Flutter Entertainment plc

Good afternoon and welcome to Flutter's Q4 and fiscal year 2024 earnings call hosted by CEO Peter Jackson and CFO Rob Koldrick. Please note this conference call is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during that time, simply press star followed by the number one on your telephone keypad. We kindly ask that you please limit your questions to two. I will now hand you over to Paul Timms, Flutter Director of Investor Relations, to begin today's call.

Hi, everyone, and welcome to Flutter's Q4 results call. With me today are Flutter's CEO, Peter Jackson, and CFO, Rob Goldrake. After this short intro, Peter will open with a summary of our operational progress, and then Rob will run through the Q4 financials and our new guidance for 2025. We will then open the lines for Q&A. Some of the information we are providing today, including our 2020 These factors are detailed in our earnings press release and our SEC filings. In addition, all forward-looking statements are based on current expectations and we undertake no obligation to update any forward-looking statement except as required by law. Also in our remarks or responses to questions, we will discuss non-GAAP financial measures. Reconciliations are included in the results materials we have released today, available in the investors section of our website.

I will now hand you over to Peter. Thank you, Paul. I'm delighted to provide an update on what has been a fantastic year for Flutter. Our strategic positioning provides a compelling investment opportunity. This includes access to significant growth markets and a scaled and diversified portfolio of local hero brands who win in their local markets through accessing our unique differentiator, the Flutter Edge. In 2024, we capitalized on these opportunities as we strengthened our leadership position in the US market, while globally, our local brands solidified their number one positions and took share in key markets, including the UK and Italy. We also grew into new markets with a very successful Fangio launches in North Carolina and Vermont, along with the addition of MaxBet in our international business. We've achieved this by leveraging the Flutter to deliver the best product for players. Our pricing capabilities give our players access to the leading same-game parlay products across multiple geographies, driving both engagement and continued expansion of our market-leading structural gross revenue margin. Our iGaming product proposition is going from strength to strength with the creation of Flutter Studios, which we believe will better harness our games development capabilities, and which complements the addition of further tier one supplier content. Altogether, this translated into excellent financial performance, with revenue growth at 19% and adjusted EBITDA $482 million, or 26% higher, in 2024. With leverage now within our medium-term guidance range after declining by nearly a turn in 2024, we will truly see the benefits of being an and business in 2025. Firstly, we expect Fangio's fantastic product pipeline will drive continued organic investments in player acquisition to sustain our leadership position in the US. Secondly, in the newly formed international division, we expect to add the SNAI and NSX acquisitions in the first half, further enhancing the scale and diversification of the group in high-grade markets. And thirdly, we'll get a four-year benefit of the share repurchase program with up to a billion dollars of repurchases expected across 2025. Turning now to our performance in Q4. In the US, we exited the year in a position of unparalleled strength, with a sportsbook GGR market share of 43% and an iGaming GGR market share of 26%. This means we close the year as the clear number one online sportsbook operator in the US, a position we have consistently maintained. and we have now also overtaken other multi-brand competitors to become the number one iGaming operator. This market leadership position has been delivered and maintained through our laser focus on product innovation combined with a disciplined customer acquisition strategy. The strong performance in the quarter was somewhat masked by the world's optimistic adverse sports results as we saw some of the most customer-friendly NFL results on record. While these short-term results led to a change in outlook for 2024, the transitory nature of these impacts, which are part of operating a sports club, has no bearing on the long-term position of the business, as we have absolute confidence in our leading pricing and risk management capabilities, and in the structural growth and net revenue margin targets which we outlined at the investor day. I've been really pleased with the strength and trajectory of the US business. Existing player cohort growth remains encouraging and the opportunity to acquire new customers remain very compelling with payback periods of less than 18 months and well below our two year threshold for investments. Our focus on product innovation helps to drive our structural gross revenue margin to 14.5% in the quarter. Parlay penetration continues to increase with NFL up 500 basis points from a high base as our market-leading, same-game parlay products continue to resonate very well with our customers. Our product pipeline is stronger than ever, with a number of new sports features launched in Q4, leveraging our market-leading pricing capabilities. These included increased betting markets across all major sports, a new live activity tracker for NFL, which has seen good early adoption rates, and greater ability for customers to tailor the generosity they receive. but more to come during 2025. We also continue to trial our revolutionary new YourWay product, with all states having access to this new, customisable way of betting NFL in the quarter. And we're now in the process of rolling out YourWay to NBA markets. Although it's really early stages, the engagement we've seen from customers has been very pleasing. And iGaming, products innovation, has also delivered us to our number one positions. Launches included sports-themed games such as NBA Super Slap, who we expect will help drive sportsbook cross-outs, and exclusive titles like Samurai 888 Kenji. We know access to exclusive games appeals to our direct iGaming customers in particular, as we laid out at Design Best today. We improved our iGaming rules proposition with the introduction of a new jackpot functionality on our daily prize mechanic, Fanjul Reward Machine, as well as trialling our new Fanjul Rewards Club loyalty programme. Combined, these features help to deliver exceptionally strong anchorage, up 37%. Our fundamental drivers are taking good momentum into the new financial year. The NFL season ended with a great Super Bowl, and as we look into 2025, I feel very confident about Fanjul's prospects. From a regulatory perspective, the US continues to be a dynamic market. On new state opportunities, we continue to push map expansion for both Sportsbook and iGaming. We also note the recent developments of prediction markets and opportunities that may arise for us there. We are also monitoring proposals for state gaming tax increases within the regulated sports betting market, and we're working closely with advisors and regulators alongside our peers to ensure the impact such changes can have on the regulated market are well understood. Irrespective of what means states may use to manage their budget deficits, as the largest operator in North America, we believe that we are in the best position within the sector to mitigate impacts should they arise. Outside of the US, we have a strong quarter with revenue growth of 14% where access to our flat edge capabilities is driving share gains across the portfolio. In UKI, we had another excellent year. We've now grown our market share by four percentage points over the last two years. Product delivery continues to be key to that success. In the quarter, Paddy Power's expanded super sub products drove increased pilot penetration and in turn structural growth revenue margin improvements. An engaging English Premier League has also driven high levels of player demand. Our iGaming proposition continues to improve with expanded free-to-play content such as the SkyVegas Guaranteed Prize Machine and a broader range of Tier 1 gaming content. In Italy, CSAL's poker players now have access to PokerStar's shared liquidity pool, quickly resulting in record prize pools and showing the direct benefits of access to the Flutter Edge. DeSalle's compelling omnichannel offering helped drive a 33% increase in Italian apps during Q4, with omnichannel players generating over one and a half times more online revenue compared to online-only players. Given its large omnichannel presence, we look forward to welcoming Snye into the group in the second quarter. Positive momentum continues across our key consolidating investment markets, demonstrating the benefits of our diversified portfolio and our capacity to invest for long-term growth. This is demonstrated well in India, where we continue to invest for the impact of tax changes introduced in October 2023, which temporarily impacted growth rates. The underlying can now be seen, with our growth 72% on a year-over-two-year basis. In Australia, player-driven momentum in sports remains a positive tailwind against the known softer racing market, with underlying trends playing out in line with our expectations during the quarter. Finally, and in summary, we believe that the group is very well positioned for 2025 and also to deliver our 2027 goals that we set out at our investor day. We have excellent momentum in our global businesses and we are delivering against our play well ambitions. Fangio has made a strong start to the year, and we expect to materially expand our fair base due to our market-leading products. The reorganisation of our ex-US businesses into our new international division will enhance our strategic focus on winning in our local markets, while our cost transformation programmes will ensure we maximise shareholder value. I will now hand over to Rob to take you through the financials and our guidance.

Thanks Peter, and hello everyone. great to be talking to you today about another strong quarter. The group delivered revenue and adjusted EBITDA growth 14% and 4% respectively, despite the impact of the customer-friendly sports results in the US. The group generated net income of $156 million, which is after the combined non-cash expense of $346 million, the amortization of the acquired intangibles, and the fair value movement on the Fox options. and an impairment charge in the prior year comparative period. Adjusted EPS, which now excludes certain fair value movements, primarily the impact of the revaluation of the Fox option, increased 67% due to the tax credit. Turning now to the financial performance for each of the segments. In the US, revenue was 14% higher with adjusted EBITDA of $163 million. This included continued strong iGaming growth driving excellent player growth and engagement during the quarter. Sportsbook revenue growth of 8% reflected the adverse impact of sports results, as well as a moderation in handle growth to 12%. As anticipated, the sequential handle trend was lower than Q2 and Q3 due to various factors, including the timing of state launches in the current and prior year, a greater number of NFL games in Q4 2023, and the continued migration of our customers to higher revenue margin products, which are typically also lower handle wages. We estimate customer-friendly sports results cost approximately $550 million in revenue and $360 million in adjusted EBITDA and Q4. This is before factoring in one-off cost mitigations and any recycling benefits. I will summarize our estimate of the net impact on 2024 when I walked through our 2025 guidance. From a cost perspective, we continue to deliver excellent operating leverage despite the impact of sports results on revenue, the incremental taxes year over year in Illinois, and the opportunity to continue to invest in customer acquisition. Outside of the US, revenue grew 14% while adjusted EBITDA increased 6%. UKI had an excellent quarter Sportsbook revenue is aided by the positive year-over-year swing in sports results at 390 basis points, combined with a further 110 basis points expansion in our structural gross revenue margin as players engage with our expanded same-game parlay offering. In international, constant currency revenue growth year-over-year growth. DeSalle had an exceptional quarter in Italy highlighted by online revenue growth of 41% as we took share in the market and benefited from a favourable swing in sports results. India, Turkey, Georgia and Brazil all performed strongly in the quarter demonstrating the benefits of our diversified portfolio. In Australia revenue was 8% lower reflecting Cash flow growth in the quarter was underpinned by the growth in our business, with net cash from operating activity up 67% and free cash flow growth of 175%. Cash flow also benefited from the comps versus prior year, which included increased capex relating to the acquisition of our new US office in LA and increased transaction costs associated with our US listing. Cash flow conversion over the year as a whole was excellent, free cash flow of $941 million, a $0.6 billion increase year-over-year, despite the $428 billion headwind-related assessment of derivatives in 2023 and 2024. The significant expansion in group-adjusted EBITDA of $482 million over the last year and FX movements drove a $635 million reduction in our net debt over the equipment period. to bring leverage within our medium-term target range at 2.2 times. This anticipated reduction unlocks the capacity to repurchase up to $1 billion in shares across 2025, in tandem with the acquisitions of SNAI and NSX, totaling approximately $2.7 billion. Moving now to the 2025 guidance we have published today, which includes trading up to the end of February. we expect existing state revenue and adjusted EBITDA midpoints of $7.72 billion and $1.4 billion, respectively. This represents year-over-year growth of 33% and 176% and growth at the midpoints of our Invest Today commentary after adjusting for sports results in the 2024 phase. Normalizing 2024 for sports results, US net revenue This includes adjustments of one-off costs we called out as mitigation in Q4, as well as our estimate of the benefit of recycling in the quarter. 2025 has started really well. Underlying trends are in line with our expectations, with an acceleration in staking trends from Q4 levels as we lack a more life-for-life calendar period. Sports results for the year to date have been roughly neutral, with a great Super Bowl result offsetting adverse sports results in January. In the first half of 2025, it's worth remembering that the shape of 2024 was impacted by adverse sports results in Q1 and positive sports results in Q2, and therefore failure year over year will look different. Around 60% of our U.S. adjusted EBITDA is expected to arise in the second half of 2025, with Q4 remaining our largest quarter of the year. New states and territory launches are expected to result in negative revenue of $40 million and an adjusted EBITDA cost of $90 million, reflective of a Q4 launch in Missouri and some pre-launch investment costs in Alberta ahead of an anticipated Q1 2026 launch. Moving on to group ex-US guidance, we expect revenue and adjusted EBITDA midpoints of $8.25 billion and $1.85 billion respectively, excluding M&A. On a nominal basis, this is in line with 2024, but equates to growth of 6% and 10% for revenue and adjusted EBITDA respectively, after adjusting for foreign currency movements, and the gross sports results benefit in 2024 and is in line with our expectations. Foreign currency exchange rates have moved against the dollar over the last few months to create a 3% year-over-year headwind at revenue and adjusted EBITDA of approximately $220 million and $50 million respectively. Quarterly phasing should be broadly in line with 2024 after allowing for the Euros in Q2 and Q3, along with very favourable sports results in Q2. Revenue growth is reflective of continued momentum in international and an encouraging outlook in Australia. As anticipated, growth in UKI is moderating from the high levels reported during 2024 as we come against positive sports results, the European Soccer Championships in 2024, absorbing the impacts of the government white paper finally being implemented, and as we migrate Skybet onto our global platform. Overall, $300 million in annualized cost savings by 2027. 2025 is an important year for these programs, and we are very pleased with our progress to date. We expect to migrate Skybet customers to a single UKI platform across the summer and complete the program by the end of the year. As our players now have access to PokerStyle's poker liquidity pool, we expect Italian players to be accessing a combined platform later this year. From Q1 2025, we will combine UKI international and Australia into one new combined international segment. This means the group XUS adjusted EDA midpoint guidance is split between $2.08 billion for the new international segment and $230 million of unallocated corporate overhead. Finally, we have also guided on some additional income statement and cash flow items that you can find in today's release. With that, Peter and I are happy to send your questions, and I'll hand you back to Regina to manage the call.

At this time, I'd like to remind everyone in order to ask a question, press star followed by the number one on your telephone keypad, and we kindly ask that you limit your questions to two. Our first question will come from the line of Ed Young with Morgan Stanley. Please go ahead.

Thank you. My first question is on U.S. guidance. You've given a lot of detail there, so thank you. I wonder if you could pick up on the 90 million of investment losses in new states. Can you just talk through the timing movement on Missouri and Alberta, and if there are any other underlying changes within the guide, and perhaps more broadly, could you comment on the customer acquisition environment? And then the second question is prediction markets. Peter, you mentioned it very briefly there, just listening to your main peer describe there's more of an opportunity than anything else. Is that how you see it?

Okay, shall I pick up on the first question with regards to the new state? So, as mentioned, we're expecting to launch Missouri in Q4, you know, potentially around November, and we're expecting Alberta not to be until Q1 2026. As we've said previously, 1% of the population we think roughly equates to around $35 million in contribution costs in terms of the state launch in the first six months. So that ends up being around $80 million for Missouri, as most of those investment costs are typically incurred upfront, as we said before. And then in Alberta, we're expected around $10 million

I think you asked about customer acquisition more broadly. We've been very pleased with the way in which we've been able to continue to lead into the market. I referenced earlier the extent to which we continue to see good opportunities to acquire customers. We actually did 24 with a bigger business than we anticipated. And I don't see any reason that we can't continue to push on and build as big a business as we can. With regards to your second question, Ed, we are monitoring the situation with these sports futures contracts closely. The regulation is very fluid. I think we understand that the CFTC is due to hold a roundtable on sports-related event contracts for next month or so, and we get speculations and parities thereafter. It could be an interesting opportunity, but I think it's worth recognising that the products themselves lack the richness of a true sportsbook offering. You know, I think about the U of A products and the stuff we were doing around the Super Bowl for that. It's a very compelling, very broad subparly production. We need to remember that the prediction products are very vanilla in comparison.

Thank you.

Our next question comes from the line of Clark Lampin with BTIG. Please go ahead.

Thanks very much. Good evening, Peter. I wanted to follow up on customer acquisition trends just very quickly. Did you see any major delta in acquisition trends between, say, iGaming First customers and Core Sportsbook? And as it relates to iGaming product in sort of 25 and beyond, you talked about the launch of a rewards program and integration of new jackpot features into the product. I don't know if it's too early to comment, but I'm curious if you could give us, on the product and rewards program, maybe a feel for what the expected benefits might be from those integrations over time.

Well, it's afternoon, Clark. It's certainly afternoon where I am. But look, from the customer acquisition perspective, I made the point earlier about how pleased we are with the trends. We're seeing very strong growth in iGaming. You can see that in the AMP numbers year over year when you look at the fourth quarter and that's what's behind it. Very strong revenue performance we saw in the quarter. It is a function of the fantastic things we're doing from a product perspective. The reward machine jackpots, which were live in October, I think have been very important. the Fangio Casino Rewards Club, which is a flagship loyalty program. We did a beta launch in December, so a subset of our customers. There's a lot going on. There's a bunch of things that we've been doing over the course of this year, which I'm sure you've seen access, where we're giving customers access to some exclusive content, which I know the team are very excited about as well. I'm delighted with the way both to drive the direct casino acquisition, but also to continue to support the cross selling into the sportsbook as well.

Thank you. If I may, I have a very brief follow up just on Italian lottery. Peter, you've previously expressed some interest in bidding for a second lottery contract. I'm curious if that's still an opportunity that's in focus or has that materialized maybe the way that you might have expected?

I think you're referencing, I mean, in Italy, there is an opportunity to bid for the lotto contract. It's a very different type of product to the super and the lotto that we already run in Italy. We've been very pleased by the way in which we've been able to you know, run the Super Lotto product. I think C-SAL has done a brilliant job in terms of activating that driving cross-sell into, you know, the online channel and driving benefits from that. There is an opportunity to bid for the Lotto. You know, we are, you know, pulling our thoughts together on that. We've got a couple of weeks to decide what we're going to do. But luckily, I think the extent to which we can make a good financial return on it, you'd expect us to lead into it. It is different to the lottery products that we see in the U.S. There are more opportunities to drive. Rob, you've got a bit more experience. I don't know whether you want to just reference it.

Yeah, I mean, the Super and Lotto products that we've got at the moment, it's is that you look at the loss of the 21 million Italian people playing every week, which is over 40% of the population. That says a lot. So we think that's a huge opportunity there. If the numbers make sense, it's something we're looking quite closely at. Thank you.

Our next question comes from the line of Brandt Montour with Barclays. Please go ahead.

Hello, everybody. Thanks for taking my question. So your way is rolled out to a big portion of the system. I know it's been a very light touch with what you've put out there so far versus what, you know, you have aspirations to put out there eventually throughout through that product. What has the early learnings been with what you've put out? Give us an update on that product, please.

I can talk a little bit about some of what we saw in the Super Bowl, where the product was available. We didn't particularly market this aggressively. We saw around one in 20 customers use the product of the Super Bowl. I think around 90% of the bets that people placed were bets that they couldn't have done without utilizing the customization that's available within the YourWay product. I think around 25% of the customers have placed parlay bets with more than 10 legs. We're seeing really strong engagement with it. People are really enjoying the extent to which they can customize and find bets that they couldn't have done otherwise. We're excited to see what we can do with this product as we continue to evolve it. You need to remember we're solving two very complex things with One is an enormous expansion of markets that become available for customers and finding ways of merchandising and simplifying that back to customers so we can give them what they want to bet on quickly. And then secondly, managing all the risk associated with that. And I think the team are doing a great job in cracking that, but we've just been very thoughtful and careful in terms of how we roll this out to the customer base.

Thanks for that, Peter. And just to follow up on hold, you gave structural hold calculation for the fourth quarter, 14.5%. Maybe you could talk about how you're thinking about hold for 25, given that fourth quarter number that you hit. It isn't far away from the 15% that you guys had sort of put out as a target for 27, recognizing there's some seasonality to it.

Yeah, thanks, Brian. Listen, we're not guiding specifically on hold for 2025, but what I would say is we laid out some targets structurally at the capital market stage back in September. We're making really good progress towards that. You can see that in the published data in 2024. We feel like we've got off to a very good start in Q1 this year, and we're very much tracking in progress with those longer-term targets that we set out. So we're feeling quite sanguine about Okay, great. Thanks, everyone.

Our next question comes from the line of Bernie McTernan with Needham. Please go ahead.

Great. Thanks for taking the question. I wanted to ask on tax rates, you know, just dealing with Illinois in the second half of 24, what did you actually see on a gross impact and net impact, and was there any change in the competitive environment in the state because of the higher tax rates?

Yeah, let me pick that one up, Bernie. So, you know, as we previously mentioned, within another week, we said there was going to be circa $50 million impact in 2024, and that would be 40 after mitigation. You know, it's broadly, you know, ended up resulting in a result for us that's in line with that. We previously said for 2020. So broadly, it's played out as we expected.

Understood. Then maybe just on the other side of regulation, thinking about potential iGaming legalization, we'd just love any updated thoughts here in terms of potential momentum in states.

The beginning of the year is always the time when we get a better read of what's going to happen over the course of the year. of jeans ending at this stage but you know we we're excited that we'll be launching in uh missouri in the fourth quarter you remember the investor day we talked about the fact we anticipate again a couple of percentage points of sports betting in each of the um the three years and one new by gaming states i think that we remain um confident that can happen great thank you both our next question comes from the line of jordan bender with citizens please go ahead

Good afternoon, everyone. We're getting questions around handle growth slowing in the U.S. and then continuing into January. I believe parlay handle growth comps are incredibly tough in the 4Q and the start of the year. Anything else you could point us to to help us bridge from what we're kind of seeing today to your implied handle growth for the full year? And then the second question unrelated, I'm seeing if you can expand on the broader strategy across South and Latin America. The region is pretty untapped by any Flutter brand. So, you know, it's a strategy there to kind of, you know, build your presence and brand in Brazil before potentially laying the groundwork to kind of further expand throughout the region. Thank you.

Hi, Jordan. Why don't I just quickly deal with that Latin American question? You know, we're excited to be, you know, working with NSX, and we hope to get the deal closed next quarter. You know, we've got a terrific team. And the opportunity to be able to bring the flutter edge to bear there with our products, expertise, technology, and other scale benefits, I think will be very exciting. As and when we find other opportunities across Latin America, we'll take them. You need to remember we're an end business, so we're investing very heavily in organic customer acquisition, rate paybacks, so 18 months, whether that's in. iGaming, all sports here in the US and other markets around the world, India, etc. We're also going to continue to do M&A and we've got this billion dollars of share repurchase this year. M&A will continue to be an important part of our strategy, but we have to make sure that it's the right opportunities for us in terms of delivering the right financial returns and us being able to bring the benefits from the Flutter Registry.

Yeah, picking up on your handle question, John, so Q4 handle trends were broadly as we'd anticipated, so 12% up in Q4. We're expecting Q4 to be lower than the previous quarter, partly due to the impact of state launches and some phasing around NFL games. But you look at Q4 specifically, it had one less NFL round, and it also lapped Kentucky, which moderated kind of the sequential growth. As I mentioned in my remarks, we also talked about some recycling benefit, but that's not enough to kind of offset the above. 2025 started really well, as we stated, then Q1s improve year on year as we lap this kind of like for like calendar periods. So yeah, we're quite pleased. I think the last point I'd like to mention is we don't really kind of obsess about handle, you know, it can be a I appreciate the commentary. Thank you.

Our next question comes from the line of Paul Reddy with Davey. Please go ahead.

Hi, good evening guys. Just two questions for me. Just firstly on on the Italy acquisition in tonight. Just could you give any little bit more detail maybe on the timing of that coming in and just the second part of it looks like that business may have lost some share in the second half of 2024. you know, just how quickly do you think when you absorb that business, you can kind of start to turn that around and get growth back. And then just as a quick follow on from that, just if you can give any broad guidance on the expected contribution from the two acquisitions in 2025 and a half year basis.

Yeah, thanks Paul. So I can pick up on that. So we're still on track for Q2 with snide completion um you know as you've noted in the italian market share data you know with our c cell brand we've been doing very well so we've been taking the share so you know we're keen to get the snide deal completed and give them access to our products capabilities and on the flutter edge and also get on with delivering some of these synergies which will we're confident we'll be able to start realizing those quickly And with regards to the numbers around the acquisitions, you know, as previously stated, in Brazil, we think that NSX, you know, they'll be up to 100 million of EBITDA losses this year. Also hoping for completion of NSX at some point in Q2. And, you know, Snyder has previously guided as well. But, you know, feeling very good about both acquisitions and, you know, keen to get into the building on both and start making a difference.

Okay, great. And if I could just ask a second, just to unpick the handle growth question for the US a little bit more. Is it right to think about a kind of a lower handle growth environment now as we go through 2025 as people, you know, as you look to more of those recreational high margin products that are maybe lower bet size and higher margin?

and you know maybe up some upsides on on hold uh percentages and uh lower handle growth or how how should we think that through is there kind of any broad um guardrails you think about to to handle growth i i think you know i've come back to the point i just mentioned paul which is we don't obsess about handle we're quite happy with where handle's trending um but you know you can artificially inflate that with with promotions and other things in revenue, which is the key KPI that we look at. It's very strong. We're very pleased with it. So in Q4, there was a reason for sequentially why the trend was slightly lower. But as we kicked off this year, we're really happy with where the business is trending.

That's great. Thanks, guys.

Thanks, Paul.

Our next question will come from the line of Dan Pulitzer with Wells Fargo. Please go ahead.

Hi, Peter and Rob. Thanks for taking my questions. First, I know you guys gave a lot of great detail on the U.S. If I look at your kind of normalized revenue EBITDA for 23 and for 24 and 25, it looks like flow through is in the low 40s. Is there any way to kind of give us a little bit additional color, whether it relates to gross margins and being able to get some additional upside there relative to the prior year or even leveraging kind of some of the fixed OPEX buckets? Any additional detail would be helpful. Thanks.

Dan, is that the only question you had?

No, my follow-up is just another one on the Italian lottery. Any puts and takes as you think about that concession, whether joining the existing concessionaire versus maybe competing against that incumbent in the bidding process, just how you're thinking about that high level would be great.

We're not going to talk about our bidding strategies that are commercially sensitive, but we're we will be very, rest assured, we'll be very disciplined and we'll, you know, the extent that we go ahead, we will, you know, put on as good a show as we can.

Yeah, so in terms of your drop through question, I mean, there's a number of dynamics playing into this as we previously talked about, but, you know, you've got the existing states which are maturing and with the maturity of those states, you might see some lower handle, but you're going to see higher net revenue as the pilot penetration increases. One thing that's important to say is actually we are delivering operating leverage across all lines, and you can see that in P&O and Q4. We expect that trend to continue into 2025. So we're clearly making progress on cost of sales and marketing towards those targets that we set out in 2027. I think the last point is, And we prefer to focus on revenue and EBITDA on those targets that we laid out as the capital markets thing.

Got it. Thank you so much. Thanks, Ben.

Our next question comes from the line of Jed Kelly with Oppenheimer. Please go ahead.

Hey, great. Thanks for taking my question. Just circling back on Handbook, because we've been getting a lot of questions on it. You know, just when we look at it, where your iGaming growth is really strong, we are seeing some handled acceleration. So is that some of your better, higher value players choosing to play iGaming over sports betting? Or is there anything else out there? And then just on the your way parlay, just to roll that broader, just to get a broader rollout. Are you more concentrating more on the merchandising or is it more still on the risk management? Thank you.

I don't know. Yeah, I think the you know, I can I can talk a little bit about the the your way products and I mean, I think I can I can make a comment on my gaming and I'm sure Rob will have some follow up there. But yeah, the on the on the your way product. We've got to get the merchandising right from a customer perspective. So the user experience of having a vastly increased array of product could become overwhelming and we have to make sure it isn't. So I think the team are doing a really nice job on the user experience that we've made available. But it's no good taking bets on an array of new products if you actually haven't got the price and risk management right at the same time. And so you've got to solve all of these problems simultaneously. It's very complex. But I think the team are doing a brilliant job. And we're really excited to see where we can take this product. It's worth remembering that I remember being in Australia when we launched the multi-revolution as it was then in 2016. And here we are. Nine years, basically, so they're developing the product. I'm sure your way is something which will be similar. I don't know whether you want to talk about the iGaming.

Yeah, I mean, in terms of your first question, Jeff, we're not seeing that. So in terms of trends, we're going to take away from sports. But I think as Peter outlined earlier, we've had some fantastic product developments in iGaming, which are really kind of driving the performance of iGaming forwards. We're really pleased with that. We're also continuing to see, you know, excellent paybacks in both Sportsbook and iGaming, arguably even better in iGaming. You know, the question for us is how much we keep, you know, really kind of investing behind that. We've, you know, got Asaf, who's our casino director and fan, he's constantly asking me to invest more. So it's a good challenge to have, but, you know, we're really pleased with the performance of both. So there's definitely not a drag on Sportsbook from iGaming. Thank you.

Our next question will come from the line of Barry Jonas with Truett Securities. Please go ahead.

Hey, guys. Thanks for taking my questions. Given the Illinois mitigation efforts you've seen to date and you expect this year, can you kind of offer any general guidelines around the mitigation targets we could see as more states talk about increases? Is 50% sort of a good baseline target? Should it come to that? Thanks.

I think it's a good starting point. We need to remember that as the largest operator in the market by a long way, I think we're in the best place to mitigate this. But I think it's a rule of thumb. It's not about starting points.

Great. That's really helpful. Then just a general follow-up. Do you think there was anything structurally different about the NFL this past year that led to abnormal holds? And I guess, did you learn anything from the season that you could take with you in the future? Thanks.

More favorites than what normally would happen. So I think that's a simple answer.

All right. Thanks so much, guys. Appreciate it.

In the interest of time, we ask that callers limit themselves to one question. Our next question will come from the line of Jeff Stanchel with Stifel. Please go ahead.

Hey, great. Good afternoon, everyone. Thanks for taking our question. Peter, can you just talk a bit on the trajectory of promotional reinvestment in the US heading into 2025? Do you expect reinvestment as a percentage of handle to drift higher as you allocate or share back a portion of your structural hold rate expansion back with players? And if that is the case, can you just add some color on how you think about Derivative market share impact as your reinvestment strategy starts to bifurcate from peers who do seem to be managing promos either flat or lower in 2025. Thanks.

The thing that we do, which is true for acquisition as well as deployment in general, is we look through a very, we're very disciplined in terms of how we allocate and spend it. We want to see a good return. We talk about the two-year paybacks of a marketing acquisition perspective, and here we're 18 months. It is true for deployments of generosity as well. Making sure it gets to the right customer and drives the right outcome is how we're really focused in the business, and that's how the team is set up to think about deployments that are very big by us and for us.

Our next question comes from the line of Joseph Stoff with Susquehanna. Please go ahead.

Hi. Thanks, Peter, Rob. Just wondering how you think about the impact of your way both on structural hold in the U.S. as well as, you know, your ability to kind of accelerate, say, handle growth. Just curious about, you know, do you see that as more accretive to your structural hold or what?

I think that the types of benefits we'll drive from your way are likely to be, as you say, like higher hold. I think we should get better engagement, increased customer frequency. I mean, we might get all of them. We're excited to see what happens with it.

Our next question comes from the line of Robert Fishman with Moffitt Nathanson. Please go ahead.

Thank you. Good afternoon. I'm curious if you guys are seeing any signs of consumer weakness in your older vintage U.S. states for either sports betting or iGaming, and then any lessons that you can take from the international markets that you can apply to FanDuel, if in fact we do see any sort of macro U.S. headwinds in the coming quarters.

Thanks. Robert, in terms of macro impact, traditionally, our experience is that the business is actually very defensive. So, you know, when we think about the impact of the financial crisis or other macro impacts, the business has actually been very defensive in the face of those. And so we're not seeing any bearing on our historical cohorts in the US, I wouldn't expect.

Yeah, and the same applies for international. So, you know, from my experience with international businesses tend to be very resilient in times of economic downturn. So we're not seeing any signals at all at the moment, despite despite the various volatilities in the U.S. economy.

Our next question comes from the line of Chad Beynon with Macquarie. Please go ahead.

Hi. Good afternoon. Thanks for taking my question. Wanted to ask one on the U.S. business. I know there's some broadcast partnership deals that could be coming to an end, and these are always fluid. And, you know, particularly on American football, you guys have participated when it made sense. wondering if you could elaborate a little bit in terms of how you view media rights, partnerships, if anything has really changed as the economics of these contracts is pretty dynamic. Thanks.

I think the team has done a brilliant job over the years of negotiating good contracts. I mean, I think we I've always been very disciplined in how we tackle these, and we've been able to use our global experience to help us identify which ones are going to be most attractive. I think there is a lot of change happening at the moment. We're all aware of the fragmentation of rights and the increase in streaming, so we're thoughtful about how we continue to ensure that our customers can access The sports they want to watch, but I'm pleased with the portfolio we have. Our scale helps us in terms of investing to acquire the right types of rights, and we've got a bigger customer base. We can spamatize those things across, which is important.

Our next question comes from the line of John Decree with CBRE. Please go ahead.

Hi, thank you. One question on Brazil. I'm not sure if I missed it earlier, but I know it's only been a couple of months since the regulated market launch. But, you know, curious if you could walk us through kind of your investment strategy kind of in a in a launch. And is that happening already or would we expect more investment when the NSX acquisition closes later this year? Thank you.

John, it's worth remembering that Brazil is not like the launch of a US state. There was a very extensive market in operation before regulation arrived. There was a lot of advertising, plentiful payment opportunities. It was a very functioning market. And so it's not going to be like the launch of Missouri will be in sort of acquisition perspective. Well, if you may comment on that, you've got experience of Brazil from your international.

Yeah, I've got lots of experience of Brazil from Berkshire and Berkshire. But, you know, the headline is we're still working to the $100 million in terms of EBITDA losses for this year. We might see some slight phase and differences on that depending on when the deal completes. And, you know, the Brazilian football season doesn't actually start until the end of this month. So we need to see what happens then. Yes, there is going to be in this first 12, 22 months in terms of competition for media assets. There were up to 200 different companies that applied for a license. We think the market will start to shake out quite quickly. But I think given our track record, given our capabilities, given our products, we're very confident of our ability to succeed in the Brazilian market. We're very excited to get started with NSX.

Our next question comes from the line of Ben Shelley with UBS. Please go ahead.

Hiya. If we take your normalized revenues in EBITDA for the US in 2024, they were meaningfully in excess of your original guidance in March last year. Can you just talk us through what your forecasting underappreciated last year? And to that effect, where do you see potential upside to guidance in the US in 2025?

I'm happy to give you a bit of a flavour. Ben and Rob will definitely want to follow up. We ended the year with a much bigger business than we anticipated in terms of the number of customers we had on the platform, but particularly the progress we made in iGaming, and those things really helped support the numbers that you referenced. I think it's also fair to say that we made suitable progress your whole, all the things that we talked about actually at the investor day, but Robert, I don't think you wanted to.

I think that's the key point, Peter. I mean, ultimately, we're very pleased with the progress that we're making towards those long-term targets. We've got off to a good start. I think there will be different phases within this, but as and when we see opportunities to continue investing and continue growing the business, the kind of paybacks that we're experiencing we will continue to do so but you know it's a good start and we're on track to you know get towards what we outlined for 2027 at the investment thank you team our next question comes from the line of adrian de saint-hilaire with bank of america please go ahead

Yes, hi, good evening. I'm just curious if you could decompose a bit for us the growth, the 22.5% U.S. growth on the line you expect between iGaming and online sports betting? We're not going to provide that. It's an aggregate for the U.S. business to not break any damage in sports and games. Okay, cool. Thank you.

Our final question will come from the line of Ryan Segal with Craig Hallam Capital Group. Please go ahead.

Hey, thanks for taking me in, guys. Just a bigger picture question to end. Looking at sports betting, the last couple years have really been focused on parlays, enhancing the offerings there, which has been talked a lot about. But curious what the focus on the sports betting product roadmap would be for 2025 and even if you want to go beyond that. Thanks.

You might think we've only been talking about parlays in 2024, but as I said earlier, the revolution really started in 2016. The Italian team are very excited about the introduction of the parlay products to that market. Historically, it's been difficult to deliver from a regulatory perspective, but we're making progress. There's some great things that the UK team are doing, and of course, we've got the Urway stuff here. in the US. There's a lot of product coming to bear for customers. I think the team do a brilliant job in terms of keeping our customers engaged and excited. And this is true for what we do in in our gaming as well. From a customer that's really interested in engaging with something from a player perspective. And what we can do with all the new markets and things that apply perspective is exciting. But there's a whole heap of things around generosity, which we're evolving as well. And I referenced some of the things we're doing from an iGaming perspective earlier. There's a lot of exciting things to come.

Yeah, I think maybe a couple other things to add. We're really excited about the developments in live products. So there's been a bunch of stuff this year in terms of NFL in-house game trackers, post-product improvements. People are really following the player narrative as well. So we've developed player experiences where people can go and look at the last five game stats of the players and some really interesting stuff that the

us team are doing um which is really driving um the sportsbook um forward so they're quite excited about what's to come in 2025. okay well look um i think we've come to the uh the end of the questions thank you very much everyone i'm you know i'm sorry i have to rush through the uh the last half dozen or so of you. You can get a chance to ask the second question. We can get myself and our team around to help you. But thank you all for your time. We very much appreciate it.

That will conclude today's call. We thank you all for joining. You may now disconnect.