Good morning, everyone. Welcome to the Flutter Entertainment Q3 results call, hosted by Peter Jackson, CEO, and Jonathan Hill, CFO. I would like to advise all parties the conference is recorded. There will be a chance to ask questions later in the call. For now, I will hand over to Peter Jackson. Please go ahead.
Thank you. Good morning, everyone, and thank you all for joining us this morning. With me today is Jonathan Hill, our CFO. I'm sure you've all had a chance to read the Q3 trading update that we released this morning. Therefore, I won't go through it in detail here. I'll just highlight a few key points. Our business is continuing to perform very well. Our revenue growth in the third quarter accelerated from the 22% we reported in H1 to 30% in Q3. This strong performance has been across both sports and gaming, with sports up 33% and gaming up 26%. This acceleration has been driven by excellent customer engagement across all key regions. Globally, we grew daily actives by 41% year-on-year in quarter three. That reflects both strong customer acquisition and good ongoing engagement from our global customer base.
While customer growth has been strong across all of our divisions, the U.S. has really stood out, with new customer acquisition exceeding our internal expectations. In the U.K. and Ireland, both of our recreational brands are winning market share, and it's great to see both Paddy Power and Sky Bet driving each other on. In addition, Betfair continues to prove its appeal, as was clearly demonstrated in recent weeks, when nearly GBP 600 million was matched on the next U.S. president market on the exchange. We believe this makes it the single biggest betting market ever on the exchange. More broadly, we estimate that our U.K. and Irish brands engage with approximately 50% of all consumers who had a bet online at the start of the new football season, or for American listeners, the new soccer season.
In Australia, we grew our revenues by 76%, whilst also completing the migration of BetEasy customers across to Sportsbet. That migration went very well, and customers accounting for 90% of BetEasy's revenues in the preceding 12 months have already engaged with Sportsbet post the switch. We're also continuing to acquire new customers as a result of the ongoing migration from retail to online in that market. In PokerStars, the normalization of the revenue trends that we detailed at our interim results has broadly continued. Poker net revenue trends have returned to pre-COVID run rates, but this has been more than offset by strong casino growth. We have substantially increased our level of investment in the international business through targeted generosity and higher marketing investment, and the early signs are promising. Approximately one-third of the customers acquired during Q2 continued on our platforms.
This marks just the first step in our longer term strategy to invest more in both our products and brand. Finally, in the U.S., we're building scale faster than we expected. Focusing on a few highlights, we had more than 1.8 million customers active with us in the quarter. We acquired over 450,000 new customers, a number that exceeded our internal forecasts in both new and existing states, and we grew total net revenue by 82%. We now estimate that our U.S. gross gaming revenue will be over $1.1 billion in 2020, making us the first online operator to break the billion-dollar mark for annual gross revenue. We are continuing to see very attractive customer economics across both new and existing states and have therefore decided to continue to invest accordingly. Our revised U.S. guidance simply reflects the higher-than-expected number of new players who we have acquired.
Player paybacks remain very attractive. You'll have also seen that we secured long-term partnerships with Turner Sports and Entercom. These deals give us long-term access to important sportsbook integrations across their platforms. We also recently signed a multi-year marketing deal with NBC. We've expanded our U.S. footprint with successful launches in Illinois and Tennessee, and Michigan and Virginia coming soon. This will bring our total addressable market for online sports betting to almost a quarter of the U.S. population. We finished the quarter with a 46% share of the online sportsbook market and a 29% share of the combined online sports and gaming market. In conclusion, you have seen that we've raised our guidance for Group ex U.S. this year by 5% at the midpoint, despite further COVID-related retail closures and the early impacts of new German gaming regulation.
As we look ahead into 2021, we have quantified the expected financial impact of new German regulation, which we expect will cost the group GBP 50 million in contribution on an annualized basis. This should be taken into account along with the guidance we provided to our interims when arriving at forecasts for next year. Jonathan and I will now be happy to take your questions. In the interest of giving everyone an opportunity to ask theirs, can I request that you limit yourselves to two questions each in the first instance, and if we have time at the end, we can then come back to follow-ups. With that, I'll hand the call back to Carolyn to manage the Q&A session.
Thank you, Peter. Everyone, if you would like to ask a question, please key star then one on your telephone. If you decide to withdraw your question, key star then two. All questions will be answered in the order received. You'll be advised when to ask your question. All other lines remain on listen only. To remind you to ask a question, please key star then one on your telephone. The first question comes from the line of James Rowland Clark. Please go ahead.
Hi, good morning, everyone. Yeah, I've got two questions, please. One on PokerStars and one on Australia. Just on PokerStars, you mentioned there how you flagged seeing about a third of the customers that you sort of acquired or reactivated in Q2 continuing on your casino and poker in Q3. But you've seen a 10% decline in poker in the third quarter, and some data we've seen shows about double-digit growth on poker platforms globally. Just wondered if you could discuss why that's declined by 10%. Does that relate to accelerating the RG and AML measures that you flagged at the interims? That's the first question on PokerStars. On Australia, you've obviously had a blowout quarter there with Victoria being locked down.
Now that Victoria lockdown is lifting, what are the recent trends you're seeing there, and how does that make you feel about the run rate for the fourth quarter heading into 2021? Do you think you can deliver growth year-on-year next year for Australia? Thank you.
Okay. Thank you, James. Look, in terms of the position around PokerStars, I think one of the things you have to remember in quarter three, and this is true for poker generally, is that the events that drive quite a lot of activity around poker are driven by global competitions, which different operators get behind. The World Series of Poker, which was obviously quite an important driver of volumes in the third quarter, occurred with a different timing to last year. That's not something which we run. One of our competitors has that, which has an impact on our performance relative to other players. I think it is also the case that a lot of the customers that came to us in Q2 that we reactivated, as you said, were not habitual poker players.
The fact that they came back to the platform when they were in lockdown, I think is evidence of that. We wouldn't have expected them to stay playing poker, but we're very pleased that we've kept them engaged in our casino platform. As you said, we kept one-third of those customers there. I think we are pleased with the way that the poker business is performing. As we said before, we need to make investments in poker to support the longer-term performance of the international business. That's around product, it's around marketing, tech. We have made some early changes to the levels of generosity we put into that business, which I think is something which is important to do, to give back to customers.
I'd just add two points, and one is just building on Peter's point there. Actually, the GGR trend is slightly better than the NGR given the uplifted promo spend in that Q3 as we work with the players to give a bit more back and keep them engaged in the platform. I think the second thing is exactly the point you made, some of the RG-AML points coming in in Q3. We obviously get annualization of some of those markets which often as you go through time and switch markets off, there's a little bit of that in there. Actually, the underlying trends we're quite pleased with and we're sort of testing and learning as we up this level of promo spend to see how we can do that as effectively as possible.
Yeah. Look, in terms of sports bets, clearly we've come into a very important time of year, which is the spring racing carnival. I think we've been very pleased with the performance of the business through that festival. We've recently had the Melbourne Cup, which we're delighted with A, the resilience of the platform, but also how the business performed. Clearly, they have had a localized lockdown in Victoria during Q3, which will have impacted the business. I think more broadly, we have seen a large number of retail customers come over to our online business during the course of the year. We hope that we'll be able to retain many of those customers because of the benefits of the improved generosity and frankly, sort of better product that they get with us compared with the retail environment. Certainly, they get much better value from us.
Look, we are pleased with the way the business has performed, pleased with the indications we're seeing coming into quarter four. Obviously, we'll then go into next year with a much bigger base than we would have originally anticipated, Our job is to keep as many of those customers who've migrated over to us from retail as we can.
Hopefully things like the racing streaming will also help us as we go into next year, and the team are really focused on that retail cohort and how we keep a bit of that share of wallet as we go into 2021.
Thanks, James.
Thank you.
Thank you. The next question comes from the line of Ed Young. Please go ahead.
All right. Good morning. Thank you.
Yeah.
My first question is on the U.S., and obviously, as you said, a very strong result there. I know you've given the FOX Super 6, but I wondered if you could give a bit more color about FOX's performance within that, or more broadly, what you've found as you've had a bit more chance to get into that business and sort of take it over operationally. Your sort of wider strategic thoughts around where FOX sits within the broader FanDuel Group, if that's okay. That's my first question.
Do you have a follow-up question, Ed?
I'll save it depending on what you say on that really, if that's possible.
I don't think we're giving you conditionality on the call out.
Clearly, we're very pleased with how the business is performing in America. You'd imagine that when you see the market share figures that we're taking. It is interesting for us to be able to contrast the benefits that we have of the scale, brand, customer franchise, and frankly, the platform advantages with FanDuel in comparison with FOX Bet. I think it does make us realize how important a number of those advantages that the FanDuel brand has, and particularly around the ability to acquire customers at sensible acquisition costs. I think it is a good reminder of why we should continue to push hard and take advantage of the opportunities that we have. That's what we're continuing to do with the FanDuel brand.
I think for the FOX Bet business, the most important thing we can do is to build up that national franchise of Super 6 customers, and that's what we're doing, and we were very pleased with the figures that we've acquired onto the platform. Actually, when you look at some of the app activity, you can see how popular the Super 6 product has been amongst engaged sports fans in the U.S. Look, we're really pleased with how that's going, the levels of integration and stuff that we have right across the Fox platform is fantastic. Actually, we acquired a lot of customers off the back of some smart integrations the team did with Fox News, off the back of some of the U.S. presidential debates.
I think we're really working hard with all the different Fox properties to make sure we can take advantage of different integration efforts. I think ultimately that's what will be important in terms of driving that business forward, is acquiring that national Super 6 franchise and we're pleased with the way in which we've been able to do that.
Thank you. I will leave my follow-up on it. That's a really useful answer. I guess the other thing you mentioned a long while ago now is perhaps a need to clean up the ownership structure of FanDuel Group, which is quite complicated. Is that still something that's still ongoing and front of mind, or have you changed your mind about that?
Look, it's an important point, Ed. The arrangements we have in place are quite complex as we have previously disclosed. There's the put and call agreements to increase our stake in FanDuel to 77% in 2021, in the middle of next year, and then to around sort of 95% in 2023. The structure of those arrangements meant that we did not require shareholder approval at the time of the original deal. Since then, of course, the level of complexity has risen further because we had Boyd's investment, and then we put in place reciprocal arrangements with Fox at the time of The Stars Group merger. Of course, the prospects for the U.S. business are far more highly valued today than when we did the original deal. There is a lot of complexity around it.
I don't think we feel any immediate short-term pressures to address it, but I think we also have to recognize that in the majority of cases where businesses have these complex arrangements, you often find that they find an alternative route to resolving them. We don't feel any pressure to necessarily undertake that path ourselves.
I think, Ed, if there was something that worked for our partners in FanDuel and for our shareholders, then we'd look at it. We're not going to be pressurized into doing something in the short term.
Understood. Thank you very much.
Thank you. Our next question comes from the line of Monique Pollard. Please go ahead.
Hi. Morning, everyone.
Morning, Monique.
Hello. A couple of questions from me, if I can. The first was just whether you could talk a bit to, particularly the PokerStars brand, if you've seen any further reactivations of some of those customers that you'd acquired in Q2 at the start of this new U.K. lockdown from November, in particular, strong poker performance or gaming performance. The second thing was just around the U.S., as we've mentioned, really strong positions that you're achieving there, particularly the market share in sportsbook. Just wondered if you could touch a little bit on, the gaming market share, I mean, still very good, but sort of what you're focusing on there to drive further market share gains.
Yeah. Okay. Thanks, Monique. Look, obviously, it's very early days in terms of this new sort of lockdown part two in the U.K. We have seen lockdowns occur in a number of different markets across Europe over recent weeks. I think it's fair to say that the lockdowns probably are not as strict as they have been previously. That said, we have seen some increase in sort of activation on the platform when we look at it in comparison with year-on-year or last month. There has definitely been a step up, but nothing like we saw in quarter two. In terms of-
In terms of the gaming side, actually, we've seen a slight reduction in market share. What we've actually done by putting in the account and wallet, which we've now got in, obviously, across all of the states, that gave us a slight short-term reduction in the number of games available. Actually, we're just working very hard to get that availability of games back up, improve the offering to make sure that we can drive market share up as we go forwards. We're very comfortable with our position at the minute, and I'm really pleased with having got the entirety of the business across to our own account and wallet at this stage.
Yep. Sounds great. Thank you.
Thank you. Our next question comes from the line of David Rohan. Please go ahead
Morning, guys. Just two questions from me. Firstly, on Germany, you've obviously given the kind of guidance around the impact of the new measures. Just to what extent is mitigation built into that? Just the second question around TVG, very strong growth in your daily customer numbers. Obviously, some of that is the retail to online shift. Is there any other factors that's kind of driving that very strong growth?
Hi, David. Let me pick up the TVG point and then Jonathan can talk to us about Germany. Look, we're very pleased with the way that TVG performed. Clearly, TVG is an online operator and we're always very strongly placed. Whilst there have been a number of ongoing restrictions in the U.S., horse racing's continued, and that has allowed the business to thrive off the back of the sort of retail to online migrations that have had to happen for people to be able to sort of carry on engaging with the sport. Again, we hope that we'll be able to retain a lot of that business in the future as people realize the benefits they get from the sort of enhanced generosity, the sort of money back specials, the type of things that you would recognize with our brands that we've taken to America.
In terms of Germany, yeah, this has been net effect across primarily PokerStars, but a bit on Betfair. The point is that it's quite uncertain at this point because we obviously have the EUR 1 slot restrictions coming in from the middle of December. We've put in place what our best estimate of the net effect is overall on 2021 annualized at this stage, and we'll see how it pans out when we get past that 15th of December point. Quite a few of the restrictions, as you know, will have come in already, but that's obviously a big movement itself just from that one change.
Okay, perfect. That's great. Thanks, guys.
Cheers, David.
Thank you. Next question comes from the line of Michael Mitchell. Please go ahead.
Yes. Good morning, Peter. Good morning, Jonathan. Thanks for taking my questions. Two, if I could, both on the U.S. and I guess the context here, obviously a strong quarter from a customer acquisition perspective and a share gain perspective. Could you just talk a little bit about kind of the role product plays in the customer decision in the U.S. at the present time, or is it more about kind of brand and generosity on the acquisition front? That's question number 1. Question number 2, just around your kind of net revenue margins in the U.S. in the quarter, clearly down and driven by what you call strategic investment. Could you just talk a little bit about what that tells us about the kind of competitive route you've taken there and what that might look like going forward? Thank you.
Yeah. Thanks, Michael. Look, to some extent, I think you're leading with what you think the answer is with your question around the role of product. It is really important. You can have the best brand and the best marketing, if you haven't got the product to back it up, then customers will quickly switch away from you. That's something that we've definitely experienced over the years with the Paddy Power business, with Sky Bet, and with Sportsbet. We know that when we have the best product, to some extent, the ads almost write themselves and you get into a bit of a virtuous circle. When we launched in America, we had our access to our global risk and trading capability, of course, that is to some extent what product is in America. I think that that's always given us a head start.
We are the home of same-game parlays, which I think is a product which not many other people have access to in the U.S., I think customers are really enjoying that. Of course, our introduction of our new accounts and wallet and over the back end of this year, early next year, the rollout of our own sort of sports betting platform in America will sort of leapfrog our product on ahead of where we stand today. I think we believe we have product leadership in America, and that we're investing hard to make sure that we maintain it.
Actually, there was a review done by Eilers & Krejcik of the products across the U.S. FanDuel ranked number one, which we were really pleased with. We're not going to rest on our laurels there. There's improvements we need to continually make in that, and we'll make every effort to do so.
No. I think that is the case. We're really pleased with the product. Then to be able to back that up with the level of investment we're putting in from a marketing perspective, to be able to cross-sell to those customers who are already using daily fantasy on FanDuel, and then to have the strength of the brand so well-known, I think positions us incredibly well in the U.S. market. I think it's important we continue to invest hard to keep that virtuous circle going. I think from a margin perspective, things like, for example, some of the same-game parlay stuff does actually enhance our margins. I think we've always said that in the U.S. market, we've focused very hard on keeping margins pretty tight. We don't want to allow a lot of oxygen into the market.
That said, in quarter three, when you look at it year-over-year, there is a big drop in margin. Jonathan, do you want to just take us through some of the sections?
Yeah. The biggest element here is this very strange situation we had obviously with the hiatus of sporting activity within the U.S. Therefore, we had an absolute focus on the return of sport and getting our customers back and getting the value back into the business. About half of the drop from where we would have expected to be was actually this return of sport investment, which we think we prosecuted that campaign really well. I think that's come through in terms of the numbers. We then saw, obviously, some new state launches. Obviously, that has a promotional investment attached to it. The other bit which is greater than we probably thought is the ongoing growth in our existing states where staking was up 100% year-on-year. These states are still growing.
That makes us feel very positive about continuing to invest. To give you a sense of it, I was just looking at this earlier. We acquired more than 450,000 customers into the franchise in Q3 in terms of new U.S. customers. It's 800,000 in the year to date, albeit it's a slightly odd year in that we didn't have much in Q2, but it gives you a sense of the skew into this Q3 customer acquisition period. I think the other thing to point out is, actually in Q4, we're seeing margins return more to where we would expect them to be. We think this is a very clear Q3 impact, a lot down to that return to sport, which we think the team did a phenomenal job in the U.S. on that.
Got it. Great for me. Thanks.
Thanks, Michael.
Thank you. I'd just like to remind everybody, if you would like to ask a question, please key star, then one on your telephone, and to withdraw your question, key star, then two. Our next question comes from the line of Richard Stuber. Please go ahead.
Hi. Morning, both of you. Just a quick question on synergies. You haven't mentioned it too much this quarter. I'm just wondering if you've got a change in view, particularly given how successful the BetEasy migration was, and any sort of commentary around the timing and/or the delivery of the synergies. Thank you.
Look, Richard, obviously, we're very pleased with the speed with which we've been able to integrate BetEasy into Sportsbet and to have done that when everybody was in lockdown in under 90 days, I think is an unbelievable achievement from the team. To have done it in a way which has retained so much of the revenue with those levels of growth, I think is pretty unprecedented. Look, we're absolutely delighted with what the team have done. I think we continue to be very pleased with the progress we're making on integration across the world. We always plan to give you an update on how we're doing with synergies when we would do our full year results in March.
I think you can assume that the speed with which we've managed to get Australia done would probably put us ahead in terms of timing, but we'll give you a better update at the year-end.
Great. That's very clear. Thank you.
Thanks.
Thank you. Next question comes from the line of Christine Chen. Please go ahead.
Hi. Yes, good morning. A couple of questions, please. On U.K. and Ireland, you say that Paddy Power and Sky Bet brands both took share. Could you give some color on where you think that share came from, and how sustainable do you think that is? My second question is just on the U.S. What is your responsible gambling type strategy in the U.S. in particular, in light of the significant amount of marketing spend that's been going on and is coming up? How concerned are you that there might not be enough focus on this industry-wide? Are you worried that it could cause a significant problem later down the line? Thanks.
Good morning, Christine. In terms of your first question for Sky Bet and Paddy Power, we think that the businesses took market share growth both from customers, the acceleration of retail to online. We've seen a lot of the customers come across onto our platform with a slightly older age profile than we would ordinarily see. They definitely look like they would be typically retail customers. We know that when customers move from retail to online, they're very open-minded as to the brands that they're prepared to shift to. We think that's definitely been a real win for Sky Bet and Paddy Power. We've also made some product enhancements as well. With Sky Bet, we've improved some of our in-play betting products.
We've also undertaken some changes to make Paddy Power more of a Paddy Power product with a program that we call Paddify. We think that those product enhancements have also helped. I think these are two brands very focused on the recreational market, and we've definitely been taking share away from other players. You'll be able to see other competitors' results in the same period as ours, and you can probably spot those which have been market share donors. Look, I think in terms of the sustainability of this, the onus is on us with the bigger customer franchises that we now have across those brands to make sure that we can keep those customers.
We have been investing quite a lot in generosity in the quarter to keep customers on the platform, and that's something that we'll try and get the balance right between investment in generosity for keeping those customers and continuing to try to lure other customers over onto the platform. In the U.S., your question about safer gambling, I think is really important, and it's something that we're very thoughtful about. In the very early days of the launch of sports betting in America, we spent quite a lot of time with the AGA, which is one of the industry bodies there, talking to them about that. We've run campaigns in the U.S. around safer gambling.
Indeed, a lot of the work we do in the background to monitor customers' behaviors using our algorithms that we've tuned up in Europe over the years, we've taken to America as well to make sure that we get ahead of any issues there and intervene to help customers know and set their limits. The tools that will be available that customers will be familiar with in a market like the U.K., we're making sure we bring them to the U.S. and acting as a sort of agitator there to try and make sure that we address this from an industry perspective as well.
Great. Thank you.
Thank you. Next question comes from the line of James Recraft. Please go ahead.
Good morning to you. There's a question for the U.S., please. Can you talk to us a little bit about the ramping profile of the larger states that you've launched in maybe Illinois, upcoming Michigan, and then thinking about next year, what should we be profiling in terms of the number of state launches and maybe a bit more color on where you think that might be, please?
Okay. Thanks, James. Look, I think, at its most basic, we need to remember there's a lot of seasonality around the U.S. market. With the football season coming live towards the back end of the year, that's an inevitable focus for customer acquisition. I think, when we look at the profile of the business, there's always going to be a lot of seasonality around the customers that we acquire and the costs associated with that. I think we would never try and manage the business to a certain sort of profile. We said in the past, we're not trying to push the business to serve a certain point in break even because if we can continue to acquire customers at these levels of returns, we'll take as many as we can, even if that sort of delays potentially the point at which we get to break even.
Clearly, if a state follows a sort of normal trajectory, over time, the ratio of new customers to existing customers will switch. As a proportion of existing customers becomes the majority, the states ought to move into a level where it's generating positive contribution. Jonathan, you might want to talk about those profiles that we shared with people in the past and also just sort of views about next year, where we've got some big states that'll be coming online.
Yeah, I think there's probably a couple of points. Obviously, we've increased materially our states from last year into this year. We're going to be at nine by the end of 2020, of which two will have just launched. Actually, the big investment year in two of those nine states is probably going to be 2021. We estimate another sort of four. Sorry, Virginia is just after the year, and Michigan will be just at the year-end. You've got four more states, Maryland, Louisiana, Ohio, Massachusetts, coming in next year, all estimated to come in, those four probably coming in just pre-NFL. Again, there's going to be a big investment taking place. There's some big states there with those four states averaging out at nearly half a million population each, which is not a million miles away from New Jersey.
There is a lot of new exciting opportunities arising in the U.S. next year. As Peter said, if we can find good ways to invest in that at good returns, we will be doing so.
I hope, James, that people recognize now that the U.S. is a market we are investing heavily, but because we're such a big scale operator in the market, these investments are to enable us to acquire customers. We're getting real confidence in our ability to retain them year after year. We've seen that again this year in places like New Jersey, where we've been live for a couple of years now. I think we're getting confident about our ability to retain customers. The profile that we're seeing in terms of the lifetime value of these customers continues to be higher than we'd have anticipated. We're also being able to continue to acquire customers at very sensible acquisition costs. We're frankly taking as much advantage of this as we can.
We are unique because we can see what it's like to be a subscale operator as well when we look at life through the lens of FOX Bet. It's really tough. That's the position that most of our competitors in the U.S. are in. We'll continue to take advantage of the scale position that we have.
Yeah. I think finally, the thing that gives us confidence is the sort of shape of the J-curve that we're seeing in New Jersey and how that's being tracked by the states that started in 2019, and actually how the states are starting in 2020. As we get more and more confidence of the shape of those investment curves and as they move towards positive contribution, that gives us more conviction that we should be investing in these new states aggressively, but with clear discipline in how we're doing it.
Very helpful. Thank you.
Thank you. Next question comes from the line of Simon Davies. Please go ahead.
Yeah. Morning, guys. Two more on the U.S., I'm afraid. Firstly, just returning to the subject of sports margins, obviously there's been an awful lot of competitive pressure at play. Do you see any structural reasons why, as the U.S. market begins to mature, you shouldn't see gross win margins revert to the sort of levels that we see in Europe? Secondly, can you just talk a bit about the recent trends you're seeing in CPAs in the States?
Yeah. Morning, Simon. Look, I think we've often said that when we went into America, we deliberately set margins low to make it hard for people to operate there unless they were big scale platforms and particularly if they're having to pay away a lot of that to third parties would make it even more difficult. That continues to be the case. I don't expect that you'll see margins in the U.S. trend towards those figures seen in European levels. I know that some people are positive that that might have been because U.S. sports don't result in draws, so there's only two outcomes, not three. Fortunately, it's not quite that simple.
We've deliberately set over rounds tightly to make things very competitive, which we think is the right thing to do in the U.S. market. I think in terms of CPAs, we are increasing the amount of money that we're spending in the market. We're actually really confident with the levels of CPA that we're seeing. With Jonathan shared with you the customer acquisition numbers that we're seeing, we're absolutely delighted with the figures that we've acquired in quarter three. I think whilst there has been some small sort of inflation in CPAs, actually what we're seeing is the same, if not more increase in terms of our expectations of the customer lifetime values as well. We're very comfortable with the dynamics that we're seeing in the U.S. market.
I think that latter point's really critical in terms of getting more and more confidence around the LTVs, and therefore, really understanding our payback periods and having discipline around those payback periods and making sure that we're driving to the right level as we invest.
Great. Thank you very much.
Thank you. The last question we're going to take today will come from Karan Jhabru. Please go ahead.
Hey, guys. Just two questions from me. You're quite unique in terms of operating several brands in the U.S. Has a lot of the growth been a result of cross-sells between the brands? Secondly, have there been any surprises for the new states that have been launched in terms of the level of competition you've seen or the appetite to bet there? Thank you.
Yeah, look, around the world, we often find us operating multi-brand. It's not something that we're nervous about. I think it's important to provide customers with the choices that they want. You see that in fast-moving consumer goods. They'll often operate multi-brands in the same space. I think for us in the U.S., what we would focus on is the fact that we've been very successful at cross-selling customers between our products. They're often different brands, sometimes we operate them under the same brand family. FanDuel is now operating in Daily Fantasy, it's operating in sports betting, racing, and casino. Daily Fantasy is a great source of contribution for us in terms of covering our fixed costs. Most importantly, it allows us to get our brand out there and build our customer franchise.
We're using that to acquire customers in sports betting and then in states where iGaming is legal, we can cross-sell from sports betting into gaming and we see really good penetration levels occurring there. Racing is the thing that people sometimes forget in the U.S. It's legal in many states across America, in places like California, for example. We're very excited about the opportunities to sort of build out our business in those brands. We operate now the TVG and FanDuel Racing brands in that space. Cross-selling is very important for us, but actually having positions in all those different products is also key. To make it easy for customers, it's important that we operate our business on a single account and wallet. That's the focus that we have around the FanDuel business at the moment.
In terms of surprises, in terms of how we think about the different states, look, we've been really pleased with the recent launch of the businesses in Tennessee and in Illinois. I think in places like Illinois, we hadn't anticipated that we'd be able to have mobile sign up. We thought we'd have to have in-person sign up for a period of time. Because of COVID, we were allowed to have mobile sign up, and we've tried to take advantage of that for the period of time which it's been open. When we look at sort of customers' betting habits, we haven't found massive differences between the states at this stage. We see very high levels of in-play betting and use of our parlay products, which I think shows us that there's a degree of sophistication amongst some of the early customers who are coming onto the platform.
I think the one comment I'd make around competition, and then Jonathan might want to come in and talk about this, is what's interesting for us is we have seen a number of our competitors sort of pass on some of the early states in the hope that they can come in and make a play in some of the more recent states to open up. It doesn't seem to be working for them, though, because when you look at the combined market share of DraftKings and FanDuel even in the more recent states have opened up, we're maintaining very high levels between us. I think the strategy that we're both pursuing of leveraging our DFS base, our brand and knowledge now, I think is working well for us and making it very hard for other operators to come in.
I think it'll also, in the end, come back to product and who's got the best product in the market. While the early sign-ups is very helpful in gaining our market position, we also see the absolute importance of having product leadership to back that up as we go forward, and that will help sustain the business and our position, as Peter said, in same-game parlays, and as we develop the product further and integrate with the betting platform to give us an even stronger range of products there, I think will stand us in really good stead as we go forward.
Thank you, John.
Perfect. Thank you.
Look, Karan, I'm going to wrap up there. I think you said that was the last question that we'd take. In summary, we're delighted with the performance of the group in the quarter. We're growing our recreational customer base well across all key regions and are building real scale in our U.S. business. We look forward to bringing you through our strategic priorities in more detail at the time of our full year results in March. Thank you all very much.
Thanks.
Thank you both. Everyone, that concludes your call for today. You may now disconnect. Thank you for joining, and enjoy the rest of your day.