Flutter Entertainment plc — Q1 2024 Form 10-Q Summary
Business context and reporting period
Flutter is a global online sports betting and iGaming operator with brands including FanDuel, Sky Betting & Gaming, Sportsbet, PokerStars, Paddy Power, Sisal, Betfair and TVG. It operated in more than 100 countries and reported four segments: U.S., UK & Ireland, International and Australia. The filing covers the three months ended March 31, 2024; all financial amounts are in U.S. dollars unless stated otherwise.
Flutter completed its New York Stock Exchange listing on January 29, 2024. Following changes in leadership and board location, the company expects to cease qualifying as a foreign private issuer after the second fiscal quarter of 2024 and transition to domestic-filer reporting forms in the following fiscal year.
Financial and operating metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $3,397 million | $2,918 million | +16% |
| Gross profit | $1,604 million | $1,377 million | +16% |
| Operating profit/(loss) | $124 million | $(15) million | Improved $139 million |
| Net loss | $(177) million | $(111) million | Loss increased $66 million |
| Net loss margin | $(5.2)% | $(3.8)% | Down 140 basis points |
| Adjusted EBITDA | $514 million | $352 million | +46% |
| Adjusted EBITDA margin | 15.1% | 12.1% | Up 310 basis points |
| Net loss attributable to Flutter shareholders | $(196) million | $(102) million | EPS: $(1.10) vs. $(0.58) |
| Cash flow from operating activities | $337 million | $(49) million | Improved $386 million |
Total average monthly players increased 11% to 13.7 million. Segment revenue and Adjusted EBITDA were: U.S. revenue of $1,410 million and Adjusted EBITDA of $26 million; UK & Ireland revenue of $861 million and Adjusted EBITDA of $268 million; International revenue of $797 million and Adjusted EBITDA of $173 million; and Australia revenue of $329 million and Adjusted EBITDA of $83 million.
At March 31, 2024, cash and cash equivalents available for corporate use were $1,353 million, excluding $1,782 million of player-deposit cash and cash equivalents. Total debt was $6,836 million net of issuance costs, including $46 million due within one year. The company reported $716 million of undrawn revolving credit capacity, including $13 million reserved for guarantees, and was in compliance with debt covenants.
Material changes versus the prior comparable period
- Revenue growth was led by the U.S., where revenue increased 32% and Adjusted EBITDA improved from $(53) million to $26 million. U.S. sportsbook stakes rose 24% to $13,484 million, while iGaming revenue increased 49%.
- UK & Ireland revenue rose 17% and Adjusted EBITDA rose 30%, supported by 27% iGaming revenue growth and operating leverage.
- International revenue increased 5% and Adjusted EBITDA increased 16%. MaxBet contributed $47 million of revenue after Flutter acquired 51% in January 2024. India revenue declined 25% following tax changes.
- Australia revenue declined 6% and Adjusted EBITDA declined 2%, primarily because stakes fell 19% amid a softer racing market, partly offset by higher sportsbook margins.
- Sales and marketing expense was flat at $881 million, reducing sales and marketing expense as a percentage of revenue from 30% to 26%. General and administrative expense increased 20% to $409 million.
- Other expense increased to $174 million from $45 million, primarily because the fair value loss on the Fox Option liability increased to $184 million from $64 million. The Fox Option liability was $580 million at March 31, 2024.
- Interest expense increased to $112 million from $92 million, reflecting higher debt. The company also reported a $15 million tax expense compared with $41 million of tax income in the prior-year quarter.
- Adjusted EBITDA excludes share-based compensation beginning in 2024, and prior-period segment data was revised accordingly. This change reduces comparability with previously reported non-GAAP measures.
Guidance, outlook, commentary, risks and unusual items
Management emphasized continued player growth, product innovation, disciplined customer-acquisition spending, operating leverage and long-term deleveraging. It expects regulated-market expansion and migration to online channels to support industry growth, but the filing does not provide a clear numerical full-year revenue or EBITDA guidance value.
- Flutter acquired a controlling 51% stake in Serbia-based MaxBet for provisional cash consideration of $144 million. Call and put options cover the remaining 49% stake, exercisable in 2029.
- On April 29, 2024, after quarter-end, Flutter issued $525 million of 6.375% senior secured notes due 2029 and €500 million of 5.000% senior secured notes due 2029. Proceeds were used primarily to repay the EUR First Lien Term Loan B due 2026, revolving borrowings and related costs.
- Known contractual purchase obligations totaled $2,996 million, including $831 million payable during the remainder of 2024. Operating lease obligations totaled $490 million, including $128 million due within 12 months.
- Austrian and German player claims remain a contingency. Flutter accrued $15 million for claims it expects to settle and disclosed additional claims of approximately $44 million for which no liability was accrued because the outcome and enforceability remain uncertain.
- Other risks include extensive and changing gaming regulation, licensing requirements, responsible-gambling measures, taxation, competition, sports-result volatility, foreign-exchange and interest-rate exposure, cybersecurity, litigation, acquisitions and the ability to retain customers.
- The company’s disclosure controls were not effective at March 31, 2024 because previously identified material weaknesses in internal control over financial reporting had not been remediated. Management stated that additional procedures supported the fair presentation of the financial statements, but remediation remains in progress.
- The Fox Option valuation is highly judgmental. Management estimated a fair-value range of $168 million to $1,445 million under specified sensitivity assumptions, compared with a recorded liability of $580 million.
Most important facts for investors to verify
- Whether U.S. growth and the move to positive U.S. Adjusted EBITDA are sustained after unfavorable sports results in Q1.
- The effect of the revised Adjusted EBITDA definition and segment reclassification on period-to-period and company-to-company comparability.
- Debt reduction, refinancing costs, floating-rate exposure and compliance with covenants following the April 2024 notes issuance.
- The valuation and future cash implications of the Fox Option liability and redeemable non-controlling interests.
- Progress toward remediating the material weaknesses in internal control over financial reporting.
- Potential exposure from Austrian and German player claims, the Italian tax dispute, the cybersecurity incident and India goods-and-services-tax matters.
- The effect of UK safer-gambling measures, Australian tax increases, changing U.S. state regulation and other licensing or tax developments on future margins.