Flutter Entertainment’s chief executive, Peter Jackson, commended the company’s strategy of adapting to local markets. This approach contributed to a remarkable 24.7% surge in revenue for 2023, reaching a substantial $11.79 billion (£9.32 billion/€10.87 billion).
Jackson expressed his satisfaction with the robust performance in 2023, emphasizing growth across nearly all of Flutter’s divisions. Revenue saw an upward trend in the United States, the United Kingdom, and Ireland, as well as in international markets. The only exception was Australia, which experienced a minor downturn.
As previously disclosed in preliminary results released in January, the US operations were a pivotal factor in the company’s success. Jackson stated that through FanDuel, Flutter holds a dominant position in the US market. Notably, the US business achieved profitability in terms of adjusted EBITDA for the first time in 2023.
Flutter’s achievements in the United Kingdom and Ireland were equally noteworthy, while its international operations continued to expand. Although the decline in Australia was a setback to an otherwise strong year, there remains potential for future growth in this region.
Indeed, Jackson and Flutter are confident about achieving double-digit growth in both group revenue and adjusted EBITDA in 2024. Flutter anticipates a 17.5% increase in revenue and a 30.2% rise in adjusted EBITDA, both at the midpoint.
Flutter enjoyed a successful year in 2023, and they’re continuing to make progress as planned, according to Jackson. This success is attributed to their localization strategy for technology and products, and the unique scale advantage of Flutter Edge.
As anticipated, their leading position in the United States impacted the group’s profitability in 2023, as FanDuel achieved its initial full-year adjusted EBITDA profit in the US.
Beyond the US, they’ve made substantial strides in integrating Sisal into their international operations. This is a prime example of their “local hero” strategy in action, and they’ve gained market share in the UKI region.
Flutter’s stock is traded on the New York Stock Exchange.
The group’s focus on the US isn’t limited to actual operations, but also extends to their financial strategy. In January, Flutter commenced trading on the New York Stock Exchange (NYSE).
This marked the conclusion of Flutter’s secondary listing on the Euronext Dublin exchange in Ireland. However, Flutter will continue to be listed on the London Stock Exchange (LSE) and will maintain its premium listing status on that exchange.
Despite their progress, Flutter still has some tasks to complete regarding their US listing to ensure full compliance with GAAP and SEC reporting standards. This includes “ensuring complete separation of responsibilities” and “restructuring key controls.”
Furthermore, it is crucial to recognize that education is necessary for financial and technical staff to ensure they grasp their duties in carrying out and documenting controls over essential financial reporting. Flutter emphasizes that this will contribute to enhancing the capability to address any potential problems or shortcomings.
Flutter’s stock concluded at $221.99 on the previous day (March 25th).
“I am pleased that Flutter’s stock made its debut on the New York Stock Exchange on January 29th,” stated Jackson. “We are delighted to observe sustained interest from new US investors following the US listing.
“We are actively seeking shareholder approval for a primary listing on the New York Stock Exchange on May 1st.”
US Revenue Surpasses $4.48 Billion
Flutter’s 2023 segment performance reveals that the US is leading the way with $4.48 billion in revenue, a 40.6% increase from the preceding year.
US sports betting revenue expanded by 45.9% year-on-year, while online gambling revenue increased by 47.2%. Flutter attributes the growth in sports betting revenue to expansion into three new sports betting states, the complete-year contribution of new states opened in 2022, and a 24.8% growth in pre-2022 states. Regarding online gambling, robust player numbers drove growth despite a limited total addressable market.
Overall, the US operations had a net gaming revenue market share of 53.4%, an improvement from 43.2% in 2022. FanDuel attracted over 3.7 million new betting and online gambling participants in 2023.
Expansion was stagnant compared to the previous year, with projected investment returns aligning with prior years, less than eighteen months.
“This will propel long-term profitability of the enterprise, considering the robust contribution of the existing user base,” Flutter stated.
Double-digit expansion was achieved in the United Kingdom and Ireland, as well as globally.
Outside of North America, Flutter has witnessed greater achievement in the United Kingdom and Ireland. Income in the area increased 13.7% to $3.05 billion, driven by continuous expansion of the casual user base.
Sports wagering income in the area grew 10.5% year-over-year, while gaming income increased 18.1%. Retail and online market share also grew overall by 2.0%, estimated to be 30.0%.
“We have continued to concentrate on product positioning, further enhancing our high-margin Bet Builder and Build-A-Bet mix,” Flutter stated. “We have added exclusive new wagering markets and launched popular new offerings such as ‘Acca Freeze’ on Sky Bet, which has driven penetration of these high-margin offerings and benefited our net income margin.
“We have also introduced new gaming features to provide sports wagering customers with an improved cross-sell journey to promote gaming offerings and expanded content, particularly for live casino.”
As for global operations, it covers all other markets outside of the United States, United Kingdom, Ireland and Australia. Income in the area increased 34.2% to $2.81 billion, with Sisal in Italy alone contributing $1.22 billion.
Moving beyond Italy’s expansion, Flutter boasts a larger market presence in Georgia and Armenia, and has achieved success in Brazil, Spain, and Turkey. Flutter asserts that the recent acquisition of a controlling interest in Serbia’s MaxBet will fuel further expansion in this sector.
“Our robust growth trajectory in 2023 showcases the efficacy of our international strategy of acquiring and establishing dominant positions,” Flutter stated. “We remain focused on targeted investments and a ‘local champion’ approach in key ‘consolidate and invest’ regions, while optimizing the PokerStars enterprise, which has a greater influence in our ‘optimize and maintain’ territories.”
Unsatisfactory performance in Australia
The sole segment to report a revenue decline in 2023 was Australia, which experienced a 7.1% drop to $1.45 billion. Flutter attributed this to a weaker horse racing market climate in 2023 compared to 2022. The previous year also benefited from heightened customer engagement following COVID-19-related restrictions.
Flutter observed that the horse racing market softened in the latter half of 2023, a trend anticipated to persist into 2024. However, there is still optimism for future triumph in the nation.
“We anticipate the challenging market, coupled with escalating regulatory and compliance expenditures, to further diminish profitability in Australia in 2024,” Flutter indicated. “Nevertheless, we are confident that Sportsbet’s scale, 45% market share, and leadership position in branding and product will place us in a favorable position for the future.”
The Flutter company faced a significant setback in 2023, with expenses escalating across various departments. The most substantial expenditure was the cost of goods sold, which surged by almost 30% to a staggering $6.2 billion. Furthermore, marketing and sales costs climbed by 25.4% to $3.78 billion, while administrative and general expenses witnessed a 36.2% increase, reaching $1.6 billion. Technology, research, and development expenses also experienced a substantial rise of 38.6%, hitting $765 million.
A notable component of the marketing and sales expenses was a $725 million impairment charge linked to the PokerStars trademark dispute. During the final quarter of the year, Flutter acknowledged a reduction in the value of its intangible assets, aligning with its “homegrown heroes” strategy and PokerStars’ position in “optimize and maintain” markets characterized by slow growth.
In December 2023, Flutter made the decision to abandon the existing capital-intensive PokerStars technology. The objective was to enhance efficiency and performance by optimizing technology and marketing resources.
Consequently, Flutter re-evaluated the portfolio of intangible assets acquired with PokerStars. The analysis concluded that the anticipated decline in royalty revenue, stemming from strategic and operational model adjustments, resulted in a total undiscounted cash flow that fell below the carrying value.
As a result, a recalculation of the fair value was necessary. The revised fair value estimate ranged from $337 million to $533 million, contingent upon the assumptions employed. This indicates a depreciation of at least 57% for PokerStars following the impairment.
Flutter clarified that this was mainly due to an evaluation of their strategic and operational framework, aimed at maximizing the worth of PokerStars’ distinctive poker resources. This aligns with their global business division’s plan of combining worldwide reach with local presence.
Despite an increase in expenditures, the net loss has diminished.
After accounting for $5.42 billion in non-operating expenses, the pre-tax loss was $1.09 billion, compared to $2.95 billion in the preceding year. Total income tax payments amounted to $1.2 billion, resulting in a net loss of $12.1 billion, greater than the $3.7 billion in 2022.
However, there is more information to consider, namely the effect of foreign exchange translation. Last year, Flutter reported a negative impact of $8.96 billion. However, in 2023, this figure was a positive $3.57 billion.
After taking into account other financial factors, including the fair value of cash flow hedges, investment hedges, and the sale of debt securities, this had a significant impact on Flutter’s final outcomes. The total comprehensive net loss for 2023 was $8.47 billion, compared to $14.1 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.
2024 has begun strongly.
Regarding the current situation, Jackson stated that Flutter has had a good start to 2024. He mentioned record Super Bowl engagement, which contributed to a 55.6% increase in US revenue between January 1st and March 17th.
FanDuel commenced operations in North Carolina during this period.
Beyond the United States, their revenue rose by 6.3%. This was due to expansion in the UK and Ireland, along with other global markets, offsetting a decrease in Australia.
“We are confident that our strategy and advantages will enable us to continue expanding, both organically and through acquisitions,” Jackson stated.
Russell Penton, an expert in consumer goods at the Edison Group, offered his perspective on the outcomes. He described them as “quite good” in 2023. He also expressed concern about rising expenses.
“Despite witnessing a surge in player participation and revenue, the company incurred an overall loss due to some unusual expenses, including $1.68 billion in charges related to underperforming assets,” Penton explained.
“Although they experienced a loss, their adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) climbed by 45.4%. This is despite certain events in the most recent quarter that benefited customers but not investors. The US market witnessed significant growth and generated profits for the first time, while their international operations also contributed to their overall expansion.
“Looking ahead to 2024, Flutter anticipates continued growth. They project a 17.5% increase in revenue and a 30.2% rise in adjusted EBITDA. This indicates their confidence in generating profits and strong cash flow in the future.”
The firm is assured of its profits and cash flow, thus they’ve altered their debt target. This signifies they’re striving for greater achievement in the future. The next significant event is the shareholder vote in May, where they’ll determine if the company should relocate its primary listing to the United States.
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