The chief executive of Flutter, Peter Jackson, lauded the firm’s “globalization” approach, as the company’s income increased by 24.7% in 2023, reaching $11.79 billion (£9.32 billion/€10.87 billion).
Jackson was satisfied with the robust performance in 2023, emphasizing growth across nearly all of Flutter’s divisions. Income expanded in the US, UK and Ireland, as well as worldwide, with only a minor decrease in Australia.
As reported in the preliminary outcomes in January, the US operation was a primary driver of its achievement. Jackson stated that through FanDuel, Flutter is a market leader in the US, with the US business attaining annual adjusted EBITDA profitability for the first time in 2023.
Flutter’s success in the UK and Ireland was also apparent, while its global business continued to expand. Although the decrease in Australia was a setback to an otherwise strong year, there is still potential for expansion in the future.
Indeed, Jackson and Flutter are optimistic about double-digit growth in group income and adjusted EBITDA in 2024. Flutter stated it anticipates revenue to increase by 17.5% and adjusted EBITDA to grow by 30.2%, both at the midpoint.
Flutter has exhibited robust progress in the current year, and we remain committed to our strategic plan, Jackson stated. This is attributed to our localization approach for technology and offerings, along with the distinctive scale benefits of Flutter Edge.
As anticipated, our dominant position in the American market impacted the group’s profitability in 2023, as FanDuel achieved full-year adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) profitability in the US for the first time.
Beyond the US, we have made considerable strides in integrating Sisal into our global operations. This serves as a prime illustration of our “local hero” strategy in action, gaining market share in the UKI region.
Flutter’s stock is traded on the New York Stock Exchange.
The group’s emphasis on the US extends beyond actual operations, encompassing the financial sphere as well. In January, Flutter commenced trading on the New York Stock Exchange (NYSE).
This marks the conclusion of Flutter’s secondary listing on Euronext in Dublin, Ireland. Nevertheless, Flutter will continue to trade on the London Stock Exchange (LSE) and will maintain its premium listing status on that exchange.
However, Flutter still has some tasks to complete regarding its US listing to guarantee full compliance with Generally Accepted Accounting Principles (GAAP) and Securities and Exchange Commission (SEC) reporting requirements. This encompasses “ensuring complete separation of responsibilities” and “restructuring key controls.”
It is crucial to emphasize the significance of training financial and technological personnel to ensure their comprehension of their duties in the execution and substantiation of essential controls in financial reporting. Flutter highlights that this will contribute to the enhancement of any potential problems or shortcomings.
Flutter’s stock concluded at $221.99 on the previous day (March 25th).
Jackson stated, “I am pleased to observe Flutter’s stock being listed on the New York Stock Exchange for the initial time on January 29th. We are heartened by the augmented interest from new US investors since our US listing.
“We are striving towards a shareholder vote on May 1st to approve the transfer of our primary listing to the New York Stock Exchange.”
US Revenue Surpasses $4.48 Billion
Flutter’s breakdown of its 2023 segment performance reveals that the US leads the way with $4.48 billion in revenue, representing a 40.6% increase from the preceding year.
US sports wagering revenue experienced an increase of 45.9% year-over-year, while gaming revenue expanded by 47.2%. Flutter points out that sports wagering revenue benefited from expansion into three additional sports betting states, a full-year contribution from new states inaugurated in 2022, and a 24.8% increase in pre-2022 states. Regarding gaming, growth was propelled by robust player numbers, despite a limited total addressable market.
Overall, the US business witnessed a net gaming revenue market share of 53.4%, an improvement from 43.2% in 2022. FanDuel acquired over 3.7 million new betting and gaming participants in 2023, 19.
The company reported a stagnant growth rate compared to the previous year, with an anticipated return on investment timeframe aligning with prior years, under 18 months.
The company stated, “This, combined with the strong contribution from our existing customer base, will drive long-term profitability for the enterprise.”
Double-digit growth in the UK and Ireland, as well as global markets
Outside of the US, the company has experienced greater success in the UK and Ireland. In these regions, revenue increased by 13.7% to $3.05 billion, fueled by the continuous expansion of the casual customer base.
Sports betting revenue in the region grew 10.5% year-over-year, while online betting revenue surged 18.1%. Overall market share for both physical and online operations also rose by 2.0%, reaching an estimated 30.0%.
The company said, “Our unwavering focus on product offerings has further enhanced the high-margin Bet Builder and Build-A-Bet hybrid products.” “We introduced exclusive new betting markets and launched popular new products, such as ‘Acca Freeze’ on Sky Bet, which spurred increased penetration of these high-margin products and positively impacted our net revenue margin.
“We also introduced new online betting features to provide sports betting customers with an improved cross-selling journey to promote online betting products and expanded content, particularly for live casino.”
Regarding the international business, it encompasses all other markets excluding the US, UK, Ireland, and Australia. Revenue in this segment grew by 34.2% to $2.81 billion, with Sisal, which is centered in Italy, contributing $1.22 billion.
Outside of Italy’s expansion, Flutter has also witnessed a larger market share in Georgia and Armenia, and has achieved success in Brazil, Spain, and Turkey. Flutter claims that its recent acquisition of a controlling interest in Serbia’s MaxBet will bolster its future expansion.
Flutter stated, “The effectiveness of our strategy of acquiring and establishing leading positions globally is evident in our robust growth performance in 2023.” “We continue to focus on targeted investments and local hero approaches in key ‘consolidate and invest’ markets, while optimizing the PokerStars business, which has a wider presence in our ‘optimize and maintain’ regions.”
Disappointment in Australia
The only area to report a decline in earnings in 2023 was Australia, where earnings decreased by 7.1% to $1.45 billion. Flutter attributed this to a weaker horse racing market environment in 2023 compared to 2022. The previous year also benefited from increased customer engagement following COVID-19 related restrictions.
Flutter observed that the horse racing market softened in the latter half of 2023, a trend anticipated to persist into 2024. However, there is still optimism for future success in the nation.
Flutter stated, “We anticipate that a challenging market, coupled with increased regulatory and compliance expenses, will further diminish profitability in Australia in 2024.” “However, we believe that Sportsbet’s scale, 45% market share, and leading position in brand and product will place us in a strong position for the future.”
Flutters Financial Report Highlights a Significant Impairment Charge for PokerStars
As we enter 2023, Flutters expenditures have risen across most categories. The most substantial expense was the cost of goods sold, reaching a staggering $6.2 billion, a remarkable 28.9% increase. Other notable increases include a 25.4% jump in sales and marketing expenses to $3.78 billion, a 36.2% rise in general and administrative expenses to $1.6 billion, and a 38.6% growth in technology, research, and development costs to $765 million.
Among the sales and marketing expenses, a significant $725 million impairment charge stands out, directly related to the PokerStars trademark dispute. In the final quarter of the year, Flutter acknowledged an impairment of intangible assets, reflecting its “homegrown heroes” strategy and PokerStars’ presence in key “optimize and maintain” markets characterized by low growth.
In December 2023, Flutter made the strategic decision to abandon its existing capital-intensive PokerStars technology. This move aimed to enhance efficiency and performance by optimizing technology and marketing resources.
Consequently, Flutter reevaluated its portfolio of intangible assets acquired with PokerStars. Due to the impact of the shift in strategy and operating model, which was projected to result in a decline in royalty revenue, Flutter determined that the total undiscounted cash flows fell below the carrying value.
As a result, Flutter was compelled to recalculate the fair value. The revised fair value estimate ranged from $337 million to $533 million, contingent upon the assumptions used. This signifies that PokerStars has experienced a depreciation of at least 57% following the impairment.
Flutter clarified that this was mainly due to an evaluation of strategy and operational structure, aiming to maximize the worth of PokerStars’ distinctive poker resources. This aligns with our approach in the International Business division, which combines global reach with local presence.
Despite increased expenditures, net losses were lessened.
After accounting for $542 million in non-operating expenses, the pre-tax loss was $1.09 billion, compared to $295 million the previous year. Total income tax payments were $120 million, leading to a net loss of $1.21 billion, up from $370 million in 2022.
However, there are more noteworthy figures – the effect of foreign exchange translation. Last year, Flutter reported a negative impact of $896 million. However, in 2023, this figure was a positive $357 million.
After considering other financial factors, including the fair value of cash flow hedges, investment hedges, and the sale of debt instruments, this had a significant impact on Flutter’s final outcomes. The total comprehensive net loss for 2023 was $847 million, compared to $1.41 billion in 2022.
Additionally, adjusted EBITDA for the year increased by 45.4% to $1.87 billion, with a margin improvement to 15.9%. This does not include the effect of the PokerStars impairment charge.
Solid beginning to 2024
Regarding current performance, Jackson stated that Flutter had a solid start to 2024. He mentioned record Super Bowl engagement, which contributed to a 55.6% increase in US revenue for the period from January 1 to March 17.
FanDuel also began operations in North Carolina during this period.
Outside the United States, their revenue increased by 6.3%. This was due to growth in the United Kingdom, Ireland, and other global markets offsetting losses in Australia.
“We believe our strategy and what distinguishes us from the competition will help us continue to expand, both organically and through acquisitions,” Jackson stated.
An external expert, Russell Poynton, who works with consumers at Edison Group, provided his own perspective on the results. He said that the 2023 results were “quite good.” He also noted that rising expenses were a concern.
“Despite the company seeing growth in key metrics like average monthly players and revenue, they experienced an overall loss for the year. This was attributed to some very high unusual costs, such as impairments, that totaled $1.68 billion,” Poynton said.
“Although they incurred a loss, their adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) increased by another 45.4%. This is despite the last three months of the year being challenging for customers due to sports events, which had caused investor anxiety earlier in the year. The US market expanded significantly and turned profitable for the first time. Their diverse global markets contributed to their overall growth.
“Looking ahead to 2024, Flutter anticipates continued growth. They expect their revenue to rise by 17.5% and their adjusted EBITDA to increase even more, by 30.2%. This demonstrates their confidence in their future profitability and strong cash flow.”
The firm is assured of its profits and financial resources, so they’ve modified their debt goal. This will aid them in reaching long-term triumph. Currently, everyone’s attention is on the investor vote in May to transfer their primary listing to the United States.
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