Q1 2024 Earnings Summary
- Despite a $76 million headwind from unfavorable sports results, Flutter maintained its guidance for the U.S. business, demonstrating confidence driven by a strong launch in North Carolina, where they gained significant market share, and maintaining a 52% share of U.S. NGR, with a positive outlook for the rest of the year.
- FanDuel has become the #1 player in U.S. iGaming, capturing significant market share, particularly in slots, which represent 70% of the market and are the fastest-growing segment, supported by exclusive content and sophisticated marketing strategies, including effective cross-selling from their sports betting business.
- Flutter is achieving record levels of market share in Italy for online sports betting and casino, driven by significant product improvements, the launch of a new sports betting app in Q3 2023, and effective cross-selling from its lottery operations, leading to strong performance and growth opportunities in the Italian market.
- Regulatory risks in the U.K. market may negatively impact profitability, with an expected EBITDA impact of $25 million to $50 million in H2 2024 due to affordability guidance changes. Additionally, there is acknowledgment of further regulatory developments, indicating potential additional headwinds.
- Elevated competition in the U.S. market remains a concern, potentially putting pressure on margins and requiring continued high levels of investment to maintain market share. The market is described as "very competitive," which may impact profitability.
- Higher cost of sales in Q1 (59%) due to significant investment and unfavorable sports results may challenge the company's ability to meet its full-year guidance. The company needs to achieve better than 56.5% cost of sales for the remainder of the year, relying on improved performance in H2, which poses a risk if expectations aren't met.
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U.S. Guidance Maintained
Q: Guidance unchanged despite $76M headwind?
A: Despite a $76 million headwind, we held our U.S. guidance due to strong performance, notably an excellent launch in North Carolina, capturing significant market share. -
iGaming Growth Drivers
Q: What's driving strong iGaming performance?
A: Our iGaming growth is driven by acquiring direct casino customers interested in slots, offering exclusive content, and utilizing sophisticated generosity mechanisms, making FanDuel the #1 player. -
Cost of Sales Discrepancy
Q: How will cost of sales improve from 59% to 56.5%?
A: The 59% cost of sales in Q1 aligns with expectations due to heavy investment in North Carolina; we anticipate normalizing to 56% for the year as revenue impacts from state launches and sports results even out. -
Capital Return and Acquisitions
Q: Plans for capital return and acquisitions?
A: Our priorities are investing in the business, strategic acquisitions like MaxBet and Sisal, and returning cash to shareholders as leverage targets are met and EBITDA grows rapidly. -
Customer Acquisition Efficiency
Q: Are CACs remaining efficient amid high investment?
A: We maintain efficient customer acquisition costs with no change in long-term payback trends, embedding future value while meeting return criteria. -
Competitive Dynamics
Q: Is U.S. competition rationalizing?
A: The market remains competitive but more rational; we're not seeing excessive spending by competitors, and having the best product helps us acquire customers effectively. -
Structural Hold Outlook
Q: Can structural hold gains be sustained?
A: Structural hold remained high in Q1 due to more parlays; Q1 and Q4 tend to be higher, and we expect to maintain strong margins without letting them go too high. -
Taxation Risks
Q: Thoughts on potential state tax increases?
A: Healthy gaming environments optimize state tax revenue; while discussions occur, no new developments, and we'll address any changes if they arise. -
India Revenue Impact
Q: How are you mitigating India tax impacts?
A: Despite a 25% revenue decline due to tax changes from GGR to deposits, we expect positive growth by year-end, with underlying business performing well. -
AMP Growth Slowdown
Q: Why did AMP growth slow to 15%?
A: The slowdown reflects tough comps from Ohio’s full-quarter inclusion and only three weeks of North Carolina; we're pleased with continued strong growth. -
Interest Guidance Clarification
Q: How does net interest reach $370M guidance?
A: Interest received on cash balances fluctuates significantly throughout the year, affecting net interest; we're happy to follow up with detailed calculations. -
Operational HQ Move
Q: Does moving HQ to New York increase costs?
A: The operational HQ move involves no significant cost changes; board meetings and executive presence will increase in New York, with practical costs remaining similar. -
Affordability Guidance Impact
Q: Effects of U.K. affordability guidance?
A: No change to our guidance of $25–$50 million impact expected in H2 2024; pleased with progress and increased clarity in the market. -
April Trading and Recycling
Q: Any color on April trading and recycling?
A: We're happy with April's performance and confident in our outlook; as expected, some recycling of consumer winnings is occurring. -
iGaming Tech Stack Integration
Q: When will iGaming tech stack be in-house?
A: The tech migration is broadly done; we've brought capabilities to the U.S., supporting our leadership position in iGaming. -
North Carolina Market Share
Q: What's your North Carolina handle share?
A: North Carolina doesn't disclose operator data; we won't share figures but note we signed up 1 in 20 adults, winning the state. -
Italy Market Share Gains
Q: What's driving Italy market share gains?
A: Improved product offerings, a new sports betting app, cross-sell from lottery operations, and record levels of online customer engagement in sports and casino are fueling growth.