Flutter Entertainment plc (FLUT) Q4 2019 Earnings Report, Transcript and Summary

I’m going to start by giving you a brief overview of the headline developments of the group over last year. I then want to talk for a few minutes about the changes we’re making to put responsible gambling at the heart of what we do and the regulatory backdrop for our business and the sector more broadly. Jonathan will then go through our 2019 financial results before handing over to Matt, who will provide an updated view on the U.S. market and the progress we’re making there. It’s almost a year since our U.S. Capital Markets Day, and a lot has happened in the U.S. in that time. So it’s great to have Matt here. I’ll then talk about the performance of our core PPB online and Sportsbet businesses before giving you a brief update on our proposed combination with the Stars Group. We’ll then open up for Q&A. Turning to Slide 4. I can work the slides – here we are. It’s fair to say that 2019 was a very busy year for Flutter as we made progress against all four pillars of our strategy. In the year of big developments, the standout one was obviously announcements of our proposed combination with The Stars Group, which I’ll speak about at the end. Aside from that deal, in Europe, we added a podium position to our portfolio with the acquisition of Adjarabet in February and have been very encouraged by how well that business has performed in Georgia and Armenia since. In the U.S., performance has exceeded our expectations across the board. We became the market leader in both the online sport betting and online gaming. It is a market which I continue to believe were the biggest – to be the biggest legal market in the world. We saw encouraging underlying performance across the business. In Paddy Power and Betfair, we’ve delivered good operational progress as we look to build a more sustainable business for the long term. Our UK retail business had performed better than our expectation since the change in FOBT regulation was introduced in April 2019. In Australia, Sportsbet was faced with a substantial increase in taxes but really stepped up to decrease, delivering strong growth and underlying operational leverage, which saw it largely offset the incremental taxes. We’ll obviously go into a fair bit of detail on each of these things over the course of the presentation. But before we do, I’d like to speak for a few minutes about where we are as a business and where we are as an industry when it comes to responsible gambling and the future regulation of the sector. Slide 5. See – and you’ve all heard me talk about regulation in the past. But it’s a topic that’s important to me and the future sustainability of the sector. I believe this is a pivotal time for the sector when it comes to responsible gambling and the future direction of regulation, particularly in the UK. The recently elected UK government has announced it will conduct a review of the 2005 gambling act. We believe that this is an important opportunity to look at the regulatory framework as a whole. This review must ensure that the regulation provides the greatest protection possible for those who may be vulnerable to gambling-related harm, while also enabling the vast majority of people who enjoy recreational betting to have the freedom to stake amends comfortably within their means. These two objectives should not be mutually exclusive, and I believe they can be achieved if the right approach is taken. To achieve this and provide the safest possible gambling landscape, we must focus on how we can put player affordability at the heart of future regulation. The key to ensuring that our customers enjoy our products responsibly is to use the information available to us to better understand how much they can afford to spend on our products and by then putting place a framework that applies that knowledge to protect them. Each of our customers will differ when it comes to their individual needs. And as an industry, we must strive to design a framework that brings to the fore the needs and circumstances of our individual customers. In the meantime, we continue to make advancements as both an operator and as a sector. Ultimately, as operators, we all need to strive to become best-in-class when it comes to responsible gambling. It is competitive when it comes to responsible gambling as we are when it comes to product design or pricing sophistication. I’m heartened to see the recent buying amongst the leaders of the other major gambling operators to the concept of a race to the top in responsible gambling. I hope there will be real competition for those podium positions. To that end, we’ve spoken at length about the technological improvements we’ve made to better understand player behavior, allowing us to intervene when we assess that a customer is vulnerable. To do that effectively, we’ve tripled the size of our responsible gambling team over the last 18 months. But as importantly, we’ll continue to evolve how we interact with our customers, recognizing that the true measure of our progress here isn’t simply the number of interactions with our customers, but the quality of them. One of the great benefits of being a global operator means that we can leverage our expertise from around the world to build a business with the best framework for protecting our customers everywhere. Therefore, we also rolled out the second generation of our proprietary RG technology in Australia in late 2019 while also implementing measures required by the National Consumer Protection Framework. This includes improving communications to customers and tools such as deposit limits and the introduction of national RG training. As you heard from Matt, we are just as determined to build the business in the U.S. that is sustainable. We also continue to raise the bar when it comes to compliance standards, not just for ourselves, but also for our partners, whenever our customers see us as a crucial partner using the exchange to hedge risk and manage their own positions. While we strive to know as much as we can about our customers, we require them to adhere to the same high standards that we demand of ourselves. If we find that any are falling short, we’ll not hesitate to switch them off. As part of our ongoing review of our partners, we decided to switch off a small number of customers towards the end of last year. While that means we will likely see a decline in exchange revenues in 2020, we are sure that it’s the right thing to do. It’s also important to talk about the changes that we’re making as an industry. In late 2019, the Betting and Gaming Council was established to bring the vast majority of the UK industry together to collectively raise standards and work together. The BGC is overseeing the delivery of the safer gambling commitments, which were announced in November, and is also coordinating the industry work with the Gambling Commission on three important work streams; around the new VIP code, advertising technology and game design. Responsible gambling is at the heart of our own strategy, and we’re encouraging other sector peers do the same. And I’m proud of the work we’ve done of late to move in the right direction. With that, I hand you over to Jonathan, who’s going to take you through the numbers.

All right. Thanks, Peter, and good morning, everybody. As you can see, it’s been a pretty busy year in 2019. There’s a lot to get through, so I’ll kick straight into the numbers. I’m pleased to say, to start with, that we achieved our results in line with guidance. Our revenue in 2019 increased by 14% to GBP2.1 billion, benefiting from a mixture of good organic growth, our U.S. sports betting expansion and the acquisition of Adjarabet. Group delivered underlying EBITDA of GBP385 million on a pre-IFRS 16 basis. The year-on-year decline of GBP66 million reflects the additional taxes and regulatory changes introduced during 2019, which combined, totaled GBP107 million and also reflected GBP26 million of additional U.S. investment losses as we expand our business there. As a result, reported profit before tax reduced to GBP336 million from GBP119 million in the prior year, and reported EPS was 183p, 24% lower than 2018. The balance sheet remains in a strong position with net debt at the year-end of GBP265 million, equating to a leverage ratio of 0.7 times. And in line with the guidance provided at the time of the Stars combination announcement, we are proposing to maintain the full year dividend at 200p per share. Okay. Moving to Slide 8, the bridge in this slide provides us, hopefully, with a better view of what’s happening in the underlying business. To make this comparable, this chart is prepared on a pre-IFRS 16 basis and excludes the U.S. So just starting from the left of the bridge to the right, firstly, we have adjusted the base for the FX changes, and then we bring in the pro forma Adjarabet numbers. As I said on the previous slide, the impact of the regulatory and tax changes was GBP107 million, consistent with our guidance at last year’s results. Importantly, the next green bar, we delivered organic revenue growth of GBP52 million. This reflects a strong performance in Australia during 2019 and really good momentum in Adjarabet, as Peter has already referenced, since we acquired that business. I haven’t adjusted out the World Cup revenues in 2018 from the comparable, but you can see the benefit on the 2019 marketing, with a year-on-year reduction of GBP14 million. And other operating costs grew by a moderate 3% on a pro forma basis. And then as a result, you can see that the underlying EBITDA for the group, excluding U.S., would have increased by 14% pretax and the regulatory changes outlined. Moving on to Slide 9, this shows the reported income statement for 2019, again, on a pre- and post-IFRS 16 basis. And obviously, the remainder of this presentation, we’ve done on a pre-IFRS 16 basis. Just to confirm, the net impact of IFRS 16 at the PBT level was just GBP1 million in 2019, and a detailed breakdown is included in the appendix of the impact by division should you wish to get into that detail. In the upcoming slides, I’m going to go through divisionally through to EBITDA. So therefore, I’m just going to focus on this slide and the elements below EBITDA. Depreciation increased by GBP18 million year-on-year. This reflects a full year of FanDuel and its increasing sports betting investment as well as ongoing online product development across the group. Separately disclosed items relate to the amortization of acquired intangibles, mainly from the Paddy Power Betfair merger. There were also GBP18 million of costs associated with the proposed combination with Stars. And finally, we have a positive minority interest line given that 42% of our U.S. losses are currently borne by the minority shareholders in FanDuel. I will now look at each of the divisions in turn. Starting with PPB online, which obviously includes Paddy Power, Betfair, Adjarabet and our B2B operations. In the 2019 year, Adjarabet contributed for 11 months. So revenue in the division increased by 6% to just over GBP1 billion and was flat on a pro forma basis. Within sports, sportsbook was flat year-on-year and 6% higher when the World Cup is excluded from the prior year. As expected, the rollout of country-specific pricing had a material impact on staking, reducing some of that low-value staking in our international business, and we can see some of that coming through, as I’ll touch on a second, and the improvements in expected net margin. So that expected net margin increased by 90%, sorry, 90 basis points from 2019 due to several factors; firstly, what I just touched on, the country-specific pricing; second, the ongoing refinement of our risk and trading capabilities; and finally, changes in our customer bet preference. This structural improvement in margin was partially offset by less favorable results year-on-year. As a result, the net – the sportsbook net revenue margin was 8.1%, up 40 basis points year-on-year. Exchange in B2B revenue declined by 5% due to the market switch offs that we’ve flagged previously and occurred during H1 and the absence of the World Cup. Excluding these two items, revenue would have been up by around 1%. Gaming revenue grew by 26% or 7% on a pro forma constant currency basis. Combined gaming actives across Paddy’s and Betfair brands were up by 14% in the year, and this was partially offset by the reduced revenue from some of those higher-value customers given the RG changes that Peter has already talked about in his opening. Adjarabet continued to perform strongly since acquisition. The increase in cost of sales included an additional GBP23 million in online taxes in the UK and Ireland from rate changes that are well flagged. The absence of the World Cup meant that marketing spend declined year-on-year, while other costs, you’ll see in here, now include Adjarabet. The division’s underlying EBITDA decreased by 3% to GBP307 million, which given some of the RG improvements that we are delivering in the business was a positive result. Okay. Now turning to Australia on Slide 11. Sportsbook really did deliver a really fantastic performance against the backdrop of the major step-up in gaming taxes. Revenue grew by 14%, driven by good customer growth, along with the expansion in our expected margin. Cost of sales, as a percentage of net revenue, increased from around 30% to around 41% as a result of approximately the GBP50 million in incremental point of consumption taxes and product fees. Sales and marketing declined, reflecting a shift in spend towards more targeted personalized customer generosity. That change in approach is obviously captured within our net revenue margin. Overall EBITDA reduced by just 16 – by just – by 6% in 2019. And excluding those increase in taxes, underlying EBITDA would have been up 49% for the year, demonstrating once again, Sportsbet’s ability to deliver improvements in operating leverage. Okay. Moving on to the U.S. on Slide 12. The numbers shown here are on a pro forma basis as if the group had owned FanDuel for all of 2018. Our sports revenues grew by GBP45 million – 45%, benefiting from the expansion of online sports betting into four states. We generated over GBP100 million in sportsbook revenue in 2019 compared to GBP11 million in 2018. And the improvement in our net revenue margin of 180 basis points was driven by improved risk and trading capabilities and the benefit of some of that geographic diversification with more states being live. Our existing sports businesses of DFS and TVG grew revenue on a combined basis by around 4%, with double-digit growth in contribution. Our online casino business had an excellent year driven by cross-sell from sports betting. New Jersey gaming revenues increased by around 150%, and the growth is particularly strong in H2 once our casino content was embedded within the FanDuel Sportsbook app. Marketing spend increased as we continued to grow our customer base. And by the end of 2019, FanDuel have acquired over 350,000 sports betting customers. Other operating costs increased in line with our expectations and guidance with 300 people added to our U.S. team. We now have more than 1,000 folks working in our U.S. business. And the loss came in at GBP40 million, in line with our Q3 guidance and ahead of our previous expectations, more of which will come from Matt a little bit later. Okay. Looking at retail on Slide 13. Total revenue was 6% lower, following, obviously, the introduction of the staking limits on UK gaming machines. Sportsbook’s revenues were 4% ahead with growth across both the stakes, helped by a slight improvement in net revenue margin year-over-year. Gaming revenues, obviously, were impacted from the 1st of April in the UK from the introduction of the GBP2 stake limit on FOBTs. Encouragingly, we have seen an improving trend in our gaming revenues in each consecutive quarter since the change came into effect. In Q4, gaming revenues declined by 21% year-on-year. And this compares with a 44% reduction in Q2. We believe that the improvements seen reflect excellent operational performance by our team as well as the closure of competitor shops towards the end of the year, and we hope to take further share in 2020 as we anticipate further competitor closures. Overall, our retail delivered an EBITDA decline – which declined by GBP19 million despite GBP34 million of regulatory and tax changes. Okay. Moving on to cash flow on Slide 14. Our free cash flow improved year-on-year to GBP282 million. CapEx came in at GBP136 million and reflected ongoing product investment we are making across our online businesses as well as U.S. product and market access investments. Our U.S. business growth had a positive impact on working capital. Added to this was the one-off effect of increased taxes during 2019, whether they are obviously, tax credits or at the year-end. And finally, in 2018, we had some prepayments in the 2018 year, which benefited the 2019 year as those unwind as well. Other material cash outflows in the year were the acquisition, obviously, of Adjarabet and the completion of our share buyback program, which brought shareholder returns for the period to GBP243 million. We retained a robust balance sheet with leverage of 0.7 times EBITDA, and this flexibility has provided us with the opportunity to continue to deploy our capital effectively, particularly within the U.S. business. And this was a key enabler of our proposed combination with Stars. And we are retaining our medium-term leverage target of 1 to 2 times. Okay. Coming on to financial guidance. You’d be glad to hear I’m nearly done. So this slide provides some specific line guidance on 2020. The first thing is to say – is that our current trading has been strong with good customer and revenue momentum across the business. Football and racing results in the UK were particularly strong in January. New changes in the UK on credit card deposits is likely to obviously impact revenues in PPB online in 2020. The annualized revenue impact of this change is expected to be between GBP20 million and GBP25 million, with about three quarters of that landing in 2020. And then, obviously, that will fall through at a lower rate through to EBIT impact. As Peter has mentioned, we have quite rightly taken the decision to switch off a small number of B2B partners who weren’t meeting our compliance standards. We anticipate a reduction in exchange revenues in 2020 as a result. The precise impact is difficult to quantify at this point because if they do get back to achieving our compliance status, we may switch them on, and alternative partners may be added during the year. So we’ll look to mitigate the impact. We anticipate that any impact will be less than 1% of group revenue. Euro 2020 will provide us with a great opportunity to engage with customers and hopefully acquire some customers. And we do plan to invest heavily around acquisition and the – and retention as a result. This means that we expect sales and marketing as a percentage of net revenue to be approximately 25% in 2020 for PPB online, up from approximately 24% in 2019. And in our retail business, you will have seen our gaming revenue trends have improved quarter-on-quarter. As a result, retail performance is now expected to be better than previously thought, effectively offsetting that additional Euro investment – marketing investment money. And finally, in the U.S., we currently expect the 2020 EBITDA loss to be roughly in line with 2019, with substantial further investment as we expand into, we think, three new states. This is expected to be offset by the strong revenue growth from states in which we’re currently live. And at this point, I will now pass over to Matt, who can talk to you a bit more about the U.S.

Thanks, Jonathan. Great to be here today. Very excited to tell you our story in the U.S. Frankly, it’s been almost a year since I saw a number of you at the Meadowlands for our Capital Markets Day. By way of introduction, I’m Matt King, I’m the CEO of FanDuel Group. There’s lots of moving pieces going on in the U.S. today. So what we thought we would do is focus on a couple of things. One, provide a legislative update in terms of where we’re seeing progress and then also what that means in terms of our estimate for the medium-term size of the market for us. And then we’ll talk to you in terms of where we’ve gotten to in – with market access, which is obviously critically important to building a large business there. Then we’ll move – go on to the critical success factors that we believe are important to win the market long term and how we’re leveraging the assets at the lighter group to make sure that we’re successful. And then last, we’ll run through our performance to date and demonstration of the – how the strategy is working in the action. So if we go to Slide 17, this is the legislative update. Simply put, we’re very encouraged by the legislative progress and momentum to date. In 2019 alone, states accounting for 14% of the U.S. population passed legislation for online sports betting. This brings the total number of states that have passed sports betting legislation to 14, and that represents 24% of the U.S. population. On the gaming side, five states have passed online casino legislation, and that equates to about 10.5% of the population. Last March, we explained to you that there – you should expect a time lag between the passing of legislation and when a market comes online. And you can see that in some of the states up here where some of the states that have already legislated, we don’t expect to go on until 2021. And the reason for that is it takes time, once a law is passed, to turn that into regulations, get through the licensing process and to bring the market active. The table also shows that a small number of markets, about 3% of the U.S. population, have legislated in a way that limits our ability to compete. This is typically where there’s a state-run monopoly or where they might have tethered mobile-access only. We remain very focused on working with legislators to explain the benefits of facilitating an open and competitive mobile marketplace and why that allows them to maximize their tax stake. Thankfully, most states to date have listened to this perspective and are regulating in a way that allows us to leverage the strength of our brand in each market. If you look at the bottom of the table, you can just see how healthy the legislative pipeline is. 23 states, covering 44% of the population, currently have active sports betting bills. And the way we think about the world is in the medium term – we think about 50% of the U.S. population will have access to online sports betting in the medium term. So if you go to Slide 18, you can see how we think the market evolves. To start with, what we’ve done is we’ve made an assessment about which states we think will legalize online sports betting and gaming over the next five years, and then we use Eilers & Krejcik data to size each market. As things stand, those states that have already legislated online sports betting, we expect to be worth $2.7 billion to – at maturity. And the dynamic we’re talking about here is once a state goes online, it takes typically three to five years for that state to reach maturity. And to put it in perspective, that $2.7 billion number, that’s 1.2 times the size of the Australian sports betting market. And that’s just the state that have legislated. If you look at the healthy pipeline of states that have active legislation then, we ultimately think that states accounting for 50% of the U.S. population will legislate sports betting. And our list of likely states does not include large states like California, Texas and Florida, which would materially increase the size of the addressable market if any one of those three were to pass. On the casino side, we believe that at least one medium-sized state will legislate that we don’t know. And so that we think – we’re projecting that online casino will go to about 15% of the population. This results in a medium-term forecast for online gaming of about $2 billion at maturity. What’s interesting to see is what happens when a state legalizes both online gaming and online casino as you saw in New Jersey, where the size of the online casino market more than doubled in the second – from the second half of 2018 through the cross-sell of sports betting customers into online casino. And as this effect plays out, we believe that legislators in other states will understand this dynamic and understand the importance of online casino in terms of maximizing their tax stake. And then finally, when we include DFS and the racing ADW markets, we ultimately conclude that the addressable market for the FanDuel business in the U.S. is at least $10 billion in the medium term. And that – we believe that forecast may prove to be overly conservative. And then for those of you that like detail, and I’m told a lot of you do, in the appendix, we give a breakdown of the sports betting market and the casino market, so you can get into a little bit more detail. So – okay. Great. We have a nice big market. What’s key is that we can access that market. And so we are – have been very focused on building our market access footprint as you can see on Slide 19. And one of the most important messages to take away from today is that not all market access is created the same. The real benefit is having high-quality partners in every state. And the benefits here are twofold; one is it allows you to partner with people that are well positioned in each state, including having great retail locations; and then having first-skin access is important because it ensures you have access to the market once it legislates. So what do we mean by first skin? First skin means having the right to use the first online or mobile skin that a land-based partner receives. And the reason that, that’s important is that some states are legislating in a way where each land-based partner only gets one skin. And as you’re doing these deals, you don’t know which state is going to be what. And so the only way to ensure access is to have first-skin access. And so today, we have first-skin access across 15 states, and a further three states are expected to be – where we will be able to go direct. And between those, we have first skin or direct – expected direct access to 50% of the U.S. population. And then when you combine that existing footprint and the strength of those existing partnerships with our performance to date, we’re confident that as we enter and – discussions in new states that we will be viewed as one of the premier partners that a land-based partner can work with, and so we’re confident that we’ll be able to continue to expand our market access footprint. Another benefit of having high-quality partners is the access to marquee retail. For those of you that have visited the Meadowlands, you’ll have a sense of the benefits of a marquee retail location to the overall brand experience. And it also – they not only contribute to group profit, but they also actually create a significant halo for the online business. A tangible expression of our brand is something that gives a lot of confidence for people when they want to come and choose their online playing location. We will look to leverage this marquee retail strategy in other states where it makes sense. A good example of this is our recent deal with Cordish, where we secured first-skin access in Maryland, and then we also secured access to marquee retail locations in both Maryland and in Philadelphia. And so we’re excited as we announce partnerships like this that we’re continuing to build our roll of decks and our network of top-quality partners in every state where we operate. If you move on to Slide 20, what we want to do is then now shift from kind of the market to our business, and we want to give you a sense for our business today. Put simply, unlike a lot of our competitors, our business is not a startup in the U.S. We have a business that has a presence in 47 states, meaning we have the experience and know-how to operate throughout the U.S. and understand many of the local market idiosyncrasies. It’s important when understanding the legislative landscape in each state to understand the regulatory framework, how payments work, how to market, et cetera. Our team, in particular, has vast experience in digital channels and marketing to sports fans in the U.S., and we also have a number of valuable relationships that we’ve built over the years with key sports leagues, games and media companies. Our team now numbers over 1,000 people, with over 70 of those team members having come from Flutter globally. And we believe that this means that we have a depth of expertise that exists nowhere else in the U.S. and creates kind of an unrivaled team in the U.S. Furthermore, our business did almost $0.5 billion of revenue last year, which is – including good contribution from DFS and TVG, which is helping to fund our investment in sports betting and gaming. So let’s move on to the brand. Slide 21 highlights that the FanDuel brand has quickly become the number one brand for sports betting in the U.S. This has been helped by the long-term investment of over $600 million to date and a run rate of $130 million investment in 2019 alone. You’ll see from the chart on the left that we continue to have the highest brand awareness in the markets where we operate. And the chart shows that from the period of March to December 2019 – that our business and our brand awareness has grown significantly over all other competitors. It’s pretty clear from the chart that the DFS strategy is the winning strategy at the moment in the U.S. and that other operators have found it hard to bridge the gap in terms of brand awareness. The fantasy database of over 8 million customers in 40 states continues to be a rich source for sports betting customers. To date, 42% of our sports betting customers have come from our DFS database, and this is a key driver of our ability to both acquire customers at scale and to deliver market-leading CPAs. But while cross-sell from the DFS database is valuable, we’re also outperforming competitors when it comes to direct acquisition, because even if a sports betting customer didn’t play fantasy, they know our brand. And what that’s led to is things like leadership in places like Google Search, where as people look for who to bet with on – for sports betting, ours is the top brand that comes up. These factors have resulted in acquiring over 350,000 sports betting customers as of the end of 2019 at what we believe is the industry’s lowest CPA at less than $250. And we believe DFS operators are paying multiples of this to acquire every new customer. So if you go on to Slide 22 and shift then to products, acquiring customers is great. But you actually then need to deliver a product experience that’s the best in the market, and we believe that we’ve done that. What we’re doing is investing heavily to ensure that we have market-leading product features throughout the product, that we also have numerous betting options and that we also have embedded casino content in the states where it’s available. FanDuel was the first to market with same-game parlays, and we’re still the only operator to offer them on NFL. We have an extensive range of cash-out options covering a significant amount of markets. We also offer more markets than anybody else, more than twice that of – twice the average of our competitors. And that when you align us with also a market-leading player prop that offering, we believe it creates significant advantage in the market relative to our competitors. And we’ve achieved this leadership position by leveraging Flutter’s global risk and trading capabilities. Our sports betting customers have also seen a high propensity to cross-sell to casino, and this is a key factor in our market leadership in New Jersey, where 54% of casino revenues in December 2019 came from sportsbook users. We continue to progress our technology. We’re never resting. And one of the key initiatives for 2020 is actually to bring more of Flutter’s proprietary technology into the U.S. that we believe will help us scale and also continue to set the pace for innovation in the marketplace. So what does all of this deliver? If you look at Slide 23, these are a couple of simple proof points. When we held our Capital Markets Day last March, we’ve built an internal model that we thought would be a good reflection and forecasting tool for what our returns might look like in an individual U.S. state. That forecast model was based on the group’s historic experience in other markets. And so what we thought we would do is talk about what we found since then. First, we’ve acquired more customers than we expected to; second, we’ve retained those customers in higher volumes than we thought we typically would; third, our product cross-sell rates have beaten expectations. As we said to you in the Meadowlands, cross-sell matters. And frankly, it matters even more than we thought. And finally, our customers are spending more than we forecasted they would. And so this adds up to a 44% market share in 2019 for the markets where we operate. And then on the gaming side, we now have 22% market share of the New Jersey casino market, which is 9 points greater than the comparable period last year. So not only do we have the industry-leading sports betting franchise, we have the industry-leading online casino franchise. And to give you one simple stat, in January of 2020, we launched a casino in Pennsylvania. And despite only being live for nine days, we took 18% market share for the whole month’s revenue. And such high market shares probably aren’t sustainable, we would fully expect that the market gets more competitive and that competitors raise their game, but we’re highly encouraged by the performance to date and how we seem to be replicating that success in each new state that we’re rolling out. And so in summary, what you should take away is that this combined performance now makes us the largest online sportsbook and the largest online casino business in the U.S. And as we look at 2020, we now expect the New Jersey casino – or the New Jersey sportsbook to be structurally contribution-positive on a stand-alone basis, and we believe that’s an important milestone to demonstrate how the J curve evolves for each individual state. Also in 2020, we expect three new states to launch online sports betting. And as Jonathan said, we expect an increasing revenues from those states in which we are already live to fund the investment in the three new states. So we have plenty of work to do, but we are incredibly optimistic about our future in the U.S. and what will come in 2020 and beyond. So with that, I’ll turn it over to Peter.

Thank you, Matt. As I told my kids last year when we visited the U.S., everything is big in America. I’ll now talk to you about developments in the rest of the world. We’re on to Slide 25. If I can make this work – here we are. So firstly, let’s look at Paddy Power, and I’ll try to steer clear of talking about the rugby results. I’ve been really pleased with the performance of Paddy Power brand during 2019. It continues to resonate strongly with the recreational customers. Our punters believe that Paddy Power provides them with the best offers and promotions in the market and as product that’s the easiest to understand compared to the other operators. Since 2018, we’ve continued to improve our gaming proposition with new content and better integrations. And by Q4, our customers are telling us that Paddy Power had the best games on offer compared to our competitors. Our daily jackpots ad campaign, fronted by Jose Mourinho, helped increase our direct gaming and customer acquisition and the average number of customers that regularly use our gaming products. There’s good innovation on the sports betting side, too. During the year, we expanded our popular acca insurance product to all markets, and we’re the only operator to operate on four leg accumulators and on all sports outside racing. The focus on recreational customers is leading to an increase in the popularity of accumulated bets. The higher margin in this product contributed to the increase in our expected margin within PPB. You’ve heard Dan Taylor talk before about how he thinks the number of average daily active customers is the right metric to track the underlying performance of our business. In 2019, excluding the World Cup, we delivered 12% increase in daily actives across our sportsbook and gaming products. And while the responsible gambling measures we took in 2018 and 2019 are having an impact on top line growth, we are very encouraged by our customer metrics, which we believe demonstrate the health of the underlying business. Paddy Power, as a more recreational brand, is perhaps less impacted by these measures in Betfair but it will be incorrect to think that the measures we’ve taken haven’t impacted Paddy Power, too. They have. Delivering a strong recreational customer growth, however, is helping to mitigate the reduction in revenues from high-value customers. Slide 26, you see that 2019 was a more challenging year for Betfair. I’ve already talked to you about a considerable enhancements we’re making to responsible gambling within our business to protect our customers. In the UK and Ireland, these measures have impacted our top line growth, and we’ve seen average revenue per customer drop as a result. But as I said at the outset, these changes are in the best long-term interest of our customers and will ultimately lead to us having a more sustainable business. The Betfair international business was also impacted by a number of unexpected market switch offs in the first half of the year, which we talked to you about at the interims. Despite these changes, I’m very pleased with the underlying health of our Exchange business. The new Clive Owen ad campaign is helping to drive Exchange-led customer acquisition, which you’ll recall are our most valuable customers. And you can see from the chart on the bottom left the growth in active Exchange customers during the year. In our international business, the introduction of more currencies and languages has helped to increase underlying active customer growth by 23% during 2019 on the Exchange. And finally, the rollout of country-specific pricing internationally also increased revenues per customer in our international sportsbook. And you can see the growth in our net revenue margin internationally as a result. Overall, while revenue growth of Betfair has not been where we’d like it to be, I remain very encouraged by the trends I’m seeing and the opportunity that still exists, with a combined Exchange and Sportsbook offering to be a truly unique and distinct product globally. Turning now to Sportsbet. As you recall, Barni, our Australian CEO, presented during the summer and told you through the key drivers for Sportsbet’s success. The second half of the year saw more of the same, with ongoing investments in product, value and marketing helping to deliver a strong underlying performance. Sportsbet is a customer-centric business, and we are pleased to be the first operator in the market to offer same race multiproduct, which has gone down well with punters. As we have seen in our Paddy Power business, customers seem to really enjoy acca-based products and has helped to drive ongoing improvement in expected margin in Australia as well. We continue to up the MT on the generosity front in 2019, Q3 source in particular bookmaker friendly sports results, and we’ve responded by giving much of this back to our customers, using targeted and personalized generosity to ensure that we’re giving our customers offers, which are most relevant to them. We believe it’s no coincident that Sportsbet is recognized as having the most generous offers by customers in the market. All of this means that the SportsBet brand appeals to a wide recreational customer base and continues to be the main mobile account used by customers, almost twice that of our nearest competitor. The business delivered customer growth of 9%, which we believe demonstrates as our ongoing investments continuing to pay off. Moving on to the next slide, you can see how our operating leverage has allowed us to benefit from this continued customer growth. Cost of sales, as a percentage of revenue, has increased by 16 percentage points in Australia since 2015. However, through a combination of excellent top line growth and good cost discipline, we’ve seen our EBITDA margin reduce by just 2% over the same time period. We think this clearly demonstrates the strength of the Sportsbet business and gives us confidence for the future. As mentioned in my opening remarks, we’ve delivered these results in Australia while making good strides in the area of responsible gambling. All in all, I’m very proud of how the business continues to perform, and I think you will all agree, the underlying profit growth of almost 50% in 2019 is a truly phenomenal outturn. Before we conclude, I thought it would be a good idea to provide a brief update on our progress with respect to our proposed combination with Stars Group. We’re obviously restricted in terms of what we can say at this point, and therefore, we won’t be answering any questions on this topic today. However, I wanted to share an update with you on how things are progressing as we hope to get closer to completion. We’ve been busy working with various competition authorities globally to ensure that they’re comfortable with our proposal. We received approvals in ACCC in Australia, and you also have seen that the UK CMA has commenced its review. We’re very respectful of their ongoing work and remain hopeful that we get the approvals we need in due course. And if we do so, we continue to expect that the merger will complete either the second or the third quarter of this year. To the extent permissible, we’re making good progress in terms of planning for the integration of the two businesses, with a small team working through various work streams. Whilst we have small numbers of colleagues focused on integration, it’s been important over the last few months that the businesses are not distracted by the transaction and remain fully focused on executing in our key markets. From a value capture perspective, we made good progress in terms of our preparation for financing post completion. There’s no change to the GBP140 million of pretax cost synergies in the time lines previously announced. As I said at the time of the announcement, we believe that the combination of the two businesses will advance our progress against all four pillars of our strategy. It will position us very well for the growth opportunities in our sector and are remain very excited about the opportunities that will present. In conclusion, 2019 has seen us make significant progress against our four-pillar strategy. In PPB, we are reassured by the underlying health of our business as we raise the bar when it comes to responsible gambling. Our UK retail business is winning market share as our competitors downsize. In Australia, we continue to deliver strong top line growth. And in the U.S., both the market and our business is exceeding expectations. We are increasingly confident in the size of the U. S. price and excited about our prospects. Looking to 2020, the year is off to a strong start, with good trading across all four divisions of our business. We remain focused on our underlying performance while planning ahead of our combination with Stars. And with that, we’ll be happy to take your questions. In the interest of letting everyone get a chance to ask a question, let me ask that you limit yourself to two questions each to start with.

Thank you. Michael Mitchell from Davy. Two on U.S., if I could. In Meadowlands, the – you helpfully laid out that the $6 billion sports betting market probably equated to something like $600 million of contribution profit – across all product verticals. I wonder, could you help us with the same math with the upgraded medium-term market assumption?

I’m sure you can put the numbers into the spreadsheet, Michael.

Okay. Well, I guess my question is, is it as simple as putting math into the spreadsheet? Or are things like greater than expected spend versus where we were 12 months ago, better churn, et cetera, et cetera? Have they changed the kind of broader economic opportunity?

We’re going to share with you what we’ve done. You guys, I think, can extrapolate the data that you saw, which we’re very pleased with where we are as a business in that market. We’ll continue to fight for share, and we’ll continue to see how that market evolves. We are 18 months actually into the sports betting market. So we’re not going to crystal ball gaze at this point, but we’re hopefully giving you some more data, some more clarity on what’s happening, and certainly is, hopefully, we get through some of these J – positive J curve moves. Hopefully, that will enable you guys to be able to model that better in the future. So we’re doing what we can. I mean the one area that I think there’s a degree of the noise around is the cost of certain market access. And I think that is something which is difficult. Matt, you want to answer or just comment on that?

Look, I mean I think just as a guidance point, as we’ve gone through all the market access, you can use a simplifying assumption of a little less than 4% of GGR would be market access. That’s the way to do it. I wouldn’t say fundamentally, cost basis are changing differently than we expect and I think that’s one that’s settling down. And we probably knew less of that a year ago.

And then into that, question number two. Could you just speak a bit more, and we appreciate its early days. But in terms of churn rates and retention rates that you’ve seen to date, what that signals to you on a – kind of on a medium-term basis for the U.S. versus more mature markets?

I think it’s still really early days. If you think about being in the market for 18 months, the most important kind of churn rate we look at is this year-over-year reactivation, because if I acquire a lot of people in the NFL season, obviously, there’s the week-over-week and month-over-month. But what you really want to know is how many people did I acquire in one year to come back the second year. And we have a very limited data set on that because you really just have a little bit of NFL acquisition in New Jersey. I’d probably say, directionally, the way to think about it is the curves that we’re seeing look a lot more like Sportsbet than they do Europe. It’s probably the simplest way to think about it.

I’d add. I mean look, the retention curves we’re seeing in the U.S., the best that we see anywhere else in the business today. And I’d also just remind you that typically, when these markets open up, the customers you acquire start with – end up being ultimately the most viable players.

Great. Thank you.

Good morning. Gavin Kelleher from Goodbody. Just two for me. On the U.S., Matt, I appreciate you may not answer this, but you’ve given about 18 to…

Let me get that.

You’ve given the 18- to 30-month positive contribution in New Jersey. Given what you’re seeing on CPAs, they seem below $250 per person, given what you’re seeing on casino spend in Pennsylvania in such an early period of time. Do you think the new markets and obviously, the scaling and kind of scale economic benefits, you’ll see a kind of a closer to 18-month contribution positive than 30 in new states? Or how do you see that ending going forward?

I think it depends whether you’ve got one product, two products. It depend on tax rates, and it will depend on the competitive landscapes we see in each of the states. It’s really every state is going to be different is all we know. We’ve got some states, which are going to go straight to mobile-only and there are no casinos in existence. So it’s very difficult to say.

The thing I’d add, Gavin, is operating in the U.S. is going to require real scale. And I mean the ability for Matt with opening up in two or three new markets just really states that here, we don’t need to make our business just 3 times bigger. We need to add appropriate numbers of colleagues to support customer services as we serve scale. That marketing team isn’t going to grow enormously. We’ve got good operating leverage in the business, and that’s something which is really important.

Perfect. And so I just – I missed the first 10 minutes. Apologies if I’m late, and you may have talked about this in your responsible gambling slide at the start of the deck. Just on everything you’re doing with sustainability and responsible gambling in the core European online business, is it fair to say that in the last three or four years, your exposure to higher staking and gaming has not really reduced over that period? Or is it broadly the same as three or four years ago?

I mean, we’re talking – taking you through the Paddy Power and Betfair size and energies. Just now I just referenced the fact that within Paddy Power, we’ve got the recreational, customer growth has been there to offset some of the challenges we’ve seen in high volume, and that’s not been the case in Betfair. So undoubtedly, we’ve seen that part of the market be impacted yet.

Okay. And you’re not going to put – I know this morning, Stars Group put a kind of number on the revenue they lost from their responsible gambling measures last year. You’re not going to…

No, we’re not going to sit and try and work out what we could have had if we haven’t done something differently. We can show you what we do.

Perfect. Sure. Thanks.

Daria Fomina, Goldman Sachs. I have a quick question on U.S. again. Can you talk a little bit about the difference in strategy between the U.S. DRAFT in the U.S.? You gave us the data on customer acquisition costs. I think it’s slightly higher. Just what is – I’m trying to split the hair here. Just bigger picture, is it identical? We see some – or particularly different – targeting different customer cohorts? Or anything on that front would be helpful.

You’re saying relative to Draftkings?

Draftkings. Sorry, yes, Draftkings.

I think, certainly, there’s a lot that’s similar. We’re both kind of DFS-led brands. I think there are some differences that are reflective of the access we have to the global group. So if you look at our risk and trading strategy, I’d say it’s more advanced and more sophisticated, particularly in terms of market breadth as well as market innovation around things like same-game parlays, and that’s a direct result of being able to access group resources versus outsourcing your risk and trading. I think the second thing that would be tied back to the group capabilities would be the retail expertise. And so if you look at the scaling of our retail footprint, particularly the ability to execute on that marquee retail locations, a lot of that comes from the ability to leverage group infrastructure and expertise around retail that Draftkings wouldn’t have access to. And so I think there are some places where the group has really helped us differentiate the strategy.

Ed Young from Morgan Stanley. Two for me as well. The first one is on sports margins. Peter, you spoke about the sort of structural improvements you’re getting. You mentioned a number of times, accas and multiple bets becoming more important to the mix. Is there a reason why that margin shouldn’t structurally continue to improve, given the focus on recreational customers? I noticed that there’s obviously overinflation in the UK and Australia and there’s the pricing with sort of one area, I think, not in [indiscernible] side. So is there any sort of structural tailwind to margins?

Give us the second one.

And the second one, just on the credit card impact. I think previous discussions with a number of payers over the last sort of 6 to 12 months have been the credit card deposits of 4% to 5%. A lot of that could be mitigated. What is it exactly about the way the regulations are hitting that means that we’re now looking at a regulatory impact of the size you’ve outlined? If you could help us understand what does that means please?

Matt, you want to pick it up?

Yes, I’ll certainly pick up the second of those. We’ve historically around 1.5% of customers are using credit cards only. It’s 6.5%, 7% of overall deposits come from credit cards. We still think that the mitigations we expect to take place would lead to a 50% to 60% reduction in that, which gets you to this guidance of $20 million to $25 million. I mean these are estimates for the actual rules and regulations come into play. So we’re just trying to give a size and shape to it. So I think it gets us to around 3% of the revenue is lost rather than the 6.5% to 7%. And so that’s roughly where we are. It is an estimate today, and we’ll see how it pans out, and we’ll try and help you understand better when we see the actual regulation coming in and seeing the impact on customer deposits.

And regarding the point of our sports margin, I think you have to look at it market by market. And if we take our business in Australia, we have made some small changes to some margination around – particularly racing. We’ve introduced the same-race multis, which improves margin in racing. We have seen some changes towards the further accas in Sportsbet. So – but they can’t keep going those things, right? We’ve done it. And so I think I wouldn’t expect that trend to continue. I think we’re also in a more stable point.

And also, the recreational mix is already very high. So you’re not going to see a kind of core to recreational benefit in Australia.

Yes. In Paddy, we’re starting to that point of recreational. In Paddy, we’re starting to see the benefits of having a greater recreational mix. And we’re doing more to try encourage and drive customers towards those sort of accas. We haven’t launched the same race multi-products yet in the UK. So there’s stuff that we could do in the future, but – however, these things are very important. But I think it’s – particularly in Australia, it’s more stable. And in the UK, what we’re seeing is just it’s more sort of a mix effect coming between the customer types and some better. The – whilst we didn’t talk about margins in the U.S., I mean I think one of the things that Matt referenced earlier was the benefits we’re getting from the group technology. So we do have quite good penetration in terms of parlays, as we call multis in the U.S. I think that is quite important in terms of supporting our margin in the U.S. market.

Richard Stuber from Numis. Two questions as well. First, on responsible gambling, you mentioned at the top, I mean sort we’re reassured by the KPIs, just saying. Could you just elaborate exactly which KPIs you’re tracking? Do you have any specific targets on any of those? And would you be reporting those on a – sort of an interim basis? And the second question is on the U.S. Is there any sort of evidence to suggest that customers are having some multiple accounts? I know you talked about some retention. But I guess that doesn’t include the people with two, three, four accounts, and obviously are chasing bonuses. Do you see anything like that?

Do you want to take the U.S. point now, Matt?

Yes. I think generally, we’re seeing customers to be far more loyal than they would be in Europe. You see – and some of that comes from – it’s hard to sign up for an account, so there’s just more friction for a traditional account. We certainly expect you’ll start to see, over the medium term, when people experiment a little bit more with other brands and these multiple brands. But we think it’s going to be likely to be kind of more loyal customer base than you might see

Yes, Richard, regarding this – the RG stuff, I mean there’s a couple of things I’d highlight in it. First of all, Jonathan and I, and indeed all of the management and the seniors folks of the business here, we will have RG measures included in our bonus scheme. So I think it is important that, that is there. And if it will be the case if Jonathan and I, and you’ll see that when the – with the publication of the annual report. If you look at the RNS, you can see some detail of what we’re doing from an operation on Page 3 in terms of some of the important aspects of what we’re doing. At the end, we can sort of highlight in there that the 84% increase in customers choosing to set the limits and, at the same time, delivering a 56% increase in real-time contact with customer service. Some of those KPIs are very important here. I don’t think we’re going to be in a situation where it’s publishing almost on a regular basis, but as it’s – I hope – I wish I did mention.

Good morning. Ivor Jones from Peel Hunt. Can I just understand what’s happened on Exchange and what the risk is from here? Are you saying you’ve excluded B2B customers of the Exchange that were not KYCing their underlying customers? And so is that washed out of the Exchange now that you now know who the underlying users are? And the second thing was, you talked about wanting to see improved RG standards around VIP. That was one of the schemes. That was one of things you’re going to put to your proposal to the Gambling Commission. And how big is VIP for platter? And what is it that you want to see change in relation to the IP schemes? Thank you.

Thank you, Ivor. In terms of – I’ll pick up the RG sense around the VIPs. I mean it’s one of the three important areas of focus from the Gambling Commission, and we’re working very closely with them on supporting their work there. And it is something which I think is important to deal with. From my perspective, a lot of the concerns that people have around the VIP scheme stem from the fact that people assume the VIP scheme there is in place to encourage customers to spend more money that they can afford. And it is why you hear me talk a lot about affordability, because I think that’s absolutely the most important thing that we can get right in this – for ourselves and across the sector. And so that is the way in which we will be focusing and thinking about VIPs. As it happens within our business, our key account managers who manage the – our higher-value customers, they are not incentivized to the amount of money that those customers are spending with us. So I think that is important. And it’s again another way of ensuring that we don’t get on the wrong side of that affordability point. In terms of your first question around the Exchange, as I said earlier, we run this ongoing review of customers in all of our businesses all around the world. And if we find that customers are not meeting asked numbers, then we will make sure that we – they’ll be happy trading with us. And if they do start to meet our standards, we’ll allow them to continue trading with us.

Good morning. Simon Davies from Deutsche. Two for me, both on the U.S. Firstly, you talked about increased use of proprietary technology during the course of 2020. Can you give us an indication of what products you might introduce then? And secondly, in terms of New Jersey, obviously, impressive to move into profit 2020. Can you give an indication of the level of marketing spend that you expect as a percentage of revenue now that it’s beginning to mature a little?

We’re just on the second question, Simon. We’re not going to start breaking down marketing spend by individual state. But what you can expect is that what we said in the analysis we did around 18 to 30 months which is what we’re expecting in New Jersey, is that as we get more and more customers who become – retaining customers rather than new customers, that upfront CPA of marketing spend plus promotional spend to drive people into the business, will reduce as a proportion. And what you’ll see is that proportion getting better. We aren’t going to split out the individual states at this point. But the sort of analysis that we gave you over the long term, we will be moving from a much higher level of promotional and marketing spend to – towards a more long-term state. And that’s one of the things that benefits because of that ongoing revenue stream making up a greater proportion of revenues than new revenues.

And Simon, I’d also add that when you think about some of the stats that match out with you in terms of the proportion of the U.S. population that are going to be covered by state, which helps sports betting in place, we’re not far off the point where, at some point down the chart, we’ll be able to run much more national sort of advertising, so trying obviously to work out how this all cuts out by state will be very difficult. I mean, you’ve seen the volume of marketing spend that we had in 2019, we shared that with you a minute there. I think what is important is to keep driving the brand and acquiring customers into our DFS business. And our other businesses are low cost, we can then get a contribution from those businesses. We even cross-sell into sports betting when the states open up. And even for customers who are new to franchise have the recognition and understanding of our brand, which gives us those structurally lower acquisition costs, and that’s the model we think about. Matt, do you want to declare the tech stuff?

Yes, on the tech stuff, most of what we’re focused on is a big drop of new technology for NFL Season start. So you see all the proprietary technology get launched kind of leading into the NFL. That will obviously be balanced with the tech lift of launching in new states. And so you’ll see kind of both of those things happening in parallel.

Today, we have our own wallet live in the U.S. We’re using our proprietary risk trading technology. So we – and those – for those reasons, we have better depth in markets and pricing capabilities than you see other people in the market. And we will always just keep pushing here. We’ve got – I think we’ve got a couple of questions coming on the phone. So I don’t quite know how we do that in here.

Thank you. Your first question on the telephone comes from the line of Monique Pollard, Citi. Please go ahead, Monique. You’re live in the call.

Hi. Good morning, everyone. Can you hear me all right?

Yes. Yes, we can.

Great. And couple of questions from me. Firstly, the loss of the Exchange revenues, just wanting to understand what the drop through of those Exchange revenues is to EBITDA, what we should model that as sort of the margin. And then secondly, just wanted to touch briefly on the UK online growth. So when I look at that in the statement, 2019 UK online growth implies the second half UK online revenue is down 2% versus the first half, they were up 1.5%. I know, obviously, the customer due diligence measures have been coming in. But just wanting to understand is that some behind us now? And do you see an acceleration in growth and a return to positive UK online growth for 2020?

If I can deal with the first of those questions. I mean what we’ve said is that the scale of what we have turned off in terms of the small number of partners is up to 1% of revenue. There are significant numbers of mitigating actions that we will look to put in place. So we’re not trying to necessarily guide to that as a loss work. That’s why we didn’t give a range like we did on credit cards, because we think there’s a range of mitigating actions to take place. You should see that coming through in our Q1 trading update in terms of the Exchange. And then we’ll further update you at that point as to the mitigating actions and the outcomes of those as we see that playing out.

And the UK online growth numbers?

That’s a good question. I’m just trying to get to the underlying here and look at the…

Do you want to come back to it?

We’ll come back to it.

We’ll come back. David will come back.

Okay. Thank you.

I think there’s one more question on the phone.

Thank you. Final question on the telephone comes from the line of Kiranjot Grewal, Bank of America. Please go ahead. You’re live the call.

Hi. I just had two questions, both on the U.S. Firstly, given the upcoming listing of one of your key competitors in the U.S., there’s increasing focus on vertical integration. Could you maybe comment on where you’re out with that in the U.S.? And how important you – how important it is for you and how you would compare to that business that’s been outlined, the Draftkings business? And then secondly, could you comment on – actually, the app in the U.S., I think originally, there were – you had to download one app per state. Do you think that will be changed to one app per sort of across several states? How long would that take? Thank you.

I’ll take the second one first. On the one app, your comment is true for our competitors. We actually always have the view that having one app per state was not the right consumer experience. And so when we launched, we were actually the first in market with an app that works across multiple states. And so you can use the same sports betting app in New Jersey, Pennsylvania and Indiana. And we look to continue that strategy because it’s the right customer-first approach. But it’s a demonstration of the type of investment we’re making in technology to differentiate ourselves from the competition, because it’s not an insignificant technical lift. So we’ve always been one app across multiple states. On the vertical integration point, I think the general kind of takeaway I would give you is, I think the Draftkings combination with SBTech is, frankly, an emulation of the strategy that we started 18 months ago. And in terms of why the tie-up between FanDuel as a stand-alone business and Flutter made sense was actually that access to all of the global technology that Flutter had in place. Our view has always been, to really have the best user experience, you need to be using proprietary risk and trading. And you need to be using proprietary technology. Because if you’re simply using that of B2B partners, your product is going to look like the product that everybody else that uses that set of B2B partners. And so I would argue that Draftkings simply came to the same conclusion we did about 12 months later. And so we’ll see.

So you’d say what they sort of outlined is pretty comparable to what you have? Or do you think you’re think you’re still ahead of the curve, given your launch with Eilers?

I think you have – if you want to get into the details of what Draftkings is doing, I suggest you get into a chat with Draftkings. We’re very pleased with the progress that we’ve made in the U.S. I think Matt has outlined to us the considerable investments we’re making into tech to try and stay ahead of the curve. I think it’s multifaceted. I think you’ve got to make sure you’ve got the right product and technology. You’ve got to have the right approach to marketing. You’ve got to have the right engagement with customers. I think actually some of the pricing and risk capabilities are also crucial. We’re very pleased with what we’ve done in the U.S., and I think that’s why we are the number one online sportsbook and the number one online casino business. And I think it’s great. This team has done a great job for us.

Thank you.

Matthew, in terms of past sales, what would be upside case for ones that we drive forward from that post 2020 group into 2020? And would you be – I can’t think you’d be among the first to launch if they did come earlier than expected?

So kind of the second part of your question, we have an explicit kind of guiding principle of trying to always be, if not the first among the first, that launch in any given state. Obviously, it depends on the state in terms of their specific technical requirements and everything else. But certainly, we endeavor to be among the first to launch in every state. I think in terms of what states might come forward on top of the three, I think it’s hard to predict. For context, you’re in the middle of the legislative cycle that the U.S. goes through. You will have certain states that potentially, like they did last year, pass a law in the spring and try to be live for football season. Because in certain states, they view that to be a critical kind of milestone to get live and certainly the tax revenue slowing. And so I think probably the most likely upside, without naming specific states, would be – we have one or more states that pass a law in the next, call it, 60 to 90 days. And the – based at the objective to be live for football season. Probably the best analogy that has happened so far is Indiana, where they passed a law last spring and they were live basically during football season. So that would be the upside case.

Hi. Thank you very much. It’s Julian Easthope from RBC. Just one question from me. In terms of – it’s a very specific question about the U.S. as it seems to be common today. The other OpEx that you have has moved up from 100 to 150 approximately. And – but within that, you said that you’ve gone from 300 to 1,000 people, which presumably there’s quite a lot of infrastructure that you spent in terms of new states that haven’t opened up yet. So therefore, there’s obviously quite a big cost that’s associated with the things that haven’t opened. I just – I was wondering if you could sort of give an indication as to where, given the states you expect to open, your other OpEx will ultimately level out.

We’ve gone from 700 to 1,000 people. So we have added 300 during the year, which is precisely in line with our expectations. A good chunk of the 300 increment is because we’ve opened in states and we need customer service and folks to interact with our new customers. So actually, you’ll see quite a lot of growth coming through as we scale up state-by-state on the customer operations side, but you shouldn’t expect to see big growth in other areas. The finance team is – finance team and these different departments can scale up. There are certain departments which will scale up. They are not necessarily the – at the higher end of the pay scales in terms of – relative to some of the more highly scaled tech growth, et cetera. So that’s what’s actually happened, that’s exactly in line with what we expected to happen in the year. [Call Ends Abruptly]