Hello, everyone. Thank you for joining us, and welcome to Flutter Entertainment third quarter 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask your questions, please press star one to raise your hand. To withdraw your questions, press star one again. I will now hand the conference over to Paul Tymms, Director of Investor Relations. Please go ahead.
Hi, everyone, and welcome to Flutter's Q3 update call. With me today are Flutter CEO Dan Taylor and CFO Rob Coldrake. After this short intro, Dan will set out his immediate priorities alongside the operational progress we made in Q3. Rob will then share an overview of our Q3 financials, as well as updated details on our outlook. We will then open the lines for Q&A.
Some of the information we are providing today, including our 2026 guidance, constitutes forward-looking statements that involve risks, uncertainties, and other factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors are detailed in our earnings press release and our SEC filings. In addition, all forward-looking statements are based on current expectations, and we undertake no obligation to update any forward-looking statement, except as required by law.
Also, in our remarks or responses to questions, we will discuss non-GAAP financial measures. Reconciliations are included in the results materials we have released today, available in the Investors section of our website. I will now hand you over to Dan.
Thank you, Paul. Good morning, everyone, and thank you for joining us. I am pleased to be speaking with you all for the first time as CEO of Flutter, and for this opportunity to set out my initial thoughts and priorities. I am now almost five weeks into my role as CEO, but having worked at Flutter and in the industry for many years, I know the business well.
Building on my experience in international markets, I have spent a lot of time in the U.S. with the FanDuel team over the last five months. I have been really impressed with the team on the ground, and the time I have spent with the business has been critical in helping me determine our immediate priorities. Across Flutter, we have a portfolio of fantastic brands, unmatched in our category around the world.
We have exceptional talent with deep sector expertise and a set of amazing products our customers love. We have built global leading scale over the last five years, but we will be more demanding of the benefits this can deliver. We need to simplify how we operate and move faster. We need to remove costs so that we can invest more in the right areas that benefit our customer proposition and the opportunities that best position us for growth in the long term.
Our Q3 performance shows that the actions we have already taken are the right ones. While sports results went against us, underlying performance in the U.S. was ahead of expectations. In international, we delivered market share gains in our core markets. I have four immediate operational priorities which require clear leadership and tough decisions.
We will remain disciplined in our investments, focused on improving our cash flow conversion and deleveraging the balance sheet. My first priority is to build on our U.S. leadership position. I strongly believe we have the best assets to capture the North American opportunity, which still has a very long runway of growth ahead. We need to operate at pace and deliver relentless product innovation while investing with discipline where we see long-term opportunities.
The U.S. market is highly competitive, but our decisive actions to increase share of wallet by returning more to customer and to accelerate our product roadmap are beginning to pay off, delivering market share gains in August and September. I am confident we are taking the right decisions to deliver FanDuel's long-term success. I believe sportsbooks offer a superior proposition versus prediction markets, and our consumer research and customer analysis continues to support this conclusion.
We are, however, beginning to see an impact on our media costs as prediction market operators increase their spend. The duration of this trend will depend in part on how the regulatory landscape develops. We need to continue investing behind the FanDuel brand in a disciplined way, maintaining competitive levels of marketing intensity.
Over the last four years, we have transformed FanDuel Casino from a distant third place into the market leader. We must now ensure we maintain our laser focus on our customer proposition. Player engagement in Q3 was strong. However, revenue growth was impacted by competitive dynamics and market moderation as the U.S. iGaming states move through the maturity curve. Looking forward, the potential for new states to regulate iGaming provides very significant upside.
As evidenced by our very strong launch in Alberta in July, we have already achieved more than 20% market share across Q3, significantly surpassing our launch in Ontario. Second, prediction markets represent a very meaningful incremental opportunity for FanDuel. We must build a strong position now, investing with discipline and maintaining flexibility to adapt quickly as regulation develops.
In the last few months, the FanDuel Predicts product has been transformed, and we are just getting going. The changes have been enabled by our integration onto Crypto.com and the delivery of our FanDuel One App solution, leveraging the core sports code base and experience. While we always have more work to do, our product is now genuinely competitive. Our customers are responding very well, with retention of frequency metrics already 80% to 85% of OSB, and we have a clear pipeline of further improvements from here.
We will leverage the nationwide strength of the FanDuel brand to acquire customers, and we can now service existing customers nationwide. We are investing at a level that we believe will position us well for the long term, balancing the need to operate at scale in targeted states against the regulatory uncertainty in this space. Initial trading volumes are encouraging, almost trebling in October when compared with July, reflecting our accelerated product roadmap.
The behavior of the customers we acquire look like typical sportsbook customers, giving us confidence in their long-term value. We are also using our leading expertise in pricing sports events to participate as a market maker and help fund our prediction market acquisition spend. We are making excellent progress here, and we are on track to deliver our market-making guidance for 2026.
Third, in international, we have built a portfolio of regional powerhouses with number one positions in many of the world's largest regulated markets. Our scale allows us to invest in better products and customer experiences, while our diversified business delivers resilient growth when individual markets face regulatory or economic change. My immediate focus is on delivering continued product improvements and customer experiences to drive consistent execution, sustained growth, and further market share gains.
We have made good strategic progress during the quarter, with market share gains in the U.K. and Ireland, Italy, and across CEE. Our successful integrations in Italy, UKI, and PokerStars are unlocking meaningful revenue upside and cost benefits. We are taking share in Italy on the back of an advantaged product, and having delivered this into Snai, we see plenty of further upside to come.
In the UKI, we saw strong double-digit gaming growth on the back of record engagement during the World Cup, and we believe our recently announced restructuring right-sizes the business going forward, positioning us well to take market share gains in the post-tax environment by protecting our investment in the customer. We were clearly very disappointed with the government provisional measure banning online sports betting and gaming in Brazil.
With the right regulation, Brazil could still be an attractive market. However, the level of uncertainty and the already challenging regulatory environment that developed prior to the ban mean we are taking a cautious view of the outlook at this point in time, determining the non-cash write-down recorded in our Q3 results. Following the ban, we have acted decisively.
We took immediate steps to restructure our business to focus on Betnacional as our sole brand in Brazil and are ready to resume operating if and when the market returns. Despite the regulatory challenges we have faced over the last 12 months, I feel very confident that our diversified international portfolio is now well set to leverage the transformations and cost efficiencies we have delivered, to take full advantage of our global scale, to continue to take market share, and deliver against our target of 5% to 10% annual growth. Fourth, simplifying our operating model.
The next phase of Flutter will be more streamlined to maximize the benefits of scale and ensure we can do non-customer-facing work once. This will help us remove complexity, move faster, reduce costs, and improve cash generation, allowing us to invest organically in the areas that deliver the highest returns, whilst also deleveraging the balance sheet.
In addition to our existing international cost transformation and U.K. gaming tax mitigation programs, we expect to deliver an additional $500 million in gross operating cost and capital expenditure savings by 2029, and the work to deliver this is well underway. in the U.S., these efficiencies create the room to invest behind our next stage of growth. Internationally, we expect these benefits to support our previously projected long-term 5% to 10% growth while helping protect adjusted EBITDA margins through regulatory and tax changes.
Looking ahead, I am encouraged by the momentum we are building. We are making deliberate choices to secure FanDuel's long-term success. In international, consistent execution and further scale benefits should enable continued profit growth despite regulatory pressures. Realizing the full potential of Flutter's exceptional set of assets and opportunities will require hard choices, faster decisions, and strong execution.
I know confidence is earned through delivery, and that is what I am focused on. While I am only five weeks into my new role, I am already clear on my immediate operational priorities, and I look forward to sharing more on our strategy alongside our Q4 results in February. With that, I will now turn it over to Rob to talk you through the financials and outlook.
Thanks, Dan, and hello, everyone. I will cover three areas today: Q3 results, balance sheets and capital allocation, and our updated guidance and outlook. Let me start with the Q3 results. U.S. sportsbook performance was ahead of expectations, and we gained market share. In international, consistent execution and the benefits of our transformation programs delivered share gains across core markets, including UKI and SEA.
This underlying momentum was partly offset by adverse sports results, resulting in group revenue growth of 2% in Q3. Adjusted EBITDA declined 25%, reflecting our investments in Alberta and prediction markets, alongside higher U.K. gaming taxes, partly mitigated through cost actions. While reported EBITDA was down, this reflects deliberate investment and specific external factors rather than a deterioration in the underlying trajectory of the business. As Dan mentioned, we have taken a prudent view on Brazil, resulting in a non-cash impairment charge of $873 million.
This charge, together with an increase in legal loss contingencies, drove a reported net loss in Q3. Moving to the balance sheet. We ended Q3 with leverage of 4.6 times. While this is elevated, we expect to deleverage significantly through 2027 and remain committed to returning to our 2 to 2.5 times target range over the medium term. Our capital allocation priority is clear: continue to invest behind our highest return growth opportunities.
Delever the balance sheet, and only then consider returning additional capital to shareholders. As a result, we have decided to pause the existing share repurchase program for the foreseeable future. Free cash flow, including financing capex and excluding player funds, improved by 22% year-over-year. We also successfully refinanced our revolving credit facility and Term Loan A, extending our debt maturity profile and providing additional financial flexibility at competitive rates.
Now moving on to our updated guidance for 2026 and our early thinking about U.S. investment into 2027. Q4 trading has been in line with our expectations on an underlying basis, although sports results have been unfavorable in both the U.S. and internationally. We have therefore updated our full-year guidance to reflect the unfavorable Q3 and Q4 sports results and the closure of Brazil, partly offset by further cost actions.
This reduces our full-year group revenue midpoint guidance of $300 to 17.61 billion, and a reduction in full-year adjusted EBITDA guidance of $160 to 2.495 billion. Additionally, group transaction, restructuring, and integration costs will now be approximately $620 million, reflecting an increase of approximately $120 million from our previous expectations, primarily due to the increase in legal loss contingencies. Additional detail on our 2026 guidance is available in today's release.
Looking further ahead to 2027 in the U.S., improving customer trends and sportsbook performance give us confidence to continue reinvesting underlying growth into the customer proposition. Our promotional spend is expected to remain at similar levels in Q4 and throughout 2027, resulting in a broadly flat net revenue margin year-over-year.
At this early stage, we expect our 2027 marketing intensity to remain at the elevated levels we have observed for 2026. On prediction markets, as Dan outlined, we believe we are increasingly well-positioned to capture this opportunity. We expect investment in this area to continue at similar or higher levels, given the early momentum we are seeing. We also expect cost of sales as a percentage of revenue, tracking at 58% for 2026, to remain at the same level in 2027.
While Q3 reported earnings were impacted by investment, sports results, and some one-off items, I am encouraged by the underlying trajectory of the business. We are improving the U.S. proposition, continuing to invest behind our strongest growth opportunities, and taking a disciplined approach to capital allocation and deleveraging. Together, these actions give us confidence that we are building a stronger and more valuable Flutter for the long term. As usual, we will give our full guidance for 2027 alongside our Q4 results in February. With that, Dan and I are now happy to take your questions.
We will now begin the question-and-answer session. Please limit yourself to two questions and ask both upfront. To ask your questions, please press star one to raise your hand. To withdraw your questions, press star one again. We ask that you pick up your handset when asking a question to allow for optimal sound quality. If you are muted locally, please remember to un-mute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ed Young from Morgan Stanley. Your line is now open. Please go ahead.
Hello. Two questions, please. First of all, thank you, Dan, for the initial strategic commentary you set out in the shareholder letter and your prepared remarks. Even though it's early, it's very useful framing. Could I ask you to give a bit more color on capturing the prediction markets opportunity? How do you see the relative importance of scaling on the B2C side versus, say, market-making, and how to get the right balance in investment given the regulatory uncertainty and, frankly, your late start? The second is on Italy. You've talked about market share gains there.
The presentation clearly shows that's really being driven by Sisal. You've had Snai integrated for a little while now. Is there anything that's holding back Snai from starting to capture the same level of growth as Sisal, or how should we think about the ability for Snai to be a contributor to market share gains through 2027? Thanks.
Hi, Ed. Look, thank you for those. I'll take those in turn. Look, on the predict side, we've talked about, as you say, three things. The first thing on the product side, which I think is really an important enabler, is, being candid, the product when I first went over to FanDuel in the spring was not competitive. I think the team have made tremendous progress on the product in the last few months, and the pace of delivery has really, really impressed me.
The results we're seeing are very good. We obviously have one app live now, but it's really only been live at scale to customers since the start of the NFL season. The results we're seeing from that in terms of metrics around retention, frequency, it's starting to look, parlay percentage, it's starting to look a lot like our sportsbook in terms of those metrics.
We had about 140,000 actives on the platform in October. Look, you're right in saying it's early days, right? It's hard to get the balance right in terms of the economics there. We're acquiring at materially lower CPAs than our sportsbook, and we can see a pathway to materially improving the LTVs as we go forward. We've got our own FCM license now available to us, which will be a step in the right direction there.
There's lots of things we can do to keep improving the economics, but they are uncertain. We need to be disciplined about the returns we get. I think we're confident about returns in more turn, better returns in states where we have a higher prospect of OSB. That gives us more certainty.
But as the economics and the player behaviors start to evolve over the next few months, I think we will get a clearer view on how much we can spend economically on the B2C side, as we have only really been going for a couple of months in anger there. On the B2B side with market-making, this is really at the heart of Flutter's capabilities.
We have made great progress there. We are now trading across multiple exchanges, across multiple sports, and I think our ability on the complex parlays is a real differentiator for us. We are on track to deliver the guidance that we did, and we have only really been live for obviously the second half of this year. So, I think that is a really exciting near-term revenue and profit generator. The B2C side is probably a longer term.
We need to build, leverage the brand for the long-term franchise. On Italy, I am pleased you asked that question. I think it is a great one. So, if I look at when we acquired the Snai business, one of my hypotheses was, it is an amazing brand. It is probably one of the iconic brands in Italy, but I think the product on it was poor. And I think that we have the very best product in the market on Sisal, the best sports, we have the best gaming product.
So, I feel very good about it. We migrated the Snai product onto the SEA platform in the summer, and we bounced. You always have a bit of a drop in market share at the point of migration, and we bounced back to the pre-migration levels faster than any migration we have ever done in Flutter's history.
And I think the trajectory is very good from here. So, we saw a bit of degradation prior to the migration, which was on the old product. It dropped at the point of migration, bounced straight back, and is now higher than it was pre-migration. And it now has all the same product features, capabilities, and drivers that has underpinned the Sisal strength. So, I am very excited about where we take Snai over the next 12, 24 months and longer. I think it is a big opportunity for us.
Thanks very much.
Your next question comes from the line of Brandt Montour from Barclays. Your line is now open. Please go ahead.
Good morning, everybody. Thanks for taking the question. I want to follow up on the iGaming commentary. I think you said, moving through the maturity curve. You guys obviously have a ton of international data and history with iGaming products. What does the maturity curve look like to you when you look at your historical data sets? Does this feel like a market that can kind of bounce back to growth levels that we saw earlier this year, or does it generally follow a pretty obvious curve there?
Thanks, Brandt. If you look at Q3, I think the market grew about 13% on a GGR basis, which is below where we saw the growth in H1. That doesn't hugely surprise us. We think that is, to your point, consistent with this level of moderation in growth that we would expect for what are markets in these states that have been around for some time now.
We have seen an international market, long-term growth at high single, low double digits for the long term. I don't see that wouldn't be the case here. But we are seeing that moderation. Obviously, for FanDuel, we had some specifics in Q3 last year where we had a very strong release of a game, which meant that we were lapping that, which put some pressure onto our comps.
But look, we feel very good about our competitive proposition, and how we sort of maintain that and grow that going forward. The other thing I'd add on the gaming side is in the quarter, we obviously went live in Alberta. Alberta is the first new gaming state, I know it's a Canadian province, but for some time. The success there has astounded us.
Our pace of customer acquisition was materially faster than Ontario. We've reached 20% plus market share on the gaming side within the first quarter, which is already well ahead of where we thought we would be, particularly given there was existing gray market operators in that state beforehand. I think the success in Alberta gives us real confidence and conviction about the opportunity for iGaming as we expand the TAM. We are only penetrating from a TAM perspective 10% of the U.S. population today, and there's a lot more to play for there.
That's really helpful. Then a follow-up question, maybe for Rob, on sports net revenue margin, looking for a number roughly flat year over year, and it says, you said reflecting continued promotional level. Can you just maybe double-click on that?
If we think about promotional level at the exact same level, then you're not necessarily implying a lift in any structural margin from parlay mix. So, maybe that's not the right way to read that. If you are going to have a slightly higher promotional spend annualizing what you did in the second half of 2026, what kind of structural parlay lift would you need to see in 2027 year over year to pay for that uplift in promotional spend? Hopefully, that makes sense.
That does make sense. Hi, Brandt. So, yeah, we are seeing the net revenue margin when we look out to 2027 at the moment being relatively consistent. We've always said that we expect further parlay penetration over time and enhancing our structural gross win margins, and we expect that to continue in 2027.
If you think about levels of generosity in 2026, we deliberately upped our investment from Q2 onwards. We're going to need to annualize that spend year on year, which means the promo cost goes up, and that's how you kind of get back to a similar net revenue margin. I think when you look out longer term, I think we are confident that we can still grow the overall structural margins and the net revenue margin within the business. I think we see this as more kind of temporary to medium term, given some of the dynamics that we're seeing in the market at the moment.
Great. That makes sense. Thanks, everyone.
Your next question comes from the line of Barry Jonas from Truist Securities. Your line is now open. Please go ahead.
Hey, guys. Thank you for taking my questions. Any early thoughts on potential implications from the U.S. midterm elections, whether that's OSB or iGaming legalization, further PM regulation, or really anything else that could impact you? Thank you.
Hi, Barry. I'll take that first. Obviously, we were disappointed with the result in Nebraska, where the ballot didn't go in our favor, but I think we'll take something from that. When we look at the broader opportunities, I think, yeah, we feel good about the prospect of future OSB and iGaming regulation over the coming years.
We know that there's a need for the tax dollars, and we know that we can deliver through regulation the protection for consumers that is required. Without reminding us all, we're slowly at half of the U.S. with OSB and 10% from an iGaming perspective. I'm not going to try and tell you which states in which order, but we feel good coming through this that there is a strong pipeline of further state openings.
Great. Then just for a follow-up, just wanted to ask a little bit more about market-making. Just given the early success you are seeing there, curious if you can give any thoughts on how big that business could ultimately get for Flutter, and also how to think about the level of risks present around unfavorable sporting outcomes. Thank you.
Yeah. Hi, Barry. I will pick that one up. I think, as Dan said earlier, we are making really good progress with the market-making piece. I think with our expertise, particularly on correlated events markets, parlays, and complex products, we certainly see an advantage for us in this space. I think that at the moment, we are focusing on delivering our forecast for this year.
We are still very confident that we will deliver on the market-making guidance that we set out at Q2 in terms of $50 million revenue being around circa $40 million adjusted EBITDA for this year. Then we see that building next year. We are not putting specific numbers on it at the moment. We are working with more exchanges now, and that will give some more opportunity, but we are really pleased with the progress that we are making.
Thank you.
Your next question comes from the line of Jordan Bender from Citizens JMP. Your line is now open. Please go ahead.
Hi, everyone. Good morning, and thanks for the question. When you gave the original increase in marketing last quarter for the back half of this year, the messaging was more around customer acquisition, activation. In your prepared remarks, you said some of the media costs that you are seeing, or the media piece from prediction markets is basically intensifying the environment.
I am just trying to understand, has the investment spend that you guys laid out last quarter kind of turned from being more opportunistic for the company to more defensive, just given what you have seen during the NFL season? Rob, maybe on the follow-up here, the share buyback program now paused. Is this kind of a conversation that we start to have once you get leverage back into the 2x-2.5x range, or is there some sort of level where this discussion starts up again? Thank you.
Thanks, Jordan. Look, I will take the first one, then Rob will pick up on the second here. Look, the change that was communicated by the team in Q2 was an uplift in promotional spend. It was not the marketing dollar media spend. So, the uplift in promo is something that we are really pleased with the response to. I think that is underpinned the improvements we have seen in AMPs, in frequency, in bet count, and ultimately share of wallet.
I am pleased with that, and that has been a core part of the proposition, and the team have, I think, lent into that and done an excellent job. We expect, therefore, to continue that posture going forward. That has brought us from a promotional spend in aggregate level broadly in line with the market. I think that is what sets us up for the long term to be at that posture.
With regard to the elevated marketing media cost, I think we have seen in Q3 this year in particular elevated media spend across the category. I am thinking here about sort of brand marketing, digital marketing, et cetera. That was, as a category, was up more than 60% year-on-year in September, up more than 50% more than year-on-year in October, primarily driven by investment from some of the predicts operators.
Candidly, that does put pressure on asset costs. It also puts pressure on some of our share of voice, and we need to be disciplined about how we spend our marketing dollars, but we also need to protect and grow our brand reach. We are very lucky with the amazing brand that we have that we can amortize that spend across the whole country now. There are two different points, I think, specifically, just to be clear, on the promo investment and then on how we are seeing the marketing environment in particular.
With regards to the share buyback, I think we have been quite clear about our capital allocation priorities in the short term, and we will continue to allocate capital efficiently and where we see the highest returns. At the moment, there is lots of organic opportunity within the business to do that. We are very focused on bringing the leverage down.
As we said, it is 4.6 at Q3. We think we have got excellent free cash flow generation into 2027, and we will delever at pace and move back towards the quoted leverage range in a medium term. I think as and when we get there, and I do realize that at the moment, there is a compelling case for buybacks, but our focus is definitely on the organic capital allocation and deleveraging. As and when we get back towards our quoted medium-term leverage ratio, it is definitely something that is on our list. We have always said that we will look at shareholder returns as well. It is something we will continue to consider.
Thank you very much.
As a reminder, we request that you ask both of your questions upfront. Your next call is from the line of Bernie McTernan from Needham & Company. Your line is now open. Please go ahead.
Great. Thanks for taking the questions. Maybe first, just would love for you to talk about the sustainability of this U.S. acceleration growth in handle, and how you're thinking about retaining those gains. Then second, can you talk about the early results from FanDuel Rewards? Is the higher promotional activity that we're seeing right now concentrated in this program, or is it beyond that in other areas as well too? Thank you.
I'll take the second one first, I think. We launched the FanDuel Rewards program to the full base from the start of the NFL season. I think that's landed very well with our customers. We've seen a 7% uplift in perception of rewards and recognition from our FanDuel customers. That isn't just through the rewards program, but that has clearly been a very important part of that.
I think beyond that, we've been leveraging some of the smart promotions and capabilities we've had around the group. We've got deep experience of how to deploy generosity from our different brands across the international business, and we've been taking a lot of that capabilities into FanDuel to be really scientific and thoughtful about how we deliver it to the right customer at the right time as well.
I'd say it's both of those things, and it's clearly resonated very well with customers. With regard to sort of handle uplift, look, I'm pleased to see the underlying customer momentum. I'm pleased to see the momentum in AMPs. I'm pleased to see the growth in bet count. We're seeing on average now, each customer's betting twice more per week.
It's good to see that frequency improvement. It's testament to the share of wallet, and I think there's further opportunities for us to grow that share of wallet. I'm not going to sort of try and predict handle trends. Ultimately, we're focused on the revenue generation from the business. But look, I think we're pleased with the early signs from the changes the team have made, and credit to the team for the way they've lent in and made those changes very quickly.
I think just to add to that point, I think as we mentioned earlier, I think we feel vindicated in terms of the investment that we laid out at Q2 and how that's working. We've definitely seen a stabilization of market share, so we've taken some market share into Q3. We've definitely built on the momentum off the back of the World Cup. I think we're seeing the levels of growth in the market that we anticipated at kind of mid-single digits on sportsbook, and that's something that we'd expect to continue into next year.
We'll obviously come back at Q4 and talk in more detail about our guidance for 2027, but it's important that we get a bit more of the key Q4 trading period under our belt as well with NFL in full flow and the NBA season having just kicked off, just to understand where the momentum's taking us into next year.
Great. Thank you both.
Your next question is from the line of Ian Moore from Bernstein. Your line is now open. Please go ahead.
Hi, thanks for taking my question. Just picking up on that last thread on the NBA. Viewership has been super strong so far this season, but there has been some pretty notable, I guess, star player injuries. How are you thinking about NBA handle this season and engagement versus last year given that, and has player availability had any noticeable impact on parlay mix or hold?
Yeah, thanks, Ian. Well, it is pretty early days on the NBA, as you know. I think there was some momentum held over from last year where there was a really exciting end to the season and the Knicks wins. I think we started the season in a good place, and there was some great fixtures to start the season with. I think so far, we are seeing it perform in line with our expectations.
It is a long season. Players getting injured in NBA is not a new thing. So, that is something that we factor in. We are seeing quite a competitive market in terms of player injury insurance and the products that are out there. We have had some strong products offering in that in NFL, and we continue to monitor that space as we go into the season.
Thanks. Appreciate it.
In the interest of time, we ask that you limit yourself to one question moving forward. Thank you. Your next question is from the line of Robert Fishman from MoffettNathanson. Your line is now open. Please go ahead.
Hi, good morning. With increased costs for the media and marketing in the U.S. that you've talked about, would you be reevaluating your go-to-market strategy and even willingness to work with some of the media partners, like a Fox, in a different way? If you could just comment on whether you're shifting more of your spend nationally away from the local state advertising market. Thank you.
Yeah, look, I think the way we think about our brand spend is in a very disciplined way, right? I mean, it's not going to be my job to decide the precise channel mix, but we are very focused on delivering the right economic returns, the right paybacks. As media costs change, of course, we have to keep reevaluating all of the assets that we have.
But we still see good returns, albeit, as we've acknowledged, the competitive intensity is materially higher. The costs, therefore, are under pressure in places, and it's putting some of the pressure on some of the share of voice metrics. So, I think we need to be flexible and disciplined in how we deploy our media spend, but we've got an amazing asset in the FanDuel brand, and we need to keep developing it.
Thank you.
Your next question is from the line of Dan Politzer from JPMorgan. Your line is now open. Please go ahead.
Hey, good morning, everyone. Thanks for the question. I just wanted to go back to how you're thinking about the sports growth in the U.S. If your NGR margins are going to be flat there, obviously, you're more reliant on handle growth from here, which I think is driven by that elevated promotional level. I guess the question is, how sustainable is this strategy, and maybe how differentiated is it, especially as we enter an environment which, as you guys have said, it's increasingly competitive?
Yeah. Hi, Dan. Yes, so as we said, we're not specifically guiding on 2027. I think when you think about some of the building blocks for next year and how we're thinking about them, we've talked about the fact that we expect there and anticipate there to be an elevated marketing intensity. I think if you look at the combination of what's happening in the prediction market space and in core OSB at the moment, we think that's something that will continue into 2027.
The generosity investment that we've made over the last quarter has worked very effectively for us. So, that's not something, again, that we anticipate stepping away from as we move into next year. As I said earlier, we need to see how the market develops into 2027 and the levels of market growth that we see.
We're pretty confident that we're making the right steps in terms of product development, customer proposition, and we've really kind of moved forward in that space as well over the last quarter, which I think will stand us in good stead as we go into next year. As I said, we'll come back in February, our Q4s, and talk about 2027 in more detail.
Thanks so much.
Your next question is from the line of Joe Stauff from Susquehanna. Your line is now open. Please go ahead.
Good morning, Dan, Rob. I was curious to see if you could share any more details on the retention and the engagement metrics of the very large cohort of new World Cup customer acquisitions you had. It was about 2.3 million. If you could share in terms of the participation, what you have been able to convert, whether it be in football, U.S. football, and/or basketball in October.
Yeah. Thanks. The World Cup was about 6% of Q3 handle. It was a big customer acquisition event, as you said. We had 2.3 million customers on the World Cup. About a third of those were reactivated. We exited July with 600,000 more customers than we had in the previous two years. The retention was very strong.
We saw MLB engagement through July and August benefiting from that. I think that has helped us as we carry through into September, increasing player frequency. As I said, that has been up by 4%, bet count up 15% in the quarter. I think it has contributed to the strong start of the NFL season. We acquired a lot of customers in the World Cup, and I think that has put us in good stead as we, as I said, started the NFL season.
Thank you.
Your next question is from the line of Jed Kelly from Oppenheimer & Co. Inc. Your line is now open. Please go ahead.
Hey, great. Thanks for taking my question. If we look at the overall combo volumes and then the sports volumes on prediction markets, and we kind of assume low double-digit share, it should imply your market-making revenue should be pretty well above the $50 million you're calling out. Can you just kind of talk about some of the puts and takes when we look at the public volumes we can see, how we should think about how you're competing against other market makers? Thanks.
Yeah, I think with that kind of maths, Jed, we should get you onto the team, and it'd be helpful for the overall forecast. As I've said, we are very much confident in the forecast that we've got for this year. We're not coming out and saying that we're going to be materially better than that at this stage. I think some of the things as we look forward with market-making that gives us a cause for optimism, as we said earlier, is the fact that we are linking up with more exchanges.
Ultimately, we do feel we have a right to win in this space in terms of our expertise, our ability to price complex products, and also ultimately with our liquidity, when you see some of the requests for prices on coming in. So, we're not upping the guidance for this year on market-making.
You'll recall as well, there are market-maker fees to be paid as well, so there is a cost to sale associated with market-making. We're confident in our guidance for this year, and we'll look to continue to improve that into 2027.
Thank you.
Your next question is from the line of Ryan Sigdahl from Craig-Hallum. Your line is now open. Please go ahead.
Hey. Good day, Dan, Rob. How much of the increased competitive intensity do you think is a direct result of FanDuel, which you guys as the leader, everyone else has to work harder to compete against you guys? It feels like this could just be a negative feedback loop of promos, lower industry profitability, and that ultimately driven by FanDuel. Then kind of second part of that, what gives you confidence, I guess, that you can ultimately wean players off of higher for longer generosity, and ultimately move net win margins higher over the medium term after being flat for a period over the near term? Thanks.
I will take that. Look, I think when the increase in generosity was communicated, to be clear, that was to bring FanDuel in line with the market, not ahead of the market. Where we are today, we believe is in line or slightly below the market in aggregate, not ahead of the market.
This for us was about ensuring that we had the right firepower, and then we will use the science and the smarts that we have to deploy that more effectively than anyone else can with the scale of our customer base. We are definitely not elevating the generosity here in the market. From a marketing spend perspective, the increase has predominantly been driven by the predict operators, and that is a reality of where we are right now in the market with some of the uncertainties that we have.
And that, as Rob has said, I think, be a temporary position. We wouldn't expect that to be at that level forever. But it is the nature of the market we're in today. Thinking more broadly, if I look out, the levels of overall generosity spend are not unusual in an international context, albeit we would expect to see continued growth in the underlying gross margins.
If I look around the world, the sorts of mix of promotions that we have is not unusual at all. And we've got a lot of experience from how to optimize this from our businesses in Australia and the U.K. and Italy, where we've been doing this for many, many years. And the science between how you think about your pricing, your gross margins, your generosity through margin, there's a lot in that.
I think we feel good about the long-term ability to drive overall net revenue, frankly, and net revenue margins. But we need to be flexible on the different levers that sit behind that to serve the customer in the right way.
Thanks, Dan. Good luck, guys.
Your next question comes from the line of Clark Lampen from BTIG. Your line is now open. Please go ahead.
Thanks for taking the question. Good morning. Dan, I wanted to see if you could elaborate on the comment in the shareholder letter around accelerating the U.S. product roadmap and innovation. I am going to guess that includes first-party prediction product, but would be curious, I guess, for core sportsbook and iGaming, where you see opportunities for innovation and improvement.
Does some of the sportsbook growth that has been topical in Q&A thus far hinge on further parlay penetration via new products and theoretical margin improvement, maybe that is tied to product? For iGaming, does product potentially allow you to manage greater competitive intensity right now? Would just be curious, I guess, what the playbook looks like. Thank you very much.
Look, it is a great question. Look, I think that on the product side, it is one of the things I have been really, really impressed with the team on. The pace with which we are improving the product experience for customers now, I think, is the fastest that I have ever seen. We are 80% or more of our code in FanDuel has been driven by AI.
We are deploying at six times the rate in terms of product development that we were 18 months ago, and that has really picked up in the last quarter, I would say. I am feeling good about the pace of development. We are privileged because we have got no shortage of ideas from around the group of how to serve our customers even better. During the period, we saw a step change in our cash-out availability.
We saw some core improvements on things like market up times, but we also saw some more differentiated features on the social side of things and how we allow customers to share bets on personalization. We are leveraging FanDuel Labs to test and iterate new ideas, and that is giving us, whilst early days, powered by our unique betting capabilities, different ways to create bets for customers that we do not think anyone else can do.
We will continue iterating those with customers and see what lands well, but I am excited to test and learn quickly there. Again, to the previous point of the previous question, really, I think that we know that there is further upward scope for driving parlay penetration. We know that there is scope to drive frequency and bet count, and to deliver new products.
This is, in the U.S., by international standards, a young market, and there is lots of demand for our product and customer journeys and experiences that we have not yet captured that we have seen from other parts of the world. I am excited about that for the team, and as I said, I am really pleased and impressed with the way the product and tech teams are driving that innovation for the customer at increasing pace.
Thank you.
Your next question is from the line of Monique Pollard from Citigroup. Your line is now open. Please go ahead.
Hi, everyone. Thanks for taking my question. Dan, I just wanted to pick up on what you were mentioning around the ways in which you can think to promote, et cetera, and generosity, and generosity through margin. Rob, I think at the last set of results, you talked to promotional spend in the second half being about 6% of handle.
I just wanted to understand how much of that was going to come via straight generosity and how much via a kind of odds boost pricing dynamic. I was thinking particularly of the Bet Protect+ that you had in September that was given away for free, and what the uptake is like when you do the straight promotions versus generosity versus the kind of pricing dynamics, and how to think about that.
Hi, Monique. Look, I mean, we think about the overall bucket of generosity in one. I think there are ways that it's reported, right, in terms of different promos get reported in different ways. But that's not something that we split out or the way we think about it. We need to be flexible to deliver the right promo to the right customer at the right time. Sometimes those come through as free bets, sometimes they come through as price boosts, sometimes they come through as injury protects or Super Sub. And we have all sorts of those in our armory. I think the aggregate level of 6% is the right way to think about it.
We are not going to be tied, and the team would be wrong, frankly, to try and tie the team to any particular way of distributing that, rather than what works for the customer at that point in time in the market. We are very, very dynamic and responsive. These plans are constantly evolving. We think about it as one bucket, and how to deliver the best experience for the customer.
That is the same way we do around the world. You would have the same complexities when we think about Super Sub across the UKI or across the Italian market, or many of the promotions we run in Australia. Many of those run through gross margin, some run through the free bets line. But I do not really focus on splitting those out, and I do not think it would be right for the team to do so.
Understood. Thank you.
Your next question is from the line of Chad Beynon from Macquarie. Your line is now open. Please go ahead.
Morning, afternoon. Thanks for taking my question. Wanted to ask about, I guess, the UKI gaming mitigation journey thus far, what you have learned, and as you think about how to navigate that business when sports betting implements the higher margin in 2027, if you have different views versus original expectations based on your success thus far in iGaming. Thanks.
Hi. So look, I think, as people will have probably picked up, we've had to make some pretty challenging decisions in the U.K. in the context of tax rises. We announced last week or the week before that about 1,400 departures from our UKI business. Those are hard choices that the team have had to make, but we think they set us up to win in a post-tax environment.
We really had two choices with the taxes going up. One was to cut marketing and to cut generosity. The other was to leverage our scale to allow us to protect the investment in the customer, and we've picked the second. We're leaning into our scale advantage. That's allowing us to reduce the fixed costs whilst protecting investments at a higher level on marketing, generosity, et cetera.
We think that is underpinning the share gains we've seen, and we think it will underpin further share gains going forward. I think that's sort of strategically something that I think is very important for us, not just in the UKI, but actually across Flutter more broadly.
We have unparalleled global scale. We have the ability, therefore, to drive more operational leverage than any other operator in this sector anywhere in the world. We haven't always taken full advantage of that for lots of good reasons, but that's available to us in a way that I don't think it's available to anybody else. I think that positions us well to navigate these sorts of regulatory tax pressures better than others.
They will all be painful, and the choices in the U.K. were very painful, but they're the right ones for the health of the business, and they'll set us up well. I think that we're starting to see the results in that. I have to say, credit to the leadership of that business, because they've done an admirable job of dealing with that, what is a very challenging situation, positioning us for the long term.
Thank you for that, Dan. Appreciate it.
Your next question is from the line of Paul Ruddy from Davy. Your line is now open. Please go ahead.
Hi, Dan and Rob. It's actually a bit of a follow-on from that question, and it's really about the growth paradigm in International. I think you've referenced 5% to 10% annual revenue growth rate paradigm. Just thinking about 2027, is that an appropriate level for 2027 from a revenue perspective?
Just when we think about the puts and takes, you've referenced very strong Italy, but we've some tax headwinds in the U.K., and we've Brazil coming out. Would you be able to give us a sense of what level or what range of EBITDA growth we could expect next year if that 5% to 10% revenue growth paradigm is appropriate for 2027?
Yeah. Hi, Paul. It's Rob here. Good question. Ultimately for 2027, we are pretty confident about the ability to continue growing the EBITDA in our International business, and we'd expect to be at the higher end of the range that you quoted there of 5%-10%. I think when you look at revenue, due to some of the other factors that you mentioned, we'd expect that to be slightly lower.
We've got a significant number of cost initiatives landing into 2027 that will obviously help with the EBITDA delivery, and also investing behind initiatives within the business. So, we've got a good level of confidence about the strength of the International business into next year, certain parts of the portfolio performing particularly strongly.
We've not talked a huge amount about Italy today, but we're really, really pleased with the performance in our Italian business, and we continue to grow our market leadership there. So yeah, overall, we'd expect to be at the high end of that range that you mentioned from an EBITDA perspective.
Your next question is from the line of Charlie Muir-Sands from BNP Paribas. Your line is now open. Please go ahead.
Dan, Rob, thank you very much for taking my question. Given the context that you've talked about positively on international, perhaps more limited development in how you see profitability in the U.S. next year, and your focus on trying to delever the business as well, have you got any early thoughts you can share on potential capex levels? Also, have you contemplated and set aside any consideration of potential operational disposal in order to accelerate getting the balance sheet back into your target range? Thank you.
I'll let Rob take the capex, and I'll come back on the second.
Yeah, so we spoke about capex at Q2, Charlie, and how we'd brought the guidance down for this year. So we brought it down to $815 million. We're very confident that we'll hit that number, if not a number slightly below. Then into 2027, we're focused on reducing that further. We're looking at capex across the business as part of the simplification measures that Dan's laid out and bringing that down over time. So, you can expect to continue to see capex come down over time.
I think, I am a big believer in the scale that you need to win, and we have got unrivaled global scale in our category. We will always take a disciplined look at any of the assets around the world, but right now, I think there is more opportunities to get more benefits from the scale that we have, rather than going the other way.
We have reached the end of the Q&A session. I will now pass the call back to Dan and Rob.
Thanks, everyone, and goodbye.
This concludes today's call. Thank you for attending. You may now disconnect.