Flutter Entertainment has reported that its US business has reached a profitability inflection point after FanDuel generated $100m (£79m) in adjusted EBITDA.
Following the success of FanDuel thus far, the company also noted that it is confident in its financial growth strategy, which includes value-creative M&A in other regions globally where the company doesn’t already have a presence and where it sees potential.
Publishing its 2023 interim results, Flutter declared a group revenue of £4.8bn, a 38 per cent uptick (24 per cent pro forma) in comparison to the previous year (H1 2022: £3.4bn) which the company attributed to a strong US performance and momentum in UK & Ireland and International, along with the addition of Sisal in August 2022.
Sports betting revenue improved by 39 per cent to £3bn (2022: £2.1bn) while gaming rose by 37 per cent to £1.8bn (2022: £1.3bn).
Average monthly players rose during the period as well by 28 per cent year-over-year to over 12 billion (2022: 9.6 billion).
“The first half of 2023 marks a pivotal moment for the group”
Flutter noted that the group is at an “earnings transformation point” after adjusted EBITDA rose by 72 per cent (37 per cent pro forma) to £823m with a significant improvement coming from US operations, improving to £49m in comparison to a £132m loss in H1 2022.
Group ex-US adjusted EBITDA increased by 24 per cent (4 per cent pro forma) following “strong top-line momentum and the addition of Sisal” which performed well in H1, partly offset by tax changes in Australia.
Flutter’s profit after tax came in at £128m, an increase on the loss of £112m the previous year after a £314m charge for amortisation of acquired intangibles. As of June 30, 2023, net debt currently stands at £4.6bn and a pro forma leverage ratio of 3.3 times.
Reflecting on the results, Chief Executive Peter Jackson noted that the group’s financial flexibility has been enhanced following the strong first half of the year, noting the benefits of Flutter Edge.
Jackson said: “The first half of 2023 marks a pivotal moment for the group, with our US business now at a profitability inflection point, helping transform the earnings profile of the group and significantly enhance our financial flexibility.
“With our divisions and their brands benefitting from the competitive advantages provided by the Flutter Edge, Group performance in the period was very strong, with delivery of our strategic objectives resulting in pro forma EBITDA growth of 37 per cent.
“Our recreational player base increased to over 12 million monthly players, and importantly, more players than ever interacting with our safer gambling tools, aided by a £45m investment in our Play Well strategy in H1.”
Per region, and as previously stated, US operations reached a profitability inflection point, as FanDuel generated $100m in adjusted EBITDA ($63m for division) as revenues rose by 63 per cent YoY to £1.8bn (2022: £1.1bn).
Sports betting revenue increase by 70 per cent YoY to £1.4bn (2022: £770m) while igaming followed suit via a 44 per cent uptick to £425m (2022: £281m).
“This profit profile provides us with a clear platform to invest materially in the second half”
FanDuel represents 98 per cent of total US revenue, with adjusted EBITDA “more than offsetting losses” from PokerStars and FOX Bet, the latter of which recently began a phased closure.
The progress being made in the US comes as Flutter continues to work towards a US listing in late Q4 2023 or in early Q1 2024.
Jackson stated: “The US delivered another exceptional performance. We acquired over two million new players in the period, cemented our leadership position in sports and grew our share in igaming to 23 per cent. The US business was profitable in the first half with FanDuel generating over $100m in EBITDA.
“This profit profile provides us with a clear platform to invest materially in the second half, as we strive to continuously improve our customer offering. Our player acquisition strategy has consistently delivered, generating excellent returns on investment, embedding even greater value into our customer base, and increasing our future profitability.”
Outside the US, growth occurred through regulatory headwinds with pro forma revenue up eight per cent and EBITDA improving by four per cent.
UK & Ireland revenue rose by 13 per cent YoY to £1.2bn (2022: £1.1bn) after “product enhancements and efficient generosity underpinning recreational customer growth and driving market share gains in both sports and gaming”.
Sports betting revenue in the segment improved by 12 per cent to £709m (2022: £630m) while gaming revenue rose by 15 per cent to £533m (2022: £462m).
In Australia, revenue fell by 1 per cent YoY to £601m (2022: £612m) as an effective retention of an enlarged customer base (AMPs up 7 per cent) was offset by “covid spend reversion and point of consumption tax changes”.
“In the UK, we took market share due to ongoing product enhancements”
Flutter’s International segment saw its revenue improve by 8 per cent YoY to £1.2bn (2022: £1bn) with a “division at a growth inflection point” as “consolidate and invest” markets lead the way with 77 per cent of divisional revenue, growing at 19 per cent.
In the segment, sports betting revenue improved by 18 per cent to £315m (2022: £255m) while gaming revenue increased by 5 per cent to £854m (2022: £780m).
Jackson added: “In the UK, we took market share due to ongoing product enhancements, while in international, Sisal continues its strong trajectory since its acquisition in August 2022. This combined momentum helped offset the reduction in Australian profitability, due to more challenging COVID-related comparatives and a changing tax environment.”
Flutter also highlighted the progress of its Positive Impact Plan, as Play Well tool usage is up seven percentage points to 42 per cent. The group also now has a 34 per cent female representation in leadership with a goal of 40 per cent by 2026.
Looking ahead, Flutter noted that H2 has started in line with expectations and that it anticipates 2023 adjusted EBITDA to be broadly in line with market expectations.
For the US, revenue is expected to be between £3.6bn to £3.9bn ($4.5bn to $4.9bn) with adjusted EBITDA between £90m to £190m ($120m to $240m).
Group ex-US, adjusted EBITDA is expected to be between £1.44bn to £1.6bn with strong momentum in the UK & Ireland and International, offset by market conditions in Australia being softer than expected.