Flutter’s Third Quarter Results Highlight the US Success of FanDuel

Flutter Entertainment plc is the world’s largest online gaming operator, with roughly $7 billion in 2021 revenue. Its portfolio of brands includes Paddy Power, Betfair, PokerStars and Sky Bet, among others. However, its crown jewel at the moment seems to be FanDuel, whose presence is powerful both in the US market and on Flutter’s balance sheet.

On November 9, the Ireland-based company reported 31% year-over-year growth in Q3 2022 global revenue to $2.18 billion. It credited strong performance in the US market and raised its full-year guidance for US revenue. It now expects to see a jump of 114% year-over-year for that market to around $700 million, making it the company’s largest.

A Changing of the Guard

Flutter’s performance elsewhere was also good, though less dramatically so. The company said it has seen 11% Q3 revenue growth in other markets and 19% growth in average monthly players. Even this was primarily driven by markets other than Flutter’s traditional home turf in the UK and Ireland.

The company reported 43% constant currency growth in its “international” business – meaning everything except the US, UK, Ireland, and Australia. Those international operations brought in £466 million in Q3 ($550 million). That number isn’t all organic, however. It includes two months of revenue from leading Italian operator Sisal, which Flutter acquired in August 2022 for roughly $2 billion.

For the UK and Ireland, previously Flutter’s largest market, online revenue has ticked a modest 4% higher to £443 million. Online casino is the critical vertical there, up 29% and offsetting an 11% drop in sports betting. Flutter’s retail operations in that market and overall revenue from Australia are on the decline.

Overall, the story seems to be that the company’s future growth lies in new markets – including the US – and in iGaming more than sports.

Setting US Hearts A-Flutter

Sports betting will remain important in the US so long as it remains legal in many more states than online casinos.

Flutter’s US sports betting revenue has doubled since last year and comes almost entirely from FanDuel Sportsbook, which holds a 42% market share.

Flutter CEO Peter Jackson is, unsurprisingly, upbeat about the company’s prospects:

We are really pleased with our performance in our US division since the start of the NFL in September where we are now averaging over one million players on a regular NFL Sunday. In addition, we are seeing an increase in customer retention rates as our parlay products continue to grow in popularity, boosted by the start of the NBA season.

Even so, iGaming contributed to the strong performance despite not being one of FanDuel’s traditional strengths. According to the release, Flutter has seen US iGaming revenue rise by a robust 36%, thanks to 1.86 million average monthly players, a 42% increase.

Although less dominant here than in sports betting, FanDuel Casino is still impressive, with a 16% market share of all iGaming. This includes its secondary brand, Stardust Casino.

The company raised its full-year 2022 US revenue estimate to $2.95-$3.2 billion from a previous $2.85-$3.1 billion. Expected adjusted EBITDA loss of $300-$360 million remained in line with previous guidance, though Flutter expressed “confidence that we will be profitable for 2023.”

Can Flutter Catch BetMGM?

The forecast puts Flutter on sound footing in the battle for US online gambling supremacy. So, how has Flutter outperformed virtually every other online gaming operator in the US?

The leader in the space as of November 2022 remains BetMGM, which posted annual revenue growth of nearly 90% in Q3. BetMGM is a collaboration between MGM Resorts and prominent European online operator Entain, whose other brands include Bwin, Ladbrokes and Partypoker. BetMGM holds a 29% share of US iGaming, and a 22% share of combined iGaming and sports betting.

What the two companies have in common is that they aren’t building an online presence from scratch. Unlike FanDuel, however, BetMGM is a hybrid, benefitting from MGM’s top-tier terrestrial gaming brand and the massive customer database that comes with it. FanDuel, on the other hand, has relied on its databases from the heyday of daily fantasy sports.

The combination of online expertise and a pre-existing customer base seems to be the key. MGM’s land-based rivals like Rush Street (BetRivers) and Caesars are trailing somewhat. That’s even more true for latecomers like Wynn and Bally’s, who are struggling to gain much market share.

Companies with only the other half of the recipe are faring even worse. For instance, Unibet has ample experience with European online gambling. However, without a familiar brand and loyal customers, it has found it tough going in the US and has had to rein in its aspirations.

The most direct comparison for FanDuel is, of course, fellow DFS pioneer DraftKings. In contrast to FanDuel, DraftKings is seeing slower-than-expected customer growth and heavy losses on its bottom line. Its mistake may simply have been the assumption that users attracted by its heavy promotional spending would stick around. It is now finding it hard to take its foot off that gas pedal without losing what market share it has.

The Fox Problem

The only real worry for FanDuel in the US has been its strained relationship with Fox Sports. However, the two companies may be close to disentangling themselves.

The Fox-Flutter saga began with the latter’s $6.95 billion acquisition of The Stars Group (TSG). This included both PokerStars and Sky Bet. However, it also brought along Fox Bet, a joint venture between TSG and Fox.

As part of that deal, Fox Corporation, a minority stakeholder in The Stars Group, wound up owning 2.6% of Flutter, with an option to buy 18.5% of FanDuel in July 2021. However, ambiguity in the relevant valuation led to a fight that required arbitration to resolve.

Another point of contention is the poor performance of Fox Bet, which has less than a 1% market share. Fox has claimed that the joint venture has floundered because Flutter’s refused to provide “commercially reasonable resources.”

This claim, like Fox Bet itself, fell flat. Now, Fox is left to decide whether to commit to a joint venture with a lukewarm partner in Flutter or treat it as a failed experiment and walk away. At this point, Flutter probably won’t be too unhappy if it chooses the latter route.

About the Author

Emile Avanessian

Emile Avanessian

Emile is a one-time banker turned freelance writer. He previously worked in equity research and as a member of the Financial Sponsors Group with Goldman Sachs, where he worked on numerous casino- and gaming-related projects. His written work has focused largely on sports (NBA basketball and European soccer) and sports betting. Emile currently also writes for Squawka and Urban Pitch. His work has also been published in The Los Angeles Times, The Blizzard, Yahoo Sports, SI.com, and ESPN.
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