Flutter Entertainment 30% revenue growth driven by 40% increase in average monthly players

Flutter Entertainment plc (LON:FLTR) has announced interim results for six months ended 30 June 2021.

Operational Highlights: all commentary on a pro forma basis

·    Group: Scale and quality of business enhanced with 30% revenue growth driven by 40% increase in average monthly players (“AMPs”)

·    US: FanDuel product underpins leadership position; 45% online sportsbook market share⁸ in Q2

–   Revenue growth of 159% to £652m ($906m); over 2.2 million customers acquired since sports betting launch at average CPA⁹ of $291

–   Average return on investment in first year post customer acquisition of 1.2 times⁹

–   Proprietary sports technology migration complete; product and risk management advantages key to strong customer acquisition/retention, also benefitting sports margin

–   Flutter US expected to generate positive EBITDA in 2023, based on our expectations of future state openings

·    Group ex-US: Excellent customer growth with AMPs +26% aided by more normal sporting calendar

–   UK & Ireland AMPs +44%, with integration progressing well

–   Australian AMPs +52% driven by very high customer retention rates

–   International revenue decline less than anticipated with casino now largest product vertical

·    Safer gambling: Continued investment in resource and technology to optimise our controls

–   Advanced development of Affordability Triple Step in UK&I, with next phase of rollout in H2

–   Stepped up Group wide campaigns to promote safer gambling awareness and tools

Financial Highlights:

·    Reported revenue and Adjusted EBITDA growth of 99% and 75% respectively benefitting from May 2020 combination with The Stars Group (“TSG”)

·    Reported profit before tax of £77m, including amortisation charge of £276m for acquired intangibles

·    Pro forma revenue of £3.1bn, 30% higher than in H1 2020

·    Pro forma Adjusted EBITDA for Group ex-US 2% lower year-on-year to £684m

·    Higher US Adjusted EBITDA loss reflecting increased investment, with 6 additional states live compared to H1 2020

·    Net debt reduced by 7%, equating to a leverage ratio of 2.3x

·    Debt refinance complete, increasing liquidity and reducing future annual interest cost by circa £50m

·    Dividend policy to be kept under review with medium-term leverage target of 1-2 times retained

Outlook:

·    The second half of the year has started well. Assuming an uninterrupted sporting calendar for the remainder of the year and normalised sports results, we anticipate the following:

–   Group ex-US: Adjusted EBITDA of between £1,270m – £1,370m, assuming our retail estates remain open throughout H2  

–   US: Net revenue of between £1.285bn and £1.425bn ($1.8bn – $2.0bn) and Adjusted EBITDA loss of between £225m and £275m. This assumes H2 online launches in both Arizona and Connecticut

Peter Jackson, Chief Executive, commented:

“The first half of 2021 exceeded our expectations as we made substantial progress against our operational and strategic objectives while maintaining excellent momentum in growing our player base. Our global sports businesses benefitted from further enhancements to our products and the return to more normalised sporting calendars while we sustained our strong performance in gaming despite the challenging comparatives set last year.

In the US, we remain the number 1 online sports betting operator by some distance thanks to the quality of our products and the extensive reach of the FanDuel brand. The customer economics we are seeing in the US bode very well for the future, with early FanDuel customers generating positive payback within the first 12 months of acquisition. We remain absolutely focused on extending our sports product advantages and replicating our market share success in further states as they regulate. In gaming we see an opportunity to grow our market share and look forward to further enhancing our product offering in the coming months.

In the UK and Ireland, integration is progressing well with our 3 brands benefiting from shared learnings across product and operations. In Australia, Sportsbet delivered a phenomenal H1 performance with high customer retention rates during a period of reduced Covid disruption, suggesting that the business has experienced a permanent step change in scale. In International, which faced particularly challenging revenue comparatives following the growth in poker last year, revenue declines were less pronounced than anticipated as we continue to reposition and invest in the business for long-term sustainable growth.

Taking a lead on safer gambling remains a key priority for the Group as we continue investment across our brands and step up our activity to promote safer gambling awareness and tools. In markets where our campaigns are most advanced we are already seeing a positive impact on customer engagement and usage of safer gambling tools.

The second half of the year has started well and we look forward to making further progress in the coming months.”

Notes:

¹ Reported represents the IFRS reported statutory numbers. Where amounts in the table have been normalised for separately disclosed items (SDIs) they are labelled as Adjusted.

² Flutter’s combination with TSG completed on 5 May 2020. The pro forma numbers presented show the Group’s financials with TSG included for a full 6-month period in 2020. Junglee, which was acquired in January 2021, has not been included on a pro forma basis. See Appendix 3 for a reconciliation of pro forma results to statutory results.

³ Constant currency (“cc”) growth is calculated by retranslating the non-sterling denominated component of H1 2020 at H1 2021 exchange rates (see Appendix 4). Growth rates in the commentary are in local or constant currency.

⁴ 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. The AMP numbers do not include Junglee players in 2020 or 2021 to allow for better comparability of underlying player growth for International and Group.

⁵ The “Adjusted” measures include items that are separately disclosed as they are: (i) not part of the usual business activity of the Group (ii) items that are volatile in nature and (iii) purchase price accounting amortization of acquired intangibles (non-cash). Therefore, they have been reported as “separately disclosed items (SDIs)” (see note 5 to the financial statements).

⁶ EBITDA is profit before interest, tax, depreciation and amortisation expenses and is a non-GAAP measure.

⁷ Net debt is the principal amount of borrowings plus associated accrued interest, minus cash & cash equivalents plus/minus carrying value of debt related derivatives.

⁸ Online sportsbook market share is the GGR market share of FanDuel and FOX Bet for Q2 in the states in which FanDuel was live based on published gaming regulator reports in those states. During Q2 FanDuel was live in 10 states; Colorado (CO), Illinois (IL), Indiana (IN), Iowa (IA), Michigan (MI), New Jersey (NJ), Pennsylvania (PA), Tennessee (TN), Virginia (VA) and West Virginia (WV). During Q2 FOX Bet was live in 4 states; CO, NJ, MI and PA.

⁹ CPA is cost per acquisition and represents the total media and digital marketing spend per acquired customer including those cross-sold from daily fantasy sports. The return on investment is the average gross profit generated from those customers divided by their average CPA. It includes all quarterly cohorts of FanDuel sportsbook acquired between Q3 2018 through Q2 2020.

Flutter Entertainment will host a questions and answers call for institutional investors and analysts this morning at 9:30am (BST). Ahead of that call, a presentation will be available on the Group’s corporate website (www.flutter.com/investors) from 7.00am. To dial into the conference call, participants need to register here where they will be provided with the dial in details to access the call.