FanDuel and Sportsbet drive Flutter Q3 revenue growth

7 November 2019

Flutter Entertainment saw revenues increase 10% to £533m (€618.4m/$685.7m) for the third quarter of 2019, as FanDuel and Sportsbet’s growth in the US and Australia respectively offset a lower retail combination.

Sports betting made up the majority of the operator's overall revenue, with £417m, up 11% year-on-year. Gaming revenue rose 8% to make up the remaining £116m of revenue.

The operator said that its February acquisition of Georgian online sports and betting brand Adjarabet accounted for four percentage points of revenue growth in Q3.

The online sector — which comprises the Paddy Power, Betfair and Adjarabet online sports betting and gaming brands — was the largest revenue generator for Flutter, bringing in £247m, down 1% year-on-year.

While the online group’s gaming revenue increased 11% to £84m, its betting revenue fell 6% to £163m. Flutter noted that a large amount of this sports betting decline was due to the fact that Q3 of 2018 contained the latter stages of the FIFA World Cup, and was a particularly high-volume quarter for sports betting. Flutter said that if the World Cup contribution was stripped out, the online sports sector grew 5% year-on-year.

Sportsbook revenue fell by 5% while exchange betting revenue fell 9%. Flutter did not reveal how much revenue came from each vertical, but did mention that the net revenue margin from sportsbook betting was 8.2%.

Although online revenue improved when the effect of the World Cup was factored in, the company did note that, “a combination of responsible gambling measures and international market switch offs have continued to affect PPB Online”.

Flutter chief executive Peter Jackson also said that the operator’s short-term revenue took a hit as it attempted to build a more sustainable customer base.

“Within PPB, both the Paddy Power and Betfair brands continued to make good progress in building more recreational customer bases through enhanced responsible gambling measures,” Jackson said. “While revenues in the quarter were impacted by this ongoing work, we remain confident that the changes being made will improve the sustainability of future growth and lead to a more diversified customer base for both brands”

In Australia, where Flutter operates the Sportsbet brand, the company took in £119m, thanks in part to a net revenue margin of 11.4%, which it said was helped by favourable sports results.

The operator saw great success in the United States during the quarter, as revenue from the country rose 67% to £91m.

Sports income from the FanDuel brand made up the majority of US revenue, at £76m, a 55% improvement on the prior year following the launch of retail sportsbooks in Iowa, New York and Indiana. Mobile offerings were also rolled out in Pennsylvania and West Virgnia, where the brand already conducted retail operations.

Flutter said that customer acquisition is ahead of expectations, having already acquired 250,000 customers.

Online casino in the US took in £15m for Flutter, up 174% year-on-year. Flutter put this increase largely down to successful cross-selling to FanDuel customers.

This American success prompted Flutter to revise its US earnings before interest, tax, depreciation and amortisation (EBITDA) guidance from a loss of £55m to a loss of £40-45m.

However, Flutter's overall EBITDA guidance remains the same at £420m-£440m.

The operator’s retail revenue from 620 Paddy Power betting shops across the UK and Ireland declined by 9%, however. Although retail sportsbook growth grew 5% to £58m, retail gaming fell 37%, largely due to the reduction of the maximum stake on FOBTs to £2.

However, the retail decline for Q3 was significantly less than Q2’s 44% drop. Flutter said the hit from the regulation should continue to get softer as competitors close shops in close proximity to Paddy Power locations.

Flutter did not provide information about its expenses or overall profits for the quarter.

The third quarter also saw Flutter announce a merger with the Stars Group to create the largest online gambling company in the world.

Stars today (7 November) announced revenue of $622.5m (£483.8m/€561.3m), slightly less than Flutter’s revenue and enough to ensure the pair combined for revenue of more than £1bn for the quarter. Subject to approval, the merger is expected to go through in the second or third quarter of next year.

“We believe that this deal will accelerate delivery of all of our core strategic objectives and we are very excited about the international growth prospects for the combined group,” Jackson said.