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Hey, good morning, everyone. I'm Dan Politzer, J.P. Morgan Gaming and Lodging Analyst in the U.S. I'm joined today with Estelle Weingrod, the European Gaming and Lodging Analyst and Leisure Analyst here at J.P. Morgan, as well as we're thrilled to have the CEO and CFO of Flutter Entertainment. That's Peter Jackson and Rob Coldrake here today to join us. I think that we can kinda get it started, you know, kind of high level. I'll focus on the U.S. and then Estelle will run through some of the international questions. I guess, you know, Peter, Rob, whoever wants to take it, if we just kinda start high level.
You know, in the past six months at FanDuel, can you kind of walk us through what in your view has gone right, what has gone wrong, and can you talk through the changes in your approach or execution, whether it comes to any new products or the manner in which that you're promoting?
Yeah. Good morning, Dan and Estelle and everyone who's on the call. Thank you so much for having us. I'm not gonna go through all of the history of Q4 for FanDuel, but, you know, we know that we didn't operate as effectively as we should have done. We exited 2025 with a smaller business than we would have planned to have had. You know, the issues, particularly around generosity, were a problem. We saw very high margins in Q4, which, you know, to some extent supports our view of where our gross win margins can get to, but we didn't execute well on generosity. We ended up starting this year with a smaller customer base than anticipated.
Look, those challenges are well known, and we've talked about them. I think that we have then subsequent to that this year, we've been focused on three things which we're doing to face into it. The first thing that we've that we've done is we've made some changes to the organizational structure. We announced new leadership of FanDuel last week, but we've also got revised structure underneath that within the commercial functions. We have Karol leading the sportsbook with all of the capabilities he needs.
There's a, you know, there's a bunch of other sort of organizational changes that we've made, which I think really will sharpen our focus on execution and delivery, which ultimately has been, you know, one of our challenges. What have we done, what are we doing about it to get ourselves on the front foot? I do feel like we're getting a little bit more onto the front foot. I think the first thing is that we talked about the success we've had in loyalty in our gaming business, and that's something we've now brought into sports. Belatedly, but, you know, we've now brought it into sports. We've rolled it out, in April.
Obviously we're, you know, effectively, you know, one month in for a sort of cycle through, for small cohort customers. I think, you know, you know, the reason we're feeling good about it is we've got customers, you know, beating the door down, wanting to be included in the loyalty program. It feels like we've, you know, really, you know, identified something that we need to address. By the time we get to the start of the football season, that will be fully rolled out across all of our base. I think will give us a really good mechanism for being on the, you know, on the right side of the discussions we have with our customers around generosity, particularly when margins are moving around.
The second thing that we know we did last year was we watched a number of people come into the market with products around, you know, protecting players when, you know, protecting sort of customers when players got injured. We had, you know, an okay offering, but we've come out with BetProtect+ , which we think is the market-leading product now, charging customers a small fee for that sort of insurance. We're seeing, you know, a much bigger uptake for that product than we thought. I think the final thing that the team are doing is we've just got a much better sort of focus on our trading and the sort of the cadence of getting stuff out into customers' hands.
You know, we're thinking about, you know, taking a much more customer-centric, back to basics, you know, approach for customers. Look, when we got injured, we were out there refunding customers. I mentioned on the call last week, we had a bit of fun when the Mets were on their losing streak. You know, we're tapping into the sort of being a bit cheeky, you know, into the sort of where the conversations flow from a customer perspective. I think that's really important. We're seeing sequential improvements in our KPIs, which I think is, you know, giving us, you know, conviction that we're focusing on the right thing. I think, you know, I would, you know, answer your question about what's gone right with gaming.
You know, I think we're very pleased with our performance in gaming. Obviously seeing strong growth in the first quarter. That was despite having a smaller sports base to cross-sell into. You know, our performance actually amongst direct casino customers I think was up sort of around 24% year-over-year. You know, that part of the business is performing really well. I think, you know, we've got really good traction in there. Of course, like I, you know, the other thing that we should also recognize is the progress we're making on prediction markets as well. I'm sure we'll end up spending more time talking about that.
Thanks. I guess if we're sitting here having the same conversation six months, you know, what are some of those KPIs or metrics or things that you'd wanna see the team having achieved with Christian and Dan now in the leadership seat?
Yeah. I'd like to see us continue with this focus on sort of execution, right? In six months' time we'll have fully rolled out the loyalty program. I think we'll see this injury stuff will have stuck, and I think we'll be much more on the front foot from a sort of trading perspective. This customer-centric approach I think will be something that we'll really lean heavily into, and I think we'll see the benefits of that in our KPIs. Of course, we also, I'm sure we'll continue for looking six months into the future. I think we've gotta keep the momentum going in iGaming as well.
I think, you know, we're at the cusp of quite an interesting point on prediction markets. You know, when I think about the opportunities we have to be able to go after supporting, you know, the FanDuel customers wherever they are in America with a great sports experience. We're, you know, the customer delivering that. We're, look, we're making money in market making already, so that's, you know, we're probably one of the few people who's making any money out of prediction markets at the moment.
That makes sense. I mean, I think this is probably one of the most prolific topics, but maybe not your favorite, is the handle discussion, right? Industry handle in the U.S. it's obviously decelerated. What do you attribute this slowdown to? Recognizing prediction market cannibalization, it does seem to be generally understood to be fairly modest. You've also talked about handle trends improving from down 10% in January to growth in March, ex March Madness. I guess, can you give us a sense on what's been happening overall with handle and maybe any sense on April or May to date trends, and how you envision it, kind of the trajectory over the rest of the year for handle?
Yeah. Why don't I answer the first part of that, Dan, and Rob can talk a little bit about recent trends and how we're thinking about the full year. You know, I think it is important to recognize that when you're looking at handle performance year-over-year, you've got to acknowledge that big swings in margin have a big impact on what you see in hand. You know, it's been a particularly noisy two quarters for the industry when you think about Q4 and Q1. You know, we saw in Q4 2025, we saw, you know, particularly strong gross win margins in NFL, which contrasted with, you know, low for the prior two years, right? You know, consumers suddenly saw a big flip in how they were feeling about their wagering from NFL.
Look, and, you know, if margins went, you know, if margins move from, you know, 10% - 20%, right, and it halves the amount of handle you generate. It's, this is really material, right, in terms of the, you know, the impact it has on handles generated. Then again, you know, this year, you know, we actually made good margin in March Madness, and last year we made, you know, on $1 billion of handle, we made nothing, you know, less than $10 billion. It's, you know, to try and get sort of too forensic about what's happening, you know, month -to -month, it is tricky 'cause there's a lot of noise. you know, I think that we saw the market delivering good growth last year.
I think there are questions around whether it has slowed down at all, you know, in, you know, going into the back end of the year. I think it's hard to read it. I think we'll know more as we get into the back part of this year. You know, Rob.
Yes. I think as we've said consistently, Dan, we tend to think about handle as one component of revenue, but we're looking at a broader set of KPIs. As Peter alluded to, it's fair to say that at the start of the year we had some softness in the top line coming out of Q4 and some of our execution there. As we move towards the end of Q1, we certainly saw some improvement in March. We saw AMPs coming back onto the platform and some positive year-on-year movement in terms of AMPs, which we've retained into the NBA playoffs, which is encouraging.
We've also seen, you know, some improvement in handle over that period, and we're getting some real good engagement behind NBA, which is clearly one of our key sports, actually our top revenue sport when you look calendar year round. We're feeling, you know, reasonably sanguine about some of that underlying improvement we're seeing in the end of Q1 and into Q2. When we think about that through the rest of the year, as I mentioned on the call last week, we've baked in a graduated improvement through the year. It's not heroic assumptions, it's a gradual improvement, and we've got a number of product and generosity initiatives landing over that period.
By the time we exit Q4 this year, we're looking at a modest handle improvement year-over-year, which we think is very achievable given the product and generosity improvements we've got in the pipeline.
Got it. That's helpful. If I think back to 2024 in your Analyst Day, one of the things that really stuck out to me was this kind of formulaic 16% structural margin, 4% promotions equals 12% net win margin, right? That was, I think, you know, kind of the goal to where you'd get to. I think that in Australia, the kind of formula there is 18% structural win, plus 6% promotions gets you back to, I don't know if it's a magical number of 12%, but for whatever reason it's 12%, too. I guess as we sit here today, you know, the way, you know, I think the first quarter your structural hold was down a little bit just because the sports mix.
Like, what is kind of the path to getting longer term to that 16% minus 4% equals 12%? Is it different formula that gets you to 12%? I guess, how do you get there? How do you think about that kind of formulaic dynamic in terms of promotions, and overall win margin?
There's probably a few key parts to this that we should touch on. One, as we've seen and experienced throughout the world is parlay penetration. We're expecting that to continue to improve this year. We don't think we're at the ceiling yet in the U.S. We think there's definitely some room to go in terms of parlay penetration. There's obviously been some sports mix dynamic in terms of results, and that's kind of carried into the first half of this year. We expect that to be more temporary and transient in nature. I mean, for us, getting the right balance between structural hold and net revenue is kind of the key barometer that we look at, and obviously a key part of that are our promotions.
If we look back at last year, it was very evident, you know, with the benefit of hindsight, that we were slightly inefficient in our generosity approach and laid out of generosity last year. Actually, as we come into the second half of this year, we'll be comping that and, you know, be slightly easier comps for us as we get more efficient with our laydown. Add to that the new loyalty scheme which we've launched, it seems to be getting good traction initially. It'll be in full flow by the time we get to the NFL. The fact that we're trialing our model-driven generosity that's been delivered in Sportsbet. We've got our team from Sportsbet over working with our FanDuel team to make our generosity deployment more efficient, so we get more bang for our buck in the U.S.
That all gives us a high level of confidence that we can hit that 16%, 4%, 12%. You know, whether it's 16%, 4%, 12% or 16 .5% , 4 .5% , 12%, or it's, you know, 17%, 4%, 13%, we're very confident that's gonna grow from where it is today. I think from, you know, a handle perspective as well, we're confident, as I said in answer to the earlier question, that we're gonna see some sequential growth as we move through the year given some of these initiatives that we're putting into play.
Even in a world where you have those, you know, net win margins of 12%, handles should theoretically still be growing at some level. Is that a fair assumption?
Yeah, absolutely.
Fair conclusion from that?
We don't think we've reached anywhere near the maturity of penetration in the U.S. market, which absolutely gives us confidence that there's still headroom to grow on the top line.
Okay.
I mean, Dan, we've seen similar situations in, you know, in penetration rates in markets like the U.K. where sort of penetration rates have sort of slowed down a little bit and then actually, you know, they've driven back up again. You know, when people have, you know, developed some, you know, better engagement, you know, interfaces for, you know, more recreational customers and things like that. I'm sure we'll see similar things happen in the U.S.
Okay. This is more near term, I think it would just be helpful for all the listeners. Just the second quarter EBITDA guidance, the implied guide is about $104 million of EBITDA at the midpoint. Is there any way to just walk us through the moving pieces? If we start at the second quarter of 2025, I think your EBITDA was around $400 million. Can you maybe bridge us to where the $300 million year-over-year decline comes from?
Yeah, sure. The first point I'd mention here is that nothing's materially changed from our perspective. We always assumed that Q2 this year would be a little bit lighter from an EBITDA perspective than Q2 2025. There's a few things to bear in mind. First is sports results. Last year we had about $90 million of positive sports results in the numbers. That's $90 million revenue, $70 million EBITDA. We've got the Arkansas launch this year, so we're factoring in about $20 million of investment in Arkansas. We're also factoring in investment in prediction markets. You know, roughly we've got tagged about $60 million-$70 million for prediction markets in Q2.
As we mentioned on the call last week, we've now got PokerStars North America in the U.S. numbers, that loss is slightly skewed towards Q2. That's in there as well. You've got some smaller factors such as the annualization of some of the tax increases that we saw last year. When you roll all of those up, they form the majority of the bridge year-on-year. You've got a bit of a mix impact where we've got more iGaming growth coming through this year relative to sportsbook, and that has a bit of a change in the mix. Probably the last point to mention is the World Cup, 'cause I think there's a bit of a misconception in some parts that the World Cup's a huge profit-making machine for us.
We view it more as a customer acquisition event. We're very excited about it, we think we're gonna get great engagement from our customers, and we think we're gonna get new customers as well around the World Cup. You know, that doesn't tend to drive incremental EBITDA. We put a fair amount of investment behind it from a marketing perspective as well, some of which will be in Q2. They're the main bridging elements. As I say, nothing's really changed with regards to how we're thinking about Q2. That's not a recent change.
Does the second quarter embed much organic growth in there?
The second quarter has got organic growth in iGaming. From a sportsbook perspective, we're still modestly behind last year from an underlying perspective. I say you've got those other factors that I mentioned on top.
Got it. No, I appreciate the clarity there. And then a lot of your call last week had talked about sequential improvements. It does sound even this morning like the worst is in the rear view for online sports betting. Recent data points have certainly been a little bit more positive. Can you maybe give some of those monthly KPIs that give you confidence in that kind of full-year guide and, you know, how the team is executing? It's just one of those things, this is the last question, I promise, on at least this year's guidance. If we just kind of think about the first half of the year, I think revenue growth, revenue's declining about 8%, trying to adjust for hold. The second half implies somewhere in the mid-teens revenue growth.
You know, it's just kind of a big difference. I mean, is this just that sequential improvement kind of those sequential improvements gaining momentum, or is there something else embedded in there with the comparisons?
Yeah. There's a couple of factors to bear in mind. One factor you didn't mention there is actually sports results year-on-year. When you look at 2025 as a whole versus our expected margin, we were at $200+ million underwater from our expected margin based on sports results. A lot of that was in Q3 and the start of Q4, that will actually naturally come back this year if we're on or around our expected margin. When you look at top-level handle improvement year-on-year, the phrase I'm using in terms of our assumptions are they're not heroic. Actually, we started off the year with a slight downgrade year-on-year in terms of revenue from and that was the overhang from Q4, as I mentioned.
In Q2, we still think from a Sportsbook perspective, handle's going to be slightly negative year- on- year. As we get into Q3, we expect it to be more neutral, and that's then into modest improvement in Q4. If you zoom right back out and think about our assumptions from a net revenue perspective, iGaming's in the mid to high teens, which we're hitting that run rate and we're feeling very confident about, and our direct acquisition strategy continues to work pretty well for us. From a Sportsbook net revenue perspective, including the luck element that I talked about before, we're at high single digits or just into double digits, if you, if you exclude the luck.
All of it feels very achievable, and that's also underpinned by some of the generosity efficiency that I talked about, where we were slightly inefficient last year, and we've got a bunch of efficiency measures coming into play on our generosity playbook this year. The last thing I'd also mention is OpEx. We're really laser-focused at the moment in terms of cost discipline. We will be driving more leverage as we go through the year. We've also been looking very closely again at our cost of sales, and there's a number of initiatives around cost of sales which will take hold as we move into the second half of the year and we'll be lapping slightly easier comps. We're feeling pretty sanguine about the guidance. As we've said continuously, we think it's a sensible, measured guidance for the full year.
Got it. I recognize this is not the forum for 2027 guidance changes, and I'm not gonna ask what that might look like. I guess if we just think about the moving pieces from when you talked about how you envision 2027 to versus, you know, where you are today, you know, a lot has changed on the tax front, and certainly, you know, even in the fundamental picture. I think it would be helpful if you can kind of walk us through what's been tracking better, maybe than what you had originally forecast as you were thinking about 2027, what's been, you know, and where there's maybe room for improvement.
What are the other big kind of moving pieces that just you couldn't necessarily forecast, like taxes and maybe a few other things?
Yeah. I mean, as you say, Dan, we need to trade out this year to see where we are from a timing and a phasing perspective. If I reflect back on the foundational blocks that we laid out at the Capital Markets Day, I mean, firstly, you've got the structural revenue margin, where we said by 2027 we'd be at our 15% target and longer-term 16% that we talked about earlier. We're very confident about that. We continue to see improvement in our structural revenue margin. We've got that playbook from the rest of the world, and we're very confident in terms of our delivery in the U.S. From a map expansion perspective, we said 2% a year on the Sportsbook. We've been hitting our straps on that. I think it's quite interesting with the emergence of the prediction markets.
I think if anything, they should have a net favorable impact in terms of the cadence of new Sportsbook states over time. From a map expansion iGaming perspective, we said one new state in the next three years. I think there's some good pressure building around that, and the monies that we're investing behind the super PAC are laying some good green shoots for us. I think, you know, in time we'll have some progress on that front. The performance of our iGaming business has been stellar, and that's actually ahead of our expectations, and we continue to see headroom there. From an operating leverage perspective, I think trust us on our track record there. We've delivered good operating leverage around the world.
As Peter mentioned earlier, we've got some plans that already we're putting into play in the U.S. this year, and we'll continue to get that operating leverage over time. We've demonstrated on, you know, through the P&L and things like sales and marketing, we will get that over time. You know, I think to summarize, we're probably slightly behind where we thought we'd be from an overall sportsbook perspective, and that's Politzer's right. I think judge us at the end of the year as we've traded out this year, and we'll be able to give a bit more color in terms of where we are on timings.
That's fair. iGaming, that's been obviously a big bright spot for the company. You know, your market share is up. You've been gaining AMPs. It's an interesting dynamic as we look at it because, you know, you've been gaining a lot of momentum. One of your other competitors has been gaining momentum, there's another two that have been losing a little bit. Can you maybe talk about what you're seeing across the competitive environment? Is it a product differentiation that's driving this dynamic? I guess, how do you think about overall industry growth in the coming years, acknowledging, Peter, your comments on the call that you can't just underwrite 30% growth in perpetuity?
I do think it is important to think about iGaming and compare it with sports. There are some fundamental differences. You know, I mean, in sports, you're subject to someone else's calendar, right? There's a World Cup for soccer this year, and, you know, the football season starts on a certain day, and you may get this many games in the NBA playoffs, et cetera. In gaming, you make your own calendar, you know, and you have your own opportunity to drive that, particularly amongst the direct casino customers. That's been a real area of focus for us. I think the team have done a great job of executing around delivering exclusive content.
I think the loyalty program is working really well for us. We just got to the sort of second year anniversary of that. Just getting all the basics, you know, right from a customer perspective. I think in a very, very competitive environment, and it has been very competitive, you know, I think, you know, the team have performed very well. You know, it makes me feel old because I can remember when we first launched our original casino operation in New Jersey, you know, back in 2013. Look, we're still growing, right? You know, you look at the growth rates in New Jersey, and it's because the penetration rates have still got a long way to go, right?
You know, we're sort of, you know, on a, you know, there's still another sort of 50% headroom really, you know, on penetration rates. I think, you know, growth isn't gonna be at the sort of 38% we delivered last year. I think, you know, as I've said, we can't underwrite that forever, right? You know, we are expecting high teens growth this year. You know, Q1 would've been higher were it not for the fact that, you know, we came in with a smaller sports base, which has impacted our sports cross-sells. Look, you know, if I look at our international business and maybe as a plug for what we're doing in, you know, in our international business.
You know, a lot of very mature, so-called mature markets there. You know, we still grew gaming 15% in Q1, right? You know, I think, you know, iGaming is exciting. I think there's lots of sort of structural tailwinds. You know, it's the 1 area where, you know, U.S. consumers spend time going to physical casinos, and this is the sort of natural conversion for them from, you know, land-based to online. Look, you know, we're super excited about, you know, new states coming on stream. You know, one of my favorite stats is, you know, when the day comes and we get iGaming in New York, it's a bigger opportunity than sports betting in California.
Interesting. Yeah, I guess that makes sense. We'll see. As a native New Yorker, I'm skeptical on the timeline. All right. Let's move to prediction markets. We wanna make sure obviously we cover that. There's a lot of ground there. I mean, look, it sounds like market-making has become an, you know, a very quickly and quickly profitable emerging kind of area that you're talking a lot more about, as well as your peers. As you think about overall the prediction market ecosystem, where do you see the greatest opportunity just given your skill set, given the background and kind of the competitive advantages you bring to the table?
I think it's important when we look and talk about this just to make sure we're all sort of, you know, in the same place from a sort of language perspective. When we talk about market-making, we're actually on principal risk. It's actually no different really to a lot of the bookmaking activity we'd undertake for a regulated RSB. You know, where again, we're sort of taking principal risk. We can leverage a lot of our pricing accuracy capabilities in both areas. You know, there's a natural opportunity that, you know, the businesses that are best placed like we are, and have the highest gross win margins ought to be very good in the sort of, you know, the market-making opportunity and predictions.
That's why we're leaning in heavily into it, where we can particularly leverage our capabilities around parlays to get into the combo space. It's, you know, that is an area where we have a lot of expertise. Of course, you know, as you were saying, Dan, you know, look, we're making money there already. There's no complexity around sort of, you know, managing sort of lifetime value of customers. You know, we can switch it on, we can price it, and we can immediately make money. There's a lot of opportunity there for us, which I think is exciting. You know, there's very little of that in our guide for the year ahead.
I think when you then look at what are we doing with the core sort of Predicts, you know, customer acquisition funnel, what's the point in that? Well, you know, now that we've got our unified app in place, right? You know, if you open your FanDuel Sportsbook app when you travel to Florida or California that you're using, you know, in Manhattan today, Dan, you'll find that the Predicts product launches in there now, right? We've got that unified experience for customers. We will soon have an sort of integrated experience. Our Predicts product will look very similar to what we do from a sports standpoint, albeit the catalog will not be as extensive.
We want to make sure that we are there for our customers wherever they go in America and focused on delivering great sports experiences for FanDuel customers. It's principally around sort of customer acquisition, and that's how we're thinking about it. Ideally, you know, we'll be acquiring lots of customers in the States where we'll be able to ultimately launch regulated RSB, which is what, you know, what our sort of true north still is for this business.
Is there a scenario where at some point you're gonna be disclosing some of the prediction market volumes or trading activity or any of those metrics explicitly?
Look, we need to think about what we're going to do from a disclosure perspective. I think, you know, at some point it's going to be helpful for people to understand how to translate between the difference of volume metrics. Of course, you know, a $1 million of, you know, handle in a sort of RSB at odds of $8 million to $1 million translates into sort of $8 million of volume in prediction markets. It's not all apples to apples with some of the comparisons that people see. You know, look, we're thoughtful about what are the right metrics that we can have to talk about what we're seeing in our business and the different parts of it.
Is there any way to think about that opportunity over time for market making? Obviously, it's early days, publicly, we only see big volume numbers coming out of the prediction market operators, so it seems like a ripe opportunity. Obviously it's profitable, so it seems like a bright spot. I don't know if there's any way kinda longer term to think about it or frame that opportunity.
I'm, you know, I am excited about it. I think for us the opportunity is in the combo space. You know, and I think that, you know, you'll have seen from some of the public commentary, from Tariq around what's, you know, Kalshi would do. You know, what proportion of their business is combos. And, you know, you can work out, you know, what would be a reasonable share of that for us to take and, you know, what would the margin be. You know, you can get to some big numbers, right? To some extent, if the VCs are pouring money into customers' pockets and then we can take that through the combos, we'll have it.
Right. That makes sense. It'll be interesting to see how it plays out. For the direct FCM license, how do you view the strategic optionality of having that? Is this something, you know, you would do alongside the CME partnership, or is it a kind of independent endeavor?
Look, we need to make sure that we have the right flexibility in our operating model to adapt to this, you know, environment, which is moving very quickly. I mean, it wasn't, you know, we weren't talking as excitedly about market-making, you know, such a long time ago. We're now live in the market. You know, I think, you know, the strategy for having a unified app is the right one, but, you know, that wasn't always clear to us. You know, we're there and we've got it in place. You know, we'll adapt to make sure that, you know, to make sure that we can win for our, you know, win in this space. You know, we're working with the CME to ensure that we're aligned on what's required for our partnership to be a success.
You know, the, you know, CME obviously gives us access to their leading financial market products and capabilities. You know, we, you know, as part of our relationship and agreement with them, you know, we can use other venues for sports in certain circumstances. If they don't have the coverage that our customers need, we can go to other venues. You know, that's, you know, that's something that we're looking at to make sure that we can, you know, deliver a good experience for our customers. You know, an FCM license application provides us with further optionality. You know, we're just making sure that we're, you know, we're there in this rapidly evolving environment to win. You know.
Have there been any limitations in terms of the partnership thus far, in terms of just the getting the product out there that you wanna have? You know, what are kind of the advantages as you think about to kind of more owning the rails, so to speak?
Well, I think you need to look at the, this product in three ways. I mean, you know, I think we're gonna be able to make money through market-making, which is something where we can leverage all of our sort of core pricing and trading expertise, and that's something where we've got a lot of, you know, experience there. We, you know, we've developed and deployed a reasonably early prototype from a product perspective that will soon have our fully fledged platform live. You know, really I think you've got to distinguish between what the user experience looks like within the sort of unified app. It's very clear to us that we want to launch an experience that looks very similar to the FanDuel Sportsbook, right?
We know that that's what, you know, people know and understand and like using. So, you know, we're on our way to, you know, with a sort of unified code base to be able to deploy that. Then when we find things that work well, you know, everybody gets the benefit of them. You know, that's something that is actually independent of the rails that you operate on. I think the question is whether you are able to sort of stand up the breadth of market, that you know, that whether we can sell at the breadth of market that we need with our relationship with CME. That's where I think, you know, the optionality of alternative venues comes into play for us.
You know, I think, you know, we'll continue to work through it, but I think we're pleased with our sort of positioning that we have in the market.
These market-making capabilities, when you start integrating those into your own product, does that change those customer unit economics at all and/or the generosity equation? You know, it's just we're trying to reconcile, it seems like, you know, you're playing a lot of different areas here. From a customer standpoint, how should we think about, you know, what that experience is gonna look like in terms of, you know, generosity or kind of just playability or, you know, betting options?
One of the challenges in prediction markets is the lack of generosity. You know, we know from operating OSBs around the world that when you are severely constrained in your ability to offer customers generosity, it has a real impact on customers' longevity and frequency of the sort of APDs and all those sort of things. This is a real issue, you know, that we are, you know, that we've seen elsewhere. You know, we're focused on the sort of the twin track of, you know, making sure that we can leverage our capability in market-making. I think that, you know, with combos on third parties platforms as well as our own.
Then, you know, we're also going to make sure that, you know, our FanDuel customers have a great experience wherever they are, you know, with this sort of unified experience. I think, you know, the question as to whether you can start sort of joining the two up and, you know, what happens if you're market-making on your own platform. Well, you can't guarantee that you're gonna win the bid, right, when someone's requesting a combo. It, you know, it's one of the issues and one of the reasons why prediction markets don't have that sort of same clean cut approach to generosity that you do in an RSB.
Got it. We think about, I guess, the next few years for prediction markets. It's still early days, and I recognize that 2026, you know, revenues are modest, and investments are probably somewhere in the $300 million neighborhood. I guess directionally, how do you think about the contribution in 2027, 2028? You know, is it safe to presume that 2026 is gonna be a peak investment year?
Yeah. I mean, we've always said consistently that this is the divot year, if you like, in terms of investment, and that's why we've maintained that we'll be towards the top end of that $200 million-$300 million range.
That we talked about. As you move out in time, we've always said that we think that prediction markets will inflect similarly to new sportsbook states in terms of profitability. You know, move to contribution positive after a year or so, and then cumulatively contribution positive after a couple of years. I mean, as Peter said, it depends slightly on the regulatory landscape and how that develops alongside. There could be a slightly shorter or longer inflection profile when you look at that. What gives us a high degree of confidence at the moment as well, is that we think this $300 million envelope will be very synergistic across our sportsbook as well.
In time, if we develop this product, we're the go-to sportsbook across regulated OSB states and other states, actually we'll have a huge opportunity to use our marketing on a national basis synergistically across sportsbook and prediction markets, and the two will be able to interplay for us, which is great. Then you add to that the market making opportunity that Peter referenced earlier. You know, we're feeling quite encouraged by what we're seeing. Ultimately here, as we've always maintained, our number one objective is to acquire customers and to build a database to actually sell regulated sportsbook to in time, and that's our North Star in this space. Hopefully, we can make some money along the way, we'll see how the regulatory landscape plays out.
Yeah. I've one last one on prediction markets, I promise, and then I'm gonna hand it over to Estelle for more of the international side of the business. You know, from a product perspective, you rolled out your combined app, you added more markets in recent months. I guess, what are the next goalposts that we should be thinking about from that product perspective, you know, to see that you're showing progress in terms of the timing of the customer acquisition ramp? You know, what are the hurdles or kind of opportunities that need to be passed to kind of get to where you need to be?
Well, naturally, you know, when we look at this through that sort of sports first lens, we've got some exciting opportunities coming up. You know, there's the World Cup, and then there's the really biggie, which is the launch of the football season. You know, we're really focused on sort of how we can prepare ourselves for those things. You know, really trying to deliver a continuous set of product innovations along the way, you know, as we do with any of our businesses. Yeah, I think there's a few things that we will want to deliver. I think we want to deliver, you know, an integration of the wallet experience.
I think, you know, there's always gonna be questions of co-mingling your funds, which are more complex that we, you know, that we need to deal with. I think having a integration of the wallet will be important. We clearly need to expand the catalog, right, that we have available for customers, particularly around player props, which we know is something that's very important. They'll, you know, as the people who develop the parlay, you know, we know how important combos are. That's something that we have to make sure we're there delivering on in the same way that we deliver for parlays from our customers in the OSB states. I think, you know, there's a lot of that stuff going on.
Ultimately, to have a UX which looks and feels like our experience in our sports states is going to be very important. You know, 'cause we know that works well for us, and people understand and, you know, can get their heads around the navigation. We want to leverage that.
Okay. That's great. Thank you for all the insights and comments. I'm gonna hand it over to Estelle now for the international. Thanks, guys.
Thank you, Dan.
Thanks, Dan. International now. FY 2026 guidance implies EBITDA flat year-on-year, also more Q4 weighted. What are the biggest drivers keeping EBITDA flat? Are we talking, I mean, Brazil investment, U.K. changes, COGS mix? Can you outline the bridge to flat and where you see the most upside, downside, please?
Yes. There's a few parts to start in terms of the EBITDA growth, the limiting factors in 2026, but where we think we'll be able to kick on and flip from 2027 onwards. Clearly, the U.K. tax increases, as you mentioned, the gaming tax, increase from the 1st of April. We're working through that. As we said at the time of the increases, we think we'll be able to mitigate circa between 25% and 30% of that this year, and then 40% at an annualized kind of run rate. Our Indian business, obviously, we had to shutter it last year, so you've got the year-on-year impact of that and the EBITDA that we were making there.
Last year, we continued to invest behind Brazil, which we're very excited by, but this is another investment year for us in international. In Brazil, that would inflect profitability in time. We've got the World Cup investment in Q2 and Q3, which we alluded to earlier. Again, you know, that should result ultimately in more customers on the platform and future revenue growth in time. I think when you look at the second half of the year, we're lapping some easy comps in terms of some of the cost initiatives that we've got in play and some of the transformation initiatives that we've already delivered. We also had some adverse luck in the international business last year. I think we had about $110 million of adverse luck in 2025.
When you put all of that together, the international EBITDA is obviously broadly flat year-on-year. As we move into 2027, we will be stepping up again in terms of overall profitability.
Thank you. On the U.K. iGaming tax, you mentioned almost doubling of the tax from the first of April. You expect some sort of first order mitigation and second order share gains, also the risk of customer shift to unregulated operators. What is your mitigation toolkit and pricing promo product marketing, how will you measure and limit the trade-off between profitability and channel migration?
Yeah. I mean, ultimately here we're quite well insulated by virtue of our scale. Actually, when you look at the gaming market in the U.K., there's a very long tail of sub-scale operators. I think those are the ones that ultimately will be most impacted by this and have to cut the deepest in order to be able to live with the tax changes. As we said at the time, we think there will be some leakage to the black market, but I suspect that most of that share donation will come from that longer tail. With regards to our position on this, we're very confident about our plans because a lot of it comes from the first order mitigation.
We've seen with these kind of tax changes over time in different markets around the world that there does tend to be a second order mitigation. The timeline of that, you can't always be 100% accurate on, but it will happen over time as some of these smaller players adapt to deal with the changing economics that we're seeing. With regards to the plans that we laid out in terms of tax mitigation in the U.K., we still feel very confident about those.
Okay. Now in Brazil, sorry, I'm moving, you know, from countries to countries. You talk about Betnacional AMPs, like 40% up, and the upcoming integration of proprietary pricing to unlock the further edge advantages ahead of the World Cup. What is the timeline or KPIs for the integration, and what incremental uplift do you expect in H2 performance?
You know, it's obviously, I mean, yeah, religion in Brazil is soccer. I mean, I can remember being there when the, you know, the World Cup was on, a couple of, you know, times ago. I mean, there wasn't even a dog on the street. You know, to say that Brazilians get excited about this when the games are being played is an understatement. We're, you know, we're very excited about having this integration in place. Like, as you say, it'll bring, you know, an improvement to the product and pricing for customers, particularly, you know, giving them access to more multis and you know, that whole sort of, you know, sort of parlay style journey that we've been on in America.
The integration is on track to deliver ahead of the World Cup. The first phase is live in production, we'll complete the products rollout in May. In terms of what we expect it to deliver, it's not gonna deliver sort of huge sort of step changes, we should expect to acquire a lot of customers in the World Cup. That's always the sort of focus for us around the world. We expect to see a steady ramp-up in performance across the second half as the performance of the pricing capability and the frictionless customer experience improves. It is also a place where we haven't historically had a lot of sophisticated generosity.
At one point there was no sort of bonusing capability. There's a bunch of features and capabilities we're bringing to Betnacional, and I think we're excited to see what we can do with that business.
Okay. In terms of the cost efficiency program, you're making good progress on the $300 million 2027 cost efficiency plan with the full rate savings expected to be achieved by year-end. How much is already effectively delivered versus still to come? Where will savings land in terms of, you know, cost of sales versus OpEx? I guess last one, how would you ensure savings on slow product delivery? Thank you.
We're really pleased with the progress that we're making around the cost transformation. As a reminder, in terms of the buckets within the $300 million, we had $120 million in terms of PokerStars transformation, $80 million for the SNAI synergies in Italy, $100 million for the UKI efficiency program, and then $30 million for the UKI platform integration. Taking each of those in turn, the PokerStars transformation, we've made great progress, and it's, you know, probably more advanced than we thought it'd be at this stage. We've had proof of concept in Italy. We've now got pooled liquidity with Sisal and PokerStars. That poker business is performing as well as it ever has, and actually it's outstripping COVID times in terms of the poker revenue that we're getting at the moment.
We've gained market share. Not only are we getting cost savings, but we're proving that this is additive on the revenue line as well. From a SNAI perspective, we've just very recently completed the migration onto the Sisal platform at the end of April. Again, that gives us confidence about delivery and actually overachievement of the $80 million envelope, and we'll start to see some revenue benefit as well as the cost synergies in time as we can roll out our Sisal blueprint there. In the U.K., the new operating model's in place under Kevin Harrington, making really good progress on that. We've migrated the Sky Bet technology onto the core UKI platform, We've been in a period of transformation and flux there. Now we're out of that.
We're seeing some green shoots in Sky Bet, as Pete's mentioned earlier. When you look at run rate by the end of this year, we're actually run rating towards that $300 million. I'm actually reasonably confident that we'll end up exceeding the $300 million. Now, you know, better never stops as far as cost is concerned. We're really still focused on what we can do next. We're onto the next phase of cost transformation, and we're looking at cost both in our U.S. business, what else can be done in international, but also at the group level as well, and we expect to be able to talk a bit more about that at Q2.
Thank you. Perhaps just to come back to the U.K. In Q1 you had negative FX trends, and you called out Sky Bet being behind expectations post-migration, though improving. What is structural versus transitory in the UKI softness, sports results versus migration product versus competitor behavior perhaps? What are the specific KPIs you expect to improve in Q2 onwards?
Yeah. I mean, you know, most of this was transitory as we navigated the Sky migration. It was both the bet and gaming business that we migrated last year. Look, it took customers a bit longer to adapt to the new interface. It probably took some of our colleagues who were running the business a bit longer to adapt to it as well. Which is not something that we're not unfamiliar with. It happened with Paddy Power. Yeah, I do think it's worth acknowledging the customers now have access to the full, you know, extensive Flutter product suite that we have available for our U.K. consumers. I think, you know, we've seen momentum improve across the quarter.
If I look at it from a betting perspective, we had our highest customer acquisition in January for five years. We had a brilliant festival at Cheltenham, which is a big sort of horse racing festival. You know, actually the underlying sportsbook was back showing growth in March. You know, all important KPIs for us. You know, I think if I look at our gaming business, you know, I think in March, the first time we had more than 1 million customers on the platform. You know, when we look at the sort of, you know, the leading indicators, I think we're feeling, you know, good about it, and we, you know, we're confident that this will continue to improve.
Thanks. We have not covered Australia left yet, so just one question here. You just, I mean, under the new advertising regime, what are your expectations for Sportsbet growth trajectory for FY 2026? Maybe more specifically is the, you know, impacts to CAC, competitive intensity, net revenue margins. Just wanna understand a bit better how to look at Australia for the remainder of the year.
Yeah. I mean, the measures have been discussed and debated for a long time, you know, this is, you know, not been a surprise to us. You know, I don't think we foresee a material impact on the business. You know, like a lot of these regulatory changes, we've been trying to sort of pre-position ourselves as well as we could have done. You know, we removed odds from some of the, you know, advertising that we have in live sport. We've also been reducing our ad volumes as well. This stuff doesn't come in place until the 1st of January, 2027 anyway. You know, what we found, you know, in other markets around the world is that the scale operators often benefit from any restrictions around sort of advertising.
That, you know, we are the scale operator in Australia. Look, I think we see, you know, ultimately we see a potential for return to net revenue growth, you know, from H2 onwards in the business. We, you know, we've got good momentum in higher margin sports and, you know, all the stuff we're doing around model-driven generosity, where we're really sort of pushing the boundaries using technology to deploy that generosity more effectively. You know, we're doing that in Australia first, learning benefits from it, and I think we'll see that start to come through in the business in the second half.
Thanks. The last question from me on capital allocation, how do you think of your capital return priorities versus deleveraging and M&A, particularly with your share at these levels?
Yes, I think Peter mentioned this on the call last week, that we're focusing on delevering the balance sheet a bit at the moment. I mean, we've always said with our capital allocation framework that we've got the flexibility to dial up and dial down as we see fit in the moment. You know, we'll always focus on deploying the capital to the areas that generate the highest returns. Thinking about that in the short term, we're obviously focused on investing behind our FanDuel Predicts, as I talked about earlier, but also strengthening the balance sheet. You know, if you think about the leverage guidance that we set out previously, 2x- 2.5x , we're focused on getting back within that.
We think based on our current cash flow trajectory, that would be more towards the end of 2027. Actually, if you look at the runway of cash growth in this business over the next few years, we feel really confident about. We see significant cash generation. We will delever the balance sheet, and that will give us more opportunities to look at things inorganically in due course.
Thank you very much.
Peter?
Yeah.
Yeah, I think one last question. I think we're at time. This is just kinda a high-level subjective one. I guess, you know, the stock obviously has seen better days. I guess as we sit here today, what are kind of the key points that you feel like investors need to understand or, you know, that you're trying to get across as we kind of think through the opportunity set here?
Well, I appreciated the chance to talk about our international business 'cause I think people sometimes, you know, skip past that, and it's a, you know, it's a profitable part of the group. I think we're incredibly well-placed with a lot of very exciting opportunities in front of us. When I look at the growth that we're delivering in places like Italy or Turkey, you know, I think, you know, we've got a, you know, a very exciting few years ahead of us. As I said, the cash flows, you know, conversion is gonna really improve as a result of all the cost out initiatives we're doing. I think, you know, when you look at our, you know, underwriting, our, you know, the business, you know, the international part is a, is a very large component of it.
I look at the U.S. and look, you know, I think we are continuing to execute very well in iGaming. I think that, you know, that is a part of the business which is gonna continue to grow, and I think we're incredibly well placed to use our scale there. I think from a sports perspective, you know, there were a few things that we didn't, you know, execute on very well last year. I think we've actually, you know, we've identified that, we recognized it, we got to grips with it, we've made the changes, and we've got the sports improvement plan in place, and I think we're beginning to see the benefits of that come through. I think, you know, investors obviously want to see us continue to execute, but, you know, we are still the largest player in America.
We're profitable, I think, you know, we will, we're determined to get the business not just back on the front foot, but we need to get our mojo back and show that we can keep growing our share and help grow the category. The final piece is prediction markets. You know, I look at that and I'm very excited around the money we can make in market making using a sort of core capability that, you know, we've shown time and time again around the world, we're best placed to deliver on. I think, you know, ultimately, this just gives us all incremental TAM that we couldn't access before, which is tremendous.
I think, you know, we showed in March when we did a, you know, a small bit of generosity that, you know, there's real appetite, real latent demand for the FanDuel brand in sports, and we're gonna lean into that and take advantage of it.
All right. I think that's it for me. Estelle, any last burning questions?
That's it for me too. All good.
All right. Great. Thanks so much, Peter and Rob. We really appreciate it. We'll talk soon.
Thanks. Thank you.
Thanks guys. Bye.