Flutter Entertainment plc (LON:FLTR; NYSE:FLUT), the world’s leading online sports betting and iGaming operator, has announced results for fiscal year ended December 31, 2023. Guidance for fiscal year ending 31 December 2024 introduced, with Group revenue growth of 17.5% at the midpoint.
| Key financial highlights: | ||||
| In $ millions except percentages and AMPs | Fiscal year ended December, 31 | |||
| 2023 | 2022 | YOY | ||
| Average monthly players (‘000s)1 | 12,325 | 10,245 | +20.3% | |
| Revenue | 11,790 | 9,463 | +24.6% | |
| Net loss | (1,211) | (370) | (227.3%) | |
| Further Adjusted EBITDA2 | 1,874 | 1,289 | +45.4% | |
| Further Adjusted EBITDA Margin2 | 15.9% | 13.6% | +230bps | |
| Net loss per share | $(6.89) | $(2.44) | (182.4%) | |
| Adjusted Earnings per share ($)2 | $3.51 | $2.79 | +25.8% | |
| Net cash provided by operating activities | 937 | 1,163 | (19.4%) | |
| Adjusted Free Cash Flow2 | 938 | 576 | +62.8% | |
| Leverage ratio2,3 | 3.1x | 4.4x | (1.3x) | |
· Excellent delivery against Group strategy drove AMPs +20.3% and revenue +24.6% year on year
· US business rapidly scaling with revenue +40.7% and first year of positive Adjusted EBITDA:
‒ Product innovation helped add 3.7m new customers at attractive projected payback periods4
‒ Continued #1 sportsbook position with sports net gaming revenue (NGR) share 53.4%; (Gross gaming revenue (GGR) share 43.2%) in Q4 20235
‒ FanDuel #1 iGaming brand as of January 2024; US GGR share 25.7% in Q4 20235
· Outside of the US, diversified portfolio delivered AMPs +15.0% and revenue +16.4% year on year:
‒ Strong UKI performance added 2 percentage points of GGR market share6 to 30%
‒ “Local hero” strategy drove growth in International “Consolidate and Invest”7 markets, while division also benefited from full year consolidation of Sisal acquisition
‒ This strong growth more than offset a softer Australian racing market in 2023, and the unwind of the prior year benefit from increased player engagement following Covid related restrictions
2023 financial overview
· Net loss of $1,211m reflected strong performance described above, but after non-cash charges of $1,681m due to (i) $725m PokerStars trademark impairment reflecting greater emphasis on revised “local hero” strategy; (ii) $791m acquired intangibles amortization; and (iii) $165m fair value change on Fox Option liability, (IFRS net loss $981m)
· Group Further Adjusted EBITDA2 (excl. share based payments) of $1,874m, +45.4% year on year:
‒ US Adjusted EBITDA of $65m, Further Adjusted EBITDA of $167m despite significant Q4 2023 customer friendly sports results
‒ Group Ex-US Adjusted EBITDA2 of $1,613m, which on an IFRS basis was £1,444m in line with previous IFRS guidance8, Group Ex-US Further Adjusted EBITDA of $1,707m +10.0% year on year
· Group Further Adjusted EBITDA Margin2 accretion +230bps to 15.9%, despite ongoing US investment
· Net cash provided by operating activities -19.4% to $937m primarily from Sisal’s record lottery jackpot which accrued in 2022 and resulted in a payment when won in February 2023
· Strong cash conversion and balance sheet position with Adjusted Free Cash Flow2 +62.8% year on year and leverage ratio2,3 at December 31, 2023 of 3.1x compared with 4.4x at December 31, 2022
2024 trading to date
· Strong trading year to date with Group revenue growth of 23.4% from January 1, 2024 to March 17, 2024 versus prior comparable period
· US revenue growth of 55.6%, with sportsbook +63.7% driven by staking growth and a 230bps improvement in sportsbook net revenue margin driven by structural margin improvements and higher promotional spend in the prior year on new state launches; iGaming +50.3% carrying product driven momentum into 2024
· Group Ex-US revenue growth of 6.3% benefited from diversified geographic portfolio with UKI +17.3%, International +3.0% impacted by unfavorable sports results and Australia -8.8%
2024 Outlook
· Guidance for the full year 2024 introduced with implied Group revenue growth of 17.5% and Further Adjusted EBITDA growth of 30.2% at midpoint:
‒ US revenue $5.8bn to $6.2bn, +36.3% year on year at midpoint
‒ US Further Adjusted EBITDA $635m to $785m, +206.1% year on year at midpoint
‒ Group ex US revenue $7.65bn to $8.05bn, +6.3% year on year at midpoint
‒ Group ex US Further Adjusted EBITDA $1.63bn to $1.83bn, +5.4% year on year at midpoint
· Medium-term leverage ratio target updated to 2-2.5x (from previous target of 1-2x)2,3 to reflect Group earnings and cashflow potential
Peter Jackson CEO commented:
“Flutter delivered a strong 2023 performance as we continued to deliver on our strategy. This was underpinned by a localized approach to technology and product coupled with the unique scale advantages of the Flutter Edge. As anticipated, our number one position in the US has transformed the Group’s earnings profile during 2023 as FanDuel delivered a positive US full year Adjusted EBITDA for the first time. Outside of the US we made excellent progress integrating Sisal into our International business, a business which is a great example of our “local hero” strategy at work, and took market share in UKI. We also made further progress on our sustainability strategy with an increase in Play Well safer gambling tool usage, investment of over $100m in our global safer gambling initiatives including key marketing campaigns in the US with our FanDuel ambassadors to promote responsible play during the year.
I was proud to see Flutter shares trading for the first time on the NYSE on January 29, 2024 and we have been encouraged by the increased focus from new US investors as a result of our US listing. We are working towards a shareholder vote on May 1, 2024 to approve our primary listing move to NYSE.
The year has started well with very good momentum continuing into Q1. Record Super Bowl engagement contributed to US revenue growth of 55.6% for the period from January 1, 2024 to March 17, 2024. We also launched in North Carolina where we have been really pleased with performance to date. Outside of the US, revenue grew 6.3% as the market driven decline in Australia was more than offset by the growth of our UKI and other International businesses. We believe that our strategy and competitive advantages position us well to continue to grow the business through both organic and inorganic opportunities.”
FY 23 Operating Review:
US:
FanDuel had another excellent year as we consolidated our position as America’s number one online sportsbook, with NGR market share of 53.4% (GGR share 43.2%) for Q4 20235, while our iGaming strategy is delivering substantial market share gains, achieving 25.7% share in Q4 2023. As of the end of January 2024, FanDuel is the number one iGaming brand based on GGR5.
FanDuel acquired over 3.7m new sports betting and iGaming players in 2023, 19% more than the prior year. The average projected payback period on investment to acquire customers remains in line with recent years at less than 18 months4 giving us the confidence to continue investing in further customer acquisition. When combined with the strong contribution from our existing player base, this will drive the long-term profitability of the business.
FanDuel launched compelling new product features during the recent NFL season which increased player engagement. The Parlay Hub drove over 1.5m pre-packaged Same Game Parlays (‘SGP) on Super Bowl 2024 alone. The Pulse improved our live betting experience, and contributed to a near three-fold year on year increase in the proportion of live SGP bets during Super Bowl 2024.
In iGaming, we launched 82% more gaming titles than the prior year, and also secured periods of exclusive access to some of the sector’s most famous games. We also expanded our iGaming team, agreed new partnerships and added new features to our product proposition. Our iGaming strategy is delivering strongly, and we believe we have now achieved product parity with our closest competitors. With a strong pipeline of further new products, including greater jackpot and multi-player functionality expected to be provided by the acquisition of Beyond Play we signed in February 2024, we are well-placed for further market share gains.
Group Ex-US:
Performance in UKI was strong during 2023, taking share across both retail and online channels, with our estimated 2023 online UK market share growing by 2 percentage points to 30%6. Our continuous focus on our product proposition saw us further enhance our higher-margin Bet Builder and Build-A-Bet parlay products. We added exclusive new betting markets, and launched well-received new products like ‘Acca Freeze’ on Sky Bet which drove increased penetration of these high-margin products and benefitted our net revenue margin. We also rolled out new iGaming features with improved cross-sell journeys for sportsbook customers to iGaming products and expanded content, particularly for Live casino. These changes drove iGaming AMP growth of 11.8% and record multi-product player rates with Paddy Power reaching 53% of sports customers playing iGaming in Q4.
In Australia, Sportsbet grew AMPs by 1.9% to 1.1 million, driven by high levels of retention. Average spend per player has however reduced back to pre-Covid levels. We have also seen a softness in the racing market across the second half of 2023, which we expect to persist through 2024. We expect the challenging market, along with increased regulatory and compliance costs, to reduce Australian profitability further in 2024. However, we believe Sportsbet’s scale, 45% market share9, and leadership in brand and product, position us well for the future.
The effectiveness of our International strategy to buy and build podium positions was evident from our strong 2023 performance with growth across both revenue and AMPs. We continued to focus on targeted investment and a “local hero” strategy in key “Consolidate and Invest” markets while optimizing the PokerStars business which has a greater presence in our “Optimize and Maintain” geographies. In Italy, Sisal is the #1 online brand across the combined sports, iGaming and lottery market9 and helped deliver 10.3% pro forma revenue growth10. We grew market share in Georgia and Armenia, continued to leverage key local partnerships in Brazil where we also improved our customer registration journey, delivered good growth in Spain with a refreshed product proposition, and drove strong online adoption in Turkey. We believe we are well-placed for continued expansion in India having successfully maintained our high levels of customer engagement following the change in tax regime in Q4. The acquisition of Maxbet was completed in January 2024 and the plans to integrate the business are progressing well.
FY 2023 financial highlights: Group
| In $ millions | Revenue | Adjusted EBITDA | Further Adjusted EBITDA | |||||||||
| 2023 | 2022 | YOY | YOY CC | 2023 | 2022 | YOY | YOY CC | 2023 | 2022 | YOY | YOY CC | |
| US | 4,484 | 3,187 | 40.7% | 40.6% | 65 | (347) | 167 | (263) | ||||
| UKI | 3,047 | 2,664 | 14.4% | 13.7% | 888 | 757 | 17.2% | 16.0% | 911 | 777 | 17.3% | 16.0% |
| Australia | 1,447 | 1,558 | (7.1%) | (2.8%) | 348 | 477 | (27.0%) | (23.1%) | 356 | 485 | (26.7%) | (22.8%) |
| International | 2,812 | 2,055 | 36.8% | 34.2% | 592 | 395 | 49.8% | 41.5% | 627 | 417 | 50.4% | 42.7% |
| Unallocated corporate overhead11 | (215) | (141) | 52.7% | 48.3% | (187) | (127) | 47.2% | 42.7% | ||||
| Group Ex-US | 7,306 | 6,277 | 16.4% | 16.6% | 1,613 | 1,489 | 8.4% | 8.2% | 1,707 | 1,552 | 10.0% | 9.8% |
| Group | 11,790 | 9,463 | 24.6% | 24.7% | 1,678 | 1,142 | 46.9% | 46.6% | 1,874 | 1,289 | 45.4% | 45.1% |
The Group delivered strong revenue growth for 2023 up 24.6% year on year to $11,790m. We continued to expand our recreational customer base across all segments, with AMPs up 20.3% year on year to 12.3m. FanDuel was a key driver of this growth, with revenue in our US business up 40.7% despite customer friendly sports results. The impact of sports results is calculated as the difference between our expected net revenue margin and actual net revenue margin and had an approximately 7.8 percentage point negative impact on US revenue growth.
Group Ex-US revenue growth of 16.4% was driven by a strong performance in UKI and in our “Consolidate and Invest”7 International markets. We also benefited from the full year consolidation of the Sisal business acquired during 2022, which generated $1,218m in revenue compared with $465m in 2022. This was partly offset by the impact of softer racing market conditions in Australia combined with a reduced level of Australian player engagement compared with the prior year, following easing of COVID-19 restrictions. On a pro forma basis, revenue growth for the Group-Ex US was 6.3%10.
The Group reported a net loss for 2023 of $1,211m after recording a number of non-cash expenses including (i) a loss of $725m relating to an impairment of trademarks associated with the PokerStars business reflecting “local hero” strategy and PokerStars’ presence in predominantly lower growth “Optimize and Maintain” markets; (ii) a loss of $165 million relating to a change in the fair value of the Fox Option liability (2022: $83m gain); and (iii) amortization of acquired intangibles charge of $791 million (2022: $655m). The increases in the net loss, the net loss margin and the net loss per share during 2023 compared with 2022, were all primarily due to the PokerStars impairment loss and the change in the fair value of the Fox Option liability.
The Group delivered Further Adjusted EBITDA2 growth of 45.4% to $1,874m. This growth reflects the strong performance described above and an expansion in Further Adjusted EBITDA Margin2 of 230 basis points. This margin growth was primarily driven by the inflection of our US division to positive Adjusted EBITDA, partially offset by (i) the impact of the annualization of 2022 point of consumption tax rate increases in Australia; and (ii) an increase in unallocated corporate overhead (excl. Share compensation expense) of 47.2% to $187m. This reflected greater investment in Group resource and Flutter Edge capabilities, due to the rapid growth of the business in recent years, as well as new compliance requirements as a U.S. listed company11.
Loss per share increased to $(6.89) per share due to the increase in net loss discussed above. Adjusted Earnings Per Share4 grew 25.8% to $3.51 year on year reflecting the Further Adjusted EBITDA2 growth as detailed above which was partially offset by (i) an increase in Interest expense, net, when compared with 2022 as a result of the full year impact from the increased borrowings to fund the Sisal acquisition, as well as a higher cost of debt during 2023, (ii) the change in the Fox Option liability from a gain of $83m in 2022 to a loss in 2023 of $165m; and (iii) an increase in Adjusted Income tax expense primarily due to geographic profit mix changes.
Flutter Entertainment net cashflow provided by operating activities in 2023 decreased 19.4% compared with 2022 reflecting a decrease in player liabilities following the record lottery jackpot win in Sisal in February 2023. Adjusted Free Cash Flow2 growth of 62.8% was primarily driven by the inflection of our US business.
Total debt increased from $6,750m to $7,056m while net debt2 increased from $5,674m at December 31, 2022 to $5,795m at December 31, 2023. Further Adjusted EBITDA2 growth reduced the Group’s leverage ratio2 to 3.1x from 4.4x at the end of December, 31 2022 bringing the Group closer to the now updated medium term target of 2.0-2.5x.
FY 2023 financial highlights: Segments
US revenue increased 40.7% year on year with strong growth in sportsbook and iGaming of 45.9% and 47.2% respectively. Sportsbook revenue benefitted from expansion into three additional sportsbook states, a full year’s contribution from 2022 new state openings and 24.8% growth in pre-2022 states. iGaming revenue growth was driven by strong player volumes with iGaming AMPs 41.8% higher than 2022. Adjusted EBITDA2 and Further Adjusted EBITDA2 grew $412m and $430m respectively due to the top line growth, combined with operating leverage efficiencies in sales and marketing and general and administrative expenses.
UKI strong revenue growth of 14.4% (13.7% on a constant currency basis) was driven by a continued expansion of our recreational customer base as we grew our AMPs by 5.4%, while delivering more efficient generosity to our customers. This resulted in sportsbook revenue growth of 10.5% and iGaming revenue up 18.1%. Adjusted EBITDA2 and Further Adjusted EBITDA2 growth of 17.2% and 17.3% respectively, reflected the revenue performance coupled with continued focus on driving marketing efficiencies which delivered an increase in both Adjusted EBITDA Margin2 and Further Adjusted EBITDA2 Margin of 70 basis points.
Australia revenue was 7.1% lower year on year or 2.8% lower on a constant currency basis2. This was due to a softer racing market environment during 2023 when compared to 2022, which also benefited from higher levels of customer engagement following Covid related restrictions. The reduction year on year in Adjusted EBITDA2 and Further Adjusted EBITDA2 of 27.0% and 26.7% respectively, reflected this, as well as the annualization of 2022 point of consumption tax rate increases which drove a decline in Adjusted EBITDA Margin2 and Further Adjusted EBITDA Margin2 of 650 and 660 basis points, respectively.
International grew AMPs by 31.0% and revenue by 36.8%, or 34.2% on a constant currency2 basis while Sisal generated $1,218m in revenue during 2023 compared with $465m in 2022 post acquisition. On a pro forma basis, International revenue grew 6.0% with “Consolidate and Invest” markets up 13.7% year on year10. This included Italy +10.0%, Georgia & Armenia +17.0%, Turkey +36.2% (despite a material foreign currency headwind), India +24.0%, Spain +15.5% and Brazil +6.5%. Adjusted EBITDA2 and Further Adjusted EBITDA2 were 49.8% and 50.4% higher year on year, respectively (41.5% and 42.7% on a constant currency basis, respectively), reflecting the top line growth above. In addition, optimization of sales and marketing expenses led to a year on year reduction of 570 basis points as a percentage of revenue. This contributed to an expansion in Adjusted and Further Adjusted EBITDA Margin of 180 and 200 basis points, respectively.
Q1 2024 to date trading update
| January 1 to March 17, 2024 compared with January 1 to March 17, 202312 | ||||||
| Period on period growth rates | ||||||
| Sportsbook net revenue margin | Sportsbook net revenue margin | Sportsbook revenue | iGaming revenue | Other revenue | Total revenue | |
| US | 8.5% | +230bps | 63.7% | 50.3% | (6.5%) | 55.6% |
| UKI | 11.9% | +30bps | 9.6% | 27.7% | 4.9% | 17.3% |
| Australia | 12.8% | +160bps | (8.8%) | (8.8%) | ||
| International | 9.8% | (420bps) | (13.0%) | 7.5% | 20.9% | 3.0% |
| Group ex-US | 11.8% | (20bps) | (2.2%) | 14.8% | 11.3% | 6.3% |
| Group | 9.7% | +110bps | 26.0% | 22.2% | 2.3% | 23.4% |
The Q1 trading update is based on how segments will be reported in 2024. PokerStars US will be reported in the International segment, having been included in the US segment for 2023, in line with how the business is now managed. In the above table, 2023 comparative numbers are on a 2024 comparable basis.
US: trading has been strong with total revenue growth of 55.6%:
· Strong sportsbook revenue growth of 63.7% driven by sportsbook staking +19.6%, combined with a 230bps sportsbook net revenue margin improvement. The higher sportsbook net revenue margin is driven by ongoing structural margin improvements and significant prior year promotional spend on customer acquisition on launches in Ohio (January 1, 2023) and Massachusetts (March, 10 2023). This was partly offset by an unfavorable year on year sports results impact. The current year period includes seven days of North Carolina trading following launch on March 10, 2024.
· iGaming revenue growth of 50.3%, benefitting from our larger player base and continued product improvements.
· Excluding revenue from new state launches in both periods, total revenue increased by 34.1%.
UKI: revenue +17.3% with improved product proposition driving momentum into 2024, most notably in gaming +27.7%.
Australia: revenue reduced by 8.8% due to racing market softness continuing into 2024, partly offset by favorable sports results
International: revenue increased by 3.0%. The addition of MaxBet was more than offset by customer friendly sports results in Italy reducing sportsbook net revenue margin by 420bps. Sportsbook stakes were 24.4% higher year on year, somewhat benefitting from the recycling of players’ winnings
FY 2024 outlook
| FY 2023 | 2024 guidance13 | ||
| Low | High | ||
| US revenue | $4.4bn | $5.8bn | $6.2bn |
| US Further Adjusted EBITDA | $232m | $635m | $785m |
| Group Ex-US revenue | $7.39bn | $7.65bn | $8.05bn |
| Group Ex-US Further Adjusted EBITDA | $1.64bn | $1.63bn | $1.83bn |
| Australia Further Adjusted EBITDA | $356m | Approximately $250m | |
| Depreciation and amortization excl. acquired intangibles | $464m | Approximately $510m | |
| Interest expense, net | $385m | Approximately $370m | |
| Capital expenditure14 | $602m | Approximately $670m | |
| Cash transaction, restructuring and integration costs | $220m15 | Approximately $150m | |
The outlook above is based on how segments will be reported in 2024. PokerStars US will be reported in the International segment, having been included in the US segment for 2023, in line with how the business is now managed. In the above table, 2023 numbers are shown on a 2024 comparable basis. 16
We are introducing 2024 guidance with the following expectations:
· US: Revenue and Further Adjusted EBITDA mid-points of $6.0bn and $710m, representing year on year growth of 36.3% and 206.1% respectively. The phasing of revenue is expected to be broadly in line with the prior year, allowing for the prior year impact of sports results being favorable in Q2 and unfavorable in Q4. We expect cost of sales as a percentage of net revenue to be approximately 56.5% in 2024 and approximately 30.0% of Further Adjusted EBITDA to be generated in H1, with Q2 being higher than Q1 due to the timing of new state openings.
· Group ex-US: Revenue and Further Adjusted EBITDA mid-points of $7.85bn and $1.73bn, representing year on year growth of 6.3% and 5.4% respectively. This includes a Further Adjusted EBITDA expectation of approximately $250m in Australia, reflective of the current market softness and increased taxes.
Guidance 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 update
In August 2023, we outlined that we would consider the appropriate level of leverage for Flutter Entertainment given our plans to become US listed, as well as the positive cash flows and future profitability profile expected for the Group. Following extensive discussions with shareholders, the Board has confirmed that our medium-term target leverage ratio will increase to 2.0-2.5x (from previously disclosed 1.0x-2.0x3). In line with our approach in the past and given the expected improvement in Adjusted EBITDA profile of the Group, the Board will also allow flexibility for the leverage ratio to be higher than this range in support of value-creating acquisition opportunities.
Listing update
We were pleased to announce on January 29, 2024 that Flutter shares commenced trading on the NYSE under the ticker symbol: “FLUT” (CUSIP No.: G3643J 108). Flutter shares continue to trade on the London Stock Exchange (“LSE”) under the existing ticker symbol: “FLTR”. We announced our proposal to move our primary listing to the NYSE to the market here. We believe that this will unlock long-term strategic and capital market benefits. Plans are on track for this proposal to be put to shareholders as a Special Resolution at the 2024 AGM on May 1, 2024. Subject to shareholder approval, the transition is expected to become effective on May 31, 2024.
Conference call:
FManagement will host a conference call today at 10:30 a.m. GMT (6:30 a.m. ET) 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 53722. 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)
