Flutters chief executive, Peter Jackson, commended the company’s “globalization” approach, which significantly contributed to a 24.7% surge in revenue for 2023, reaching $117.9 billion (£93.2 billion/€108.7 billion).
Jackson acknowledged the impressive performance in 2023, highlighting growth across nearly all of Flutters divisions. Revenue expanded in the United States, the United Kingdom and Ireland, and worldwide markets, with only a minor dip in Australia.
As indicated by preliminary results in January, the US operation was a key factor in the company’s success. Jackson stated that Flutter holds the top spot in the US market through FanDuel, and the US business achieved annual adjusted EBITDA profitability for the first time in 2023.
Flutters success in the UK and Ireland was also noticeable, while its international business continues to expand. While the decline in Australia cast a shadow on an otherwise robust year, there is still potential for growth in the future.
Indeed, Jackson and Flutter are optimistic about double-digit revenue and adjusted EBITDA growth for the company in 2024. Flutter anticipates revenue to increase by 17.5% and adjusted EBITDA to grow by 30.2%, both at the midpoint.
Flutter had a strong showing in 2023, and the company continues to carry out its plan, said Jackson. This is driven by their localized approach to technology and offerings, as well as the unique size benefits of Flutter Edge.
As anticipated, their top spot in the United States altered the group’s profitability in 2023, as FanDuel achieved its first full-year adjusted EBITDA profit in the US.
Outside of the US, the company made significant progress in incorporating Sisal into their international business. This is a prime example of their ‘local hero’ strategy working, and they have taken a leading position in the UKI market share.
Flutter’s shares are listed on the New York Stock Exchange.
The group’s emphasis on the United States is reflected not only in their operations but also in their finances. In January, Flutter began trading on the New York Stock Exchange (NYSE).
This marked the end of Flutter’s secondary listing on Euronext in Ireland. However, 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 work to do in its US listing to ensure reporting is fully in line with GAAP and SEC reporting requirements. This includes “making sure there is complete separation of duties” and “restructuring key controls.”
Moreover, it’s essential to recognize that educating financial and technical staff to ensure they grasp their duties in carrying out and verifying key financial reporting controls is vital. Flutter highlights that this will aid in addressing any potential problems or shortcomings.
Flutter’s stock finished at $221.99 on March 25th.
“I’m thrilled to witness Flutter stock make its debut on the New York Stock Exchange on January 29th,” stated Jackson. “We’ve been heartened by the enthusiasm from new US investors since our listing in the United States.
“We’re striving towards a shareholder vote on May 1st to approve our primary listing on the New York Stock Exchange.”
US Revenue Surpasses $4.48 Billion
In the US, Flutter’s 2023 segment performance reveals that the US takes the lead with $4.48 billion in revenue, a 40.6% surge from the previous year.
US sports betting revenue expanded by 45.9% year-on-year, while online betting revenue climbed by 47.2%. Flutter asserts that sports betting revenue benefited from entering three new sports betting states, contributions from new state openings in 2022, and 24.8% growth in previous states in 2022. Regarding online betting, robust player numbers fueled growth despite a limited total addressable market.
Overall, the US business observed a net gaming revenue market share of 53.4%, up from 43.2% in 2022. FanDuel acquired over 3.7 million new betting and online betting players in 2023, 19.
Flutters earnings remained steady year-on-year, with a projected return on investment resembling past periods, under eighteen months.
Flutter declared, “This, combined with the robust contribution from existing users, will propel the long-term profitability of the enterprise.”
Double-digit growth in the United Kingdom and Ireland, as well as global markets.
Outside of the United States, Flutter has experienced greater success in the United Kingdom and Ireland. Income in the region increased by 13.7% to $3.05 billion, fueled by the continued expansion of the casual customer base.
Sports wagering revenue in the region climbed by 10.5% year-over-year, while gaming revenue surged by 18.1%. Overall market share in retail and online also expanded by 2.0%, estimated at 30.0%.
Flutter stated, “We continued to focus on product positioning, further enhancing our high-margin ‘Bet Builder’ and ‘Build-A-Bet’ parlay offerings.” “We introduced exclusive new betting markets and launched popular new products, such as ‘Acca Freeze’ on Sky Bet, which drove penetration of these high-margin products and benefited our net revenue margin.
“We also introduced new betting features, providing sports betting customers with an enhanced cross-sell journey to acquire gaming products, and expanded content, particularly for live casino.”
Regarding the international business, it encompasses all other markets outside of the United States, the United Kingdom, Ireland, and Australia. Income in the region rose by 34.2% to $2.81 billion, with Sisal in Italy alone contributing $1.22 billion.
In addition to Italy’s expansion, Flutter declared a larger market share in Georgia and Armenia, and accomplishment in Brazil, Spain, and Turkey. Regarding further expansion in this sector, Flutter highlighted that the recent acquisition of a controlling interest in Serbia’s MaxBet would support this move.
“Our robust growth performance in 2023 demonstrates the effectiveness of our global strategy of acquisitions and building leading positions,” Flutter stated. “We continue to focus on targeted investments and local hero strategies in key ‘consolidate and invest’ markets, while optimizing the PokerStars business, which has a greater impact in our ‘optimize and maintain’ regions.”
Disappointment in Australia
The only sector that reported a decrease in income in 2023 was Australia, where income dropped 7.1% to $1.45 billion. Flutter stated this was due to a weaker racing market environment in 2023 compared to 2022. The previous year also benefited from increased customer engagement following Covid-related restrictions.
Flutter noted that the weaker racing market in the second half of 2023 would persist into 2024. However, there is still hope for future success in the nation.
“We anticipate the challenging market, along with increased regulatory and compliance expenditures, to further reduce profitability in Australia in 2024,” Flutter stated. “However, we believe Sportsbet’s size, 45% market share, and leading brand and product position us well to navigate the future.”
The impact of the PokerStars impairment charge on Flutter’s financial performance is a significant factor. In the year 2023, a substantial rise in costs and expenditures was observed across various sectors. The most considerable expense was the cost of goods sold, which reached a staggering $6.2 billion, signifying a 28.9% increase. Furthermore, sales and marketing expenses experienced a notable growth of 25.4%, reaching $3.78 billion. General and administrative expenses also saw a significant rise of 36.2%, reaching $1.6 billion. Meanwhile, technology and research and development costs increased by 38.6%, reaching $765 million.
The $725 million impairment charge associated with the PokerStars trademark dispute was included within the sales and marketing expenses. Flutter disclosed in the final quarter of the year that it recognized an impairment of intangible assets, reflecting its strategic focus on “homegrown heroes” and the positioning of PokerStars in markets categorized as “optimize and maintain” with lower growth prospects.
In December 2023, Flutter made the decision to discontinue the existing capital-intensive PokerStars technology. This move was driven by the objective of enhancing efficiency and performance through the optimization of technology and marketing resources.
Consequently, Flutter conducted a reassessment of the intangible asset portfolio acquired with PokerStars. The decision to shift strategy and operating model led to an anticipated decline in royalty revenue, resulting in a lower total undiscounted cash flow compared to the carrying amount.
As a result, Flutter was required to recalculate the fair value. The newly estimated fair value ranged from $337 million to $533 million, contingent upon the underlying assumptions. This signifies a depreciation of at least 57% for PokerStars following the impairment.
Flutter clarified that the impairment was primarily driven by an evaluation of its strategic and operational framework, aiming to maximize the worth of PokerStars’ exclusive poker resources. This aligns with the company’s global business unit strategy, which blends worldwide reach with regional influence.
While costs rose, net losses declined.
After accounting for $542 million in non-operational expenses, the pre-tax loss was $1.09 billion, compared to $295 million in the previous year. Overall income tax expense was $120 million, resulting in a net loss of $1.21 billion, greater than the $370 million in 2022.
However, there is more notable data, specifically 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 accounting for other financial data, including the fair value of cash flow hedges, investment hedges, and the sale of debt instruments, this had a considerable impact on Flutter’s net income. The total comprehensive net loss for 2023 was $847 million, compared to $1.41 billion in 2022.
Furthermore, 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.
Robust Beginning to 2024
Regarding current performance, Jackson mentioned that Flutter had a strong start to 2024. He noted record Super Bowl engagement, which contributed to a 55.6% increase in US revenue for the period January 1 to March 17.
FanDuel also made its debut in North Carolina during this period.
Beyond the borders of the United States, income rose by 6.3%. This was attributed to expansion in the United Kingdom and Ireland, along with global operations, which balanced out a downturn in the Australian market.
“We are confident that our approach and competitive edge will enable us to continue expanding our business through both internal and external opportunities,” Jackson stated.
From an external viewpoint,
Russell Penton, a consumer leader at Edison Group, provided an unbiased assessment of the outcomes, stating they reflected a “subdued” performance in 2023. He further mentioned that escalating costs were a cause for concern.
“Although the company witnessed growth in key indicators such as average monthly participants and earnings, it reported a net loss for the year, driven by a substantial $1.68 billion in extraordinary expenses, including impairment charges,” Penton remarked.
“Within this reported net loss, adjusted EBITDA experienced a further 45.4% increase, despite challenging customer-friendly sports outcomes in the final quarter, which had prompted investor scrutiny earlier in the year. The US market expanded considerably, achieving its first annual adjusted EBITDA profit, while the international market’s diversified portfolio fueled overall growth.
“Looking toward fiscal 2024, Flutter anticipates sustained growth, with revenue projected to rise by 17.5% and adjusted EBITDA expected to increase by 30.2% at the midpoint, reflecting confidence in future earnings and cash flow potential.
The firm is assured of its capacity to generate revenue and cash flow, thus they’ve adjusted their target for debt acquisition. This alteration indicates their belief in future prosperity. Currently, the primary focus is securing shareholder consent in May to transfer their primary listing to the United States.
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