CEO says Paddy Power Betfair is primed for US

8 August 2018

Paddy Power Betfair chief executive Peter Jackson insisted today (Wednesday) that the operator is “well positioned to achieve scale in the US quickly” after a 20% increase in revenue in the country boosted the company’s second-quarter figures.

The company's Q2 results received a timely boost from Fifa World Cup after a weak first quarter for the company, although revenue was up 9% year-on-year in the quarter anyway before the football tournament helped to lift sales to a 13% total increase year-on-year.

The highlight of the second quarter, though, was the completion of the deal to acquire US daily fantasy sports operator FanDuel.

Although the takeover was only completed last month, after the end of the second quarter, Jackson said in an earnings call that the operator can be justifiably optimistic about growth opportunities in the US, having already established a presence in the country prior to the FanDuel deal.

Sports revenue spiked by 22% in Q2 in the US, with gaming revenue increasing by 18%.

“Fantasy sports will continue to be an important feature in the US market, especially in states where it could take a while for sports betting to be regulated,” said Jackson, who mentioned the “cross-selling” opportunities.

Jackson added that he envisages a “different market construct” in the US in terms of the balance between free-to-play games and sports betting, given the strength of the DFS market.

“Having 100,000 customers in New Jersey is a good starting point,” he said.

“Our US strategy is to go after the B2C market under the FanDuel brand. We have secured market access agreements covering 15 states and 36% of the US population, including markets where regulation is expected by the end of 2019.

“It’s worth remembering that our US business is not a start-up. We have established brands, with FanDuel in sports and TVG in racing, an extensive product suite, operational expertise and we already operate in 45 states, including real-money wagering in 33.

“Scale is essential for generating sustainable returns in the long term.”

Jackson, referencing the company’s solid base in the US, added: “The group’s strong balance sheet gives us important firepower and could prove to be a competitive advantage.”

In the trading update, Paddy Power Betfair’s profit before tax edged up by 4% to £106m (€118m/$137m), but underlying earnings slipped by 1%.

Additionally, Paddy Power Betfair also said that full-year earnings before deductions and interest, “pre-US sports betting”, is now expected to be between £460m and £480 – down from the previous expectation outlined in the Q1 trading update of between £470m and £495m.

This was attributed to the introduction of point-of-consumption tax and new product fees in Australia and swallowing up Fanduel’s losses “in the high single digits”.

The company added that, with the “infrastructure” already in place to expand in the US, any expenditure in relation to the market would fall under the marketing column.

Jackson added: “In Europe, product enhancements and improved cross sell rates have led to stronger gaming revenue growth over the past few months for both brands, whilst customer satisfaction with the Paddy Power sports app has stepped up.

“Recent marketing campaigns have also been successful with the Betfair brand increasingly identified as having the best odds. The World Cup was a showcase event for Paddy Power, with a series of successfully executed marketing campaigns leading to it being one of the UK’s most talked about brands in social media conversations around the tournament.”