Good morning, and welcome to the Flutter Entertainment full-year results call, brought by Peter Jackson, CEO, and Jonathan Hill, CFO. There will be a chance to ask questions later. First, I will hand you over to Peter. Please go ahead.
Good morning. Thank you for joining Jonathan and I for this call. Hopefully, you've all had a chance to watch our presentation this morning, which provides an overview of why the business is well-positioned for future growth and details of our 2022 performance. Before we go to questions, I'd just like to touch on a couple of items. As announced in mid-February, we've commenced a consultation with our shareholders in relation to an additional U.S. listing. We outlined in the announcement the numerous long-term strategic as well as capital markets benefits this could yield.
One point to emphasize is should we proceed with the additional listing, it would not change where we are headquartered, domiciled, or the taxes we pay. The early feedback from shareholders has been supportive, and we'll be meeting many more of our shareholders over the coming weeks. At the end of that process, we'll announce the results of the shareholder consultation, and until that point, there is very little extra we can say. Turning to our 2022 performance, we delivered another strong year.
Our U.S. business is going from strength to strength, and our advantages are compounding with each new state opening. The recent launches of Maryland and Ohio have been our best yet, providing even greater conviction on positive EBITDA for the full year 2023. Outside of the U.S., the business carries good momentum into 2023. In U.K. and I, the product improvements and efficiency initiatives delivered throughout the year resulted in a strong Q4. Our Australian player volumes remained high as the H2 COVID frequency benefit unwound. We saw increased competitive intensity in Q4.
In international, our Consolidate and Invest markets is delivering strong growth and now make up 76% of the division. The divisions is a great inflection point, and when combined with the U.S. profitability in 2023, will transform the earnings profile of the business. With that, I'd like to hand it over to Judith for questions.
The first question is coming from Ed Young of Morgan Stanley. Please go ahead.
Good morning. Both questions on the U.S., if it's okay. The first is, you gave some detail in the presentation around the cadence of U.S. EBITDA. I wonder if you could do the same for revenue, if that's okay. If I look at previous years' Q4 sort of sets a baseline for the following year, and then there's a step-up in Q4 with the seasonality of the business. Is it reasonable to expect the seasonality and the cadence of this year's revenue will look similar to previous years, or are there any other extra considerations we should be thinking about? The second one is on paybacks.
On slide 26, you're talking to below 12-month paybacks, given what appears to be, you know, more improvement in the way you're doing, your state launches and state openings. I'm guessing that's deeper initial investment, quicker payback as you spoke about historically. You were talking about below 18 months back at the CMD, is that a change that we can think about for this year or ongoing? How does iGaming share increases play into your thought process around paybacks? Thanks.
Okay. Thanks, Ed. Jonathan can get the first question.
Yeah, sure. I mean, it pretty much follows the same seasonality as EBITDA, which is obviously driven by the sporting calendar. The only other thing to say is obviously the EBITDA shape in Q3 is there is a bigger spend there, obviously, in sales, marketing, and promo around that reactivation as we come into the NFL season. It's obviously the big acquisition point in the year from new people coming into sports betting. Very much the revenue should follow because effectively the cost base, certainly OPEX, is relatively flat, but you know, it is seasonal based on that calendar.
I don't think anything I'd build to add to that is of course, when there's, you know, specific state launches in different parts of the year will have an impact. You know, the, the start of the football season is always a great way of us, you know, it's a reason we spend a load of money, you know, acquiring customers. Clearly, if a state has launched at a period of time where they haven't been able to participate in football, we'd see in the next football season an inevitable step up. In terms of the paybacks, you know, I think we were talking specifically on that slide about some of the sort of new state launches and stuff.
Look, in general, we're very pleased with the trajectory of our, you know, acquisition costs. In fact, you know, I think in 2022, there were an improvement from 2021 if you look at it on a sort of, cost basis. You know, the way we actually look and run the business is looking at the CAC LTV dynamics and, you know, in terms of those paybacks . Look, we're very pleased with the, with the way in which the business is performing. We're continuing to improve our structural margins. If we can, you know, continue to drive up structural margins and reduce our, sort of, acquisition costs, you know, it means that the paybacks are well within, you know, our target, time frames.
Thank you. Can I ask one technical follow-up? You mentioned in the release material NOLs. Have you given the number for U.S. NOLs in the statement somewhere? Have I missed it or could you give any color on that? Thanks.
No, we haven't. We've obviously had operating losses over the last few years. You can look at the EBITDA and add something to that around the sort of estimates on depreciation. There are significant brought forward losses which will obviously impact the amount of tax we'll have to pay over the next t wo , three years.
Okay. Thank you.
The next one is from Paul Ruddy of Davy. Please go ahead.
Hey, good morning, Peter and Jonathan. Just t wo questions if I could. The first one is maybe just on the divergent performances you're seeing or between U.K. and Ireland, Australia. Kind of looks like UK and Ireland performance is strong and you appear to be taking share there. Australia may be a little bit more challenging in Q4. Could you just maybe talk to the competitive backdrop in both, you know, and how you think about going through to 2023 and potentially market share expectations. The second one is just appears to be some regulatory developments in India recently, in Brazil, popping up on screens.
Just speak to in particular your competitive position in India and how that benefits you in the context of, you know, positive regulatory developments. Also maybe just on the regulatory side, just maybe the dry question on U.K. White Paper, any kind of thoughts on the recent speculation on the form that may take around before the policy limit for levies, et cetera.
That's Paul, that's a very good way to try and get two questions in. I think you got seven in there, but we'll try and deal with them as best we can.
Look, Paul, in terms of your question around the performance of the U.K.I and Australia, you know, let me give you some high level thoughts on it and then Jonathan might follow up with a, you know, a few more specifics. I think if I look at our Q4 performance in the U.K. and Ireland, up 14% when the market was down, I'm very pleased with how the, you know, the business is performing. We've delivered a lot of product enhancements and improvements over the course of the year. I think, you know, with the World Cup and the energy we put into that, I think we were really pleased with the way that the business had performed.
Look, I feel like we've got our mojo back. You know, we've got lots of momentum we're carrying into this year. In Australia, now I think it's important to remember the dynamics that we're seeing in that market. Of course, the Australian market is somewhat behind the U.K. in terms of the time it's taken for them to come out of COVID. In Q4, which that summer was the first sort of summer period they've had without COVID for a number of years. We undoubtedly were you know, were the main beneficiary of COVID as the biggest brand in Australia.
Therefore we saw, you know, did see a disproportionate impact on our engagement with our customers in terms of average player days. I look, the main thing that happened in Q4 was a big step up in competitive intensity. You know, the Betstar launched and was spending a lot of money on very attractive odds. You know, most players in the market were trying to bulk up in advance of the changes in point of consumption tax, which we've seen happen before.
We very deliberately leaned really hard into generosity and spent a lot of money. You can see the growth we saw in AMPs in the quarter, which I think, you know, we were very pleased, we were very pleased with. In terms of the and I'll let Jonathan provide you a bit more follow up on those and then I'll turn to the regulatory element.
I think there's a couple of points I'd make on each of these. I think there's a great slide in the deck, which is slide 30 for those who haven't looked at it, which looks at both the gaming performance and then talks about our sporting performance. I think, you know, for me, overarching the fact that our pro forma AMPs are up 14% in Q4, gaming revenue is up 12%, sports revenue up 16%, you know, really strong results in the 4th quarter. I think, you know, when you look at the progression of what's happened during the year, and that's where slide 30 gives, I think, a really good picture on gaming.
You know, down in the early part of the year as we lacked some of the safer gambling measures. We got into the second half. We launched product improvements, as we said we would. You can see that performance in Q4 and the growth, that's continued on into 2023. On the sports side, again, you know, really strong performance, you know, very happy with where we were. Sadly, we had about 300 bits of negative luck in Q4, which we had hoped was going to unwind from the prior year, but actually didn't. We had roughly the same negative luck in Q4 as we did last year.
You know, we're not getting a benefit in that number from sort of an uplift in the luck component or sports results component. Really happy with where we are there. Yeah, on Australia, we decided to invest some of the margin we had in order to, you know, make sure that we were properly positioned to keep our customer base and to fight back against, you know, the increased competitive intensity we saw on both Peter and I are, you know, very happy with where we ended the year. Looking back on that, we would not have done anything different.
Look, in terms of the regulatory developments, you know, what I would say about India, you know, it's probably for us, actually our fastest growing market, you know, up to, you know, 80%. We're, you know, we're really pleased with the performance we've seen. I think it's nearly our second biggest market in international actually. You know, look, it's a great story for us, and I think the investment we made there and the trajectory that that business on is very, very exciting.
You know, there are, you know, there are a number of, you know, regulatory views going on on a state-by-state basis and indeed some federal changes which we believe will position us well, as rummy becomes, you know, accepted in more states in India. I'm afraid I haven't had a chance today to see what the wires in Brazil, so I can't comment on that. With respect to the White Paper, I have sort of slightly lost count on how many of these meetings we've been talking about it, which we've been fortunate to talk about it for a long time.
We're really keen to get it published. You know, we've made a number of changes. You know, we've taken, you know, GBP 150 million of revenues out of the U.K. business. We've, you know, made massive strides forward, really, you know, focused on doing the right thing. I think the extent to which the White Paper can be published and then can encourage other operators to pick up the slack and join us, I think would then be very helpful for the sector.
That's great. Thank you.
The next one is from Ryan Sigdahl of Craig-Hallum. Please go ahead.
Can't hear you, Ryan.
Good morning, guys.
Hey.
Good morning, guys. Appreciate you taking the time, for a question. Just one on the U.S., wanna talk at a higher level and then one follow-up. With many operators hoping to get to positive EBITDA at some point this year, our thesis is some of those have structural challenges scaling to meaningful profits beyond that. We agree with you guys, FanDuel can and will. How do you think about the need to achieve positive EBITDA now versus making investments in the near term to build the business that can earn potentially billions in profits longer term?
Did you have a follow-up, Ryan, or do you want me to pick on that first?
Just on the follow-up, just curious how Ohio, Maryland, very strong starts. Just curious how your marketing strategy since the launch playbook have changed or if they're similar?
Yeah. Look, I think the point you make about the U.S. is a very important one. You know, look, whilst we're very confident that the business will be EBITDA profitable this year, I think people need to be careful that they're not sort of just focused on, you know, getting across the line on that. If you look at slide 18 in the presentation, that cohort analysis, it doesn't require a lot of imagination to see how, you know, when you add in the business that we've acquired this year to that chart, and then you think about what it, you know, what the business starts to look like in, into 2024.
The reason we're talking about, you know, this being a transformational year is you'll see a very significant sort of change in the profile of our U.S. business. Look, we're very excited about it. We've always taken an approach of, you know, focusing on, you know, acquiring as much business as we possibly can whilst we ever have, you know, the rights to CAC LTV dynamics, and that's something that we're doing. You've seen us lean very heavily into customer acquisition this year, acquiring more business, you know, year to date than we did in the first quarter last year.
I think the important thing is that we're compounding the advantages we have in the market. You know, we're continuing to, you know, you know, see higher levels of hold against our handle than our competitors do. The parlay penetration, you know, was fantastic in things like the Super Bowl. The product offering that we have there is the best in the market, and we're continuing to develop and improve it.
We have a structural advantage in revenues, and we know that we are more efficient than anybody else from a customer acquisition perspective. When you start rolling forward those cohorts, I think, you know, yes, we are going to be EBITDA positive in 2023. It's actually when you start looking at the trajectory that business delivers, which I think is very exciting. Jonathan, I don't know if you want to add anything.
Yeah. I'd add a slight nuance to the point made, which is some of our competitors are targeting getting to profitability in Q4 of this year. We've never targeted getting to profitability this year. We said it was a resultant outcome of slide 18. You know, this is not a be all and end all target. We expect it to happen because of the cohorts, but I think Peter's point is absolutely right. People need to focus on 24 and the 25 potential of where this business gets to, because that's the, for us, the, the big story here on the transformation of the earnings profile, the cash flow profile, the deleveraging benefits of 24 and 25, and what that actually means for the group is fundamental.
Look, with regards to the launch in Ohio and Maryland. Look, you know, you will know as well as anyone, Ryan, how complex, you know, these states can be from a, you know, rules and regulatory perspective. We were really pleased with the way in which the team performed. You know, to get to a point where we got sort of 6% of the, you know, adult population as customers of FanDuel in such a short order in Ohio and about 50% of the market was, you know, pretty remarkable. You know, we were clearly leveraging our sort of DFS base hard in the States.
You know, I think we probably, you know, got to nearly sort of, you know, 60%, 70% penetration of our DFS base, you know, in Ohio already, which is a sort of new record for us. Look, I think the team refine and enhance and improve the, you know, state launch playbook with each one that we see. You know, I'm really pleased with the, with the results that they've delivered.
Congrats on the performance. Thanks, Peter, Jonathan. Good luck, guys.
Thanks, Ryan.
The next one is from David Brohan of Goodbody. Please go ahead.
Good morning, guys. Just 2 questions from me, both on the U.S. Firstly, on the iGaming side, I think very encouraging to see the share gains there. Just wondering, where do you think your product sits now versus peers? I know in the past, you know, you had mentioned that the product needed some improvement. Also just wondering, is there any updates you can give on the potential termination in Fox, of FOX Bet and all the stuff this year? Thank you.
Hi there, Nick. Look, I mean, on the in-play gaming side, you know, look, we are the world's, you know, sort of biggest, you know, online casino operator. If you look at our, you know, the strength of our business in, you know, the U.K. to the first invested market, and, you know, those figures that Jonathan just quoted and that, you know, are clear in the presentation, you know, we know how to run these businesses, and we're very successful. Look, we are our hardest critic, and I think, you know, when we looked at the quality of our products in the States, you know, we knew it was not good enough.
We have made some improvements to it, but there's a lot more that we're going to bring to the market. You know, we're very pleased with the share gains that we've seen so far, but, you know, we're not standing still from a product perspective, so we're gonna continue to make improvements, which, you know, we expect to enhance the offering we have in the market. With respect to FOX Bet, look, you know, I mean, it, you know, the... Fox is, you know, a big partner for us.
I mean, one of the things that's worth, you know, acknowledging is that, you know, they were transmitting the Super Bowl this year, and actually, you know, rather than promoting FOX Bet, you know, we, FanDuel, was promoted. You know, I think these subscale operators, very difficult to make money in, you know, the long tail of operators I think are probably struggling as Fox Bet is. You know, we'll review what we do with the business at the appropriate time.
Okay. Thanks, guys.
The next one is from Clark Lampen of BTIG. Please go ahead.
Hey, thanks. Good morning, guys. I've got 2 follow-ups. The first is on the U.S. Peter, you talked about parlay penetration and the product offerings. I think two-thirds of U.K. customers use BuildABet during the World Cup. Is there a stat you could share around usage rates for comparable products? You know, whether it's with the World Cup or maybe NFL activity, just curious what peak usage sort of looks like to level set.
For Australia, the trading comments were pretty clear around early year performance, but I'm curious if you could share thoughts around how what looks like really strong player acquisition could begin to either accrue or I guess, offset some of the competitive headwinds that you talked about throughout the year as those cohorts season. Thanks a lot.
Okay. Thanks, Clark, and appreciate you getting out for early. Look, in terms of your question around the, you know, the parlay products, I mean, look, I think there's a couple of things I'd share with you. I mean, I think, you know, first of all, if I take the Super Bowl, so around three-quarters of our actives, you know, bet on a sort of Same Game Parlay in the Super Bowl. You know, it's pretty high levels of penetration, not that dissimilar to what we'd have, you know, shared around the bet builder for the U.K.
You know, look, as, you know, as Conor shared with you the Capital Markets Day, you know, the in-house pricing is really important there. You know, around 90% of the handle of the parlays is supplied in-house, and that means we get to keep all of the economic benefits associated with it. you know, we believe we've got one of the best products in the market. We're continuing to evolve it and improve it and price more of it, and that means that we capture all of the economics associated with it. Most importantly, our customers absolutely love it. you know, we're seeing really good sort of engagement with them on that.
In terms of Australia, look, I think, you know, the important thing for us to focus on in our business, and it's one of the reasons we use it as one of our important KPIs, is this AMP figure. We, you know, we were very pleased that we're, you know, continuing to grow, sort of engagement in Australia, particularly as, you know, people are able to, you know, live a sort of, you know, a normal life in for the first time in that summer period. If you think about the way the COVID restrictions are working in Australia, you know, back end of 2021, you know, many states were only just coming out of lockdown.
In Q4, in Australia this year, we were really pleased that people for the first time were able to plan overseas holidays and all those things. AMPs were up 13%. We have definitely seen a moderation of engagement. The average player days are down, trending back down towards the levels we saw pre-COVID. That's a phenomenon we've seen in the U.K. and other markets. I think we have got these point of consumption tax changes coming into the market. If you're a smaller operator, and you're making a small profit, I think it'll probably push you into being impossible.
Last time around, we saw a bunch of people reacting and changing, margins and overruns and generosity to try and deal with that. You know, we have the scale to cope with those tax changes and, you know, the important metric for us is to keep driving engagement with our customers.
I think that's probably the critical point, is that we didn't just behave in an aggressive fashion in Q4 because of the competitive intensity. It's also in the run-up to these incremental point of consumption tax changes, 'cause we felt that the strategy that was employed in the business, as Peter said, in the run into the last point of consumption tax or the introduction of this significant point of consumption tax change a few years ago, was a successful one, and we've, you know, we followed that, and I think the team have actually executed really well in Australia in terms of the approach they've taken and the way they've executed.
Thanks very much.
Thanks, Cla rk .
The next one is from Joseph McNamara of Citi. Please go ahead.
Hi there. Thanks for taking my questions. First one's on the U.S. I just need to ask about the Super Bowl. In prior years you offered extremely generous odds to new customers, and this obviously had an outsized impact on Q1 win margins. Am I correct in thinking this year you're saying 71, 70, sorry, 57 to 1 odds, if so, can you explain the rationale and any color on, I guess, the impact for Q1 profitability this year and going forward? The second one is on Sisal very strong numbers there. What should we expect for 2023 as retail comps normalize and any ambition to bring product launches such as DUO and Tipster to other brands within the Flutter portfolio? Thank you.
Thanks, Joseph. Maybe I can take the first thing. You're correct in that we didn't employ the 56 moving to 57 to 1 offer this year. We actually ran a fantastic campaign around the ground kick at halftime, and that really caught the imagination of punters. It also did it through the sort of playoff period as well. We really think we benefited a lot in FanDuel over that whole period. Actually in the sort of playoff stages, we saw activity up, you know, 2/3 year-on-year. We're really pleased with the way that that campaign actually went on for quite a long time rather than just being a one and done.
I think the second thing is that the offer that we put in the market last year, we saw, just short of half of those, punters being effectively one and done, and therefore, you know, we reevaluated the overall economics. Actually what we've seen this year is, you know, really good value coming into the business. We think the offers that we had in the markets were the right ones for driving medium and long-term value. We're very happy with where we ended up in terms of our offer on the Super Bowl and our engagement. Certainly you can see the sort of market share stats are pretty strong through the start of this year in the U.S.
I think I'd just build on that, Joseph, you know, we think that as Jonathan said, you know, the benefit of acquiring customers in the period of time leading up to the Super Bowl rather than on the day itself meant that the sort of the average value of customers we were acquiring was much higher, and we think we've got a much better sort of engaged base. Actually, when we look at the volumes, you know, as I said, we've already acquired more customers this year than we did in Q1 last year. Anecdotally, we think that the change in strategy has been the right one.
With regard to the work we're doing with Sisal, look, we talk a lot about sort of the Flutter, the Flutter act, which is this sort of symbiotic relationship we have with all of the different parts of the group, you know, benefiting and contributing as well. I think if we look at things like from a product perspective, you know, the duty puts us, are definitely things that we are interrogating and making sure that we use those, you know, in other parts of the group in parts that make sense. Likewise, we're also taking things into Sisal as well.
You know, they're already, you know, now using our sort of risk and trading capability, and when cash out was made available from a regulatory perspective in Italy, we were able to sort of do it in a very accelerated fashion because of the capabilities we have elsewhere in the group. With regards to the, you know, the sort of the retail and online performance, look, we are very pleased with how Sisal exited 2022. Fantastic momentum in their core Italian business, the online business, you know, reaching some more sensible levels of penetration, but we believe there's still a very long way to go.
We were definitely helped in terms of, you know, customer acquisition numbers by the, you know, enormous SuperEnalotto jackpot that's, you know, EUR 370 million. We need to see what happens, you know, this year as we operate with sort of more normal lottery jackpots. You know, I think the team have got an excellent capability there in terms of, you know, having 1 million customers a week checking their lottery tickets on the Sisal app and using that as a vehicle for cross-selling people into gaming. I think we're also benefiting in Sisal from some of the international elements.
We're really excited about the opportunities that we see in, you know, Morocco, Tunisia, and of course, the business we have in Turkey as well. Look, it's been a great acquisition for us. We're really pleased with the performance, and we think that they're on a, you know, very positive, you know, trajectory. It's part of what we, you know, gives us real conviction in the turnaround in the international division.
Just adding to that, I think the thing that in terms of the Italian part of the performance that was most pleasing was, you know, when retail came back, we actually, you know, the team were very, you know, looking carefully at the performance of the online business. Actually, we saw the online continue to grow through this period, which I think shows the strength of the underlying product, but also the strength of the omni-channel offerings in that market versus those who are online only. We are really pleased with the way the business performed online with retail returning.
The other thing I'd just say is we obviously highlighted in the presentation, you know, Sisal made GBP 247 million of EBITDA this year. We obviously paid around GBP 1.6 billion for it. It's a sort of 6.6x. We're really happy with this acquisition. We look forward to going to strength from strength to strength. Both in Italy and in some of the international markets where we've got these fantastic positions, and hopefully you'll have seen the presentation and seen a little bit of a deep dive that Peter did on the Italian and international business for Sisal.
Excellent. Really appreciate the color. Thanks a lot.
Thank you.
The next one is from Louise Wiseur of UBS. Please go ahead.
Hi, Louise from UBS. Thanks for taking the question. On the U.S., I was wondering if there's any indication you could give on where you are on EBITDA profitability and margin in the kind of like more mature state, so New Jersey, Pennsylvania. Have any of these states got closer to the long-term margin you expect on the U.S.? The second question is on the consumer backdrop. Has there been any change in the consumer behavior in Q4? I think in the past you said that you were not seeing any impact from the consumer. I just wonder whether that's still the case or if you've seen any change, and if there are any differences between the different regions. Thank you.
In terms of the EBITDA margins, we're not gonna comment on a state-by-state basis. We did give a breakdown, I think, at the interim, around the sort of EBITDA trajectory in New Jersey. Look, I think the most important thing is aligning the chart 18 in the deck with the chart seven, the numbers on 17. You can see the improvement in EBITDA percent from the overall business as we get the top line driving operating leverage and that flywheel effect. Secondly, slide 18, as these contributions from these cohorts come through, the trajectory is very, very clear. We're not gonna comment on a state-by-state basis.
You get into all sorts of questions of allocation of national marketing and this sort of stuff. I don't think it's massively helpful. I can tell you from looking at the trajectory on slide 18, you can see that the contribution's increasing in each of the states and that gives us high levels of confidence of getting to sensible levels of EBITDA in this business going forward, as we talked about in the equity capital markets day. With regards to your question about, you know, consumer behavior, we've seen no discernible impact across our business. You know, the whether it's Tombola or any of the, you know, the brands in U.K. or any other markets, we're seeing no impact.
Okay, thanks.
The next one is from Joe Stauff of Susquehanna. Please go ahead.
Good morning, Peter. Good morning, John. I wanted to ask about Australian user growth. You know, you had AMP growth of nearly 13%. What's the right way to think about that? Is that, you know, in the context of where, say, the penetration is in Australia of the adult populations for, you know, obviously iGaming, is that, you know, or is that, do you read that as customers kinda, you know, trying out your product, or is that, you know, say, new customers, you know, in terms of increased penetration in that market?
Look, Joe, is there anything else you wanted to ask? Was that the...
Yeah. Then I wanted to ask about Sisal and, you know, with the reopening trade and retail kind of more normalized in Italy and elsewhere in, you know, in the world, you know, is most of the growth from here, say, you know, more online within Italy?
Okay. Look, in terms of the two, the two points. First of all, on Australia, look, we have a very, very recreationally focused business in Australia with Sportsbet. You know, it's a, it's a great sort of mass market product. You know, if you wanna have a better understanding of the brand, encourage you to look at the capital markets day we did, you know, which focused on some of the aspects of that during the sort of the COVID lockdown or even have a look at the YouTube channel at some of the creators that they do. They do a brilliant job of sort of activating and bringing excitement to life as they say in Australia.
I think if you look at what's been driving the AMP growth, you know, certainly there's a degree of sort of reactivation, you know, to historical business. Every year, you know, a new cohort of customers comes available to us because they come of age in Australia, and, you know, you know, you know how important, you know, sport is to Australians and, you know, actually having a punt, as they say, is, you know, is a, is something which, you know, a lot of people do for, you know, for fun and recreation. We're the mainstream brand in that market, and that's why we continue to grow to grow our AMPs.
I think that's supported by, you know, our innovative Bet with Mates product, which has been fantastic for recreational bettors, bringing in new recreational bettors, and we've got more products and features coming on that in the near future. Watch this space on that. Look, in terms of, in terms of Sisal, you know, if you, if you look at the chart 36 in the presentation, you can see the very strong growth that is occurring in the online space.
As, you know, as the brand, you know, that has, you know, significant retail presence, we're able to really participate and, you know, and drive that off the back of things like the, you know, the customers who are checking their lottery tickets every week near the million that I referenced. With advertising restrictions, it's very difficult for pure play digital brands to compete against us in the market. Look, online penetration is growing, it's growing strongly and we're, you know, capturing a, you know, a significant share from it.
Look, we're really pleased with the trajectory that we're seeing in Sisal. You know, the application of the Flutter Edge in terms of, you know, getting our knowledge expertise both into the business but out of the business. We were asked the question on DUO and Tipster earlier. You know, there's fantastic opportunities for us to really help drive growth in that market. You know, we've got ramps live in Sisal now. We've, you know, obviously got cash out, which came live very quickly with a lot of expertise from across the group earlier in late 2022. Very excited about the opportunities there to help drive that online growth even faster in Sisal.
Makes sense. Thank you.
Thanks, Joe.
The next one is from Jordan Bender of JMP Securities. Please go ahead.
Great. Thanks. Can you talk about your penetration rates in your more mature sports betting markets in the U.S. and kind of what those growth curves look like? For my follow-up, kind of to touch on the Fox Bet comments you made, you know, breaking out the FanDuel business from the other investments in the U.S., the loss outside of FanDuel was to the tune of about $75 million during the year, which, you know, is a decent sized loss. Maybe can you talk about how that non-FanDuel loss might look in 2023? Thank you.
Yeah, look, in terms of, you know, penetration rates, I mean, you know, you'll have seen that all of the states publish, you know, market share data. On a state by state basis, we're continuing to perform very well, even in the states which launched very early days. Of course, you know, we're performing very well in the states which we've only just launched. If we look at our, you know, performance in states that, you know, we've been in some time, we're continuing to see good performance there. We're still growing, you know, up 24% in staking in states that we launched in pre 2021, and revenue is up 42%.
You know, the strong performance we're seeing in the US is not just being driven by, you know, recently launched states. I think, you know, the product is, you know, the benefits we have are compounding, right? You know, we're continuing to see improvements in our revenue performance. We're seeing more efficient marketing acquisition, and we're able to reinvest that in having better products, better generosity, driving wallet share, driving further customer volumes and really getting that flywheel powering.
In terms of the loss, you know, in terms of Fox Bet, you know, obviously as you said, you know, Fox Bet, Fox Bet plus PokerStars, we need to remember that is the that we're talking about the 3% of revenues and 30% of loss. Yeah, that GBP 75 million would expect between half and two thirds of that to go away if Fox Bet is no longer operational. The question is how much we want to invest in PokerStars and the fact that we've got shared liquidity across multiple states now.
How much do we want to try and drive that growth and try and build that liquidity? Again, we'll have an equation of how much do we invest to grow and build that liquidity pool versus how much do we decide. It'll depend on the local TVs in those markets at that time, how aggressively or not we invest behind the PokerStars liquidity pool.
Great. Appreciate the questions.
Thanks, Jordan.
The next one is from Kiranjot Grewal of Bank of America. Please go ahead.
Hey. Hey, morning. Lastly just on the U.S., could you give a bit more color on the cost breakdowns? Clearly, marketing's being leveraged, and we'll probably see more of that next year as you go towards possibly pick up. Wanted to get a better sense of other OPEX. It looks like it was up over 60% year-over-year. What's driving this increase, and should we see a significant leveraging of that as we move forward? The second question is it's sort of building around the AMP question that came up earlier.
You've also spoken a lot about focusing on the recreational customer. I think some of your peers are also targeting a similar cohort. Given there's a lot of focus on this, I mean, where are you winning your customers from? Is it fr om competition? Is it increase in proportional population betting overall? I suppose this relates a bit more to the mature markets. Thank you.
Thanks. I'll take the cost question. Clearly, the business is scaling up in the US as we, you know, build out a lot of the functions to get to that sort of sustainable level. There are some, you know, we've got a range of different cost drivers in the business. We've got some cost bases which are relatively variable. You know, as we expand states, we'll, for instance, take on compliance and legal teams to ensure that we're able to comply with all of the new rules and regulations around each of the individual states. We will get variable costs in those.
We've got areas where we've got fixed costs, and that includes areas that, you know, sort of like finance and other areas like that. You know, the big increase that we've had year-over-year in terms of the cost basis is about two-thirds in terms of staff costs as we scale up. you know, there's actually within that we have the California lobbying costs, so there's some extra costs in the year. those will obviously drop out as we go forward. you know, we feel as if we're getting the business more towards where we need it to be, and then we'll have scaling costs associated with certain functions.
We're also clearly looking at where we can take, part of my new role as COO, we'll be looking at where we can take learnings and ways of doing things across the group and drive some effectiveness and efficiency into operations across the group. You know, the U.S. are clearly focused on making sure they build their cost bases in a very effective way to be able to service the customers at the right cost base. Yes. Look, Grewal , in terms of your question around AMPs, you know, I think it, you know, it's pretty straightforward for us, really.
You know, we have been very focused on the recreational space for a long time. We've got products which we think are very well suited to it and invest very heavily in them. If I look at the UK, for example, you know, I'm really pleased with the way in which we've been able to, you know, use our new products for that in, you know, gaming, in terms of the Wonder Wheel for Paddy Power, some of the changes we've made around Bet Builder for Sky Bet. You know, bringing, you know, fantastic quality innovation to the market.
It's helped us grow our AMPs because people are sort of really engaged with those exciting products we bring. When I think about 2023, you know, look, we definitely sort of sharing, you know, in Q4, you know, you can see that with a, you know, very strong performance we had relative to the market. I expect us to continue to take share in 2023 by growing the top line. you know, the great products we have are translating into growth in AMPs and other people in particular sort of capturing it with some of the stuff we've done a long time ago in safer gambling. I think, you know, we're, you know, really seeing the benefits of our strat egy comes to bear.
Perfect. Thank you.
The next one is from Daniel Politzer of Wells Fargo. Please go ahead.
Hey, good morning, everyone. A couple on the U.S. First, Maryland and Ohio, you guys are quickly off to, you know, 50%+ share there. One, I wanted to see what you kind of attribute that early success to. Are there changes in the market, changes in your loan strategy, and also, you know, just changes in the kind of competitive and promotional environment? The second one, your whole benefit in the second half of the year, I think it was 8.5% net revenue margin, which compares to cost, you know, 6% and change in prior years.
I know that there was a little bit of, you know, favorable hold, but also your structural margins have improved. I guess on a go-forward basis, kind of what's a good range to think about, and how should we think about kind of the breakdown between what was favorable sport outcomes and what was a structural improvement in second half? Thanks.
Look, Daniel, I mean, you know, I, you know, when I look at the Maryland and Ohio, I'm very proud of what the team has done. I mean, terrific job. We get better and better with each state launch that comes along. Think about the capital markets day and the stuff that, you know, that Mike and the team talked to you about. You know, we are, you know, shifting spend towards national advertising. That helps. We're getting more efficient around our advertising and effectiveness. Really we're able to capitalize on our DFS base.
Very high levels of penetration in Ohio, which has naturally helped. You know, our offers, our refer a friend, all the different components of the strategy, and as well as having the best products, right? We know, we're really pleased with the performance that we saw in those two states. Jonathan, do you want to talk about the margin?
Yeah, sure. I mean, year on year, when you look at the mixture of luck and promotional spend, those two things sort of net out. Most of the uplift year on year was actually improvements in structural margin. you know, we feel good about the 12% number that we talked about for gross win at the equity capital markets day, and we're on a trajectory to move towards that. you know, we do expect further improvements in our gross win margins going forward as we get improved pricing accuracy, improved levels of RLA. We're confident in the sort of medium-term target that we put out there.
Got it. Thanks.
Thanks, Daniel.
The next one is from Richard Stuber of Numis . Please go ahead.
Hi. Good morning. Two questions for me, please. 1 on safer gambling and 1 on Australia. In terms of safer gambling, I think in the presentation you said that 40% of customers use the tool. Could you split out in terms of what percentage of customers use this tool in the U.K. and what use it in the U.S.? A follow-up on the on the U.S. side, are you starting to see opposition to marketing and advertising in the U.S., or are the comments coming out of New York more of an outlier as opposed to a general nationwide consensus?
The second question is on Australia. I think you saw EBITDA margin fall by maybe 300 basis points because of the competition and the COVID reversal. Would you expect margins to return, this year back towards previous levels, or do you think now this is the new norm? Thank you.
All right. Look, you know, I think it's, you know, if I, if I look at the two markets you referenced there, I, you know, I'm really pleased with what we've done in the U.K. You know, we've directly invested ever sort of GBP 65 million across the U.K. to support, promote, and educate safer play. There's lots of proactive measures that we've implemented as part of our Play Well strategy. You know, we've taken a, you know, a leap to GBP 150 million revenues out of the business. You know, the stuff that we've done, you know, the deposit limit to GBP 500 for all U.K. customers under 25, the GBP 10 limits on slots.
You know, these things are not always included in some of the Play Well tools, right? I think that the team are doing an excellent job and, you know, we've got safer gambling targets and the bonus schemes for all colleagues, which I think is really important. I think that the U.K. team are doing a terrific job, and we're definitely sort of leading the race to the top. When you think about, you know, the fact that we set those Play Well targets for the group, as America, which is now our biggest division, is going to have to play its part, and, you know, clearly, you know, to get to our 75% target, you know, we're gonna need the Americans to be at least at that level. There's loads we're doing there as well.
You know, we have been working very carefully with the leagues, the teams, the media partners to develop codes of conduct. We've actually done some terrific work with them around advertising, which we think will try and take some of the heat out of potential problems with advertising. You know, we're obviously watching very carefully with the developments we see. You know, because it's America, we've got our safer gambling ambassadors who, you know, which are very important voices to get out there.
You know, they're not just, you know, our customers are not just hearing from us. We've actually managed to help lead the industry in the development of 12 common principles around safer gambling, leveraging some of our experiences in the U.K. and other markets. There's a lot going on, but you know, ultimately, you know, the States are gonna play a very significant role. Jonathan- What about Australia?
Sure, Richard. In terms of H2, we obviously, as you said, we're at sort of 26% EBITDA margin. We'd expect that to improve, probably around 3 percentage points year-on-year. We've got some non-recurring marketing of around GBP 7 million in H2. You know, we're obviously very aggressive in terms of generosity, and that obviously has an impact on cost of goods sold as well. We've got other areas we think we can make some efficiencies, so we'd expect that to help offset some of that POC impact, so we'd expect to be in the sort of high 20s as a sort of rough guide for this year.
That's great. Thank you very much.
Thanks, Richard.
The next one is from Andrew Turnbull from Redburn. Please go ahead.
Hi, Andrew.
Hi there, sorry. I just wanted to follow up on what's happening in terms of the online space. Are you able to share anything in terms of trade and margin differential between the retail business and the online segment and just in terms of that growth dynamic there?
Yeah, look, we know Andrew, that when we have customers in online, particularly if they've migrated from retail, we've seen much higher levels of margin from them. If you look at slide 37, you can see some of the benefits we see from, you know, from online. It operates at a higher online EBITDA margin, sort of 40% as opposed to the retail EBITDA margin. Our retail business is slightly unique. You know, these are not all sort of owned and operated stores sometimes it's sort of commission, we see a sort of slightly different sort of fall through.
You know, the online business that we're acquiring is much more sort of EBITDA positive for us and we'll, you know... We're not actually sort of migrating guests from retail to online. We actually think growing our penetration significantly in online. Yeah, obviously with the marketing restrictions in Italy, we don't spend very much marketing, which obviously helps the level of profitability in the online business.
Got it. Got it. Just a second one, just in terms of the guide towards the higher depreciation in 23. I think there were some comments around some offsets to that in terms of U.S. tax losses. Can you just clarify just the size of what some of those offsets could be?
Sure. You'll need to look at your model and work out what you think the profitability is and then therefore work out what you think the offset is. Because the offset, obviously carrying forward per the earlier question on NOLs, you know, you need to work out what your taxable profit is and therefore what the tax benefit is from the carry forward losses, which are, as you'll recognize from our losses over the last few years, quite significant. I'll leave you to, you know, have a look at that and maybe chat to the IR teams, probably the best way to get through that.
Obviously the, you know, some of the depreciation increase is about making sure we've got pro forma, making sure we get all that Sisal in. Remember, some of the Sisal is around the concession. You know, you do get an uplift there from depreciation, amortization and all that. You know, I'll leave you to work through that with the team. We feel pretty confident about the offsets.
Got it. Okay. Appreciate it. Thank you.
Thank you. Look, I think that's the end of the questions this morning. Thank you very much to everybody who's dialed in. Particular thanks to Jonathan. This is the last time he'll be sat next to me, I believe, with the results. Don't look so happy, for those of you who are dialed in and can't see in person. Jonathan, thank you. I really appreciate everything you've done over all the years to help us, and look forward to continuing to work with you to help deliver this stuff at Edge.
Indeed. Thanks.
Thank you all.
Thank you. Everyone, that concludes your call for today. You may now disconnect. Thank you for joining, and enjoy the rest of your day.