Flutter revises full-year adjusted EBITDA amid customer acquisition boom

Flutter Entertainment, the company behind brands such as PokerStars, Betfair, and Paddy Power, has reported its third-quarter results on Thursday morning, in which the company confirmed that it will post lower-than-expected full-year earnings, citing prominent events, such as the FIFA World Cup as one of the reasons why the results were depressed.

The news was quickly picked up by markets which saw the value of the company’s shares drop by 10%. It’s not all that bad, however, as the revised EBITDA is not really missing its target by too much. Initially, Flutter Entertainment expected the full-year adjusted EBITDA to be in the range of £1.44bn-£1.60bn, and this is likely to be the case. However, the revision indicates that Flutter is now veering towards the lower end of the range, i.e. £1.44bn.

Flutter has described "customer-friendly sports results" and foreign exchange rates as two of the reasons that have caught the company unprepared. Analysts, though, have puzzled over as to why these two factors could have contributed to depressing earnings by so much, as both foreign exchange rates and customer-friendly results could be hedged against.

Yet, it’s not all bad news for Flutter Entertainment, which managed to still pull a 16% growth of monthly players year-over-year, at 11,139 (‘000s). Sports revenue hit £1.12bn along with £914m from gaming, for a total of £2.03bn, a 13% growth year-over-year, nevertheless.

Even sports revenue grew despite the aforementioned impact of "customer-friendly results." Flutter Entertainment has also reported excellent results from the United States, which continues to account for the bulk of the company’s results. FanDuel is also rising quickly in the iGaming vertical and now holds 23% in the US market, the company update informed.

Flutter Entertainment CEO Peter Jackson was not so worried about the results, emphasizing on the recent successes first. He noted:

"We are particularly pleased by the great progress we are making in the US. We are the first online operator to achieve structural profitability, and the strong ramp in EBITDA during 2023 will continue into 2024 and beyond, as our profit margins expand materially."

The NFL season has also proven an important part of the group’s overall strategy, with Flutter reporting healthy player acquisition owing to the start of the season. However, a declining Australian racing market has put a crimp on the company’s immediate ambitions. Sportsbet’s revenue, the Flutter brand in the market, saw its revenue drop by 7%.

Despite the criticism, Flutter is in a good position to continue driving profitability, notwithstanding local challenges that may be further hedged against in the future by adapting the company’s offer or pulling out of markets where the group does not believe it has much of an opportunity for growth. Flutter just sold Betfair Colombia to Stake.com, as part of realizing this strategy.

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