaming, and then any lessons that you can take from the international markets that you can apply to FanDuel if, in fact, we do see any sort of macro U.S. headwinds in the coming quarters. Thanks.
Peter Jackson (CEO)
Rob, look, in terms of macro impact, traditionally, our experience is that the business is actually very defensive. So when we think about the impact of the financial crisis or other macro impacts, the business has actually been very defensive in the face of those. And so we're not seeing any bearing on our historical cohorts here in the U.S., and I wouldn't expect to be.
Rob Coldrake (CFO)
Yeah, and the same applies for international, so from my experience in international, the business has tended to be very resilient in times of economic downturns, so we're not seeing any signals at all at the moment, despite the various volatilities in the U.S. economy at the moment.
Operator (participant)
Our next question comes from the line of Chad Beynon with Macquarie. Please go ahead.
Chad Beynon (Managing Director)
Hi, good afternoon. Thanks for taking my question. Wanted to ask one on the U.S. business. I know there's some broadcast partnership deals that could be coming to an end, and these are always fluid. And particularly on American football, you guys have participated when it made sense. So wondering if you could elaborate a little bit in terms of how you view media rights, partnerships, if anything has really changed as the economics of these contracts is pretty dynamic. Thanks.
Peter Jackson (CEO)
I think the team have done a brilliant job over the years of negotiating good contracts. I mean, I think we have always been very disciplined in how we tackle these, and we've been able to use our global experience to help us identify which ones are going to be most attractive. I think there is a lot of change happening at the moment. We're all aware of the fragmentation of rights and the increase in streaming. So we're thoughtful about how we continue to ensure that our customers can access the sports they want to watch. But look, I'm pleased with the portfolio we have. Our scale helps us in terms of investing to acquire the right types of rights. And we've got a bigger customer base we can standardize those things across, which is important.
Operator (participant)
Our next question comes from the line of John DeCree with CBRE. Please go ahead.
John DeCree (Director of Equity Research)
Hi. Thank you. One question on Brazil. And I'm sure if I missed it earlier, but I know it's only been a couple of months since the regulated market launched. But curious if you could walk us through kind of your investment strategy kind of in a launch. And is that happening already, or would we expect more investment when the NSX acquisition closes later this year? Thank you.
Peter Jackson (CEO)
John, it's worth remembering that Brazil is not like the launch of a U.S. state. There was a very extensive market in operation before regulation arrived. There was a lot of advertising, principles of payment opportunities. It was a very functioning market. And so it's not going to be like the launch of Missouri will be in Q4, whether it be a big push from a acquisition perspective. Rob, you may comment on that. You've got experience of Brazil from your international.
Rob Coldrake (CFO)
Yeah. So we've got lots of experience of Brazil from background. So the headline is we're still working to the $100 million in terms of EBITDA losses for this year. We might see some slight phase differences on that depending on when the deal completes, and the Brazilian football season doesn't actually start until the end of this month, so we need to see what happens then. Yes, there is going to be, in this first 12-18 months, intense competition for media assets. There were up to 200 different companies that applied for a license. We think the market will start to shake out quite quickly, but I think given our track record, given our capabilities, given our products, we're very confident of our ability to succeed in the Brazilian market. We're very excited to get started with NSX.
Operator (participant)
Our next question comes from the line of Ben Andrews with UBS. Please go ahead.
Hi. If we take your normalized revenues and EBITDA for the U.S. in 2024, they were meaningfully in excess of your original guidance in March last year. Can you just talk us through what you're forecasting underappreciated last year, and to that effect, where do you see potential upside to guidance in the U.S. in 2025?
Peter Jackson (CEO)
I'm happy to give you a bit of a flavor and a bang, and Rob will definitely want to follow up. We ended the year with a much bigger business than we anticipated in terms of the number of customers we had on the platform, but particularly the progress we made in iGaming. Those things really helped support the numbers that you referenced. I think it's also fair to say that we made considerable progress from the parlay perspective, which helped support the structural hold. All the things that we talked about actually at the investor day that Rob, I don't know if there's anything you want to explain.
Rob Coldrake (CFO)
I think that's the key point, Peter. I mean, ultimately, we're very pleased with the progress that we're making towards those long-term targets. We've got off to a good start. I think there will be different phases within this, but as and when we see opportunities to continue investing and continue growing the business, the kind of paybacks that we're experiencing, we'll continue to do so. But it's a good start, and we're on track to get towards what we outlined for 2027 at the investor day.
Thank you, team.
Operator (participant)
Our next question comes from the line of Adrien de Saint Hilaire with Bank of America. Please go ahead.
Adrien de Saint Hilaire (Director)
Yes. Hi, good evening. I'm just curious if you could decompose a bit for us the growth, the 22.5% U.S. growth underlying you expect between iGaming and online sports betting?
Peter Jackson (CEO)
We're not going to provide that from a fairly age. It's in aggregate for the U.S. business. It's not breaking down between sports and gaming.
Adrien de Saint Hilaire (Director)
Okay. Cool. Thank you.
Peter Jackson (CEO)
Thanks.
Operator (participant)
Our final question will come from the line of Ryan Sigdahl with Craig-Hallum Capital Group. Please go ahead.
Ryan Sigdahl (Senior Research Analyst)
Hey, thanks for sticking in, guys. Just a bigger picture question to end. Looking at sports betting, the last couple of years have really been focused on parlays, enhancing the offerings there, which has been talked a lot about. But curious what the focus on the sports betting product roadmap would be for 2025, and even if you want to go beyond that. Thanks.
Peter Jackson (CEO)
Yeah. You might think we've only been talking about parlays in 2024, but as I said earlier, the revolution really started in 2016. The Italian team are very excited about the introduction of the parlay product to that market. Historically, it's been difficult to deliver from a regulatory perspective, but we're making progress. There's some great things that the U.K. team are doing. And of course, we've got the Your Way stuff here in the U.S. There's a lot of product coming to bear for customers. I think the team do a brilliant job in terms of keeping our customers engaged and excited. And it's true for what we do in iGaming as well. You have to remember, customers are really interested in engaging what's happening from a player perspective. And what we can do with all the new markets and things from a parlay perspective is exciting.
But there's a whole heap of things around generosity, which we're evolving as well. And I referenced some of the things we're doing from an iGaming perspective earlier. There's a lot of exciting things to come.
Rob Coldrake (CFO)
Yeah. I think maybe a couple of other things to add. We're really excited about the developments in live products. So there's been a bunch of stuff this year in terms of NFL in-house game trackers, post-product improvements. As Peter said, people are really following the player narrative as well. So we've developed player experiences where people can go and look at the last five game stats of the players. And there's some really interesting stuff that the U.S. team are doing, which is really driving the sportsbook forward. So quite excited about what's to come in 2025.
Peter Jackson (CEO)
Okay. Well, look, I think we've come to the end of the questions. Thank you very much, everyone. I'm sorry we had to rush through the last half dozen or so of you. You didn't get a chance to ask the second question. Myself and our team are around to help you. But thank you all for your time. We very much appreciate it.
Operator (participant)
That will conclude today's call. We thank you all for joining. You may now disconnect.