Flutter Entertainment’s flagship FanDuel Sportsbook turned a $100 million profit in the first half of the year, carrying its UK parent despite lost market share.
FanDuel reported first-half adjusted EBITDA of $100 million, Flutter announced in its first-half earnings update Wednesday. That is about six months ahead of schedule and compares to $142 million in losses for the US division in the previous year. US revenue rose 71% on the year to $2.28 billion, 98% of which came from FanDuel.
“The first half marks a pivotal moment for the group,” CEO Peter Jackson said. “Our US business is now at a profitability inflection point, helping transform the earnings profile of the group and significantly enhance our financial flexibility.”
Flutter shares fell 3.4% to £143.95 in London on Wednesday on about four times average daily volume. That is in line with virtually every other company with a US sportsbook, in the wake of a recent announcement from Penn Entertainment and ESPN.
Gross margins swell for Flutter
Flutter’s other US products, FOX Bet and Poker Stars, accounted for $37 million in negative adjusted EBITDA. Flutter shut FOX Bet down in August after an unproductive four years marred by legal troubles and microscopic market share.
Flutter expects its US division to produce adjusted EBITDA of between $120 million and $240 million for the entire year, barring an unusual NFL betting season. Its chief competitor, DraftKings, second in US sports betting behind FanDuel, is forecasting a loss of $190 million to $220 million for the year.
More same-game parlays and improved pricing accuracy helped improve FanDuel’s industry-leading expected gross margin to 11.3%, up 1.7 percentage points from H1 last year. For context, BetMGM reported 9% last week. Parlays as a percentage of handle rose by 6 percentage points during the NBA playoffs.
The US division totaled $10.9 billion in sports betting handle in Q1, a 43% increase at the time. Flutter did not address Q2-specific handle on Wednesday.
FanDuel adds 2 million users
FanDuel acquired 2 million new players in H1, an 18% improvement year-over-year, because of sports betting launches in Ohio and Massachusetts. It did so while keeping the projected customer acquisition payback period below 18 months, according to the release.
“We do not expect to incur significant losses in H2,” Jackson said. “Currently, we estimate that states representing an additional 4% and 5% of the population will regulate sports betting in 2024 and 2025 respectively. The Ohio template is a good framework for considering the financial profile of these states in the period post-launch.”
Market share leader position slips
FanDuel online sports betting market share slipped quarter-to-quarter, though it still holds a wide lead over the competition.
FanDuel held 47% of the market in Q2, down 3% from Q1. Meanwhile, DraftKings market share increased to 35%, its highest in three years.
FanDuel had 23% of iGaming market share in the first-half, in line with its Q1 numbers. BetMGM reported an industry-leading iGaming market share of 25% last week.
Marketing spend jumps for FanDuel
FanDuel’s marketing $616 million in marketing costs was a 15% jump from the previous year, though decreased as a percentage of total revenue by 11 percentage points.
FanDuel plans to cut its marketing spend in half by 2030, but Jackson assured investors that Flutter is prepared to enhance its investment in ahead of football season at a rapid rate.
“Rest assured, we’re investing very heavily in our market-leading position,” Jackson added.
Flutter executive talks ESPN Bet
In an interview with CNBC, Jackson addressed the news that competitor Penn Entertainment plans to rebrand Barstool Sportsbook into ESPN Bet in the fall:
“This is all about scale in the US. That’s why you see us with such a big share, DraftKings behind us, and then there’s a very, very long tail of small operators. It’s a very tough market to be in. Investments are required to have a market-leading product that are not straightforward. People are straggling around trying to find a way to get themselves out of that very long tail of small operators.”
Barstool Sportsbook routinely held about 1.5% of US market share, according to LSR estimates. Penn is paying Disney $2 billion in cash and stock to use the ESPN name.
FanDuel stock listing on track
Jackson provided an update on a much-anticipated separate US stock listing for Flutter.
The company is on track for a listing on the New York Stock Exchange by the end of 2023 or early 2024.
