Good morning, and welcome to the Flutter Entertainment Q1 Results Update. Peter Jackson's CEO will host the call and is joined by CFO, Jonathan Hill. My name is Kathy and I'm your event manager today. During the presentation, your lines will remain on listen only. There will be a chance to ask questions later.
This call is being recorded. But now I will hand over to Peter. Please go ahead, sir.
Good morning, everyone, and thank you all for joining us this morning. With me today is Jonathan, our CFO. I'm sure you all had a chance to read the Q1 trading update that we released this morning. I won't go through it in detail here, but I would just like to highlight a few key points. Firstly, it's easy to forget just how much has changed at Flutter his remarks are recorded since our Q1 report a year ago.
This time last year, we are yet to complete our combination with the Stars Group and we're in the midst of assessing what And the cancellation of Global Sport would mean for our business. Thankfully, 1 year on, the diversification benefits Our merger delivered are evident in the numbers we're reporting this morning. Our business is continuing to perform very well with total revenue growth in Q1 of 33% and online growth of 42%. This has been driven by 36% growth in average monthly players or AMPS his strong growth in our recreational customer base across all four divisions. In the U.
K. And Ireland, we've continued to win share as more and more customers have migrated from retail to online. What's been particularly encouraging is how SBG and Paddy Power and Betfair are both performing well with revenue growth of 35% and 36%, respectively, in Q1. We estimate that Flutter Brands accounted for 56% of all Cheltenham customers this year with Paddy Power the number one downloaded app during the week. It really was an Irish festival this year.
In Australia, we grew our revenues by 59% and our amps by 43%. We've been watching trends in this market closely his as it emerges from COVID disruption. And I'm pleased to say that so far customer numbers have remained at elevated levels. That said, while the economy is opening up in Australia, things are not fully back to normal just yet. So, we'll continue to watch this closely.
In international, we're continuing to evolve our customer proposition by increasing our levels of investments in generosity and we're seeing some early signs of progress. Overall, revenues increased 17% in the 1st 2 months of the year before we started to lap the challenging COVID comps. International, in particular, faces more challenging comps throughout Q2 with additional headwinds of German turnover tax, which we believe will come into effect on the 1st July. As a reminder, we think that change will cost the group approximately £20,000,000 in EBITDA in the second half alone. In the U.
S, we've maintained our number one position with a record quarter for revenue, amps and customer acquisition. We generated revenue of almost $400,000,000 up 135% year on year in the Q1 alone We're pleased to launch in Michigan and Virginia during the quarter. Our performance in existing states remains very encouraging with staking growth of 93% in Q1 and stable market share. ESG and safer gambling initiatives remain a key priority for the group across our markets with new measures introduced including our strategic partnership in the U. S.
And development of the planned affordability triple step in the U. K. And we are continuing to focus on new ways to ensure that our business is built on sustainable foundations. We announced in March that we're giving considerations to a potential listing in the U. S.
Of a small part of Fanjal Group.
His
We'll lay out the rationale and details in full at that point. You'll also have seen our announcement on the 7th April with respect to an arbitration process between and Fox Corporation with respect to an option to acquire an 18.6% stake in Fanjul. That arbitration process is now underway his with the appointment of an arbitrator almost finalized. Given that this is now the subject of a legal arbitration, we won't be commencing further. The parts of our business will now face steeper comparatives as we lack the benefits of stay at home restrictions in many parts of the world.
However, with a normalized sporting calendar in place and good player momentum across our business, we look forward to the remainder of the year and beyond with confidence. His
if you then decide to withdraw your question, simply key star 2. All questions will be asked in the order received and you'll be advised when to ask your open. All other lines will remain on listen only. The first question comes from Ed Young of MS. The
The first one was on Australia. I thought the comments there were interesting about Australia essentially being a bit of a lead indicator.
Joined. We have now got Gavin Kelleher. Please go ahead, Gavin.
I think I'll have to come back to Ed's. Yes, I'll come back to Ed in a moment. Okay. Gavin?
Hi, good morning. Yes, I'm here. Good morning, Jonathan. Good morning, Peter.
Good morning, Gavin.
On the U. S, Obviously, huge customer acquisition in the quarter. I know this isn't you don't give EBITDA updates. Can you give any sort of indication on where your CPAs are tracking. Are they ahead, above or in line with expectations in Q1?
That's my first question. And then my second question is on the area of responsible gambling. You're doing an awful lot on that. You mentioned The triple step introduction of affordability in the U. K.
Can you just give us a bit more insight on When that will be introduced and how extensive that introduction will be this year? And as well as that, I believe you're trialing some staging limits is in Sky Bet in the U. K. When that happens and any sort of learnings to date if there has been trials?
Thanks, Gabbet. Look, I think you're sort of definitely stretching the 2 questions with different parts there, but I'm happy to take those. So look, in the U. S, You're right. There was huge customer acquisition in Q1.
And a lot of that was focused around the tremendous success we saw in the Super Bowl. But we're also very pleased with the acquisition that we've seen in the new states that we've entered, Michigan, Virginia. We were able to take advantage of the fact that in Illinois, remote sign up was available for a period of time. So we've pushed really hard. His We continue to be very pleased with the way we've been able to sort of cross sell into our DFS space and we continue trying to believe that we have some industry leading acquisition costs in the States.
The one thing I'd Just in looking at where we are in the states, particularly in these new states is that because our some of our acquisition costs come through in promotional mechanics, particularly around our very successful Super Bowl 55 to 1 offer. What you find is a suppression of GGR joining us today in those new states during that open period. So actually when you look at those 2 new states, you should take a good look handle rather than solely looking at GGR. You've got a GGR suppression in those very early months particularly around these Either the Super Bowl offer or the Spread the Up campaign, which we also do, which is a sort of viral way of driving odds up and giving value to customers.
And look, in terms of the work that we're doing from a safer gambling perspective, this is a very important area of focus to right across the organization. I remember on the call we did last time we had a number of questions around what we're doing in the States. And so his we wanted to showcase some of that in today's statement. Here in the U. K, we are continuing is to race for the top as we said in the past.
The triple step approach to affordability is part of that. Clearly, his and for those of you who aren't familiar with it, it's the 3rd part of the triple step, which is effectively some of the spending vast stocks, which we've been introducing relatively recently into the into our brands in the UK. We're pleased with the impact that that's had and then the engagement is driving us with customers. And so we'll continue to do more of that and provide us with Good data and insights that we can use in our business to help sort of improve player protections and indeed share that data talking about the government as part of the reviews that they're doing into the gambling act. And it's actually that decision to pursue the data and insights and share them with the government has led us to undertake some of the staking limit files with Sky Bet.
We thought it was a good thing to get some data and insights out of it. So we're filing it and we will share that data with the government as appropriate.
That's great. Thanks Peter. Thanks John.
Joined. Thank you. The next question comes from Kieran Gruehl.
Hi, guys. Just two questions from me. You've offered some really interesting insights to the FanDuel group losses last year, which amounted to about 110,000,000. It looks like Voxbet is running at a disproportionately high cost. Could you perhaps offer more color on when you believe the Sandoz Group could turn cash breakeven or positive?
And what is it about Fox Vet that's explaining these disproportionate losses? Are you cross selling brand your customers into Foxtrot yet? Thank you.
Yes. I mean on your first thanks for this question, Stuart. The answer to the first question is Not very precise. The answer is it depends. And it really is driven by the pace of state opening.
And obviously, we laid out in the prelims the contribution from those 18 and 19 cohorts that have come through and the positive contribution. But obviously, what happens is every time we open a new state, clearly, we make his a loss as we invest in building the customer base. So it's very difficult to say exactly How that legislative process is going to work across the U. S. And therefore, how those loss making state openings will impact just the P and L, so and the cash flow.
So it's a really tricky question and one that I think you'd probably have to take a view on the state openings and particularly as you get the bigger states those tend to have a bigger in year dividend Particularly when the states open in the August September timeline in time for NFL when obviously we spend all of the market money. We make all of the promotional generosity to drive customers into the franchise and then obviously they return minimal or even Negative net revenues during the financial year. So it's a very tricky question to ask, but I think the thing I take most comfort in is the data that we shared with you at the prelims around that really positive contribution that we're driving from Those older cohorts in New Jersey and as we build up those older cohorts of profitable customers, it'll just be that balance in each year between the existing cohorts of existing customers and the balance the proportion of those relative to his Hi, Mark. We're driving new customer base into the business.
Yes.
I mean, and I think to say anything on Jonathan's answer there colleagues provide some explanation as to what we're seeing in terms of the disparity between the performance between Fanjul and Voxbet. The way I think about his The Fanjul business is creating a tremendous of embedded value with the large numbers of customers that we're putting into the business. The dynamics of the customer acquisitions for the LTVs are very, very positive and we're really pleased with it. And of course, we get really good we're increasingly getting better and his operating leverage as we push more volume to the business. If I contrast that with FOX Bet, which is struggling that the product is not as good as Fanjil.
Unfortunately, we have they were starting to use the legacy Stars Group sports betting platform, which is not as good as the capabilities that Fanjul have. And so customer acquisitions are lower, is Particularly on the sports side and we don't get the same benefits of that sort of operating leverage and so with the sort of fixed costs associated with the his Losses are higher. And it gives us some interesting visibility of what it's like for our other smaller competitors facing us down In the States, it's hard. Yes.
And the final point I'd add is we obviously have TBG and DFS within FanDuel And they are very good positive contribution businesses and obviously covering a lot of fixed overheads, which you have in these businesses. So a range of factors.
Okay. Thank you very much.
Thank you. The next question comes from Michael Mitchell of Davy.
His Yes. Good morning, Peter. Good morning, Jonathan. Thanks for taking my questions. 2, if I could.
First of all, international, you referenced being pleased with team has taken a look at the acquisition and retention metrics in the division. I wonder if you could provide a bit more color in terms of what you're seeing in response to some of your more recent promotional and brand initiatives? And his And then secondly, in the U. S, just interested in your comments around the expansion of the expected margin. Again, I wonder if you could just touch.
And your thoughts in terms of whether FanDuel Construction should be a more profitable business than some of the other operators in the market. Thank you.
Hi, Michael. Look, from a sort of international perspective, we have been pleased with the way in which we've been able to grow his the casino business, we talked about wanting to invest behind that. We recently launched A new campaign and we're pleased with the way that that's getting traction first and we think continued growth in the casino business. I think we're also pleased with the way that the poker business is performing. It's hard to disaggregate what's happening on an underlying basis his continued lockdowns that we face across the particularly the European markets which is so important for that business.
Look, we think that the investments we made in generosity, the investments we're making into sort of beginning to start to improve his The product are all important steps to take in that business. John, do you
want to add anything?
Yes. And I think some of the actual mechanics We're using. So if I just talk about a couple of those, we've obviously got the rig back challenge in terms of poker, and we can measure the ROI on those Very clearly and the returns to player and how that affects how much they engage with the platform. Is Very measurable in terms of how we invest. Obviously, we've got a bit of money that we're putting into also into overlay in terms of tournaments.
And again, we can measure quite precisely in terms of returns. On the casino side, 7 days of rewards, which is a really popular initiative in casino, which is driving activity and really driving customer engagement. And obviously, we've had the $1,000,000 rates that we've really been pushing in casino. It's pretty new. We've run another race at the end of March.
And again, we're seeing really good engagement with that product and then obviously some of the brand initiatives are done, the Namar, the epic downtime, which is landing very well in terms of the product and then obviously the Namar campaign which is helping drive saliency of the brand and consideration of the brand. So a lot of positive A lot of very good measurable stuff as well.
I mean, we hit an all time high number in terms of the number of games Per player in March in the casino, which was great validation for all the work that the team are doing. So in terms of the U. S, look, we are pleased with where we've seen his the margins trend too. I think we've rather sort of given his We talked a little bit about the benefits we're getting from same game Parley, which is obviously quite a proprietary piece of technology that we have in house and therefore we get all the benefits of and even while some of our competitors are beginning to try and copy that product, they're using third parties, which means they don't get the same margin uplift. And I think it's a good example of where having ownership of our own technology stack and ownership of risk and trading gives us real benefits in the business.
And I think that when you compare the sort of expected performance of our business in the future compared to a lot of other competitors who are more reliant on 3rd parties, we ought to get some structural benefits as a consequence of his The product mix is in place after the same game parlay as well as the fact that we sort of own risk and trading.
But clearly, we're not taking an underlying different approach is to the sort of head to head overruns in the market. We're keeping them where we set them to start with pretty tight in order to make sure that this is a pretty competitive market in the U. S. When it comes to overruns.
Super, great, Geoff. Thank you.
Thank you. The next question comes from Simon Davies of Deutsche Bank.
Good morning, guys. 2 from me, please. His First, can you give a rough indication of what percentage of your international revenues now come from unregulated markets? And are there any plans to exit any more markets is. And secondly, just on Canada, what are your expectations in terms of the opening up for the Canadian And how well positioned do you think FanDuel will be for that?
What I can tell you is overall Our revenues the split of overall group revenues from if you went back to H1 'nineteen, would have been 83% Regulated, I think we're now at somewhere around or just above 90%. And that comes from A mixture of factors, Simon. It comes from markets which have moved from unregulated to regulated and it comes from markets where we've chosen not to continue to operate. I would just make sure we all think The fact that there's 3 types of markets in our view, there's regulated, there is unregulated, untaxed and then there is to which is illegal marks. We do not operate in the 3rd of those.
There are markets in the 2nd category where we're very comfortable operating. So we don't immediately see that going to 0, but we'll continue to your question Do we see turning any more markets up over the next 12 months? It's a very dynamic situation in terms of regulation across the world and the geographies that we operate in and we will continue to analyze and make sure we understand exactly what's going on across the market Which we operate and make decisions on a flexible and real time basis.
Yes, I mean, look, Simon, that 90% is going to grow in time and his You'll be aware that after the transaction with the Stars Group, we did a very detailed assessment of that business and there was quite a lot of business which we chose To switch off because it didn't meet with our what I would describe as more progressive risk appetite. In terms of Canada, look, we're excited to see what happens in that market. Interestingly, the PokerStars brand has been advertised in Canada for more than 20 years. So it's an incredibly well known brand in that market. And of course Fanjul will get some bleed across as well because of the interest in the U.
S. Sports in that market as well. So look, we think we've got some very talking about good brands to target to that market and hopefully we'll be able to achieve a podium position if not a gold medal.
Joined. Thank you. And the next question comes from Ed Young, MS.
Welcome back, Ed.
Thank you. Can you hear me now?
We can, yes.
Perfect. So my first question was on Australia being a lead indicator for how markets might perform as lockdowns ramp down elsewhere in the world. So I just wondered if there were any sort of KPIs you could share about sort of retail type customers you've acquired during the period and retention or any other kind of indicators that would help Obviously, we can see on a headline basis the revenue numbers still remain very strong. And the second one is, I mean, I'm not sure which bit you'd like to answer, maybe it's a straight no, which is fine. But On the U.
S. Side, I mean, obviously, Fox is a partner, but I would say some of the process you mentioned arbitration is also a bit adversarial. I just wondered, could you just sort of help us understand if there was any risk that U. S. Operations could be distracted by what is going on?
Or are you sort of comfortable that they're all run sort of separately enough to avoid that risk going forward?
Look, Ed, on Australia, you're right. I think it is a really good lead indicator for us in the rest of the world because his A lot of the a lot of down restrictions have been lifted, albeit there are still occasional snap lockdowns in the market. I think we're really pleased with the way that the business has retained a lot of the retail customers that we acquired last year. I mean, I think we his most of the customers when we look at the betting patterns and behaviors of some of those cohorts we acquired last year, his They look very familiar to us as the type of retail funds and we seem to have kept them in the business and we think the quality of the products and the generosity we're giving them is what's helping us there. And so look, we're very pleased.
You can see the AMPS data that we shared in Q1 to have that up 43%. I think it just shows how well the business is
Yes. I mean the only thing I'd say is Australia is not back to the historic normal. So And it's pretty early days since they've come out of sort of full lockdown in all territories. So I would We'll continue to monitor this really closely because I don't think we've seen the full sort of extrapolation of we're certainly not back to normal. Until we get back to normal, we won't really see the patterns.
But hopefully, a proportion of that wallet share from those who Have migrated from retail to online. They'll keep with us and we'll keep a share of that spend.
Look, your question about the U. S, Fox are a very important partner for us in the market. His We do have those 2 businesses in the U. S. Is the Vanjool business and then Fox Bet and of course we know Fox have the trying to come in and acquire half of Voxbet.
We've done an awful lot to support the Voxbet business. When I look at the step up in the quality of the team and management that we have supporting that business, the focus that we're putting on it from a tech perspective. Lachlan has been tremendous in terms of chairing regular meetings to help boost and improve the performance of the Super6 product and you've seen where that business has got to. His We do think that they are important partners. I mean, they're particularly focused obviously on growing the FOX Bet business.
And his When we look at the amount of media spend that Fanjul has with Fox, it is small, but there clearly could be opportunities for us to to improve that in the future. We are going through this arbitration. I mean one of the benefits ordinarily of arbitration is you can do it confidentially. His So we haven't been on intention to discuss it. I think it's a pretty regular thing that occurs in the U.
S. Market and we understand that these mechanism sometimes have to be used. So we remain supportive of what we're doing with FOX Bet, he's We're obviously really delighted with the way that FanDuel is performing and you've seen the disclosures in the release this morning of the Two businesses that we effectively own in the U. S.
And just two points to add. One is, we'd obviously Peter's referenced the sports product in FOX Bet his From the earlier question, it's quite challenging. It's obviously dependent on us swapping out the sports betting product for international. So there's a sort of dependency and we're getting on with that, but that, as you'll be aware, it takes time. I think the second point to make is just his While Fox is a very important part of ours, it's not a huge component of the marketing spend of FanDuel and actually FanDuel has been Pretty successful even before pre merger and when Fox became a partner of the group.
So While we're highly, highly supportive of the Fox Bet business and Fox's partners, FanDuel is overly reliant on that as a channel to market.
Okay. Thanks. Very useful on both. Thanks.
Have we got any more questions coming through? Should we take those?
We do have another question. It comes from the line of James Rowland Clarke John Farquharson.
Hi, good morning everyone. Just a couple of quick questions on the UK and Ireland. You talked in the release about the strength you saw in January February before the COVID comps, but also in March as well. Just thinking about the trends you've seen since the partial reopening of pubs, restaurants and betting shops, it looks like online gambling deposits initially quite a bit because everyone went to the Paribas restaurant and has reverted back to the levels seen before that. Is that something you would agree with?
And then secondly, you've asked that question about Australia's activity kind of trending down recently, but not the pre COVID levels quite yet. Do you think Australia is a genuine lead indicator for the UK and Europe? And if not a perfect indicator, then why not?
Thank you.
So look, James, I think you've got to be it's particularly it's not easy in Q1. It's going to get even harder as we go into sort of Q2 and Q3 to try and sort of draw comparisons of what we're seeing in the market in comparison to last year. I mean, what What we've actually started doing in the business is we've been looking at how we've been performing based on sort of a 2 year basis because there's just so much disruption happened in March. So look, we are very pleased with the way that the business in the U. K.
Has performed in Q1. We shared with you some of the stats that we saw from Cheltenham. And actually if we look at things like the Grand National, the amounts that were stated and compared that with 2019, we believe that the market was well ahead. So I'm pleased with the way that the business is performing. I think there is undoubtedly going to be Some impact is a result of consumers being able to get out and bounce and that will have not an impact on the business.
But we think we've got some very resilient brands with the Paddy Power, Sky Bet and Vetfair. And of course, the PokerStars brand which focuses on Casino as well in the U. K. And I think whilst we might see a reduction in the number of So interactions with the customer on a weekly or monthly basis, it could be that people will just slightly moderate their behavior. We don't expect people to stop just transacting with us altogether.
I think when we look at what's going on in Australia, it isn't entirely back to normal there. Tendencies his The AFL and NRL have been down significantly year on year. Is Is that because people are nervous about getting on public transport? Is it because people would be rather seeing friends who they haven't seen all year? I don't know.
So I think Australia is definitely that it's definitely a leading indicator for us, but trying to sort of apply too much Read across into the U. K. Is tough. The U. K.
Market is different. And I think we're going to see how the economy performs as Brexit impacts are going to sort of undoubtedly have a big impact On the economy and those even yet now how lockdown is going to open up, are people going to be allowed to travel for holidays? There's a lot of stuff to work Yes.
I mean, I would probably summarize Peter's final comment as well. While we're happy and pleased with where we've got to both at end of Q1 And more recently, there is a lot of uncertainty out there. And while we're not being overly pessimistic about it, I think we just There are a lot of moving parts and over the next three quarters.
That's very helpful. Thank you.
Okay. Thanks, James. Look, I think we'll draw to our conclusion there. So Kathy, thank you very much. Thank you everyone for joining and listening this morning and we hope