Flutter Entertainment plc

Good morning, everyone, and thank you for joining our Q3 trading update call. With me this morning is Paul Edgcliffe-Johnson, our CFO. Hopefully, you've had a chance to review our statement this morning. Firstly, I'd like to talk to you about some important developments of the group before Paul will take you through the Q3 numbers. We've had another strong quarter with revenue growth of 13% despite customer-friendly sports results. In the US, Fangio maintained its leadership position and has started the new NFL season with great momentum, following the lull in the sports calendar across the summer. Ahead of the new NFL season, the team has delivered a multitude of new product innovations for customers to sustain our product leadership in the market. These include market-leading new products that react to trending action by allowing customers to bet on the most compelling in-play action, and expanding our range of player prop markets for in-play bettors. where we continue to offer the widest proposition in the market. We've further enhanced our promotional toolkit by launching profit-boost tokens, a mechanic that's proven very successful for Flutter in other markets, providing us with greater optionality for how we reward our players. These innovations have landed well with players, and the pipeline of further innovation remains strong. This has resulted in FanDuel maintaining its market leadership with a 47% NGR share, including a 55% share in September following the resumption of the NFL, in line with our year-to-date NGR share of 52%. In iGaming, last year we outlined our strategy to improve our proposition for casino players. We've been making significant improvements across our product offering and promotional capabilities, which are delivering excellent results. Fangio is the fastest-growing gaming brand and is now the number two in the market, and we are confident of taking further share. Our US business is in a great position as we head into the key months of the sporting year. Fangio will be the first operator to deliver full-year profitability, and our continued high level of investment in player acquisition and compelling returns will drive a ramp in profits into 2024 and beyond. In the group outside of the US, we've continued to deliver growth in line with our 5% to 10% revenue framework, despite some headwinds. In the UK and I, the business is performing exceptionally strongly, with our brands delivering new and engaging products to our players. We've led the industry in taking proactive actions on safer gambling, and we look forward to working with both government and the Gambling Commission on the white paper conversations. The combination of a highly recreational player base and strong product propositions is driving market share gains. In international, we hosted sell-side analysts in Milan last month to give them a deeper understanding of the opportunity that exists in our international markets, and the slides are available on our website. MaxBet, the local hero acquisition we announced in September, is giving us an exciting platform to grow in the Balkans. repeating our proven strategy of acquiring the best local player and improving its growth and profitability through the Flutter Edge. In Australia, where we remain the clear number one operator, the racing market has continued to be soft, albeit still well ahead of pre-COVID levels. This softness, combined with increased regulation and taxes, is resulting in a greater revenue impact than we previously anticipated. Sportsbet has a fantastic position in the market and we are focused on maintaining its leadership for when the market returns to growth. Lastly, on our proposed additional US listing, we have submitted a draft registration statement to the SEC and look forward to engaging with their review process over the coming weeks. We've chosen to list on the New York Stock Exchange and expect this to become effective in Q1 2024. As a consequence, we'll cancel our UNX listings. We recognise this may impact certain shareholders and we've provided details on our website which will hopefully answer all your questions. We'll provide a more specific timeline for the UNXD listing and US listing in due course. And with that, I'll hand you over to Paul.

Thanks, Peter, and good morning, everyone. As Peter outlined, Q3 was another strong quarter for the group. We added over 1.5 million new players, up 16% year-on-year, which translated into 13% revenue growth. In sports, customer favourable outcomes in Premier League and European football were a 12 percentage point headwind to revenue growth in the quarter, taking it from a 16% to a 4% increase. Gaming is performing exceptionally well, with double digit growth in all divisions, driven by delivering compelling content to our players and cross-selling sports-led players to gaming. Turning to the divisions. And in the US, revenue grew 20% despite a 170 basis point swing in net revenue margin due to lapping favourable sports results in the prior year. In Sportsbook, revenue increased 12% with strong staking growth of 38% being offset by the swing in sports results year on year. The product improvements Peter noted earlier are driving significant structural gross win margin increases up by 80 basis points versus Q3 last year. In casino, strong delivery against our gaming strategy resulted in 52% revenue growth, taking us to a 23% share of the market. We continue to make significant investments in customer acquisition, driving a 37% increase in new sportsbook and casino players in the quarter. When combined with significant operating leverage in future years, we are well set for continued strong growth in both revenue and profitability. In the Group X US, revenue increased 5% on a pro forma basis, with good momentum in the UK and I and international partly offset by a softer Australian market. In the UK and I, revenue increased 11% due to strong growth in gaming and expansion in our structural sportsbook revenue margin from greater adoption of bet builder products. In Australia, revenue declined 7% despite AMP growth of 2%. I'll touch more on the outlook for the Australian market later. Finally, in international, our high-growth consolidate and invest markets, which make up 78% of the division, grew 11% in the quarter, and the division as a whole by 5%. Turning now to the outlook for the rest of the year. Fanjul is expected to be the first sports betting net operator to deliver a full-year profit in the US with adjusted EBITDA of approximately $180 million in 2023 from revenue of approximately $4.7 billion. This would represent a near 50% increase in revenue year-on-year and a near $500 million swing in profitability. The profitability ramp will continue in 2024 and beyond, driven by significant top-line growth and material expansion of our profit margins. In the Group X US, adjusted EBITDA is expected to be approximately £1.44 billion. This expectation reflects the midpoint of our prior guidance range adjusted for £50 million of adverse sports results and £30 million of foreign exchange movements. The strong underlying momentum in our UK and our international divisions is offsetting the Australian headwind, showing the benefits of our diversified portfolio. Whilst it's difficult to read the market so far ahead, our expectation is that the softer Australian market will continue into 2024 with a single mid-digit decline, which will now limit our ability in the near term to offset the impact of the previously announced Victoria point of consumption tax increase. In India, a very exciting market for the group, where we're well positioned with our Rummy brand, Junglee, the previously announced changes to GST from 18% on GGR to 28% on deposits is expected to result in 2024's profits growing 30 million sterling, less than we had anticipated, and will likely push out the ramp in profitability from getting to a scale position by one to two years. We are also investing in the group capabilities to ensure we truly harness the power of the Flutter Edge, and this combined with U.S. listing associated costs will see growth in our corporate cost base. So, in summary, we're very pleased with the ongoing growth trajectory of the group, and in particular, the strong player growth and structural margin increases we are achieving sets us up well for enduring profitable growth. The exciting trajectory of growth of our U.S. business is on track to transform the earnings profile of the group, which in turn will provide us with significant financial flexibility. I'll now hand you back to Peter.

Thank you, Paul. And with that, we'll turn it over to questions. As this is a quarterly update, we'll be keeping the Q&A section to around 30 minutes. So we'd ask you to limit your questions to two to give everyone a fair chance. With your amount of time, the IR team are on hand to help with any questions you may have. Courtney, back over to you.

Apologies. It looks like the operator has dropped off the line.

If we all just stay on here, we're hoping they'll rejoin and they'll be able to catch the people who've queued up for questions too shortly. Sorry.

Apologies for the inconvenience. I'm standing in for the operator. Your first line is open for Ed Young from Morgan Stanley.

Hello. Can you hear me? Yeah, we can. Thank you for bearing with us, everybody, and apologies for the delay. The previous Courtney disappeared, so I'm pleased we're back to normal things. Ed, it's nice to hear from you. I thought we just needed to sit here on our own. Do you want to go ahead?

Yeah, sure thing. So my first question is on the US. Can you help us understand the Q3, Q4 phasing for US revenue, please? Obviously, Your guidance implies nearly £1.3 billion of revenue in Q4. That's nearly double the Q3. And that's a larger sort of quarter-on-quarter sequential improvement than peers are talking to. And if I look versus your closest peer guidance, it's back up to being about 25% bigger than the midpoint of their guide versus a single-digit gap this quarter. So clearly there's some very wonky phasing quarter-on-quarter. Can you understand what's driven that, please? And then my second question is on Australian racing softness. You referred to it and you've given the sort of guidance into next year. Can you just talk through exactly what you're seeing in racing and how it's different from your prior expectations? Thanks.

Hi. Let me just quickly just deal with the Australian one and then Paige will talk to you about the phasing, or Paul, sorry, I should say, will talk to you about the phasing in America. If we look at it in terms of the market is definitely soft. The marquee events are actually performing well. So we're pleased with what we saw in the Melbourne cut recently. Amps, as we stated, are up. But we are seeing a decline in the number of bet days and also in ARPU. which is particularly impacting the racing part of the portfolio. I think some of it is that engagement was driven very high through COVID, and there's been some sort of unwind from that. And I think we're also continuing to drive great products innovations in sports, but we haven't been able to land this successfully in racing, which I think is also impacting it. Paul, do you want to talk about the phasing?

Yeah, so look, on the phasing, as you said, we have continued the guidance for revenue and EBITDA for the full year. If you look at 2022 and you look at that with a sports-adjusted basis, i.e. taking out the luck element, it was phased Q3, Q4, one-third to two-thirds. And then, as you say, that's roughly in line with what the guidance for the full year would indicate. Obviously, it's difficult for you guys to see through those numbers sometimes, but hopefully that helps.

Okay, could I just sort of follow up? Because if I look at the quarter-on-quarter, perhaps, from Q2 into Q3, it's also sort of quite different from peers. So I just want to understand, you talked about NGR share, but is there anything particularly going on with Do you think promotional activity versus peers or anything versus the market that's different? Or, you know, is there anything you'd like to flag on that side?

Ed, I suspect there's a bit of, you know, looking at our pit. No one has the same mix as us. There's a sort of sports gaming thing, but it's all...

NGR, we think, is the right metric to look at because that does take account of generosity coming through. So 47% NGR for us, which is up 5% year on year. And it's good that now we've got nine states that are publishing that and we are encouraging the rest of the states to do the same because I think that's really the metric that matters. And I think that demonstrates our strength. Our NGR share in sports is 50% more than DraftKings. And I think that's the key metric. Okay, thank you. Thanks, Ed.

We'll take our next question from Clark Lampin from BTIG. Your line is open. Please go ahead.

Thanks for taking the question. Maybe I can just put a little bit of a finer point on some of the U.S. comments. Just to be clear, you're not really modeling in any sort of change in share, any real uptick in promo or anything other than sort of a mean reversion in the hold rate to get to that sort of 1.3 billion and midpoint of the guidance. Is that correct?

We don't think things are changing exactly. So it's just a reversion to the mean, taking out the sports results from Q3, Q4 last year.

Is there anything baked in for an uptick in sort of competitive intensity around that? And maybe, Paul, I guess if we step back from just sort of a discussion around the end of year, as we think about, I guess, the medium-term guidance that you guys have provided for sort of 24 and 25, should we think about, I guess, the conditions being similar, i.e., we're not expecting substantial improvements in or adjustments in share, improvements in the promotion rate or hold rate, things of that nature? Any clarity would be helpful. Thank you.

Look, Clark, I mean, we have operated in this market for many years now, and the market has remained incredibly intense from a competition perspective. We don't anticipate the back end of this year being any different, and we don't expect subsequent years to be any different. We've always been very focused on acquiring as much business as we possibly can do, as long as ever it meets our acquisition to lifetime value dynamics. And we've been very pleased with what we've been able to acquire this year. Paul will comment on how we see some promotional spend, some changing things in the market. But we will acquire as much business as we possibly can do whilst we meet our hurdles. And I believe the market is becoming more rational. I think that's actually a positive thing for all participants.

So I think you've got a couple of components that drive customers to choose the app that they prefer. The biggest one, actually, is the functionality. And if Angela's app wins on all the aspects of functionality, if you look at the latest Isles and Krycheck reports, I think it's the first time there's been a clean sweep for any operator. They're winning on every single metric. I think that will help. We continue to have very strong offers, promotional and generosity offers. We've brought in profit boost tokens now, and they're being well received by our customers. We've got significant further increases in customers who are using parlays, and parlays are obviously a higher margin product for us. I think 80% of NBA players so far have used a parlay this NBA season. So that's all heading in the right direction. Great product, great generosity, and that's what's delivering the sort of market share that we're seeing. Thanks a lot.

Thank you both. Thank you.

Our next question is from Monique Pollard from Citi. The line's open. Please go ahead.

Hi. Good morning, everyone. Thanks for the update. Just two questions from me, focused on the U.S. again. So the first is, When I look at the US for this quarter, you know, the miss versus consensus expectations was win margin driven. And in particular, when I look at the gap between the net win margin, the 6.8% and the sort of the normalized gross, or not even the normalized gross win margin, the actual gross win margin taking into account the poor sports results, it seems like this quarter was really quite promotional, you know, more in line with 1Q promotion levels in terms of free bets. which tends to be a very promotional quarter given the Super Bowl. So what I'm trying to understand is a couple of things. One is, how do you think about promotional intensity in the context of results? So do promotions get scaled back when results are very favorable because you know the customer's already getting that benefit or not? And then how should we think about that promotional intensity versus peers? You know, is it that you're ramping up promotional intensity because you're facing market share gains by the number two player in online sports betting and how will that ramp up in promotional intensity help you to take share back from the number two operator?

Look, Monique, let me give you some thoughts and I'm sure Paul wants to dive in as well. It's important to remember that the There's two things happening in the quarter three period. First of all, there's not a lot of sport. And then suddenly it's going to be the step up in the launch of the NFL and then you get into the NBA. So it's actually a quiet period from a sports perspective, but a very intense period from a customer acquisition and reactivation perspective. And so there is actually a lot of promotional activity in this quarter. I think it's a much more important quarter actually for for customer activation than the Super Bowl would be. And I think it's just important to bear that in mind. Q4 and Q1 are then obviously the very big quarters from a sports content perspective, which we always see as playing to our strengths. You know, to be clear, we have not altered our, you know, posture in the market as a result of what other people are doing, we've always tended to be very focused on acquiring as much business as we ever can do, as long as it meets our return criteria.

And in terms of the margins, there's a few moving parts. I mean, we've talked about the win margin because of the very strong Q3 last year. So the shift Q322 to Q323 is 170 bits. We're growing the structural margin, and that's driven by the continued take-up of parlay bets. I've spoken about that before, and that's about 80 bits. And then you've got the profit boost tokens coming through, and that's about 90 bits of a headwind at the GTR level. So the combination of those is what takes us down to that level.

Thanks, Monique. The final part that Monique asked actually was about how we think about generosity and with regards to favourable and unfavourable sports results and of course this is a relevant question not just for America but for any of our businesses and clearly we do manage our generosity as a function of what we're seeing from a sports results perspective so we would have pulled back in the UK when we saw those very favourable results in in September, you know, correspondingly, you know, earlier on in the year when actually results were, you know, were difficult for customers, we would have been leaning in and providing more generosity. So it's actually, you know, it's a balancing metric for us to some extent to think about.

Got it. Okay, and that's the same in the US?

You also... Yeah, everywhere we operate, yeah, we use that concept.

Okay, perfect. Thank you very much. The next question comes in from the line of Ryan Sickbell, calling from Craig Hallam Capital Group. Please go ahead.

Hey, guys. Two questions for us. Peter, you mentioned the NFL had an uplift on market share, but additionally, Vandalist historically outperformed even better on NBA. Is there any metrics you can share on market share business trends since the season started in late October? And then secondly, just internationally, thinking back to other times in history when we've had statistically better win rates for the customer-friendly ones. How quickly can you recoup those? I guess, do you see a bigger and faster reinvestment back into this? Thanks.

Well, Ryan, I mean, we obviously, we're talking about Q3 today, and the NBA is, you know, only started relatively recently. I am very pleased, though, with how the business is performing. If you look at, historically, our strength has always been when sports are back on fire in all cylinders, and you know that we have a really, really compelling product for the NBA, which always, I think, disproportionately favours us. We're excited to see what we deliver in the course of this NBA season in Q4 and Q1. The way that we... historically have talked about the impact of favourable results is a degree of recycling. There are different metrics we've looked at historically to assess how fast those benefits have flowed back, but it's more of an art than a science.

Okay, thank you. The next question comes in from the line of Paul Ruddy, calling from Davie. Please go ahead.

Hey, morning, Peter and Paul. Just a quick question, just on the US, just on the innovation piece. Would you be able to just give us some context on just where you think your product fits and what the new big blocks of product innovation, you alluded to some of them earlier in the call are, and maybe just with reference to where you think the competition set is in the US, both the number two operator and maybe the tailor operators and what the kind of various gaps you see are. And the second thing is just on India, I think you alluded to maybe a $30 million downgrade from the GST in 2024 or a headwind from it. Just thinking about the phasing of that profitability, is it sensible to kind of just think of that $30 million moving as a positive contribution into 2025, or would you expect to lower a stronger ramp than that thereafter?

Thanks. Thanks, Paul. Look, I mean, I could, you know, this is a great question in terms of product advantages. I can speak for a long time about the long list of advantages that we have in the market. But, you know, this isn't just my view. If you look at what Iliz and Krychek have said, as Paul referenced earlier, you know, for the first time an operator swept the board with a number one in all categories. And I was delighted to see that with FanDuel. We have always had a leadership position from a product perspective, and we're not stood still. We're pushing hard on innovation, and we're moving quickly. Whether it's things like our live saving game parlays, which we have on more sports with less friction than our other operators, our parlay hub, the popular bets, which is sort of a sorted feed of trending picks that we have for customers, The Pulse, which is surfacing more compelling narrative-driven in-play betting opportunities. The reward machine that we have in Casino. But it's not just those sort of product things we talk to. It's also important opportunities, things like our quick deposit mechanism, which allows customers to top up their balance as part of their bet placement process. We know how important it is to make the site easy to use, and those types of capabilities are really important. In terms of account creation, we have a pre-filled fast-track sign-up process. So we're investing right across the stack. I don't know whether, Paul, you want to talk about the Indian stuff then.

Yeah, so... In India, Junglee, a great brand, and we had very high hopes for it, having hit its profit inflection point in 2024. But the change in GST is going to push that back. It's a little difficult to tell whether that's going to then bounce back into 25 in full. We thought in 24 we would go from sort of a break-even to about a 30 million sterling profit basis. So that could come through in full in 2025. We might only see half of that. It really depends on just how quickly we can adapt there. But it will come for sure. Okay. Thanks, Paul. Thanks, Paul.

The next question comes in from the line of Kiran Yat-Grawal, calling from Bank of America. Please go ahead.

Okay. Hey, morning, guys. Just two questions from me. Firstly, I would like to unpick for the Australian impact heading into next year. I think we already had the warning at H1, but it looks like there's more headwinds in 24. Could you just share some color on how much of this is FX versus taxes versus underlying performance? And then secondly, within your release, you've outlined some softness in Italy. Are you seeing any market pressures here? And as you enter into Q4, how do you think Italy will perform? I'm just conscious that you're lapping a World Cup period where Italy didn't participate last year. Thank you.

Why don't I just quickly touch on the points in Italy and then we'll talk about Australia. I think whilst Italy weren't in the... World Cup last year, and still there's obviously a lot of interest and engagement in it, which I think is obviously important. Q3 has been much more competitive, but we've maintained our discipline. I think the CESAR team are doing a fantastic job. We're confident we took NGR share in the first half. I think in Q3 we have to remember that September was also a particularly bad month from a sports results perspective. And we have a disproportionately large sports business compared with our key competitors. But I'm not particularly concerned about short-term fluctuations. I think the team are executing well and doing a good job.

And in terms of Australia... The underlying performance of the business is good in that our amps are up 2%. We're the biggest business in the market. The racing market, having gone up a lot since COVID, is now going back. And so we're calling that out. So that's what we saw in the third quarter. It went back more than we had anticipated in the third quarter. Best line of sight for us is that will continue in the fall, and then if we lap that out into 2024, that's going to have an impact on the amount of money we'll make from that business line. So it's still a good business for us. It's still well ahead of where it was back in 2019, but it is going to be a profit headwind in 2023, and then a continued profit headwind in 2024, as we've called out.

Thank you. The next question comes in from the line of Joe Staff calling from SIG. Please go ahead.

Thank you. Good morning. Two questions, please. Paul, you mentioned the 80 bps in third quarter structural improvement in the U.S. Is that maybe the right expectation of structural hold improvement going forward, whether it be fourth quarter and I guess based on the analyst meeting, it would be a range of 50 to 80. So if you can comment on that. And then number two, if you were to maybe just comment on the competitive environment in the UK and I, you guys are taking share. And I was just curious, maybe from the side of the pond, about how many other operators you see operating that are adjusting properly in front of the white paper versus not.

Morning, Joe. Thank you for getting up so early. I mean, let me just quickly touch on the UK point and then talk about the margins and hold rate. If I look at the market share data, and look at Q3, amongst the Tier 1 operators, basically the market was sort of flat, so plus 1%, and we were up 11%. So we're clearly taking share, and I think the team are doing a tremendous job. We got ahead of the changes from a white paper perspective early last year, and I think it stood us in very good stead through the course of last year and this year. But we're also making some very considerable product enhancements. The stuff we're doing with the Aquafreeze for Skybet, the BetBuilder product for Paddy's. We're also seeing very significant growth in gaming in the UK. And a lot of that is driven through product changes we've made as well, such as the introduction of live products on the Sky brand, which have proved to be very popular amongst that really recreational customer. So we're undoubtedly performing well and taking significant share. And I think we're pleased that other operators are also implementing these changes. And I think the whole market in time will have to get there.

And in terms of the margin improvements, Joe, yeah, look, really pleased with the 80 bits improvement. This is about the quality of the product, which has been significantly enhanced. We talked to the capital market today last year about getting to a 12% level there. We're already at 11.5, so a rapid improvement and still some way to go. But we're not giving inter-quarter guidance on that, but really pleased with the performance. Thanks, Joe. Understood. Thanks, guys.

The next question comes in from the line of Alistair Johnson, calling from BNP Paribas. Please go ahead.

Morning, guys. Just two from me, please. Firstly, on the U.S., I appreciate you haven't guided on 2024, but given what you were saying about not altering your posture based on what your competitors are doing, Does that also apply to your marketing investment next year, given we've heard DraftKings talking about lowering marketing costs in absolute terms in 2024? And then on Australia, is it fair to interpret your comments on maintaining market share as meaning you will invest in customer acquisition, potentially at the expense of short-term EBTA, and what gives you the confidence that sort of that's the right approach and that the market will come back in the long run? Thank you.

I'll give you some quick thoughts on it. We set out the leverage opportunity for the business from a marketing perspective at the insurance. We don't feel the need necessarily to be pulling around those levers. We've always, ever since we started the business, been very disciplined in how we spend money. our marketing money to make sure that we acquire as much business as we possibly can do whilst meeting our return criteria. And whilst we get that profit ramp into 2024 and beyond, we're going to be able to continue to play the same game. I don't think we feel any pressure to deviate from that course. And the way I think about the business in Australia is we actually have to be really careful that we don't try and over-monetize the business and cause problems in the longer term. We have a great business in Australia. There is some softness in the market. It's still significantly bigger than it was pre-COVID. I think it's important that we continue to invest in the market to take advantage of the growth when it comes.

Thank you.

The next question comes in from the line of James Roland Clark, calling from Barclays. Please go ahead.

Hi there. Two follow-ups, please, from my side. The first is just on recycling. I don't know if you ended up giving any colour on what you're seeing in terms of recycling after the customer-friendly results in the last two months. It seems like the UK is seeing a slightly different higher rate of staking in the last couple of weeks. So any color there would be helpful. And then also on the UK on regulation, I know you just mentioned how you implemented safer gambling measures earlier than the rest of the market. And you're pleased that everyone is sort of trending to where you are. But are you confident that you don't have to make any further changes ahead of the white paper? Thank you.

Thank you, James. Look, I think in terms of, you know, providing colour on the impact of, you know, favourable results, you've probably just done it, right? You know, there is inevitably going to be some sort of impact on staking. And, you know, we'll see that. We should also remember results swing two ways, and we have had, I think, to year to date, it probably gives us a reasonably expected result. As it pertains to the UK market from a regulatory perspective, I think it's important to say that whilst we step forward early to put in place a bunch of changes, We do continue to iterate and improve our safe accounting measures. So this wasn't a sort of once and done thing we did last year. We're continuing to make changes. I think we also were very thoughtful about the guidance that we provided to the market at the time. And we guided to a 25 to 50 million pound impact on an EBITDA basis. And that was predicated on on our best view at the time of what we thought would happen as a result of the white paper and consultation. So we still stand by that today. We haven't seen anything that would cause us to deviate away from it.

Thanks, James.

Thank you.

The next question comes in from the line of Simon Davis calling from Deutsche Bank. Please go ahead.

Yeah, morning. One point of clarification, but Do you think in terms of the UK market and regulatory costs and safety standards that you are at the top end of your peer group? Or do you still see some catching up in certain areas? And do you see any further regulatory headwinds in the UK in 2024? And secondly, just on Australia, do you think this is an issue of competition or the weaker consumer backdrop? And if it's the weaker consumer backdrop, are you concerned that we may see some signs of a further slowdown elsewhere in your more mature markets?

Yes, Simon, I think we've been pretty clear in terms of the fact that we're leading the way to the top from a UK perspective around the safety standards. We took a lot of pain last year. And if you look at our performance of the business today, I'm very, very proud of what the team are doing. We're up 11%. The market is broadly flat. Some of that is undoubtedly the fact that we got ahead of the changes and other people are belatedly catching up, which would infer that we are ahead. And the other part of it is because of the strength of our product. So I think we're in a very good position. The team are executing really well in the UK, and I'm very proud of what they're doing. Paul, I don't know if you want to talk about Australia.

Yeah, if you look at Australia, our business is still performing well from a competitive standpoint. If you look at the racing market in particular, it went up a lot with COVID. And I think really what we're seeing is still the COVID reversion. It's a little slower than we would think, but it's still a very good business. And we're still leading there. And sports is up. but racing is tough as we revert back to a level that is still ahead of 2019, but lower than we've seen in the last few years.

Simon, the other thing I just, building on your question about whether this is, what are the drivers of this, whether it's macro and whether there could be any impact elsewhere. The business we look very closely at is Tombola in the UK and we're seeing absolutely no signs at all of any stress from a consumer perspective there. So I don't think this is a consumer stress thing necessarily in Australia. I think there's a bunch of other factors which we've discussed and we're seeing no indication of that in the UK or in the other markets. Right. Thank you.

The next question comes in from the line of David Brohan calling from Goodbody. Please go ahead.

Good morning, guys. Just two quick questions. Firstly, on Brazil, just curious what your latest expectations are there in terms of timing and regulation. And then just on the additional investment into Slutter Edge, could you give us a flavour for what that investment actually looks like? Thank you.

Trying to put a pin on the date of Brazilian regulation is a thing that's tripped me up many times over the years. So I'm probably not going to try and fall for that again, David, but we're hopeful they'll be coming soon. We're very pleased with the performance of our business in Brazil. We're growing, and I think that we're excited to see what we can do as that market regulates.

And in terms of investment into the central cost line, this is partly around the flutter edge. So it's building our capabilities in, say, HR systems so we can give the best data to our teams, partly around, say, procurement so that we can drive ongoing efficiencies, finance systems, et cetera. So it's structural improvements in our capabilities. And it's also partially, as we move to having a U.S. listing, And there's a few more requirements on us around solving doxy compliance, et cetera, from being under the SEC's regulation. So just building out some capabilities around that.

Okay, perfect. Thanks.

Thank you, David.

The next question comes in from the line of Joe Thomas, calling from HSBC. Please go ahead.

Good morning, Peter. Good morning, Paul. So the two from me are firstly on India. I'm just wondering, you've talked about the ongoing hit from taxes. The Indian government has also been chasing some operators for back payment of taxes. Now, I know you've said in the past that there's no merit to those claims, but I just wonder what the status is there and how the thinking is progressing on that and if there have been any developments. And then secondly... Just following on from that point on Brazil, there is a lot of change in the Latam market at the moment, and it sounds like on balance there could be some negatives in the short term as taxes go up and perhaps some games are banned. But I'm just wondering how you're thinking about headwinds or tailwinds into next year as you think about the profit outlook. Thank you.

Morning, Joe. We've had no demand in terms of back taxes for our dungalee business. I think there's a case that's going to the courts at the moment. We have no update on that at this stage. In terms of Brazil, I think there's always questions and uncertainty around the sense to which gaming will be regulated in addition to sports. I don't know whether that's what you're referring to, but we don't see Brazil as being a headwind next year. We're excited about our position in the market. I think the team are executing really well on the ground. And I think from a broader basis, there are some exciting developments across Latin America, which, of course, we're watching. Look, we're up double digits in Brazil in Q3. The team are performing well, and I'm excited to see what they do. It's about to the end of next year. Okay, thank you.

Our final question comes in from the line of Andrew Tam, calling from Redburn. Please go ahead.

Hi. Good morning, guys. Just a quick question on USI Gaming. I just wanted to understand what you see just in terms of further price improvements, given obviously other competitors are taking even more shares, notwithstanding the fact that you have taken share year on year. Is there gaps in terms of what you're doing relative to peers in terms of generosity? Are you maintaining discipline there? And also could we get an update just in terms of ?

I lost the – you said get an update on something, Andrew.

Could we just get an update on cross-sell rates from sports betting, from OSB?

Okay, okay. Look, I mean, I think if you look at what we've been doing in the U.S., in the casino space, we stated at the Capital Markets Day that we saw this as a three-phase plan. The first phase was to fix some of the things that were sort of broken. You know, we didn't have a focused brand marketing team, you know, a bunch of other things. So we needed to address that, and that was what we did. we're doing last year. We saw ourselves getting to product parity this year, and also making some enhancements to some of our promotional capabilities. So you'll have seen us bring in things like the reward machine, and we definitely expanded our range of content. And then we always anticipated that next year would be the year when we moved ahead from a product perspective. If you look at what we have managed to accomplish, we've been really pleased that we've been able to grow the business in the direct-to-casino space. So we've taken share with the fastest-growing brand, and we're now the number two operator. And so, frankly, we've got there faster than we thought, and we've got there off the back of sales in the direct-to-casino space. We still have a very strong performance in terms of cross-selling into sports. It's better than we had originally anticipated. It's now around 50%. which I think is strong if we compare that with our European businesses. But a lot of the growth that we've been seeing has actually come from the direct-to-casino space. Look, I think the team have done a brilliant job. For where we are, we're delivering better results than we anticipated, and we've got lots of exciting things still to come in casino, which we know will enable us to take further share.

Thanks, Andrew. Thanks, guys.

OK, I think that was the last question. So with apologies to those of you waiting with trepidation earlier on in the call, wondering if the operator is going to come back and patch any of you through. I apologize for that. I'm glad we managed to get it fixed and working then. So thank you for your patience. And I look forward to catching up with you all soon.