Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Flutter Entertainment PLC (FLUT, Financial) reported a strong Q2 performance with revenue growth of 20% and adjusted EBITDA growth of 17%, surpassing market expectations.
- The US market, particularly through FanDuel, showed exceptional growth with a 39% increase in revenue and a 51% rise in adjusted EBITDA, capturing nearly 40% of the US sports betting and iGaming market.
- The company successfully migrated FanDuel Casino onto its proprietary technology, enhancing platform stability and unlocking benefits such as access to in-house content.
- Outside the US, Flutter's UK, Ireland, and Italian markets demonstrated strong performance, with Sisal achieving record market share in Italy.
- Flutter Entertainment PLC (FLUT) reduced its leverage ratio to 2.6 times, nearing its medium-term target range, indicating strong financial health and effective debt management.
Negative Points
- The Australian market faced challenges with a 10% decline in revenue due to a softer racing market, despite strong customer engagement in rugby events.
- The company anticipates a small EBITDA loss in Q3 in the US, with significant earnings expected in Q4, indicating potential volatility in quarterly performance.
- The Illinois tax changes are expected to have a $40 million net impact in 2024, posing a financial headwind for the company.
- Increased operating costs, including higher payment costs and expenses related to the Beyond Play acquisition, are expected to impact the company's financials in the second half of the year.
- The company faces regulatory and tax challenges in various markets, which could affect future financial performance and strategic decisions.
Q & A Highlights
Q: Can you provide more color on the strong US performance in Q2 and the impact of the $40 million net headwind from Illinois taxes?
A: The strong US performance in Q2 is attributed to our strategy of acquiring as much business as possible while meeting our return criteria, which is a less than two-year payback. We saw significant player acquisition and increased customer numbers. Regarding the Illinois tax headwind, we plan to mitigate it by moderating levels of generosity and reducing local marketing, rather than introducing a surcharge on player winnings. We often see smaller players increase prices, which can lead to us capturing more market share. (Jeremy Jackson, CEO; Rob Coldrake, CFO)
Q: Are acquisition costs falling equally across iGaming and sports betting, and what is driving the increase in OpEx for the full year?
A: Acquisition costs have decreased slightly compared to last year, even with increased customer numbers. We maintain a consistent posture in acquiring business while meeting return criteria. The increase in OpEx is due to additional costs from the Beyond Play acquisition and higher payment costs driven by changes in player behavior. We are investing $20 million in customer acquisition due to strong payback returns, setting us up well for 2025. (Jeremy Jackson, CEO; Rob Coldrake, CFO)
Q: Can you discuss the cohort growth and the strong iGaming performance in the UK&I during the Euros?
A: We continue to see increases in parlay penetration and structural margin improvements across historical cohorts, driving strong performance. In the UK&I, the Euros contributed to excellent momentum, with all four brands posting gaming growth of over 20% year-on-year. The gaming performance has been particularly encouraging, and we are in good shape moving into H2. (Jeremy Jackson, CEO; Rob Coldrake, CFO)
Q: How do you view media tie-ins and the impact of Caesars selling World Series of Poker IP to GGPoker?
A: Media tie-ins have been beneficial for showcasing our products and pricing, contributing to strong customer acquisition. We have the best product in the market, which supports our acquisition efforts. Regarding Caesars' sale to GGPoker, PokerStars remains an important opportunity in the US, and we are seeing positive impacts from pricing initiatives and loyalty changes. We are optimistic about the growth potential of PokerStars in the US. (Jeremy Jackson, CEO; Rob Coldrake, CFO)
Q: What are the key factors driving confidence in maintaining your competitive advantage in the US market?
A: Our global business structure empowers local markets while leveraging the Flutter Edge for competitive advantage. We have strong media ties, quality products, and pricing, which support customer acquisition. Our casino business benefits from global expertise, and we continue to innovate with products like same game parlays. We are committed to maintaining our leadership position with the best product and pricing in the market. (Jeremy Jackson, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
