REG - Flutter Entertainmnt - Q3 2023 Trading Update

Flutter EntertainmentAnnouncement

09/11/2023 07:00

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RNS Number : 8607S  Flutter Entertainment PLC  09 November 2023

9 November 2023

Q3 2023 Trading Update

Group revenue +13% with continued strong US performance and market leadership

Flutter Entertainment plc (the "Group") announces a trading update for three
months ended 30 September 2023

 Unaudited £m                        Q3 2023  Q3 2022  YoY %  YoY % CC(1)

 Average monthly players(2) ('000s)  11,139   9,596    +16%

 Sports revenue                      1,121    1,143    -2%    +4%
 Gaming revenue                      914      748      +22%   +26%
 Total revenue                       2,035    1,891    +8%    +13%

All commentary within this trading update refers to constant currency(1)
growth rates. Pro forma references include Sisal, which was acquired in August
2022, for a full 3-month period in both 2022 and 2023. Any differences due to
rounding.

•     Group: Delivery of Flutter's growth strategy and addition of Sisal
driving strong player growth with AMPs increasing in all divisions (AMPs +16%,
revenue +13%):

-    Sports revenue +4% despite 12 percentage point impact from adverse
sports results year on year

-    Group-wide gaming performing exceptionally well with revenue +26%

-    Excellent pro forma growth with AMPs +13% and revenue +9% (sports +2%,
gaming +19%)

•     US: Strong pipeline of product innovation and investment in new
player acquisition underpins confidence in long term leadership:

-    Q3 sports gross revenue share of 40%(3) (47% share of net revenue);
clear number 1 position driven by leading product

-    Excellent start to NFL season with record number of new players
acquired during season launch (+37%)

-    Delivering against our iGaming strategy; FanDuel the fastest growing
brand in the market with revenue +52%; advanced to number 2 position in
iGaming with 23% market share

•     Group ex-US: Revenue growth of 10% (pro forma +5%) in line with
long-term 5-10% growth framework despite particularly customer friendly sports
results and a declining Australian racing market:

-    UK & Ireland: Excellent strategic delivery expanding customer base
+5% and growing revenue +11%

-    Australia: Racing market revenue declines more than offset good
retention of enlarged player base, resulting in Sportsbet revenue -7%. Racing
market weakness now expected to continue into 2024

-    International: Pro forma revenue in Consolidate and Invest markets
+11% driving total AMPs +12% and revenue +5%

•     Sustainability: Remains a key priority. Highlights include hosting
our second dedicated FanDuel Play Well event, winning the EGR Global Operator
DE&I Model of the Year award as well as continued co-operation and
collaboration on industry consultations in UK, Ireland and Australia

•     2023 guidance: Reflects Group-wide very customer friendly results
in September and October:

-    US: Revenue and Adjusted EBITDA both approximately £3.75bn ($4.7bn)
and £140m ($180m). Achieving structural profit for the full year despite
ongoing investment in customer acquisition to drive long term growth
(previously guided revenue range: £3.6bn - £3.9bn, EBITDA range £90m -
£190m)

-    Group ex-US: Adjusted EBITDA now expected to be approximately £1.44bn
(previously guided range £1.44bn - £1.6bn) despite very customer friendly
sports results (£50m) and adverse movements in foreign exchange rates
(£30m). Increased investment in the Flutter Edge to drive Group-wide growth
and Australian racing market weakness is offset by underlying strength in UK
& Ireland and International

•     US listing: SEC application for listing submitted; expect
additional listing on NYSE in Q1 2024 and to delist from Euronext Dublin
simultaneously or shortly prior to this

Peter Jackson, Chief Executive, commented:

"The Group had another strong quarter in Q3 and even in this seasonally
quieter period, the power of our diversified business is clear with revenue
growth of 13% to over £2bn. We remain the number one choice for sports
betting and gaming customers globally, and our 16% growth in average monthly
players augurs well for our continued growth and market leadership.

We are particularly pleased by the great progress we are making in the US. We
are the first online operator to achieve structural profitability, and the
strong ramp in EBITDA during 2023 will continue into 2024 and beyond, as our
profit margins expand materially.

The NFL season is off to an excellent start with our product leadership
driving average monthly player growth of 38% to 2.6m in the quarter. I am
excited about our plans heading into the sports rich months of November and
December as we execute on our winning strategy which, combined with the
FanDuel Advantage, keep us leading the industry.

Outside of the US, our strategy ensures we can capitalise on the many growth
opportunities which exist across our global markets. Our diversified portfolio
of leading brands are well positioned to adapt to challenges and opportunities
in their respective markets. In Q3, our UK & Ireland brands continued to
take share across online and retail channels through our winning product
offering. In addition, our Consolidate and Invest markets drove strong
momentum within our International business. We were pleased to add MaxBet to
the Flutter portfolio, in line with our strategy for acquiring "Local Hero"
brands in attractive markets. While market conditions in Australian racing
remain challenging, as the clear market leader with a player base 1.8 times
that in 2019, we are confident that Sportsbet is the best positioned brand in
the market.

We are making good progress towards our US listing which will bring the Group
significant benefits from accessing the world's deepest and most liquid
capital markets.

Overall, the significant potential for US growth and ability to leverage scale
benefits across our diversified portfolio outside of the US, underpins our
confidence in our significant and sustainable long term earnings growth
potential."

 

Q3 divisional analysis

 Unaudited revenue          Total                           Sports(4)  Gaming      Average monthly players(2)

 £m
                            Q3 2023  Q3 2022  YoY %  YoY %  YoY %      YoY %       Q3 2023 (000s)  YoY %

                                                     CC     CC         CC
 US                         668      598      +12%   +20%   +10%       +52%        2,564           +38%

 UK & Ireland               566      509      +11%   +11%   +6%        +17%        3,625           +5%
 - UK & Ireland Online      494      443      +12%   +11%   +6%        +18%        3,625           +5%
 - UK & Ireland Retail      72       66       +9%    +9%    +8%        +12%
 Australia                  262      319      -18%   -7%    -7%                    1,124           +2%
 International              539      466      +16%   +19%   +10%       +22%        3,827           +20%
 Group ex-US                1,367    1,293    +6%    +10%   +1%        +20%        8,575           +11%

 Group                      2,035    1,891    +8%    +13%   +4%        +26%        11,139          +16%

Sisal, acquired in August 2022, has been included on a reported basis within
International. The pro forma references within the commentary below include
Sisal for a full 3-month period in both 2022 and 2023.

US

The combination of the FanDuel Advantage and the Flutter Edge delivered
another strong quarter with AMP growth of 38%. The FanDuel Advantage drives
our leadership in the market through:

•     Efficient acquisition: The strength of the FanDuel brand is
supported by material ongoing investment in compelling customer acquisition
marketing campaigns. This delivered an increase of 37% in new sports betting
and iGaming players in Q3 when compared with the prior year. This includes a
13% increase in states launched pre-2022 driving very good momentum in older
states

•     Strong retention: Continued innovation of FanDuel's market leading
sportsbook product for the new NFL season with the launch of (i) Parlay Hub, a
centralised hub for all things parlay, (ii) The Pulse, surfacing the most
compelling in-play betting opportunities based on trending action, and (iii)
expansion of in-play Same Game Parlay prop markets including the addition of
in-quarter player props. These product enhancements have ensured that we have
maintained good retention rates year on year

•     Grow customer value: Product innovation drove higher parlay
penetration in the quarter and when combined with Flutter Edge pricing and
risk management capabilities, resulted in an 80 basis point increase in our Q3
expected gross win margin to 11.5%

These factors helped drive a 40% market share of online sports betting gross
revenue in Q3, two percentage points lower year on year. This is lower than
recent quarters due to seasonality associated with customer acquisition
investment in Q3 for the launch of the NFL season and the launch of profit
boost tokens. FanDuel continues to benefit from more efficient promotional
spend with a 47% share of sports betting net gaming revenue (i.e. after
deducting the cost of promotional spend from gross revenue) in Q3, five
percentage points higher year on year.

Sports revenue grew 10%. In sportsbook, stakes which increased 40%, were
offset by a 170 basis point decline in net revenue margin delivering net
revenue growth of 12%. The net revenue margin decline reflects a swing in
sports results from very favourable in the prior year to slightly unfavourable
in the current year, which was partly offset by structural gross win margin
improvements noted above. Daily fantasy sports and TVG revenue declined 6% on
a combined basis.

Our iGaming strategy is delivering very encouraging results with FanDuel being
the fastest growing brand in the market. Q3 market share increased four
percentage points to 23%, with FanDuel now the #2 operator in the market(3).
This is driven by AMP growth of 42%, with revenue 52% higher. FanDuel
continues to improve its product proposition by adding more tier one
suppliers, contributing to a 30% increase in the number of new gaming titles
in key states. There remains a significant pipeline of product improvements
for us to deliver for our players.

FanDuel's combined online sportsbook and iGaming revenue from states launched
pre-2022 increased 12% with strong growth in iGaming being partly offset by
lower sportsbook revenue from the significant swing in sportsbook net revenue
margin noted above.

UK & Ireland

Online

Excellent momentum within our UK & Ireland division continued during Q3.
The business took share as we delivered a strong start to the new season of
the Premier League with our recreational player base driving revenue and AMP
growth of 11% and 5% respectively.

Sports revenue grew by 6% driven by increased Betbuilder adoption, which is
expanding our structural revenue margin to deliver a net revenue margin of
10.9%, 60 basis points higher than the prior year. We also rolled out
innovative new product and generosity features such as Acca Freeze at Sky Bet
and an increasingly personalised approach to Best Odds Guaranteed on racing to
drive efficient retention and player engagement.

Gaming performance remains strong with AMPs 13% higher and revenue up 18%.
This was driven by complementary, start of season gaming campaigns which drove
high conversion from our sports player base. In addition, we continued to
expand our gaming content and improve our promotional mechanics across our
brands.

Retail

Retail revenue grew 9% also benefiting from a good start to the Premier League
season as well as an enhanced product proposition across our UK and Irish
estates.

Australia

Sportsbet grew AMPs by 2% in the quarter due to good retention of our
recreational player base. This was driven by our market leading product
offering, where we signed a ten year extension for access to Sky Racing
streaming in the quarter which included the addition of Sportsbet branded
content.

The challenging racing market we saw in Q2, continued in Q3 and resulted in
sportsbook stakes being 9% lower. Revenue declined 7% as sportsbook net
revenue margin increased 20 basis points to 11.3%. The softer racing market is
now expected to persist into 2024, resulting in an estimated mid-single digit
decline in the overall Australian market in 2024. The market is also
experiencing increased regulatory oversight, including a ban on credit card
deposits. The combination of these items will now limit our ability in the
near-term to offset the impact of the previously announced Victoria point of
consumption tax increase from July 2024 (annualised cost £27m).

International

 Unaudited revenue        Total                           Sports(4)  Gaming      Average monthly players(2)

 £m
                          Q3 2023  Q3 2022  YoY %  YoY %  YoY %      YoY %       Q3 2023 (000s)  YoY %

                                                   CC     CC         CC
 International reported   539      466      +16%   +19%   +10%       +22%        3,827           +20%
 International pro forma  539      529      +2%    +5%    -7%        +9%         3,827           +12%

In our International division, reported revenue growth of 19% reflects the
benefit of Sisal, acquired in August 2022, as well as good organic growth
within the business.

On a pro forma basis the division grew revenue by 5% and AMPs by 12%. Revenue
from our Consolidate and Invest markets which represented 78% of the division
during the quarter, delivered revenue growth of 11%.

Sports revenue was 7% lower due to the adverse impact of customer friendly
sports results. Gaming growth of 9% was primarily driven by strong execution
in India (+52%) and Turkey (+192%).

In Italy, revenue was 4% lower. This reflected a higher mix of sportsbook
revenue than in our other markets and therefore a greater impact from customer
friendly results. In addition, it also includes tougher comparatives as a
result of heightened player engagement from the Superenalotto jackpot in the
prior year, which reached record levels until it was won in Q1 2023.

Guidance and outlook

2023 guidance:

•     US: Revenue and Adjusted EBITDA both approximately £3.75bn
($4.7bn) and £140m ($180m), despite ongoing investment in new customer
acquisition to drive long term growth (previously guided revenue range:
£3.6bn - £3.9bn, EBITDA range £90m - £190m)

•     Group ex-US: Adjusted EBITDA now expected to be approximately
£1.44bn (previously guided range £1.44bn - £1.6bn) despite very customer
friendly sports results in September and October (£50m) and adverse movements
in foreign exchange rates (£30m). Increased investment in the Flutter Edge to
drive Group-wide growth and Australian racing market weakness is offset by
underlying strength in UK & Ireland and International

2024 items:

•     Challenging Australian operating environment to continue into 2024

•     Previously announced Indian GST tax change will delay profit
inflection for Junglee and is now expected to reduce 2024 EBITDA by around
£30m(5)

US listing

We have been pleased with the progress made on Flutter's additional US
listing. The Group has submitted a draft registration statement to the
Securities and Exchange Commission and we expect the listing to become
effective in Q1 2024. In addition, following a competitive tender process, the
Board is pleased to announce that it has chosen the New York Stock Exchange as
the future trading venue for Flutter's ordinary shares in the US.

The Board now believes that it is appropriate to maintain just two listings to
minimise regulatory complexities and consequently has taken the decision to
cancel its listing on Euronext Dublin. The Euronext delisting is expected to
take effect simultaneously with, or shortly prior to, implementation of the
additional US listing. The exact date of the cancellation will be the subject
of a separate announcement in due course. That announcement will be made at
least 20 business days prior to the cancellation date and will contain details
of the steps shareholders should take if they wish to re-position their
holdings ahead of the cancellation date.

The Group's premium listing on the London Stock Exchange, and its membership
of the FTSE 100, will not be affected by the Euronext listing cancellation.
The Group may pursue a primary US listing in due course, which would be
subject to a shareholder consultation. A shareholder FAQ has been made
available on the Flutter website (www.flutter.com (http://www.flutter.com) ).

 

(1) Constant currency ("cc") growth is calculated by retranslating the
non-sterling denominated components of Q3 2022 at Q3 2023 exchange rates.
Growth rates in the commentary are in local or constant currency.

(2) Average Monthly Players represent the average number of players who have
placed and/or wagered a stake and/or contributed to rake or tournament fees
during the month in the reporting period.

(3) Online sportsbook and gaming market share is the gross gaming revenue
("GGR"), unless otherwise stated, market share of our sportsbook and gaming
brands for Q3 2023 in the states in which FanDuel was live (excluding TN as
they no longer report this data), based on published gaming regulator reports
in those states as of 3 November 2023. Online sportsbook net revenue market
share is the net gaming revenue (GGR less promotional spend), for Q3 2023 in
the nine states in which report this data.

(4) Sports revenue includes revenue from sportsbook, exchange, daily fantasy
sports, advance deposit wagering and B2B product verticals.

(5) Goods and services tax change now confirmed as applicable to deposits and
introduced from 1 October 2023.

 Analyst briefing:

 The Group will host a questions and answers call for institutional investors
 and analysts this morning at 9:00am (GMT). To dial into the conference call,
 participants need to register here
 (https://event.loopup.com/SelfRegistration/registration.aspx?booking=mM2QYcMmHNYaZbKIp1BNES6RH9ixpumZV0DU7SX0tyo=&b=2389e96d-457b-46a8-bebb-fec356d5b031)
 where they will be provided with the dial in details to access the call.

 Contacts:

 Investor Relations:
 Paul Tymms, Investor Relations             + 44 75 5715 5768
 Ciara O'Mullane, Investor Relations        + 353 87 947 7862
 Liam Kealy, Investor Relations             + 353 87 665 2014

 Press:
 Kate Delahunty, Corporate Communications   + 44 78 1077 0165
 Lindsay Dunford, Corporate Communications  + 44 79 3197 2959
 Rob Allen, Corporate Communications        + 44 75 5444 1363
 Billy Murphy, Drury Communications         + 353 1 260 5000
 James Murgatroyd, FGS Global               + 44 20 7251 3801

 

About Flutter Entertainment plc:

We are a global betting and gaming group with an ambition to drive positive
and sustainable change in our industry. Through our world class brands we
excite and entertain customers, while leading the way in responsible play. Our
strength is the Flutter Edge, optimising the advantages of our global scale to
drive business performance and positive impact for our customers, colleagues
and communities.

We report as four divisions:

•       US: includes FanDuel, TVG and PokerStars brands, offering
regulated real money and free-to-play sports betting, online gaming, daily
fantasy sports and online racing wagering products to customers across various
states in the US and Canada.

•       UK & Ireland: includes the Sky Betting and Gaming, Paddy
Power, Betfair and tombola brands offering a diverse range of sportsbook,
exchange and gaming services across the UK and Ireland, along with Paddy Power
betting shops.

•       Australia: the Sportsbet brand offers online sport betting.

•       International: includes Sisal, PokerStars, Adjarabet, Betfair
and Junglee brands operating in multiple jurisdictions around the world
offering a diverse range of sportsbook, exchange and gaming services.

 

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