iGaming Daily

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Tough Q3 trading is testing the credentials and status of Flutter Entertainment as Global Gambling's undisputed highest value PLC. Unforeseen regulatory changes in India have forced Flutter to absorb costs of $500 million to terminate its Jung-Lee business. Mixed messages emerge in the US. Funduals margins remain heavily exposed to unfavorable sports results, yet performance is partly upset.

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by the rapid growth of FanDuel's iGaming profile. I'm Fernando Nod, Media Manager for SBC and your host for today's episode of iGaming Daily where we will discuss the latest update of one of the industry's giants and to do so I'm joined by Ted Memir, Editor-at-Large for SBC. Ted, how are you today? Very well, Fernando. Good to be back on the pod. Always great to have you.

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uh And also, of course, Flutter is big in the US, so we need our own US specialist, senior journalist, Tom Nightingale. Tom, how are you today? Yeah, very good. Thank you. Two days in a row now. You guys will have to start paying me a fee. Yeah, yeah. Maybe they will pay you a fee actually at the end of the month, which is called a salary. uh And I think it's included.

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But anyway, that's for HR to discuss. Shout out to the HR team for SBC. And let's crack on. Let's start with another episode of iGame Daily, supported by OptiMove, the creator of positionless marketing and number one player engagement platform. in every quarter, of course, Flutter has a million stories that we can pick up from their updates because they are pretty much everywhere. So what are your key takeaways?

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from their Q3 performance. Well, describe this as classic kind of side of like a good business, but it's an ugly headline, especially with regards to that India and that impairment of 500 million. And I'm sure, we're get, we're gonna talk about that later on, but I just feel that operationally kind of flutter is showing its muscles. It's doing what you'd expect from a heavyweight PLC to do, and it's still dominant across.

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very much so across global gambling's landscape. uh Again, top line metrics are coming in. They might be slowing down across markets such as the US, but the upbeat is still up and good, know, up 9%. And also you've got to look at just the scale of Flutter. 14 million active players a month. No one can come across near that. I think that again, one thing you've done very well in your introduction is pointing out kind of

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its heavyweight status is being questioned but when you can have answers like that, 40 million active players, polling places across key markets, it's very hard to argue against Flutter. And of course you mentioned India and you mentioned the 5 million in impairments which are just a major shock for any company. So how has Flutter observed this impact? Well,

03:14
Peter Jackson speaking to investors said that this was an unforeseen and unexpected regulatory change in India. It's one that hasn't just caught Flutter off guard, the market in India in itself, it's been a complete flip of the script. And as such, Flutter has chosen to shut down Junglee and reserve $500 million in impairments.

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for the closure of its business. It will maintain its technology hub in Hyderabad and it still views kind of potential kind of market entry to potential developments in India where it might be able to kind of launch soft games or non-commercial games or attach itself to kind of other sectors and provide services for India. It believes that the story is not over in Asia.

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And it's a market in which Flutter has kind of always viewed it as kind of its bridge towards the Asian market. It will have some forward presence in the Indian market. of course, like we said, there's a lot of stories in Flutter's update and India is not the only headwind. Can you take us through the other areas being probed, like the UK and of course the US as well and their home brands? Okay, I'll take you through the UK. The UK numbers are

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I wouldn't say necessarily negative, they are just stagnant. Flutter grew 1 % in revenue and with no abetting growth. ah Again, the investor calls it so that there will be adjustments in the UK in its home market, whatever the outcome of the budget. I know there's a lot of focus on Rachel Reeves and the upcoming taxes. However,

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I think with a PLC at size and especially with its retail portfolio and penny power shops in the UK, something's going to have to give way in terms of the UK market and how it operates there. Again, it's a market that's reaching peak saturation. It's harder and harder for Flutter or for any PLC to grow year on year in the UK. What about the US Tom? How has Flutter...

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How is Flutter doing in the US so far? I mean, the US is an interesting one. it's stay right off the bat that any other operator in the US sports betting market would happily trade places with Flutter and Fangil. Right. Let's get that straight at the start. market leading sports book growing pretty significantly in online casino as well. But I think what we saw from the results this time in the US

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Again, it's the second year in a row, think, where this last quarter, first quarter of the NFL season, we've heard sportsbook CEOs talk about customer-friendly results and that sort of stuff. We saw that again this year, like Fangels revenue grew 9 % year over year in the US this quarter, but sportsbook revenue down 5%, which they put down to this customer-friendly sports results, heightened competition in the market now because things have changed quite a lot in the last year.

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had brands like Fanatics and Bet365 make some serious headway chipping away at sort of the leaders market share. And I think an interesting thing to look at here is that being the number one sports book in the US market kind of only takes you so far these days. know, like there's only a certain number of, you know, most of the US has legal sports betting, but we're not really seeing much movement. Missouri is going to open a market, but other than that, we're not seeing many states.

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even make any kind of real progress towards launching legal online sports betting if they don't have it already. So the opportunities for expansion there in terms of typical regulated sports betting are pretty slim. And I think it's really noticeable that while sports but revenue declined a little bit, Fangill's iGaming, iCasino revenue, up 44%, I think, in the US last quarter. It's clearly quite a targeted strategy. Fangill, I myself, I'm a casual user of

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you Fanjool, I use a of that online casino from time to time and the upgrades they've made there in the last year are really noticeable. And I think that's partly because like on the sports betting side, know, Fanjool already number one, there's not really many more jurisdictions coming online. You know, what else sort of can you do other than try and be the most competitive with your pricing? Whereas iGaming, you know, there's little lift, there's high margins. That's a real area, I think.

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that can help them sort of maintain their number one position and keep pushing on. And let's go beyond the flutter results themselves. Ted, what do you think leadership is trying to signal to markets and investors? Look, they're going from the call, they're still very positive. think the message is to analysts and to market is, look, don't mistake accounting noise for the actual how strong and how structurally capable.

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Flutter are Peter Jackson, the executive team clearly are leading into kind of three big signals. First, that the underlying growth of Flutter quarter and quarter is always robust. There high revenues, middle signal of beta. And that again, each individual brand seems to be taking market, know, respective market share growth across markets.

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So these are kind of the fundamentals of the business saying, these are the fundamentals of the business saying this, you know, this is why we are the global leaders. It's beyond kind of the numbers. It's what we do on each market basis. Yeah. And there's a lot more to discuss about Flutter, but right now we're going to do a very quick ad break and we will be right back to continue discussing their results and their perspectives.

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both in the global markets and specific markets. And we're back with more iGaming Daily to continue discussing the latest update for Flutter Entertainment and the... I mean, how do you call it? The reactions to what they have said on their latest quarterly uh report. income and EBITDA growth aside, Flutter will end full year 2025 with substantial losses.

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Is group profitability becoming an issue for Flutter and its PLC Ted? uh

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for investors will probably be the payments that are still going out to the Fox option. And the interest rates read kind of on debt and are kind of reaching 50 million uh per quarter. But I think, know, I'll take this to Tom. mean, like so much of this is what narrative are you looking at at Flutter? And I think from the investor level is what do you like of Flutter as this kind of global business?

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You know, can take away from and do for Flutter International, even that it, it, it can, it can end, you know, it seems to be the best, um, it seems to the best portfolio for entry market, uh, each individual market and scaling up very fast. So I'll take that to Tom. I well, what do you think about kind of fuck position with profitability? Yeah. I mean, it's difficult, isn't it? Like once you have that sort of market leading position, um,

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Like I said, you sort of need to find, I mean, there's a, there's a big way that I think we'll talk about, but you need to find new ways to, um, expand your horizons. Don't you really like it's in a way it's kind of difficult, I think, to be the, the company who are pushing up against the ceiling already, because, you know, where'd you go from there? I think as well, like this, you you mentioned the, you mentioned the Fox option. I mean, that's pretty, that's pretty relevant context as well that I think is important, um, to take into account for the numbers. There's also.

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I they're still, they're still paying money to do with the Boyd, you know, uh acquiring the last 5 % state Boyd. think there's about 200 million or something on the books from that last quarter. So, I mean, some of this financial stuff, I think is stuff that will naturally kind of settle out as we move forward. But there's no doubt that particularly in, you know, speaking from a US perspective, it's about where you go from here and which.

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forward or sideways steps you take to hold off challenger brands, make sure that you are trying to stay a step ahead of DraftKings is the eternal fight obviously as well. mean, I know where you're going to take this because there are new challenges coming into the market. um I mean, it's funny for me because I always kind of look at Flutter and reflect back and I think that they're always kind of this very kind of traditional UK um PLC, but so much of

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It's thinking and it's strategy and it's being has changed since it's migrated to the New York Stock Exchange. It's a completely different beast now. I think that could be kind of reliability where kind of if you, know, what does it do with kind of new challenges of the markets and can it be in every market? Yeah. I mean, that is a great point. know, can it be in every market? And that is the particularly pertinent question, isn't it, at the moment? But maybe I'll flip this back to Fer to see if he wants to tee up where we're heading next.

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Yeah, I mean, you were talking about debt at the start of this half of the episode. And we are seeing a growth of the Flutter Debt to 10 billion pounds and still growing. while the company has a million concerns and challenges everywhere in the world, and while it's trying to remain ahead of the competition, uh

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debt, 10 billion pounds debt and growing really sounds like something to be considered. So where are the funds being spent for Flutter and is this actually a concern for Flutter and their investors? I wouldn't say it's so much a concern, but it's definitely like an observation that's being made by the analysts in the markets, right? mean, how much, you know, how much and how quickly it's kind of risen this debt, which is almost like a doubling point now. ah But then you have to look at Flutter's

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last three years, it's acquisitions, number one coming in from Italy and the acquisition of Snytech. Also another, it's either kind of two billion pound play in Bet Nacional in Brazil. The thing about these acquisitions is that once executed, right, they're there to land, flutter in that kind of podium place straight away. And then the integration costs that come with it are

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reapplying or deploying out kind of a flutter edge technologies to improve localization and to improve optimization and like the onboarding of customers. So they are needed. And if you look at it on a project basis, they are kind of fulfilling the objectives of what they need to do for kind of market launch and to improve kind of their M &A's and see them through. However, again, with that debt rising, you know, if it goes back to

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your vest are basically looking at in how much can you stomach and it is growing very, very fast. It might be an issue that in a couple of years kind of holds it down the line. Yes, Credence will say, I see a bad debt on the rise in, right? But let's address the elephant in the room here. It's not called Dumbo, it's called Prediction Markets. So Flutter's Fandual.

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has announced the launch of sports contracts offering in December. What does this mean for them and how cautious do they need to be considering prediction markets have been compared to illegal gambling in some states in the United States, Tom? I mean, listen, how long have we got? Not very long, right? ah It's, you know, this was coming for a start, clearly. We've seen some we've seen several. Fanjul were first to announce like a part, a theoretical kind of partnership to move forward into prediction markets and

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with CME Group, the Chicago Mercantile Exchange. At the time they announced that in like August, they didn't mention sports contracts, but I mean, it didn't take, you know, it didn't take a pair of glasses to read between the lines there. um Since then, so much has happened. Draft King has announced, I think, confirmed like last week, they're going to launch sports contracts in some states soon. Flutter came right out and said it this week, you know, we're going to launch sports event contracts.

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As soon as December on this new Fangil predicts platform, we're going to focus it in on states that where they cannot offer legal online sports betting. And that's the key thing, right? Is that we heard Peter Jackson talk on the call about this prediction markets and sports contracts. This is their entry point to what he called half the market. Now, considerably more than half of US states have legal online sports betting. What he means by half the market really is

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population wise and TAM because the three most populous US states, California, Texas, Florida, Fangal can't offer legal sports betting there. California and Texas don't have it. Florida has a monopoly with the Seminole Tribe and Hard Rock. Those are areas of huge potential that just have not been open to Fangal until now. By taking forward the notion that federally regulated

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prediction markets and event contracts are a viable stream in these places where sports betting isn't viable for them. Immediately you have, particularly by partnering up with CME Group who have all the licensing, they know what they're doing when it comes to offering these kind of derivatives and trading. um If you think you can do it, it's a no brainer, I feel like really for the sports betting market leader and clearly they feel like they can do it. uh

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What's particularly interesting is that obviously we know that a lot of states have pushed back against it. Understandably, the issue is in court, particularly when it comes to Calchi. None of this is getting resolved anytime soon. But while there's uncertainty, there is no certainty. So if you think you can do it, do it and, you know, see what comes down the line. What's particularly interesting is on the same day that Flutter had their earnings call, ah

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Nevada Gaming Control Board, who are one of the state regulators who warned all kinds of licensees, if you offer sports, you know, if you offer prediction markets, particularly on sports, you are in contravention of state law, you know, we hold you to be, you know, ah against what we believe and it's going to have serious effects for your licensure. Fangil do not have a

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particularly strong presence in Nevada. They've done some work there with Boyd Gaming. They work there as an information services licensee rather than an online sports betting operator. Fangel turned around and said to the Nevada Gaming Control Board, we will relinquish our license and our operations in Nevada. They said, while we are enthusiastic about expanding Fangel's presence in Nevada, our views of the current opportunity for prediction markets outside of regulated states

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are unfortunately in direct opposition to Nevada's priorities. What that means is we want the prediction markets opportunity more than we feel like we need a regulated presence in Nevada. Nevada is a particularly interesting case because Fangil don't have full operations there, but this is another line in the sand really of when clearly Fangil, not just Fangil, DraftKings as well particularly, are assessing this

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prediction markets opportunity and thinking, how far are we prepared to go to realize this huge, huge opportunity to expand our user base and expand our revenue? You really well put. I'm just going to say that. My fear here is that I think there might be more than they can chew and it's market that is still kind of not understood. And I also kind of feel that

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I just want to ask you, I mean, how much of a threat, do they actually view Polly Market and Cal-She as a threat to their business? I mean, my take on it is that they don't necessarily view the likes of Cal-She and Polly Market as a serious threat because they have said, not only Peter Jackson, Jason Robbins from DraftKings, have said multiple times that they do not feel like the depth and...

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appeal of a typical sports book can be replicated on a prediction market when it comes to setting up these prepackaged parlays and all this sort of stuff. Whether that's just bluster from them and they are trying to downplay the threat, that's a take, that's quite possible. But what I think is more than looking at like, calcium polymarket as a threat is if they don't do it, it's a missed opportunity for them. And by expanding

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It basically gives them for now until a court rules otherwise or we'll see how this develops, God knows where we'll be in even a few weeks, but until something hardline negative comes down rather than just states saying don't do this, um the opportunity to unlock that other half of US online sports betting. We were talking earlier in this, if you're pushing up against the ceiling, where do you go? Well, this is where you go, isn't it? This is where you go.

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And I think what's an interesting thing moving forward in terms of the state regulation, obviously, Fandual don't want to upset state regulators, clearly. But if you're a state, any state really, I'll use New York as the example, because it's the biggest online sports betting market. Fandual and DraftKings together are like 75 % or something of the tax revenue that these states make. That's pretty much true in every online sports betting stake where those two guys are in there. You know,

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Obviously if you're a state gaming regulator you want to be careful about how your licensees proceed but frankly can these states really afford to lose Fangil? I would argue that these states can't afford to lose Fangil more than Fangil can't afford to lose the states to be honest because if you're like New York or any state really and suddenly Fangil and DraftKings are doing this thing that you don't really approve of and you say okay you cannot offer online sports betting in our state

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You lose 75 % of your tax revenue, which let's be frank is honestly probably the main reason that states are open to legalizing online sports betting in the first place. So I think there's going to be a little bit of you blink first kind of a standoff. And I think it's going to rumble on like so much of this has done. And I will say, I'm sure that I'll be back on this podcast before too long, talking about some other kind of development in this field.

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then I guess you'll have to, you'll need to have that HR talk for the special bonus, the special podcast bonus. But right now we've reached the end of today's episode. I love to go through on Flutter's latest update. You can go and check that out across the SBC media news websites. So sbcamericas.com, SBC news, and all the media network have been covering.

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Flutter's updates, so make sure you are subscribed to all our newsletters so you can as well stay updated on the gaming industry and of course follow iGamingDaily on your preferred podcasting platform and on TikTok because we are as well on TikTok. I am a fierce defender of TikTok so I will continue to promote our TikTok account. Ted Memir, Tom Nightingale, thank you very much. Thank you very much James Ross for producing this episode.

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and to our listeners out there, we'll see you in the next one. Goodbye.