FanDuel Hit By March Madness Results But Maintains Guidance

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The parent company of FanDuel is so bullish on its US operations that even an adverse $76 million swing does not throw off its projections.

Flutter had given an update on much of the quarter’s activity in late March with just two weeks left unknown. Those two weeks were crucial for FanDuel, though, as March Madness betting results were very customer-friendly.

Despite those unfavorable results (compared to favorable results last year), strong growth throughout the US business led to $26 million in adjusted EBITDA for the quarter, the company announced May 14. That is up $79 million from the $53 million adjusted EBITDA loss posted in Q1 of 2023.

Stock falls despite bullish guidance

US-listed FLUT, which transitioned its primary listing to the US on May 31, took a hit in pre-market trading the day earnings were announced, with the stock opening down 3.2% to $197.58 despite a mostly positive report.

The stock made up that and more at one point but eventually closed down 1.3% at $201.56. Volume hit 1.24 million, or more than 4.5 times its daily average.

The most prominent blemish on the report was the $356 million in non-cash charges. That includes $184 million in fair-value change of the option Fox has to buy an 18.6% stake in FanDuel through December 2030.

Maintaining corporate guidance

Despite results dragged down by $76 million in the final two weeks, Flutter remained confident and reiterated its 2024 expectations.

Flutter US guidance has revenue of $6 billion and adjusted EBITDA of $710 million at the midpoints. That would mean 36.3% revenue growth and 206.1% adjusted EBITDA growth over the prior year.

That guidance is maintained despite CEO Peter Jackson making it clear that customer acquisition would not slow down for anything, as long as return levels remain steady. FanDuel aims to onboard customers that will pay back the cost of acquiring them within two years or less.

“We are spending money where we can,” Jackson said. “We’ve shown very strong growth in existing states, continue to acquire a lot of customers in those states and as penetration rates continue to grow we’ll spend money there whenever we can meet return criteria.”

FanDuel leads US sports betting, iGaming

Flutter declared its US business as the top operators in the online sports betting and iGaming space. FanDuel had a 52% share of net gross sports betting revenue at the end of the period and topped the iGaming charts with 27% share.

That comes from having the leading product offering and disciplined customer acquisition, Jackson said.

FanDuel focused on directly acquiring casino customers as well. That helped iGaming revenue jump 49% with slot revenue up 73%.

Jackson cautioned that while 19% growth in average monthly players seems like a decent drop from the 33% reported in the fourth quarter, the first quarter had a tough comparison, with Ohio launching last year for the whole quarter compared to North Carolina’s launch on March 11 this year.

Promotional market rational for now

The US promotional market has always been very competitive, Jackson said. But right now, newcomers ESPN Bet and Fanatics are not spending irrationally to try to buy share.

“We’re not seeing people spend ridiculous amounts of money trying to persuade customers to try out a product which isn’t very good,” Jackson said. “I think the market is competitive but much more rational, and of course having the best product in the market stands us in a good stead.

“And the returns that we’re seeing because of our parlay penetration and all the other benefits that we have in the business means we are continuing to acquire customers at very attractive returns.”

Baseball improvements paying off

Flutter management did not dive into specifics about April but gave a few clues of the positive momentum it is seeing.

CFO Paul Edgecliff-Johnson noted that there is some reinvestment seen so far after the public won big in the final two weeks of Q1.

Jackson, meanwhile, mentioned FanDuel launched a range of new MLB products for the 2024 season that are already paying off. Same game handle parlay is up 4 percentage points in the total mix of handle over the first three weeks of the season.

‘Very good’ NC sports betting launch

Flutter is pleased with FanDuel’s share in NC sports betting so far with the brand signing up 5% of the adult population in a 45-day window.

Edgecliff-Johnson called the launch “very good,” noting FanDuel is pleased with its market share gained, though he did not break out specifics.

When asked why the Ohio and North Carolina launches went well compared to other states, Jackson noted the company continues to improve its launch playbook.

Converting daily fantasy sports customers from its database, using refer-a-friend, and switching to national advertising so the brand is better known in a new state prior to launch all play into those improvements.

iGaming tech stack for FanDuel

The work to bring FanDuel’s iGaming technology all in house has been “broadly done,” Jackson said.

Flutter is the world’s largest iGaming operator, so bringing the capabilities of its international brands into the US should help FanDuel maintain market leadership, he added.

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