Q2 2024 Earnings Summary
- Strong Financial Performance and Upgraded Guidance: Flutter delivered a very strong quarter, exceeding market expectations with revenue growth of 20% and adjusted EBITDA growth of 17% to $738 million. This robust performance led to an upgrade in full-year 2024 guidance, with revenue expected to grow by 41% and adjusted EBITDA by 219%, demonstrating the company's strong momentum across key markets despite challenges like the Illinois tax changes.
- Leadership Position in the U.S. Market with FanDuel: In the U.S., FanDuel achieved nearly 40% market share of the entire U.S. sports betting and iGaming market. Continued investments in product development, particularly in NBA, WNBA, and MLB products, have increased parlay penetration and player retention rates. These enhancements position the company strongly for the upcoming NFL season, with plans to leverage same-game parlays and live betting.
- Effective M&A Strategy and Growth Investment: Flutter has a strong track record of successful acquisitions, such as Sisal, where AMPs increased by 60% and revenue by 37% over two years. The company is willing to pursue strategic M&A opportunities that align with growth objectives, even if it means temporarily exceeding leverage targets, confident in their ability to deleverage quickly.
- Increased taxation in key states like Illinois poses a risk to FLUT's margins and profitability. The company noted a $40 million net headwind due to tax changes in Illinois and expressed concerns about similar tax increases in other states. FLUT has stated they have no plans to introduce a surcharge for winners, potentially putting further pressure on margins.
- Rising operating costs, including higher payment processing fees resulting from changes in player behavior (more frequent deposits and withdrawals), increased investment in customer acquisition, and additional expenses from acquisitions like Beyond Play, may erode profitability. The company also mentioned higher regulatory compliance costs associated with their U.S. listing.
- Intensifying competition in the sports betting and iGaming markets could threaten FLUT's market share. Competitors like BetMGM are increasing investment in iCasino, and other operators are launching refreshed products, which may require FLUT to spend more to maintain its product advantage. Additionally, the sale of World Series of Poker intellectual property to GGPoker, a main global competitor, may impact the competitive dynamics against FLUT's PokerStars business.
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Upgraded guidance | Maintained full-year guidance despite unfavorable sports results, emphasizing strong momentum. | Upgraded full-year guidance for revenue and EBITDA, citing strong Q2 performance and positive sports results. | Shift from stable outlook to more confident projections |
FanDuel leadership | Emphasized clear leadership in U.S. market with 52% sportsbook and 27% iGaming share, driven by disciplined investments. | Reinforced U.S. dominance with nearly 40% combined sports betting and iGaming share, highlighting NBA/MLB product improvements. | Consistently highlighted as a key growth driver |
Intensifying competition | Noted highly competitive U.S. market but more rational spending; focused on product quality, pricing sophistication. | Addressed ongoing competition in sports betting and iGaming by emphasizing superior product offerings, pricing, and efficient acquisition. | Sustained concern, with confidence in product advantages |
Rising operating costs | Discussed mainly in terms of disciplined investment and leveraged returns, but no explicit overall cost pressure framing. | Highlighted tax changes in Illinois, increased payment fees (6% of revenue), and extra investments ($20M in acquisition, $20M additional costs). | More explicit in Q2, with margin pressures emphasized |
Regulatory challenges | Briefly covered potential U.S. state tax increases; no major new developments mentioned for the U.K.. | Focus on U.S. tax changes (e.g., Illinois) as a $40M headwind; managing these via moderated generosity and local marketing adjustments. | Shift toward U.S.-centric tax concerns |
Same-game parlays & live bet | No mention of new product emphasis for the NFL season. | New focus on product enhancements for same-game parlays and live betting features ahead of NFL season, aiming to boost engagement. | Emergent innovation priority |
M&A strategy | Highlighted success with Sisal and MaxBet acquisitions; willingness to exceed leverage temporarily if strategic. | Reiterated openness to exceeding leverage target for the right deals (e.g., Beyond Play), citing Sisal as a strong example of acquisition success. | Ongoing growth via strategic acquisitions |
Italy’s strong performance | Q1 noted record AMPS in March (+22% YoY) and a new Sisal betting app driving market share gains. | No specific mention of Italy’s performance or app developments in Q2. | No longer highlighted, indicating a pivot or less emphasis |
Unfavorable sports results | Q1 referenced $76M of unfavorable results in late March (March Madness) but maintained guidance due to strong April. | Q2 noted favorable sports outcomes contributing to strong performance, particularly in the U.S. and UK&I segments. | Reduced concern, improved sports margins |
Large potential impact areas | Not explicitly framed as such, but touched on U.S. dominance, product innovation, and prudent regulation management. | Discussed managing regulatory risks, pushing U.S. leadership, innovating product offerings, and strategic M&A as central to future growth. | Elevated priorities with a focus on long-term advantage |
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Illinois Tax Impact
Q: How will you mitigate the $40 million Illinois tax headwind?
A: We believe that moderating levels of generosity or reducing local marketing is the best response to mitigate the $40 million net headwind from Illinois. We have no plans to introduce a surcharge for winners , and we think that smaller players may increase prices, leading us to capture more market share. -
Guidance and Revenue Upgrade
Q: What's driving the full-year guidance upgrade?
A: Our terrific Q2 performance, partly driven by positive sports results, led to strong drop-through. We are investing an additional $20 million in customer acquisition with returns well within a 24-month payback. We have an additional $20 million in operating costs due to higher payment costs and the Beyond Play acquisition. Excluding the net Illinois impact, the full-year revenue upgrade drops through at 35%, or 15% excluding Illinois. -
Customer Acquisition Costs
Q: Are acquisition costs falling equally across iGaming and sports betting?
A: Our cost per acquisition (CPA) has slightly decreased in Q2 compared to last year, even with significant increases in customer numbers. We maintain a consistent posture to acquire as much business as possible while meeting our return criteria. -
Media Partnerships and M&A
Q: How do you view media tie-ins and M&A opportunities?
A: Strong media tie-ins help us showcase our products and pricing with good integrations. We have a great track record of acquisitions globally, applying the Flutter Edge to enhance performance. For the right deal, we are willing to go beyond our leverage target if we can deleverage quickly. -
Product Advantage
Q: How will you retain product advantage in the NFL season?
A: We are investing heavily in product capabilities, including live betting and parlay offerings. We have the best product and pricing in the market and plan to deploy initiatives like same game parlay live for the NFL season to stay ahead. -
Brazil Market Entry
Q: How are you positioned for Brazil's market launch?
A: We are excited about Brazil and believe we are well-placed with our Betfair and PokerStars brands. We aim for gold medal positions and may consider M&A to scale up, applying the Flutter Edge to supercharge businesses. -
Australia Trends
Q: Can you give color on Australia's trends and confidence?
A: We're pleased with Australia's resilient performance amid a tough regulatory backdrop, with strong customer engagement on marquee events. The EBITDA guidance upgrade is driven by sports results, and underlying trends align with expected market declines. -
Cost Management and Gross Margin
Q: What's driving the increase in U.S. gross margin?
A: Gross margin benefited from favorable sports results, maintaining cost of sales at approximately 56.8% of revenue, in line with guidance. We face higher payment costs due to more frequent deposits and withdrawals but see opportunities to reduce costs over time. -
In-House iGaming Platform
Q: What's the status of your U.S. in-house iGaming platform?
A: We've brought our iGaming product in-house in the U.S., improving our ability to deploy our own content and enhance platform stability. This allows us to leverage experiences from other markets and operate on our own tech stack. -
Cohort Growth
Q: Can you provide color on AMP growth in cohorts?
A: We see increases in parlay penetration and structural margin improvements in historical cohorts. Pre-2022 state revenue was up 16% with AMPs up 20%; 2022 and 2023 cohort states saw revenue up 45%.