Flutter Entertainment plc (LON:FLTR; NYSE:FLUT), the world’s leading online sports betting and iGaming operator, has announced results for Q1 20241.
| Key financial highlights: | ||||
| In $ millions except percentages and average monthly players | Three months ended March 31 | |||
| 2024 | 2023 | YOY | ||
| Average monthly players (AMPs) (‘000s)2 | 13,722 | 12,349 | +11% | |
| Revenue | 3,397 | 2,918 | +16% | |
| Net loss | (177) | (111) | (59%) | |
| Adjusted EBITDA 3,4 | 514 | 352 | +46% | |
| Adjusted EBITDA Margin 3 | 15.1% | 12.1% | +310bps | |
| Net loss per share ($) | (1.10) | (0.58) | (92%) | |
| Adjusted earnings per share ($)3 | 0.10 | 0.69 | (85%) | |
| Net cash provided by/(used in) operating activities | 337 | (49) | ||
| Adjusted Free Cash Flow 3 | 157 | (50) | ||
| Leverage ratio (December 2023 3.1x)3,4 | 2.8x | |||
· Group strategy delivering continued strong growth with revenue +16%
· US produced another excellent quarter; AMPs2 +15% and revenue +32%, despite unfavorable sports results in the second half of March:
‒ FanDuel #1 brand in both sportsbook (net gaming revenue (NGR) share 52%; gross gaming revenue (GGR) share 46%) and iGaming (record GGR share of 27%) in Q1 20245
‒ Very successful launch in North Carolina with 5.3% adult population signed up to FanDuel in first 45 days; new player acquisition in pre-2022 states +12%; projected payback in line with historic trends6
‒ Product enhancements driving iGaming player (AMPs2 +34%) and revenue (+49%) growth
‒ FanDuel a founding member of the Responsible Online Gaming Association (ROGA)
· Group Ex-US AMPs2 +10% and revenue +8% benefitting from strong performance in iGaming (revenue +15%) and the acquisition of MaxBet in January:
‒ Improved iGaming cross-sell rates in UKI driven by product improvements
‒ In International, Sisal delivered market share gains in Italy, with iGaming performance mitigating the impact of unfavorable sports results
· US primary listing expected to become effective on May 31, 2024
Q1 2024 financial overview
· Net loss of $177m, $66m higher year on year, after non-cash charges of $356m due to (i) $172m acquired intangibles amortization; and (ii) $184m (Q1 2023 $64m) fair value change in Fox Option liability
· Group Adjusted EBITDA3 of $514m, +46%:
‒ US Adjusted EBITDA3 of $26m (Q1 2023 -$53m), driven by strong revenue growth and significant operating leverage; Adjusted EBITDA margin3 +680bps, despite continued disciplined US player acquisition investment
‒ Group Ex-US Adjusted EBITDA3 of $488m +20%, reflecting increased revenue and Adjusted EBITDA margin3 expansion of 260bps, primarily driven by sales and marketing leverage and a one-off credit from the settlement of historic litigation
· Group’s financial growth algorithm driving Adjusted EBITDA Margin3 accretion, +310bps to 15.1%
· Net loss per share and adjusted earnings per share decreases of $0.52 and $0.59 primarily due to the Fox Option charge (-$1.04), offsetting improved financial performance
· Net cash provided by operating activities increased $386m to $337m primarily driven by the strong operational performance converting into cash and year on year movement in US player deposits
· Adjusted Free Cash Flow3 of $157m (Q1 2023 -$50m) and leverage ratio3,4 of 2.8x at March 31, 2024 based on last 12 months Adjusted EBITDA3 (December 31, 2023 3.1x), both benefitting from improved financial performance year on year
2024 Outlook
· Remain confident in financial year 2024 guidance7 provided at financial year 2023 results announcement on March 26, 2024, despite unfavorable US sports results in the last two weeks of March
Peter Jackson, Flutter Entertainment CEO, commented:
“We have had an excellent start to the year. In the US, FanDuel’s top line momentum is translating into strong growth in US Adjusted EBITDA and market share gains. We are focused on continuing to expand our player base, market share, and embedding future profits within our business through disciplined investment. Outside of the US, our focus on delivering the best products for our players is driving good momentum in key markets such as the UK where the launch of Super Sub on Paddy Power has been our most successful product launch to date, and in Italy where we have been taking online sports betting and iGaming market share during Q1 and reached an all-time record in April. We are proud to be one of the founding members of the US Responsible Online Gaming Association whose goal is to develop and advance responsible gaming practices. We are a strong advocate for building a sustainable sector in the US. We believe that our global experience positions us well to help lead the way.
On May 1, shareholders voted to move our primary listing to the US. We believe a US primary listing is the natural home for the Group and we look forward to this becoming effective on May 31. With a greater proportion of the Group’s future profits expected to be generated in the US, we have moved our operational headquarters to New York reflecting the importance of the US sports betting and iGaming market to our business.”
Q1 24 Operating Review:
US:
FanDuel has started the year strongly by consolidating its leadership position in sports with a 52% online NGR market share (GGR share 46%) for Q1 2024, while FanDuel Casino was the number one iGaming brand5. We had a record 27% iGaming GGR share in Q1, a four-percentage point increase year on year. FanDuel’s total AMP growth of 15% included a record 2.6 million players for Super Bowl LVIII, the culmination of a highly successful NFL season.
We launched our sportsbook product in Vermont (January 11, 2024) and North Carolina (March 11, 2024). Consistent with our long-term strategy, we are investing behind the excellent returns being generated from our player promotions and marketing spend, with projected paybacks on customers acquired in the quarter in line with historic trends6. North Carolina has been our second most successful launch to date, with 5.3% of the adult population signed up to be a FanDuel customer in the first 45 days.
Total new sportsbook and casino player volumes were lower in the quarter, due to a full quarter of significant Ohio acquisition volumes in the comparative period. However, new players acquired in states that launched before 2022 were 12% higher than last year, demonstrating the strong demand for our products well after the initial launch period (pre 2022 states staking +19%). We believe the combination of our high structural sportsbook revenue margin and significant scale result in more efficient payback periods for FanDuel. Where payback periods indicate compelling returns on our customer acquisition spend, we will continue to make disciplined investment to drive future profitability.
FanDuel added more innovations to its market leading sportsbook product in the quarter. Ahead of the new Major League Baseball (“MLB”) season we increased the range of betting markets available to players. This helped drive a four-percentage point increase in the proportion of handle on Same Game Parlays across the first three weeks of the MLB season.
In iGaming, we continue to deliver on our strategy. Our focus on direct casino players and best-in-class customer experiences is generating results. We have gained exclusive online access to one of retail casinos’ most popular slot titles and launched the first in a series of online versions, which immediately became our most played game. We expect further slots-based innovation and exclusive content to drive our leadership in iGaming.
Group Ex-US:
Our diversified Ex-US business grew AMPs2 by 10% and added another podium position during Q1 with the acquisition of MaxBet, a leading omnichannel operator in Serbia.
We continued to deliver a very strong performance in the UKI with AMPs2 +2% despite the strong prior year quarter, which benefitted from a halo effect from the FIFA 2022 World Cup. iGaming growth was particularly strong driven by further product improvements with over 100 new games launched during Q1 and improved cross-sell rates. In sportsbook we leveraged the Flutter Edge and launched Super Sub for Paddy Power, replicating the popular Duo feature first introduced in our International division. This feature swaps a substitute player into a parlay bet and early engagement has been positive with over 80% of football customers engaging with the product in March.
We are seeing the benefit of product improvements in key International Consolidate and Invest8 markets. In Italy, Sisal delivered all-time record levels of AMPs2, +22% in March compared with March 2023, together with Q1 market share gains and extending its lead as the market leading brand in the Italian market in April8. This was achieved through our new Sisal betting app, launched in Q3 2023, which continued to help drive high levels of engagement on sportsbook with online staking +24% year on year. In addition, expanded casino content, including a free-to-play “Bonus Wheel” feature drove increased cross-sell rates to iGaming. In Georgia and Armenia, a redesigned app with more personalized content helped deliver market share gains and a clear number one position8. We saw good momentum in Spain and Brazil with continued focus on localization of our product and optimized generosity offerings. Junglee Poker was launched in India, in line with our local hero strategy, with encouraging levels of player engagement since launch.
Q1 2024 financial highlights: Group
| Three months ended March 31 | ||||||||
| Revenue | Adjusted EBITDA | |||||||
| 2024 | 2023 | YOY | YOY CC | 2024 | 2023 | YOY | YOY CC | |
| In $ millions | ||||||||
| US | 1,410 | 1,071 | 32% | 32% | 26 | (53) | ||
| UKI | 861 | 736 | 17% | 12% | 268 | 206 | 30% | 24% |
| International | 797 | 760 | 5% | 6% | 173 | 149 | 16% | 20% |
| Australia | 329 | 351 | (6%) | (2%) | 83 | 85 | (2%) | 2% |
| Unallocated corporate overhead9 | (36) | (35) | 1% | (3%) | ||||
| Group Ex-US | 1,987 | 1,847 | 8% | 7% | 488 | 406 | 20% | 21% |
| Group | 3,397 | 2,918 | 16% | 16% | 514 | 352 | 46% | 47% |
The Group delivered an excellent performance in Q1 with an 11% increase in AMPs2 delivering revenue growth of 16% to $3.4bn. The impact of sports results, calculated as the difference between our expected net revenue margin and actual net revenue margin, had an approximate five percentage point negative impact on Group revenue growth. The increase in revenue reflects the continued growth of our US business, where revenue increased 32%, and strong iGaming momentum in UKI. The addition of MaxBet in Q1 added $47m or two percentage points to Group revenue growth year on year.
The Group reported a net loss for the quarter of $177m after recording non-cash expenses including (i) a loss of $184m relating to a change in the fair value of the Fox Option liability (Q1 2023: $64m loss) due to a higher valuation of FanDuel; and (ii) amortization of acquired intangibles charge of $172m (Q1 2023: $192m). The increases in the net loss and the net loss margin during Q1 2024 compared with Q1 2023, were primarily due to the improved financial performance outlined above being more than offset by an associated tax charge and the change in the fair value of the Fox Option liability.
The strong revenue momentum, combined with a 310bps expansion on our Adjusted EBITDA margin3, is driving a transformation of Group earnings with Adjusted EBITDA3 46% higher at $514m. The margin growth was primarily driven by operating leverage in our sales and marketing expenses in the US and International segments. Unallocated corporate overhead increased 1% (-3% on a constant currency basis10) to $36m reflecting investment in Flutter Edge capabilities and new compliance requirements as a U.S. listed company9, offset by an $18m credit from the settlement of historic litigation.
The higher loss in the current period increased loss per share by $0.52 to $1.10, and decreased adjusted earnings per share3 by $0.59 to $0.10. Both metrics include the $184m loss on the fair value of the Fox Option, which equates to $1.04 per share.
The Group’s net cashflow provided by operating activities in Q1 2024 increased $386m to $337m driven by the strong operational performance and the year on year movement in US player deposits. Adjusted Free Cash Flow3 of $157m was $207m higher than the prior year due to Adjusted EBITDA growth and working capital movements.
Q1 2024 financial highlights: Segments
US revenue increased 32% in Q1 with strong growth in both sportsbook (+30%) and iGaming (+49%). This reflects total revenue growth of 56% in the period from January 1, 2024 to March 17, 2024, as reported in our 2023 full year results on March 26, 2024, and -51% in the remainder of the quarter. The performance over the last two weeks of the quarter reflects the significant swing in sports results on the March Madness college basketball tournament, from favorable in the prior year to unfavorable in the current year. Sports results for this two-week period were 320bps ($76m) unfavorable, while sportsbook stakes were 46% higher.
In sportsbook, revenue growth was driven by strong engagement with our leading product proposition with AMPs2 +19% and staking +24%. Sportsbook net revenue margin increased 40bps to 7.3%. This reflected continued expansion of our structural margin, driven by our market leading product offering, partly offset by a 150bps adverse impact from unfavorable sports results versus the comparable period (sports results: Q1 2024 130bps unfavorable, Q1 2023 20bps favorable11, twelve months to March 31, 2024 90bps unfavorable). Promotional spend levels were in-line with the comparable prior year quarter.
iGaming revenue growth reflects the improvements in our product proposition noted above and our successful player acquisition driving AMPs2 34% higher. Within iGaming, slots performed exceptionally well with new content helping drive slots revenue up 73% versus the prior year.
Adjusted EBITDA3 increased by $79m to $26m due to revenue growth combined with operating leverage across all cost categories. This drove a 680bps expansion in Adjusted EBITDA margin3 to 1.8%. Cost of sales as a percentage of revenue declined 140bps to 59.0%, higher than our guidance for full year 2024 due to new state launches in the quarter, but in line with our expectations. Sales and marketing expenses reduced by 410bps as a percentage of revenue, despite continued disciplined player acquisition investment, with significant operating leverage in existing states being partly offset by new state launches.
UKI revenue increased by 17% (12% on a constant currency basis10) with AMP2 growth of 2% despite lapping an enlarged post World Cup recreational customer base and more congested sporting calendar in the prior year period. The strong revenue performance was primarily driven by iGaming +27% with sportsbook +9%. Sportsbook revenue growth reflected an increase in net revenue margin of 100bps year on year to 12.6%. This was driven by continued expansion of our structural margin as penetration of higher margin bet types such as Build A Bet increase. We also benefited from 40bps of favorable sports results year on year (Q1 2024: 40bps favorable, Q1 2023: in line with expected margin). Adjusted EBITDA3 grew 30% with Adjusted EBITDA margin3 310bps higher reflecting the strong revenue performance and operating leverage, particularly in sales and marketing.
International delivered AMP2 growth of 20% including a step up in recreational customer growth in Junglee Daily Fantasy Sports due to the earlier start to the Indian Premier League in Q1 2024. Revenue grew by 5% (6% on a constant currency basis10) driven by iGaming +8%. Sportsbook revenue declined 12% despite strong staking growth of 21%, due to an adverse year on year swing in sports results of 280bps (Q1 2024: 150bps unfavorable, Q1 2023: 130bps favorable), primarily in Sisal Italy.
Consolidate and Invest8 markets grew 8% reflecting the acquisition of MaxBet in January which contributed $47m in revenue during the quarter, as well as the benefit of our diversified geographic and product portfolio. Excluding MaxBet, growth in Consolidate and Invest8 markets was flat driven by:
· Strong revenue growth in Georgia and Armenia (+20%), Spain (+13%) and Brazil (+8%), as well as good momentum in Turkey (+1%, +66% on a constant currency basis10)
· Revenue declines in (i) India (-25%) due to tax changes introduced in Q4 2023, where product innovation to mitigate the impact has helped to sequentially improve performance, and (ii) Sisal Italy (-1%) driven by the impact of unfavorable sports results year on year which had an approximate 12 percentage point impact on total Sisal Italy revenue growth. This offset Sisal Italy iGaming revenue growth of 24% despite challenging prior year comparatives which included engagement driven by the record SuperEnalotto jackpot.
Sales and marketing expenses reduced as a percentage of revenue by 420bps to 13.0%. This was driven by increasingly targeted investment to support the key market growth described above, as well as the reduction in marketing resulting from the closure of FOX Bet in August 2023. This was partly offset by investment to support our expanding International portfolio resulting in an increase in Adjusted EBITDA3 of 16% and Adjusted EBITDA margin3 of 210bps year on year.
Australia revenue declined 6% (-2% on a constant currency basis10) with AMPs2 in line year on year. Sportsbook net revenue margin increased 180bps to 12.9% primarily due to 140bps of more favorable sports results in the quarter (Q1 2024 170bps favorable; Q1 2023 30bps favorable). This mostly offset the impact of the softer racing market environment noted at our FY23 earnings announcement, which remains in line with our expectations, and drove total staking 19% lower (-16% on a constant currency basis10). Lower racing streaming costs partly offset the revenue decline to result in Adjusted EBITDA3 3% lower (2% higher on a constant currency basis10) at $83m.
FY 2024 outlook
We remain confident in our financial year 2024 guidance7 provided at the financial year 2023 results announcement on March 26, 2024, despite unfavorable US sports results in last two weeks of March and there is therefore no change to previously communicated ranges:
· US: Revenue and Adjusted EBITDA3 mid-points of $6.0bn and $710m, representing year on year growth of 36.3% and 206.1% respectively.
· Group Ex-US: Revenue and Adjusted EBITDA mid-points of $7.85bn and $1.73bn, representing year on year growth of 6.3% and 5.4% respectively.
Guidance7 is provided (i) on the basis that sports results are in line with our expected margin for the remainder of the year, (ii) at current foreign exchange rates, and (iii) on the basis of a consistent regulatory and tax framework.
A reconciliation of our forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measure cannot be provided without unreasonable effort. This is due to the inherent difficulty of accurately forecasting the occurrence and financial impact of the adjusting items necessary for such a reconciliation to be prepared of items that have not yet occurred, are out of our control, or cannot be reasonably predicted.
Capital structure
Total debt decreased to $6,836m from $7,056m at December 31, 2023 while net debt3 was broadly in line at $5,684m from $5,795m. On April, 29 2024, we refinanced existing debt with the successful placement of over $1bn in secured senior notes, which mature in 2029. The Group’s leverage ratio3 reduced to 2.8x at March, 31 2024, based on last 12 months EBITDA from 3.1x at the end of December, 31 2023 due to growth in Adjusted EBITDA. The Group’s medium term leverage target is 2.0-2.5x.
Listing update
On May 1, shareholders voted to move our primary listing to the US. With a greater proportion of the Group’s future profits expected to be generated in the US, we believe a US primary listing is the natural home for the Group. The transition is expected to become effective on May 31, 2024. We have also moved the Group’s operational headquarters to New York reflecting the importance of the US sports betting and iGaming market to our business.
Conference call:
Flutter Entertainment management will host a conference call today at 6:30 a.m. ET (11:30 a.m. BST) to review the results and be available for questions, with access via webcast and telephone.
A public audio webcast of management’s call and the related Q&A can be accessed by registering here or via www.flutter.com/investors. For those unable to listen to the live broadcast, a replay will be available approximately one hour after conclusion of the call. This earnings release and supplementary materials will also be made available via www.flutter.com/investors.
Analysts and investors who wish to participate in the live conference call must do so by dialing any of the numbers below and using conference ID 48775. Please dial in 10 minutes before the conference call begins.
+1 646 307 1963 (United States)
+44 20 3481 4247 (United Kingdom)
+353 1 582 2023 (Ireland)
+61 2 8088 0946 (Australia)
