Entertainment
Flutter Entertainment has warned it is likely to fall approximately $370 million (£297 million/€359 million) short of US revenue expectations for FanDuel following a period of “very unfavourable” sports results in the country during November and December.
In a trading update published today (8 January), Flutter said strong player-friendly results have offset US player momentum. The group published Q3 results in mid-November, with these showing “excellent” growth across all regions.
However since the results announcement on 12 November, running into December, FanDuel has endured “unfavourable US sports results” primarily affecting NFL parlay and same-game parlay outcomes.
The operator went as far as calling the 2024-25 NFL season “the most customer friendly since the launch of online sports betting with the highest rate of favourites winning in nearly 20 years”.
Flutter takes $438m GGR hit from customer-friendly results
These results, Flutter said, generated an estimated adverse gross gaming revenue of $438 million.
Revenue took a $390 million hit and adjusted EBITDA $260 million. This covers the period between 12 November – when the Q3 results were published – and 31 December.
As such, FanDuel revenue for FY24 is now likely to be $370 million less than the previous guidance midpoint at $2.78 billion the operator said. Flutter initially said revenue would be between $6.05 billion and $6.25 billion in the US.
US adjusted EBITDA will be $205 million lower than the initial midpoint of $505 million. Flutter previously forecasted adjusted EBITDA to range between $670 million and $750 million. This comes before any mitigating steps, such as reducing sales and marketing costs, the operator noted.
It means FanDuel revenue for Q4 is now expected to reach $1.59 billion, with adjusted EBITDA coming to $161 million. This factors in a $643 million GGR hit from the adverse sports results in the quarter, which in turn reduced revenue by $550 million and slashed adjusted EBITDA by $360 million.
However, Flutter added it remains confident in the growth drivers and long-term growth trajectory as outlined at its investor day in September.
UKIE performance will offset US struggles
While the NFL results have hindered FanDuel, the operator stressed that operations in other markets remained strong. The UK and Ireland in particular performed well thanks to favourable results in the English Premier League. As a result its revenue midpoint for the 2024 financial year is likely to be 1% higher than the previous year, with adjusted EBITDA 2% higher.
Black swans “not as rare as people think”
Days before Flutter published its Q3 results, competitor DraftKings announced a revenue and earnings downgrade on the back of adverse results early in Q4. Barry Jonas of Truist called those results “the worst in company history” for DraftKings. It faced a revenue headwind of around $250 million and a $175 million impact on EBITDA.
Reflecting on Flutter’s statement analysts at Regulus Partners believe it was “inevitable” FanDuel would encounter bad luck after years of explosive growth. It expects other US operators to issue similar profit warnings.
“After nearly four years of structural margin improvements, a brief run of bad luck was almost inevitable and Flutter is largely right to confirm underlying guidance, in our view,” Regulus said. “However, the problem with black swans, both in ornithology and in risk metaphor, is that they are not as rare as people think.
“FanDuel’s leading same game parlay mix probably exposes them more to this run of bad results for bookmakers. But we doubt FanDuel will be the only US betting revenue disappointment or profit warning.”
The problem with parlays
Parlays increase – rather than decrease – margin volatility, Regulus explained. Coupled with the US market’s dependence on three seasonal local sports, the NFL, basketball and baseball, any punter-friendly results have an oversized impact.
“The NFL is by far the worst example[…], with [around] 15% of US wagering balanced upon fewer than 300 games played over just 18 weeks – with this level of risk concentration black swans are bound to appear in flocks.”
Regulus estimates that around 70% of sports betting handle – excluding parlays – comes from these three core sports.
Shares in Flutter Entertainment were down 1.28% at $251.86 per share in early trading in New York today (8 January).
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Robert Fletcher