FanDuel Parent: Our Customers Will Bring Profitability Without Chasing It

Written By

Updated on


FanDuel and Flutter‘s US digital portfolio will be EBITDA-positive this year, but that is not the most exciting part, management said on Thursday‘s earnings call.

“When you start rolling forward those cohorts, yes we are going to be EBITDA-positive in 2023 but it’s actually when you start looking at the trajectory that business delivers, that’s very exciting,” Flutter CEO Peter Jackson said on the company’s year-end call.

The market did not react with similar enthusiasm. The London-listed stock fell 1.19% to £133.30 with below-average trading volume. There likely would have been a more positive response from US investors, which backs up Flutter’s thoughts about a secondary US listing.

Profitable FanDuel = healthier Flutter

CFO Jonathan Hill made it clear that unlike FanDuel competitors, management has not targeted profitability. The growth in lifetime value of its customer cohorts will result in that profitability alone, he said.

“We expect [positive EBITDA] to happen because of the cohorts but I think Peter’s point is absolutely right,” Hill said. “People need to focus on the ’24 and the ’25 potential of where this business gets to because that’s, for us, the big story here on the transformation of the earnings profile, the cash flow profile, the de-leveraging benefits of ’24 and ’25 and what that actually means for the group is fundamental.”

Big impact on balance sheet

Positive cash flow from FanDuel will help cut down Flutter’s debt-to-EBITDA ratio, which currently sits at 3.9 times, or 3.2 times if stripping out US investment. The company’s debt was $5.6 billion at the end of last year.

Once the company is back to its medium target of 1 to 2 times debt-to-EBITDA, Flutter’s board will revisit its dividend policy.

Overall, the US digital segment posted an EBITDA loss of $300 million in the US for the full year on $3.1 billion in revenue. That EBTIDA loss is 6% worse than 2021. The entire company, meanwhile, posted EBITDA of $1.1 billion on $9.3 billion in revenue.

Maryland, Ohio FanDuel launches successful

Jackson said the FanDuel team gets better with every state launch, and Maryland and Ohio were no exception. They were the company’s most successful launches to date.

Ohio was particularly strong as the company leaned on its daily fantasy sports database. FanDuel already has 57% penetration of its DFS base in Ohio, which is a record, Jackson added.

FanDuel took more than 50% of gross revenue share in each state’s first month with a penetration of 6% of the adult population in those states so far. The customer payback period right now is under 12 months, he said.

Marketing drives losses for FanDuel (and everyone else)

The company spent $78 million on marketing efforts for both states during the fourth quarter. Without that, FanDuel’s fourth-quarter EBITDA would have been a positive $36 million.

FanDuel already added more than 1.2 million new customers in 2023, largely because of the Ohio and Maryland launches.

Parlays, Gronk rule Super Bowl

Around three-quarters of active FanDuel bettors played a same-game parlay during the Super Bowl.

Customers love the product, Jackson said. With 90% of the handle from those parlays priced in-house, so does FanDuel.

Activity throughout the NFL Playoffs was up about two-thirds compared to last year’s playoffs, Jackson added.

FanDuel leads in most states

FanDuel Sportsbook has 50% of sports betting market share in the US and leads the market in 15 of its 18 states. That share represents a 10 percentage point increase over the fourth quarter of 2021.

FanDuel is second or lower in just Colorado, Iowa and Wyoming, according to the earnings presentation.

Sportsbook revenue jumped 115% overall. States that launched before 2021 saw 42% growth compared to last year. Average monthly players climbed 26% in the US, hitting more than 3 million in the fourth quarter.

iGaming improving

The company’s US iGaming product is getting better. Flutter knew the product in the US was not good enough, Jackson said.

FanDuel Online Casino launched its Reward Machine mechanic which gives bettors a chance to win certain incentives daily. That helped player days in the fourth quarter grow 1.5 times last year.

The iGaming arm also saw a 63% increase in average monthly players compared to last year. Retention rate is improving, too, up 25% from the prior period.

Future of FoxBet still TBD

US losses in the quarter were $75 million excluding FanDuel. About half to two-thirds of that would go away if Flutter shut down FoxBet, Jackson said.

It is notable that despite Fox broadcasting the Super Bowl this year, the network chose to promote FanDuel over the FoxBet brand, he added.

FoxBet and PokerStars account for 3% of revenue but 30% of losses for the US, he said. The only question is whether the company wants to invest more in PokerStars to grow the pool of shared poker players between multiple US states.

Whether there is more investment will come down to customer acquisition costs and lifetime values, Jackson said.