FanDuel Growth Expected, Flutter Off To Strong Start In 2024

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Flutter reported a strong start to 2024 for FanDuel and its US operations as the newly listed company in the US forecasts significant growth for the segment this year.

Guidance for the FanDuel segment released Tuesday sets the midpoint for further adjusted 2024 EBITDA at $710 million, or more than three times the $232 million reported for 2023 when stripping PokerStars out on updated segment reporting.

Further adjusted EBITDA is defined as adjusted EBITDA with share-based compensation also excluded. Without that exclusion, Flutter ($FLUT) reported $65 million in adjusted EBITDA for 2023, its first full year of positive US adjusted EBITDA because of a $412 million swing from 2022.

Flutter’s New York listing was not overly swayed by earnings with the stock down half a percent as of 2:30 pm Eastern.

Current trading shows revenue growth

FanDuel is putting up impressive numbers in the first quarter, though that is not entirely surprising from the sportsbook business.

Total revenue from Jan. 1 through Mar. 17 is up 55.6%, with sportsbooks revenue up 63.7%. This year, NC sports betting is included for the first time and Massachusetts mobile betting is live for the full quarter instead of just 21 days last year.

Total handle was up 19.6% in the period and net sportsbook revenue margins were 8.5%, up 2.3 percentage points from the prior year. Without new state impacts, total revenue would be up 34.1%.

FanDuel iGaming numbers up organically

There are no new states for iGaming in the first quarter, which means its 50.3% revenue growth for the period is organic.

Flutter said the business is benefiting from a larger player base and continued product improvements that helped it become the top iGaming brand at the end of January based on gross gaming revenue. The company launched 82% more games in 2023 than 2022 with exclusive access to top-performing games.

Its average monthly iGaming players jumped 41.8% in 2023 over the prior year. FanDuel added 3.7 million total new iGaming and sports betting customers last year, up 19%.

No target for iGaming market share

With no internal target for iGaming market share, Flutter is happy to watch the business grow as long as it remains profitable, CEO Peter Jackson said.

“We’ve got tremendous momentum in the business, we’re delighted with what the team is doing,” Jackson said. “Some of the innovations I mentioned earlier we’ve only just deployed so we’re excited to see where we can take the business to.

“And just like we talk about in sports, we’ll invest as much money as we can do in iGaming whilst able to meet the return criteria. We’ve set ourselves no market share targets so we’ll just see where and how big that business can get to.”

Financials should follow same cadence as 2023

Full guidance projections show expected 2024 revenue between $5.8 billion and $6.2 billion, with US further adjusted EBITDA between $635 million to $785 million. Those figures represent growth of 36.3% and 206.1% at the midpoint.

About 30% of further adjusted EBITDA should be generated in the first half, Flutter said. Revenue phasing should be in-line with last year, which included favorable sports betting results in Q2 and unfavorable results in Q4.

Cost of sales as a percentage of net revenue should be around 56.5%.

FanDuel parent OK with more debt

Flutter is increasing its net-debt-to-adjusted-EBITDA ratio, known as leverage, for medium-term targets.

The increased level of 2X to 2.5X is up from the previously disclosed targets of 1X to 2X. Flutter said last August it would reconsider the appropriate level of leverage, given its plans to list in the US and the expectation of positive cash flows and profitability.

Given the expected improvement of adjusted EBITDA, the board will allow some flexibility with that leverage ratio to allow for value-creating acquisition opportunities. Jackson did not mention where those acquisitions might come in terms of jurisdiction or business segment, but said acquisitions remain part of the company strategy.

Flutter expects US primary listing as of May

Flutter was eyeing a primary listing in the US as soon as its stock went live on the New York Stock Exchange in January.

“We believe a US primary listing is the natural home for Flutter given FanDuel’s no. 1 position in the US, a market which we expect to contribute the largest proportion of profits in the near future,” CEO Peter Jackson said at the time.

Making the US its primary listing will “unlock long-term strategic and capital market benefits,” the company said.

Flutter will put the issue up for vote at its annual meeting May 1. Should it be approved, that transition should be effective May 31.

Parlays boost FanDuel Super Bowl performance

Improved parlay products were popular for Super Bowl betting, according to FanDuel’s investor presentation. There were 1.5 million “popular same game parlays” placed on the Super Bowl this year.

A third of all Super Bowl live bets were made through FanDuel’s Quick Bets options.

Live same-game parlays were up 2.8X from the 2023 Super Bowl.

Structural hold improving despite best parlay prices

Jackson explained that the improvements to structural hold because of more parlay mix is not coming from inflated pricing.

“It’s really important that people understand that we actually offer the best prices to our customers,” Jackson said. “So we’re offering the best prices in the market, cheaper than our competitors, and yet we end up with a better margin. And that’s because of our pricing accuracy and our parlay penetration.

“It’s slightly counter intuitive, I know, but we offer the best odds to our customers but end up with the best margin. It’s also boosted by the parlay penetration but it’s because of our pricing accuracy.”

Older states still growing

FanDuel’s top competitor, DraftKings, calls out its growth in older states as a key to its success. That is a positive trend seen at FanDuel, too.

Flutter reported states that launched sports betting before 2022 saw revenue grow 24.8% in 2023.

Overall, US revenue grew 40.7% last year with sportsbook up 45.9% and iGaming up 47.2%.