FanDuel Capital Markets Day Top Takeaways

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Management within FanDuel and its parent company Flutter used a three-hour session to show why they expect their US sports betting lead to continue in years to come.

The FanDuel Capital Markets Day in New York broke down almost every area of the business with a 113-page presentation and 40-minute Q&A session.

FanDuel expects to hit profitability in 2023 and, based on its scale advantage, expects revenue at maturity to be 4.5 to 5 times higher than 2022 revenue.

Based on guidance, that implies annual revenue of $13.3 billion on the low end and $16 billion on the high end. FanDuel also expects long-term EBITDA margins of 25% to 30%, or between $3.3 billion and $4.8 billion in annual EBITDA.

CA tribes not always against mobile?

FanDuel President Christian Genetski hit on the regulatory side of the business during his portion of the presentation and used part of the time to talk about the defeat in California.

“2022 would have been by anyone’s measure audaciously ahead of schedule,” Genetski said. He would not have thought there was a chance to even have mobile CA sports betting on the ballot 18 months ago, he added.

But there was enough support to give it a run and give Californians an option other than the tribal-only retail referendum, he said. The tribes worked to defeat Prop 27, but that was not necessarily the plan from the beginning, Genetski explained.

“I don’t want to go into too much detail about all the conversations we had along the way but suffice it to say it was not always a fait accompli that the large tribal casinos in California were going to oppose mobile sports betting.”

FanDuel President Christian Genetski

FanDuel benefits from scale

Flutter CEO Peter Jackson said FanDuel has never had a market share target in mind. Instead, the focus has been to invest hard and focus on customer acquisition costs in relation to long-term value while taking as much share as possible.

Whether it was the plan or not, FanDuel is the market-leading sportsbook in 12 of its 15 online sports betting states based on the first nine months of the year. Those early and continued investments into building a large customer base are paying off as FanDuel can take advantage of its scale.

FanDuel predicts its cost of sales will hover between 47%-52% of net gaming revenue moving forward with 50% expected for this year, FanDuel CFO David Jennings said. That is a plus for larger operators, as not all sportsbooks will be able to afford that kind of cost structure, he said.

High costs are starting to make their impact across US sports betting this year. So far, Churchill Downs, FuboTV and MaximBet have shuttered their online sports betting operations this year, citing profitability as a main concern.

Scale brings customer acquisition opportunity

Between the expansion of sports betting in the US and FanDuel’s growing customer base, the brand is seeing a big benefit to national marketing over local marketing.

In 2020, it was about 53% more expensive to buy national ad space during NFL games. But in 2022, national advertising costs were down 29%.

That meant despite spending 27% less on TV marketing in existing states, activations during the first week of NFL betting jumped 23% in those states.

Despite the improvements from scale, customer referrals remain the biggest source of new customers at 25%. That cost is 60% lower than other channels and could become more efficient as the company’s scale grows.

Influencer effect on FanDuel

Management also highlighted its many influencers, showing classic NBA on TNT banter between partner Charles Barkley and his cohosts Shaquille O’Neal and Kenny Smith while discussing a FanDuel parlay.

Another influencer, Pat McAfee, led to what FanDuel believes is the largest communal parlay bet in history. McAfee promoted a Same Game Parlay for this year’s Super Bowl, which drove more than 200,000 bettors to tail the bet as well.

FanDuel app leads to crossover

FanDuel’s single nationwide app for its products is driving cross-sell by having everything in one spot, it says.

In FanDuel’s five states with iGaming, 56% of its customers have engaged with two or more products from January 2018 through October 2022.

One out of four sportsbook customers have been active in two or more states through October.

iGaming has room to grow

FanDuel CEO Amy Howe was clear there is still room to grow on the iGaming side.

FanDuel implemented some of Flutter’s promotional mechanics that drive engagement, leading to better month-over-month retention rates, she said.

When asked about potential acquisitions, though, Howe was not sure where the fit would be. Typically an acquisition is for a brand, database or loyalty program, but FanDuel feels good about its current path.

NY tax changes coming?

FanDuel does not ignore a state from a lobbying perspective once it goes live, President Christian Genetski said.

That work is often defensive in those live states but can also be offensive, such as looking for lower tax rates.

Genetski expects to see proposals submitted in New York that would add more mobile NY sportsbooks while lowering the tax rate from its current US-high 51%.

Smaller sports streaming with FanDuel

There are better homes than FanDuel for major US sports leagues in the medium term, Chief Commercial Officer Mike Raffensperger said.

That may not be true for smaller leagues, though.

Secondary and tertiary leagues that are having trouble finding a home for their games and securing a fanbase could benefit from a FanDuel integration though, he said.