Good morning, everyone, and 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 and there will be a chance to ask questions later in the call. But 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. And 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 UK 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 600,000,000 was matched on the next U. S. President markets on the exchange. We believe this makes it the single biggest betting market ever on the exchange.
More broadly, we estimate that our UK and Irish brands engage with approximately 50% of all consumers who had to 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 twelve months have already engaged with Sports Bet 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 have 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 high marketing investments, 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. And finally, in The U.
S, we're building scale faster than we expected. Focusing on a few highlights. We had more than 1,800,000 customers active with us in the quarter. We acquired over 450,000 new customers, a number that exceeded our internal forecast in both new and existing states. And we grew total net revenue by 82%, And we now estimate that our U.
S. Gross gaming revenue will be over 1,100,000,000 in 2020, making us the first online operator to break the $1,000,000,000 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 that 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. And we also recently signed a multiyear 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. And we finished the quarter with a 46% share of the online sports book market and a 29% share of the combined online sports and gaming market.
In conclusion, you'll see that we've raised our guidance for the group ex U. S. This year by 5% of the midpoint despite further COVID related retail closures and the early impact 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 50,000,000 in contribution on an annualized basis. This should be taken into account along with the guidance provided to our insurance when arriving at forecast 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 there's time at the end, we can then come back to follow ups. And with that, I'll hand the call back to Carolyn to manage the Q and A session.
Thank you, Peter. All questions will be answered in the order received and you'll be advised when to ask your question. And all the lines remain on listen only. First question comes from the line of James Roland Clark. Please go ahead.
Hi, good morning everyone. So yes, I've got two questions, please. One on PokerStars and one on Australia. Just on PokerStars, you mentioned there how you flagged saying about onethree 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 sort of globally.
So 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 Pace Stars. And then on Australia, you've obviously had a blowout quarter there with Victoria being locked down. But 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 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. And 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. And that's not something which we run.
So 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, we're not habitual poker players. And the fact that they came back to the platform when they're in lockdown, I think is evidence of that. And so we've been, 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. And as you said, we kept one third of those customers there.
So 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. So that's around product, it's around marketing, tech. We have made some early changes to the sort of level 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.
So one is just building on Peter's point there. I mean, 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. And we obviously have some we get annualization of some of those market switch offs as you go through time and switch markets off. There's a little bit of that in there.
But actually, the underlying trends we're 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. And then look, in terms of Sports Bet, clearly, we've come into a very important time of year, which is the spring racing carnival. And I think we've been very pleased with the performance of business through that festival. We've recently had the Melbourne Cup, which we're delighted with the way that there was a, the resilience of the platform, but also how the business performed. Clearly, they have had a localized lockdown in Victoria during Q3, which would 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. And we hope that we'll be able to retain many of those customers because of the benefits of the sort of improved generosity and frankly, it's a better product that they get with us compared with the retail environment. Certainly, they get much better value from us. So 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.
And our job is to keep as many of those customers who've migrated over to us from retail as we can. And 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 that 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.
Good morning. Thank you. My first question is on The U. S. And obviously, you said a very strong result there.
I wonder if you could give it I know you've given the FOX six, but I wonder if you could give a bit more color about FOX's performance within that. More broadly, what you've found is you've had a bit more chance to get them to that business and sort of take it over operationally. So you're sort of wider strategic thoughts around where Fox sits within the broader Fanjul 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've said already, but I mean, if that's possible.
We're giving you conditions. Okay. So clearly, we're very pleased with how the business is performing in America. I mean, you'd imagine that within you see the market share figures that we're taking. It is interesting for us to have the contrast, the benefits that we have with the scale, brand, customer franchise and frankly, it's a platform advantages with Fanjul in comparison with Fox Bet.
And I think it does make us realize how important a number of those advantages that the Fanjul brand has, in particular around the ability to acquire customers at so sensible acquisition costs. I think and I think it is a good reminder of why we should continue to push hard and take advantage of the opportunities that we have. And that's what we're continuing to do with the Fengel brand. I think for the FOX Bet business, the most important thing we can do is to build up that national franchise of SuperSix customers, and that's what we're doing. We were very pleased with the figures that we've acquired onto the platform.
And actually, when you look at some of the app coming data, you can see how popular the SuperSix products has been amongst sort of engaged sports fans in The U. So look, we're really pleased with how that's going. The integrated the levels of integration and stuff that we have with right across the FOX platform is fantastic. So 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. So I think we're really working hard with all the different Fox properties to make sure we can take advantage of different integration efforts. And I think ultimately that's what will be important in terms of driving that business forward is acquiring that national Super six franchise. And we're pleased with the way in which we've been able to do that.
Thank you. And 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 the need to clean up the ownership structure of Sandro Group, is quite complicated. Is that something that's still ongoing in front of mind?
Have you changed your mind about that?
It's an important point, I mean, the arrangements we have in place are quite complex as we've previously disclosed. There's the push and call agreements to increase our stake in Fanjul sort of 77% in 2021 in the middle of next year and then to around 95% in 2023. The structure of those arrangements meant that we did not require shareholder approval at the time of the original deal. And since then, of course, the level of complexity has risen further because we had Boyd's investments and then we put in place the cyclical arrangements with Fox at the time of the Stars merger. And of course, the prospects for The U.
Business are far more highly valued today than when we did the original deal. So there is a lot of complexity around it. I don't think we've got any immediate short term pressures to address it. 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 part ourselves.
I think, Ed, if there was something that worked for our partners at VanDuel and for our shareholders, then we'd look at it, but 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, good morning everyone. 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 reactivation to some of those customers that you'd acquired in 2Q at the start of this new UK lockdown from November, in particular, you know, performance or a pandemic performance? And then the second thing was just around The U.
S. As we've mentioned, you know, really strong position that you're achieving there, particularly the market share in sports book. Just wondered if you could touch a little bit on the gaming market share, I mean, it's still very good, but sort of what you're focusing on there to drive further market share gains?
Yes. Okay. Thanks, Monique. So look, it's obviously it's very early days in terms of this new sort of lockdown Part two in The UK, but we have seen lockdowns occur in a number of different markets across Europe over recent weeks. And 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 on a sort of comparison with year on year or last month. So there has definitely been a step up, but nothing like we saw in quarter two. Terms of the gaming side, actually, we've seen a slight reduction in market share. But what we've actually done by putting in the account and wallet, which we've now got in, obviously, across all of the states, frankly, there's a slight short term reduction in the number of games available. And 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 forward.
So 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 wallet at this stage.
Yes. Sounds great. Thank you. Thank you. Our next question comes from the line of David Brohan.
Please go ahead.
Good morning, guys. Just two questions for me. Firstly, on Germany, you've obviously given the kind of guidance around the impact of new measures. Just to what extent is kind of mitigation built into that? And then just the second question around TBG and very strong growth in your daily customer numbers.
Obviously, of that is kind of retailed online shift. What else? Is there any other factors that's kind of driving that very strong growth? David, let me pick up the TBG points, Jonathan can talk to us about Germany. Look, we're very pleased with the way performed.
TVG is an online operator, and we're always very strongly placed. And whilst there have been a number of ongoing restrictions in The U. S, horse racing has continued, And that has allowed the business to thrive off the back of the sort of retail to online migrations that had to happen for Goosebumps, 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 this of the enhanced generosity, the sort of money back special, the type of things that you would recognize with our brands that we've taken to America. And in terms of Germany, yes, mean, this is the net effect across primarily PokerStars, but a bit on Betfair.
And the point is that it's quite uncertain at this point because we obviously have the €1 swap restrictions coming in from the December. So we put in place what we our estimated 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 December 15 point. Obviously, 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. 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. And 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 one. And then question number two, just around your kind of net revenue margins in The U. S. In the quarter, clearly down driven by, you call it, strategic investments.
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 be looks like going forward? Thank you.
Yes. Thanks, Michael. Look, you're 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, but if you haven't got the product to back it up, then customers will quickly switch away from you.
And that's something that we've definitely experienced over the years with the Paddy Power business, with Sky Bet and with Sports Bet. 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 access to our global risk and trading capability. And of course, that is to some extent what product is in America. And I think that that's always given us a head start.
We are the home of Steam Game Parlays, which I think is a product which not many other people have access to in The States. And I think customers are really enjoying that. And of course, the 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. So I think we believe we have product leadership in America and that we're going to we're investing hard to make sure that we maintain it. And actually, was a review done by Iris and Kraichek of the products across The U.
S. And Flangeul ranked number one, which we were really, really pleased with. But we're not going to rest on the laurels there. There's improvements we need to continue to make in that, and we'll make every effort to do so. And so I think that is the case.
We're really pleased with the product. And 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 Fancy 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.
And I think it's important to continue to invest hard to keep that virtuous circle going. I think from a margin perspective, things like the for example, some of the sort of same game parlay stuff does actually enhance our margins. But 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 on year, there is a big drop in margin. And Jonathan, do you want to just take us through some of the segments? Yes. Mean the biggest element here was this very strange situation we had.
We're obviously with the hiatus of sporting activity within The U. S. And therefore, we had an absolute focus on the return of sport and getting our customers back and getting the value back into the business. And so 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. And I think that's come through in terms of the numbers.
We then saw obviously some new state launches. And obviously, that is a promotional investment attached to it. And then 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. I mean, it's these states are still growing, and that makes us feel very positive about continuing to invest. I mean to give you a sense of it, I was just looking at this earlier.
I mean we acquired about four fifty more than four fifty thousand customers in the franchise in Q3 in terms of The U. S. New U. S. Customers.
It's 800,000 in the year to date, albeit it's a slightly odd year and that we didn't have much in Q2. But it gives you a sense of the skew into this Q3 customer acquisition period. And then I think the other thing to point out is actually in Q4 sorry, Q4, we're seeing margins return more to where we would expect them to be. So we think this is a very clear Q3 impact a lot down to that return to Sport, which we think we did the team did a phenomenal job in The U. S.
On that.
Got it. Great. Thanks.
Thanks, Michael.
Thank you. Our next question comes from the line of Richard Stuber. Please go ahead.
Hi, good 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 sort of a change in queue, particularly sort of given how successful sort of the BetEasy migration was and any sort of commentary around sort of the timing and of the delivery of the synergies? Richard, obviously, we're very pleased with the speed with which we've been able to integrate BetEasy into sports betting.
So we've done that when everybody is in lockdown in under ninety days, I think unbelievable achievement from the team and to have done it in a way which has retained so much of the revenue. I mean with those levels of growth, I think it's pretty unprecedented. So look, we're absolutely delighted what the team has 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 the 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. Thank you. Thanks.
Thank you. Next question comes from the line of Christine Zinn. Please go ahead. Hi. Yes, good morning.
A couple of questions, please. Firstly, on UK 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 US. What is your responsible gambling type strategy in The US, in particular, in light of the significant amount of marketing spend that's been going on and is coming up?
And how concerned do you that there might not be enough focus on this industry wide? And are you worried that it could cause a significant problem later down the line? Thanks.
Good morning, Christine. Look, in terms of your first question for Sky Bet and Pelly Power, we think that the businesses took market share growth both from customers the acceleration of retail to online. So we've seen a lot of the customers come across onto our platform with a slightly older age profile than we would ordinarily see. So they definitely look like those would be typically retail customers. And 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.
And we think that's definitely been a real win for Sky Bet and Paddy Power. We've also made some product enhancements as well. So with Sky Bet, we've improved some of our in play betting products. We've also undertaken some changes to make PADI PAM or PADI Power product with a program that we call PADI Fi. And we think that those product enhancements have also helped.
But I think these are two brands very focused on the recreational market, and we've definitely been taking share away from other players. I mean, 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. So 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're trying to get the balance right between sort of investments in generosity for keeping those customers and continuing to try and lure other customers over onto the platform. In The U.
S, your question about safer gambling, think is really important and it's something that we're very thoughtful about. In the very early days of the launch of Sportsman in America, we spent quite a lot of time with the AGA, which is the one of the industry bodies there talking to them about that. We've run campaigns in The U. S. Around safer gambling.
And 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. So the tools that will be available, the customers will be familiar within in a market like The UK, 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 Wecroft. Please go ahead.
Morning. Just a question for The U. S, please. Can you talk to us a little bit about the ramping profile of the largest 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 last state launches?
And then maybe give a color on where you think the hype is?
Okay. Thanks, James. Look, I mean, I think at its most basic, we are 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. And so I think when we look at the profile of the business, there's always going be a lot of seasonality around the customers that we acquire and the costs associated with that. And I think we would never try and manage the business to a certain sort of profile. Said in the past, we're not trying to push the business to serve a certain point in breakeven 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 to which we get to breakeven. Clearly, if a state follows a sort of normal trajectory, over time, the ratio of new customers, existing customers will switch.
And as a proportion of existing customers and it becomes the majority, the states in order to move into a level where it's generating some positive contribution. Jonathan, you might want to talk about those profiles that we shared in the past and also just sort of views about next year. Well, we've got some big stakes that will coming online. Yes. I mean I think there's probably a couple of points.
I mean, obviously, we've increased materially our stakes from last year into this year. We're going to be at nine by the 2020, of which two will have just launched. So actually, the big investment year in two of those nine states is probably going to be 2021. And then we estimate another sort of four so Virginia is just after the year end. Michigan will be just at the year end.
And then you've got four more states, Maryland, Louisiana, Ohio, Massachusetts coming in next year. All estimated to come in probably those four probably coming in just pre NFL. So again, there's going to be a big investment taking place. Mean, there's some big states there with those four states averaging out at nearly 5,000,000 population each, which is not a million miles away from New Jersey. So there is a lot of new exciting opportunities arising in The States next year.
And as Peter said, if we can find good ways to invest in that at good returns, we will be doing so. I mean I hope, James, that people recognize now that we are 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 place like New Jersey where we've been live for a couple of years now. And I think we're getting confident about our ability to retain customers. And so the profile that we're seeing in terms of the lifetime value of these customers continues to be higher than we'd have anticipated. And we're also being able to continue to acquire customers at very sensible acquisition costs.
And so we're frankly taking as much advantage of this as we can. And we are unique because we can see what it's like to be a subscale operator as well when we look at our life through the lens of FOX Bet, and it's really tough. And that's the position that most of our competitors in The U. S. Are in.
So we'll continue to take advantage of the scale position that we have. Yes. And 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. So 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're we should be investing in these new states aggressively but with clear discipline in how we're doing it.
Very helpful. You.
You. Next question comes from the line of Simon Davis. Please go ahead.
Yes. Good 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? And secondly, can you just talk a bit about the recent trends you're seeing in CPAs in The States?
Good morning, Simon. Look, I think we've often said that when we went into America, 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 sort of pay away a lot of that to third parties that 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. And know that some people are positive that, that might have been because U. S. Sports don't result in draws.
And so there's only two outcomes, not three. Fortunately, it's not quite that simple. We've deliberately set over and tightly to make things very, 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. But we're actually really confident with the levels of CPA that we're seeing. Jon shared with you the customer acquisition numbers that we've seen. We were absolutely delighted with the figures that we've acquired in quarter three. And 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.
So we're very comfortable with the dynamics that we're seeing in The U. S. Market. Yes. I think that latter point is 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. And the last question we're going to take today will come from Karen Jopp, Gruel. Please go ahead.
Hey, guys. So 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 sell between the brands? And then secondly, have there been any surprises for the new states that have been launched in terms of the global competition you've seen or the appetite to get there? Thank you.
Yes. Look, we ran the world where we often find us operating multi brand. It's not something that we're nervous about. But I think it's important to provide customers with the choices that they want. And 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, but sometimes we operate them under the same brand family. So Fanjul is now operating in Daily Fantasy. It's operating in sports betting, racing and casino.
Customers, Daily Fantasy is a great source of contribution for us in terms of covering our fixed costs. But most importantly, 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. Rating is the thing that people sometimes forget in The U.
S. It's legal in many states across America and in places like California, for example. And we're very excited about the opportunities to sort of build out our business in those brands. We operate now the TVG and Fanjul racing brands in that space. Cross selling is very important for us, but actually having positions in all those different products is also key.
And 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 Illinois. I think we were in places like Illinois, we haven't anticipated that we'll be able to have mobile sign up.
And we thought we'd have to have in person sign up for a period of time. Because of COVID, we're allowed to have mobile sign up and we've tried to take advantage of that for the period of time which has been open. When we look at sort of customers' betting habits, what we don't find we haven't found massive differences between the states at this stage. We see very high levels of sort 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 sort of competition, and then Jonathan might want to come in and talk about this, what's interesting for us is we have seen a number of our competitors have passed 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 Fanjul in even in the more recent states have owned up, we're maintaining very high levels between us. And so 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 will also, in the end, come back to product and who's got the best product in the market. And while the early sign ups and what 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 and same game parlays as we develop the product further and integrate with 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.
You.
So
look, Kennen, I'm going to wrap up there. So I think you said that was the last question that we take. So 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.