Flutter Entertainment Reports a $375m net loss in Q1!

Flutter Entertainment reported a $375m (£299m/€348m) net loss in the first quarter after higher expenses and negative foreign currency translation offset a 16.4% year-on-year increase in revenue.

For the three months to 31 March, revenue at Flutter hit $3.40bn. This is comfortably ahead of Q1 2023, with Flutter reporting growth across almost all markets, with the exception of Australia.

Key highlights in Q1 include Flutter’s FanDuel brand strengthening its position within the US market. Revenue in the US exceeded $1.41bn, helped by igaming gross gaming revenue (GGR) share hitting a new high of 27%.

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UK and Ireland revenue was also higher year-on-year despite a strong comparable period in 2023. In addition, Flutter reported an increase in International business revenue, driven by the growth of Sisal in Italy.

While further declines were seen in Australia, Flutter on the whole had plenty to be positive about in terms of revenue in Q1. CEO Peter Jackson hailed an “excellent” performance by the group during his analysis of the quarter.

“We have had an excellent start to the year,” Jackson said. “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. Also in Italy, where we have been taking online sports betting and igaming market share during Q1 and reached an all-time record in April.”

Land of more opportunity for Flutter !

Breaking down revenue performance in Q1, the only place to start is in the US, which now accounts for over 40.0% of group revenue.

FanDuel has started the year strongly, with the highlight being a record igaming GGR share of 27%. Flutter said this was helped by its focus on direct casino players and customer experiences, as well as he addition of new games and content to FanDuel Casino.

As for sports betting, online NGR market share also increased to 52%. During Q1. FanDuel went live in both Vermont and North Carolina, increasing its overall customer base and reach in the process.

“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 trends,” Flutter said.

Total new sportsbook and casino player volumes were lower in the quarter. This, Flutter said, is due to a full quarter of significant Ohio acquisition volumes last year. However, new players acquired in states that launched before 2022 was 12% higher than last year.

NYSE listing edges closer!

Speaking about the US, Jackson also referenced a major development that took place after the quarter had ended. Earlier this month, 98% of Flutter shareholders approved plans to relocate Flutter’s primary listing to the New York Stock Exchange (NYSE).

The move from London to the NYSE is due to completed by the end of May. Flutter said the move reflects its growth trajectory and “changing dynamics of global markets”. 

Jackson confirmed the listing remains on track to go ahead by the end of the month.

“We believe a US primary listing is the natural home for the group,” Jackson said. “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.”

Growth outside the US in Q1!

As for activity outside the US, it was largely positive news for Flutter. When excluding all US activity, revenue from businesses outside the US totalled $1.99bn, up 7.6% year-on-year.

In the UK and Ireland, revenue climbed 17.0% to $861m. This was helped by a rise in average monthly players (AMPs), despite the previous year benefitting from a “halo” effect after the 2022 Fifa World Cup

Flutter said igaming growth was particularly strong in Q1, driven by product improvements, with over 100 new games launching. In sportsbook, the group said it leveraged its Flutter Edge offering and also rolled out its new Super Sub feature on Paddy Power, the latter of which swaps a substitute player into a parlay bet. More than 80% of football customers engaged with the product in March.

As for the International business, revenue was up 4.9% to $797m. Flutter notes particular success with Sisal in Italy. The brand saw all-time record levels of AMPs, with this up 22.0% year-on-year in March alone. Flutter says this is an ongoing effect of launching the new Sisal all in Q3 of last year.

Elsewhere, a redesigned app with more personalised content helped deliver market share gains in Georgia and Armenia. There was also good momentum in Spain and Brazil, helped by a continued focus on localisation, while Flutter also launched Junglee Poker in India, with encouraging levels of early player engagement.

The only negative in terms of revenue is Australia, where revenue fell 6.3% to $329m. This reflects an ongoing trend in the region, with Flutter having also seen declines in the 2023 full year.

Australia AMPs were in line year-on-year and sportsbook net revenue margin increased on the back of more favourable sports results. This mostly offset the impact of the softer racing market environment noted in the FY23 results.

Counting the cost of growth!

While expansion and subsequent revenue growth is good news for Flutter, accompanying this is a rise in expenses. 

Cost of sales jumped 16.4% to $1.79bn while almost all operating expenses were higher. The only exception is sales and marketing, which, at $881m, was level but remains the main operating outgoing for Flutter.

The group also notes $174m in other, finance-related costs, as well as $112m in interest expense. As such, pre-tax profit for Q1 hit $162m, only slightly wider than $152m last year.

Flutter paid $15m in tax, whereas last year it received $41m in total benefits. This left a net loss of $177m, compared to $11m in 2023. 

However, other factors meant an even wider comprehensive net loss. The primary issue for Flutter was a $185m loss on translation of the net assets of foreign currency denominated entities. 

The group also noted a $21m loss on net investment hedges, a $14m loss on fair value of cash flow hedges transferred to its income statement, and a $10m loss from non-controlling interests.

All this meant comprehensive net loss for Q1 amounted to $375m, in contrast to a $54m net profit in 2023. Last year’s figure was helped by significant foreign currency gains.

However, there was better news in terms of adjusted EBITDA, which improved by 46.0% to $514m. When excluding the US, this amount hit $488m, up 20.2% year-on-year.

What to expect in the full year!

Looking ahead, Flutter also provided a short update on its expectations for the full year. 

At present, it remains “confident” in guidance ranges issued along with its FY23 results published in March. This is despite unfavourable US sports results in late March.

In the US, Flutter expects revenue to be at a range midpoint of $6.00bn, which would be 36.3% higher year-on-year. Adjusted EBITDA midpoint remains at $710m, up 206.1% on 2023’s total.

As for outside the US, total revenue had an estimated midpoint of $7.85bn, an increase pf 6.3%, with adjusted EBITDA on track for a midpoint of $1.73bn, up 5.4%.