Flutter Entertainment plc

Good morning and welcome to the Flutter H1 results update call. My name is Jo and I'm your operator today. If you require any assistance during the call, just key star then zero and an operator will be happy to assist. Today's call is recorded. There will be a chance to ask questions shortly, but first I will hand over to Peter Jackson, Group CEO of Flutter. Please go ahead, Peter.

Thank you, Joe. Good morning, everyone, and thank you for joining us. With me today is Jonathan Hill, our CFO. Hopefully, you've had a chance to read our announcement and watch the presentation we released this morning. But for those that have not yet, I'll just cover off a few of the key points. Firstly, we're very happy with the progress we've made in continuing to scale our US business. Flutter US is now 50% bigger in revenue terms than our next nearest online competitor. with the gap between Fangio and each of its competitors widening during the first half. Our sports betting and gaming customer base is now three times as big as it was just 12 months ago, having added 1.7 million customers in the last year alone. We believe that our superior sports products and the strength and reach of the Fangio brand have been the key drivers of this growth. In Q2, we crossed the half billion dollar mark in quarterly U.S. revenues for the first time, with our U.S. division now the second largest in revenue terms within the Flutter Group. As a result of our strong customer acquisition and retention, we now expect to generate between $1.8 and $2 billion in U.S. revenue this year. While delighted with the performance of the business as a whole, our market share in sports betting particularly stands out. We finished Q2 with a 45% share of the US online sports betting market, leading in new and more mature states alike. And while we believe there are good opportunities for us to grow our gaming share as we better leverage more of Flutter's in-house capabilities, it is the shape and pipeline of new state regulation with its emphasis on sports betting that is particularly exciting. We now expect up to nine further US states to regulate mobile sports betting by the end of 2022. close to doubling the proportion of the US population that would be able to sports bet legally online. And of those nine states, just one is expected to regulate gaming initially. Given the strength of our sports betting offering and the key competitive advantages we enjoy in this space, we feel this position's fangirl very well to compound its leadership position. Secondly, our performance outside the US has exceeded our expectations during the first half. In both our UK and Ireland and Australia divisions, online earnings grew by more than 50% year-on-year in the first half. This is being driven by recreational customer growth. We grew our average monthly players, or AMPs, by 44% in the UK and Ireland and by 52% in Australia in H1. These growth rates reflect an ongoing shift for customers from retail to online. In the UK and Ireland, where we've only emerged fully from stay-at-home restrictions relatively recently, it is probably a little bit soon to say definitively how permanent that shift in player behaviour has been. But in Australia, which was largely unaffected by COVID for much of H1, and where our retail competition was open, we now believe that the events of the last 18 months have resulted in a permanent step change in the size of our business there, with customer retention that has exceeded even our most optimistic expectations. In international, the revenue decline following the spike in player activity in H1 last year was less pronounced than we expected, albeit the division did continue to benefit from a tailwind from ongoing stay-at-home restrictions in parts of Europe. We are transforming the shape and quality of our international division by investing more in regulated and high-growth markets with encouraging early signs. Our customer base in H1 was just 3% below the elevated levels of H1 last year. What this all means is that we have today issued 2021 EBITDA guidance for the group ex-US of 1.27 to 1.37 billion sterling, materially above current consensus. Finally, we've announced this morning that we now believe our US business will be profitable in 2023 based on the expected timetable for new state regulation. We believe this will have a transformational impact on the overall earnings, cash generation and balance sheet profiles of the group. To be clear, we are not setting a target date for profitability. The date our US business turns profitable remains an output for us. We remain entirely focused on growing the embedded value of the business by acquiring as many customers as we can, for as long as we can, generate attractive returns on investment. The 2023 projection instead reflects simple mathematics. We now believe we will reach a tipping point in 2023 where the sheer scale of our existing U.S. customer base and the positive contribution those customers generate will more than offset the cost of acquiring additional new customers and the more fixed operating cost base of the business. Slides 29 and 30 of our presentation cover this in more detail. Our projection assumes that none of California, Florida, or Texas launched online sports betting or gaming before 2024. Should one of those large states regulate sooner, our level of investment in new player acquisition would be higher and profitability could be delayed. But such a scenario would represent a nice problem to have, as it would mean our TAM will be bigger again. If the US does turn profitable in 2023, it is not difficult to see what that would mean for Flutter's overall earnings and cash flow profile and the leverage benefits that would bring. Overall, then, I'm delighted with how the business is performing and the longer-term prospects for the group. With that, I'd be happy to take any questions you have. As always, in the interest of giving everyone a chance to ask their question, can I ask you to limit yourselves to two questions each to start with? There's time at the end. I'd be more than happy to take follow-ups. With that, I'll hand over to Jo.

Thank you. Yes, if you would like to ask a question today, please key star then one on your telephone. If you then decide to withdraw that question, simply key star two. Just a reminder, everyone, for questions, you just need the key, start, then 1 on your telephone. Thank you. OK, we have our first question. That's coming from Michael Mitchell from Davie. Go ahead. Your line is now open.