Flutter Entertainment plc (FLUT) Q1 2025 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Flutter Entertainment First Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. And I would now like to turn the conference over to Paul Tymms, Group Director of Investor Relations. Paul, you may begin.

Hi, everyone, and welcome to Flutter's Q1 results call. With me today are Flutter's CEO, Peter Jackson; and CFO, Rob Coldrake. After the short intro, Peter will open with a brief summary of our operational progress, and then Rob will run through the Q1 financials and our updated guidance for 2025. We will then open the lines for Q&A. Some of the information we are providing today, including our 2025 guidance, constitutes forward-looking statements that involves risks, uncertainties and other factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors are detailed in our earnings press release and our SEC filings. In addition, all forward-looking statements are based on current expectations, and we undertake no obligation to update any forward-looking statements, except as required by law. Also, in our remarks or responses to questions, we will discuss non-GAAP financial measures. Reconciliations are included in the results materials we have released today available in the Investors section of our website. And I will now hand you over to Peter.

Thank you, Paul. I continue to be really pleased with how the scaling of our U.S. business is driving a step change in the earnings profile of the group. Our international business is also demonstrating the benefits of scale and diversification with particularly strong performances in SEA and India. These factors combined to drive year-over-year net income and adjusted EBITDA growth of 289% and 20%, respectively, in Q1. Before I turn to the quarter's performance in more detail, I want to touch on some of the themes that have been at the forefront of discussions during the quarter. Firstly, the potential impact of any change to the broader economic outlook on our sector in the U.S. in particular. Our business is resilient. During previous periods of consumer pressure in our international markets, we saw no discernible impact on our businesses, and we have conviction that online sports betting and iGaming have strong defensive characteristics over the long term. Secondly, sports results. The nature of sports results will influence our quarterly results as we have seen in NFL in Q4 and March Madness in Q1. But over time, these variations are transient, and we do not - and do not compromise our compelling growth model and long-term value creation opportunity. In fact, it's these ups and downs in sports results that make sports so exciting and drives engagement. Thirdly, we're really excited about our revolutionary outcome-based pricing technology that will allow us to price and offer an almost infinite number of outcomes across the most relevant and immersive betting markets. Your Way is the first surfacing of this pricing capability to customers, and the results to date have been encouraging. The opportunities that this unlocks are unique, and we believe creates an amazing platform for long-term innovation across both our U.S. and international markets. Fourthly, we're also closely monitoring the developments around futures markets and the potential direct and indirect opportunities for FanDuel to explore. We already operate the world's largest sports betting exchange, the Betfair Exchange, and we have vast experience in this space. And finally, our position as an and [ph] business is clear to see as we completed another major milestone in the expansion of our portfolio in Italy with the acquisition of Snai and the continuation of our buyback program. With strong organic performance and multiple levers to drive value creation, we remain incredibly confident in our long-term outlook. And turning to performance in the quarter. We're continuing to win in the U.S., powered by our world-class customer proposition with AMPs growing to more than 4.3 million in the quarter. From a sportsbook perspective, handle growth was in line with expectations and reflected the continued shift to higher revenue margin but lower handle parlay and same-game parlay products. Basketball handle growth was lower than anticipated, offset by growth in other sports. And we believe this handle softness is specific to the basketball market, and we have a number of commercial and product initiatives that will specifically enhance basketball engagement next season. As we move into the summer season, handle trends remain in line with expectations with encouraging MLB trends. It's worth remembering that handle growth is just one driver of our long-term revenue growth, alongside product-driven structural gross revenue margin expansion, new customer acquisition, higher retention, gaming cross-sell, wallet share gains and promotional spend efficiencies, which all work to drive the most important output, our net revenue growth and all before the benefit of any new state launches. Our proprietary pricing capability continues to drive our market-leading sportsbook product and drive our expected structural gross revenue margin progression, reaching 14.1% in the quarter. We had a great Super Bowl, but overall U.S. sports results were nevertheless customer-friendly in the first quarter, driven primarily by an unprecedented number of winning favorites during March Madness. In iGaming, we go from strength to strength with highlights including site-wide jackpots and even more exclusive content. We hit 1 million amps for the first time, demonstrating the strength of the FanDuel iGaming proposition. This performance underpinned our clear leadership position with sports betting and iGaming gross gaming revenue market shares of 43% and 27%, respectively, and a 48% net gaming revenue sportsbook share. Performance across our International division continues to be positive with year-over-year revenue growth of 3% constant currency. We are benefiting from our scale and geographic and product diversification with good growth in our SEA region in particular. We were delighted to welcome Snai into the group just last week, significantly adding to our scale in Italy, and we expect to rapidly realize both the operational and financial benefits of the combination. We recently submitted a tender for the Italian lotto with a majority position in a consortium with Scientific Games. We believe the merits of this deal are compelling in a market where we have demonstrated our extensive lottery experience through the success of our SuperEnalotto proposition. Performance within SEA has been very impressive, driven by Sisal, which achieved a record high Italian quarterly market share of 15.4%, and we're also seeing very strong growth in Turkey. In the UKI, sportsbook growth moderated from previous quarters, in part due to the very operator friendly results in 2024, while iGaming growth remains strong. The migration of our Sky Bet customers to our in-house platform is progressing well with over 25% of customer's already migrated and expected completion this quarter. The strength of our Rummy business in India is once again visible now that the tax changes in Q4 2023 have been lapped, delivering strong year-over-year revenue growth of 45% through continued disciplined customer and product investment. Within Australia, we continue to face into the racing industry structural challenges. We've been able to partly offset our adverse racing handle trends by expanding our sports structural gross win margin through ongoing product-led improvements. And we've received regulatory clearance and expect to complete the acquisition of NSX imminently, forming a new Flutter Brazil business and putting us in an enhanced competitive position in a fast-growing newly regulated market. Combining a strong local management team, localized proprietary technology and a local hero brand in Betnacional, alongside our existing Betfair Brazil business and Flutter Edge capabilities will position us for success in this very exciting market. Overall, I'm pleased with our first quarter performance and remain extremely confident in the long-term fundamentals of our business. The global regulated market opportunity is significant and growing, and Flutter is uniquely positioned to win. I remain excited by the opportunity for Flutter, and I look forward to continuing to execute on our key growth drivers over the remainder of 2025 and beyond. I will now hand you over to Rob to take you through the financials and our guidance.

Thanks, Peter, and hello, everyone. It's great to be talking to you today, almost a year since becoming Flutter CFO. And over that time, I've been really pleased with our progress. As Peter highlighted, we have all the key components to ensure long-term value creation, and I'm delighted to share that this quarter, we delivered underlying growth across each component of our compelling financial growth story. Group revenue increased by 8%, thanks to our scale and diversification. Overall group net income grew 289%, while adjusted EBITDA grew 20%. Both measures benefited from the U.S.-driven earnings transformation Peter described, while net income also reflects the fair value change of the Fox Option liability, shifting from a loss in the prior year to a gain this year. Earnings per share increased to $1.57 from a loss of $1.10 with our adjusted earnings per share up 51%. And importantly, we continue to enjoy the capital optionality to invest organically, invest in M&A and return capital to our shareholders. Turning now to the quarter's financial performance. We are using our new segmentation for the first time, reporting under 2 segments, U.S. and International, with the corporate overhead reported separately. This reflects how our operations are managed, and we believe the simplified structure will help external audiences understand the Flutter growth story more easily. Starting with the U.S., revenue was 18% higher year-over-year. This included Sportsbook growth of 15% despite the adverse March Madness outcomes and very strong iGaming growth of 32%. Adjusted EBITDA of $161 million was more than 5 times higher than prior year as our business delivered significant operating leverage. Sales and marketing saw 750 bps improved leverage due to a combination of our maturing state profile and the investment in the North Carolina launch last year. The quarter's performance was also impacted by the Illinois tax increase last July, which we have partially mitigated as previously guided. In International, revenue of $2 billion and adjusted EBITDA of $518 million for the quarter reflected constant currency growth of 3% and 2%, respectively. The result was driven by strong performance in our SEA and CEE regions, combined with an excellent iGaming growth in UKI and in India. Across the segment, sports results were marginally adverse year-over-year, comprising favorable results in SEA and UKI and unfavorable results in APAC. Within International's regions, SEA had an excellent quarter with growth of 14%, driven by 25% AMP growth. UKI saw overall growth moderate to 2%. This included strong iGaming growth of 9%, driven by an 11% increase in AMPS. APAC results for the quarter included excellent iGaming growth of 45% in India, offset by luck-impacted sportsbook revenues in Australia. And CEE's strong growth of 15% was driven by performance in Georgia and Serbia. From a cost perspective, we continue to operate high levels of discipline, giving us the agility to respond to changing trends in our business. The business has many cost levers, and we've previously set out a $300 million cost saving program, demonstrating our focus on driving operational and cost efficiency, and we are making good progress. The migration of our Sky Bet customers to our in-house platform is on track to complete by the end of Q2 and the migration of PokerStar's Italian customers onto Sisal technology is expected to be completed in Q3. We are also ensuring we continue to put investment into the right areas. Flutter Edge investment increased by $6 million year-over-year to drive product innovation and optimize the efficiency of the services we provide across the group. From a cash flow perspective, net cash from operating activities reduced by 44% and free cash flow reduced by 52% year-over-year. Performance was impacted by a decrease in player deposit liabilities, which is included in our net cash flow from operating activities. The final day of the quarter fell on a weekday this year compared with a weekend last year, resulting in $211 million lower cash balances in customer wallets. While this means that reported cash flow was lower year-over-year, we remain confident in the cash flow trajectory of the business over the long-term horizon as set out at our Investor Day. Available cash remained unchanged quarter-on-quarter at approximately $1.5 billion. The marginal increase in total debt to $6.8 billion against last quarter was a function of euro and sterling strengthening against the dollar. Net debt for the quarter was $5.3 billion with our leverage ratio of 2.2 times based on the last 12 months adjusted EBITDA, consistent with the ratio at the end of 2024. We recently announced the acquisition of Snai was completed using existing debt facilities at attractive terms. As a result, our leverage will increase in the very short term before rapidly reducing given the clear profitable growth opportunities that exist across the group. And we remain committed to our medium-term leverage ratio target of 2 to 2.5 times. The share repurchase program, which started last November, and we expect will return up to $5 billion to shareholders over the coming years, continued into 2025 with 891,000 shares repurchased in the quarter for $230 million. We continue to expect to return approximately $1 billion to shareholders via the program during 2025. Moving now to the outlook for 2025. Our existing full year guidance remains unchanged on an underlying basis with the updated view adjusting for M&A, FX and the adverse year-to-date sports results, providing a little more color on each of these in turn. We have included the acquisition of Snai from May 1, 2025, with expected revenue of $850 million and adjusted EBITDA of $190 million. NSX is now included from mid-May 2025 with expected revenue of $220 million and an adjusted EBITDA loss of $70 million. Foreign currency movements of $360 million revenue and $80 million adjusted EBITDA, reflecting the strengthening of euro and sterling since our previous guidance. And finally, the transitory impact of unfavorable U.S. sports results for April year-to-date of $280 million revenue and $180 million adjusted EBITDA. Within our existing U.S. states, we remain on track with the previously guided underlying growth of 22.5% and 5.4 percentage point expansion in adjusted EBITDA. For new states and territory launches, we continue to assume a Q4 launch for Missouri and an early 2026 launch for Alberta, Canada. Group revenue is now expected to be $17.08 billion at the midpoint with adjusted EBITDA of $3.18 billion for the year, representing 22% and 35% year-over-year growth, respectively, or 14% and 30% before including the benefit of Snai and NSX. Additional detailed information on guidance is available in today's release, including additional income statement and cash flow items, which have been updated to reflect the acquisitions and changes in foreign currency rates previously mentioned. With that, Peter and I are happy to take your questions, and I'll hand you back to Krista to manage the call.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Ed Young with Morgan Stanley. Please go ahead.

Good evening. I've got two questions, both on the U.S., and I'll start with the obvious one perhaps. In your shareholder letter, Peter, you spoke about what you think are specific basketball-related factors on handle. Could you elaborate a little on what you mean by that? And when you said you've seen Q2 handle in line with your expectations and encouraging MLB trends, can you just confirm that you're indicating, therefore, you've seen a handle reacceleration in Q2? Second, on iGaming, there's been a lot of focus on handle given those various concerns around maturity or economic stress, whatever it might be. But U.S. iGaming is showing clearly very strong growth. Can you discuss where you are in terms of product and execution versus peers? And do you think it's plausible iGaming could display these kind of growth trends if the U.S. gambling market in general we're seeing some sort of maturity or macro impact as people relate to handle? Thank you.

Good afternoon, Ed and good evening to you. Thank you for the questions. I mean I'll give some thoughts, and I'm sure Rob will want to chime in as well. I think if I take your first question about basketball issues and handle, we - you're right, we mentioned it in the shareholder letter. And look, I think the most important point to make here is that handle in the quarter was in line with our expectations. When you do look at it from a sports perspective, you have to remember there's always going to be some ebbs and flows and -- we have seen -- we did see some weakness in basketball, but we saw some very good strength off the back of NFL. And actually, when I look at the MLB performance at the moment, we're very pleased with handle growth there as well. For Q2 handle, don't forget, we are - if you're looking at the comps of last year, we've got the North Carolina was included in there. And so you would expect whilst the sort of underlying handle can be performing well, when you directly comp it, you've got to make sure you factor that into the numbers. From an iGaming perspective, look, we're really delighted with the way that the team have been delivering for us. I remind you, we talked about how in this year, we plan to get ahead of competitors, and we've clearly delivering that from a product perspective. The on-play jackpot capability that we've brought into the business, I think, is resonating well. We're also trialing some of our new reward mechanics as well. So look, there's a strong pipeline of initiatives there. We've got some unique content, which we're deploying as well. So I think we're very pleased with the way that iGaming is performing first in the market.

Yes. I think just to build on a couple of points that Peter mentioned on handle basketball in particular. I mean there was a reason that we called it out because we felt that within the overall basket of the different sports, the basketball handle was perhaps slightly softer than we'd anticipated. We attribute that to some factors that we've seen in basketball in the quarter, including some less competitive matchups over the course of the regular season. That results in larger spreads when it comes to the betting and consequently has a bit of an impact in terms of what we see. Some of the top teams have made the playoffs this year, some 6s, some [indiscernible] that may build for as well. But given our outsized position as market leader, we think the impact on us may be slightly disproportionate. But that said, we retain the conviction that we've got the best NBA product in the market. We've also got the highest structural margin in the NBA, and we have a clear competitive product advantage that we'll continue to leverage and maintain. So we feel quite comfortable with that going into Q2. It's also worth mentioning that the playoffs have got off to a good start, and there seems to be really good engagement around the playoffs.

Thank you.

Your next question comes from the line of Jordan Bender with Citizens Bank. Please go ahead.

Good afternoon, everyone. I want to start in Italy with Snai. You've spoken to the longer-term synergies across that business. But if we look more near term, I'm seeing if we can get more color now that it's closed on what that integration process looks like and how fast you can start to see the omnichannel benefits between retail and online? And then my second question, it's still early days for Your Way, but you're the only operator to be offering that product in the U.S. today. So there's rumblings that a competitor might be launching a similar product in the near term. Does that at all change the player investment or reinvestment strategy if and when that offering becomes a little bit more competitive?

Hi, Jordan, it's Rob here. Let me start with the Snai question, perhaps hand over to Peter on Your Way. So with Snai, we're absolutely delighted to complete the deal. And when we look at this, it's the last available consolidation step with meaningful significance in Europe's largest regulated gaming market. The deal will see us retain the gold medal position in that market. We're really confident about the synergy plan that we've got there. We can put a common technology stack in place. We really see ways in which we can optimize the operating model, and there's a long tail of other synergies, including preferential retail commissions. We think there's a synergy - base synergy case here of €70 million over 3 years. On a run rate 12-month basis, we think we'll deliver 10% of that in the first year and roughly 50% by the time we've got through a couple of years. In terms of the integration plan, we've got a great plan and actually key decisions on organization and technology have already been made. I think as Peter and I have said before, we really believe we've got the best team in the business in Italy with Francesco and his team. So they're raring to get started and they've got good plans already in place. So we're feeling very enthusiastic about getting Snai under the Flutter SEA umbrella and seeing what we can do.

And in terms of Your Way, I think it's worth just putting it back into sort of context. And I talked about it a little bit in my opening remarks that Your Way is really one of the first sort of manifestations or examples of the new underlying capability that we've built. It's the sort of rewiring of our approach to pricing and we're - I mean, I'm super excited about what we're going to be able to do in the long term with it. So I don't want people to think that this is just about the sort of the funky sliders that are available now or some of the sort of clever matchups. There's a lot more that underpins it. We've sold a lot of the math. We've re-architected our pricing and risk management capabilities, and we're now exploring what we can do with this from a consumer perspective. We've got some very great stats on the Super Bowl, which Drew shared before. We've got it enabled for the NBA playoff, so we'll get further insight from there as well. But this is a long-term set of initiatives and capabilities we're going to roll out. And I'm very excited to see what we can do with it. Your Way is effectively one feature that's unlocked. There's going to be a heat more things coming out in the periods ahead.

Very helpful. Thanks, guys.

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

Hey, great. Thanks for taking my question. Just circling back on handle and sort of the first half comps. It does seem that there was a lot of industry promotion last year you were comping. And should we expect some of the industry promo to normalize as we get throughout the balance of the year? And then just looking longer term, you look at industry iGaming, I think New Jersey is in its 12th year from 20% or so in March. I mean, is that the right way to look at the long-term growth of the U.S. sports betting and people are probably looking a little too much into these handles as potentially implying like a slowdown in the market? Thank you.

Hi, Jed. I'll start by reiterating some of the points I made earlier. I mean, I think handle is one of the factors, but there's a load more things that come into what is ultimately the most important metric for us, which is what's happening from a net revenue perspective. And that's what we're very much focused on, and there's a large number of drivers that impact that. You're right in terms of what's happened from a promo perspective last year. And actually, even this year, I mean, some of the sort of long-tail competitors are doing some interesting things in terms of the promo stance. So people are not always going to be rational, but we've maintained in all the years we've been running the business, a very disciplined stance to this stuff. And we're not going to try and sort of generate handle. It doesn't make any sense to do that. Your observations around iGaming, I think, are interesting. Look, I remember when we launched into Jersey originally. And here we are those years later, and the business is still growing. We've made a dramatic improvement to the quality of our products, and there's still more to come. And you're seeing - we're seeing the benefit of that in terms of the growth rates that we're delivering for our business. I think we need to remember, we're still in the early days of this industry, right? There's a lot of growth ahead. There's a lot of penetration rates to take. There's new states to bring on board, but we're delivering good growth in the business.

Thank you.

Your next question comes from the line of Bernie McTernan with Needham & Company. Please go ahead.

Great. Thanks for taking the questions. Maybe to just follow up on the handle conversation. Can you just talk about the and maybe it was the point of Jed's question as well, but just the balance of handle growth versus promotion and how much you're investing in the customer right now? And maybe if we are in a world where handle growth is decelerating to mid- high single digits going forward, what the offset could be on the promotional side?

Yes. Maybe let me follow up on that first, Bernie. So I think as Peter said, we've always said that we're extremely disciplined when it comes to our approach in terms of customer generosity. I think the other point is we continue to innovate and develop our stance when it comes to customer-specific generosity, and we're looking at a bunch of things that should hopefully give us more of an advantage over time. When you look at the broader market, and this is bringing in some of the kind of Tier 2 and Tier 3 operators, we are seeing some very high levels of generosity in the short term. If you look on a more medium to long-term horizon, we think some of those levels will be quite unsustainable. So we're following a playbook and an approach that's been very successful for us in the past. But as Peter said, in terms of the measures and the metrics that are really important to us over the long run, net revenue is the thing that we really focus on.

Understood. Thank you.

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

Hi, team. Thanks for taking my questions. Just got two. On promotions, you've called out the comp in North Carolina. But on an underlying basis, would it be right to think of promotions as flat? And then my second question is, unfortunately, also on U.S. handle. Are sports betting A&Ps outgrowing handle, i.e., is the slowdown more so over ARPU, if you will, rather than player volumes? Thank you.

Maybe let me start on the promotions question. I think you're right that if you exclude North Carolina from the comps, then we are broadly flat. So you're correct with that assumption, maybe.

And then, Ben, your question was around what's happening to the ARPU for the sports betting customers in the quarter year-over-year. I mean we have seen - we're seeing growth in average player days of around 12% over the year. And you can see what's happening to revenues. And so there has been some expansion as a consequence. AMPs are growing in line with handle and revenue has been growing fast to say.

Thank you.

Its been expanding.

Your next question comes from the line of Clark Lampen with BTIG. Please go ahead.

Thanks very much. Peter, I wanted to follow up on some of the comments you made around U.S. iGaming performance. I know you highlighted the benefit that some of the daily jackpocket -- jackpot, sorry, I did it again, and rewards features are having on the business. But I wanted to see if you could also talk about the push that you're making with first-party content. And specifically on the back end, if you're successful with both of these, is this going to be a revenue driver? Will it be something that helps you extract some cost savings? And then bigger picture, this feels like it's sort of part of what we've seen over a multiyear time frame in the U.K. So I'm curious, I guess, if you could just help us maybe contextualize things around what maybe is on the back end of this sort of current push a few years down the road?

We're really focused in the iGaming business. It's true here in the U.S., but if we picked out any of our other markets, it would be equally valid on delivering what our customers want. And if I think about the Huff 'n Puff launch, look, it's a very popular slot across casino floors in America. And so being first to market for an online casino was important, right? It was a record-breaking launch for us, and it's ranked number one in unique actives for slots across all states in the days of launch. So these things are really important in terms of driving revenue and frequency and customer engagement. And I think the extent to which we can find ways of bringing that sort of unique content to the platform is important. And we know that's true in all of the markets, right? People want to have their favorites, but they also need to keep us fresh and exciting new content available for people as well. The work that we've been doing around jackpots, we've been really pleased with the number of our actives on the platform, and we've hit 1 million AMPs in Q1 for the first time in iGaming. So we've got a lot of them now. We've been really pleased with the way that jackpots have worked for us on the platform. We've taken a decision to have higher frequency, lower payouts, and we think that's working well. It's delivering what our customers want. So we take a very customer-obsessed approach to delivery. And I think the teams, whether it's here in the U.S. or other markets around the world, do a really good job in terms of figuring out what's needed and landing that for our customers.

Just building on Peter's first point as well, Clark, we do have our own kind of studios in-house, which provide a certain proportion of our overall content and games within our iGaming suite. That's something that we've invested in, we're quite focused on. But given the quite disaggregated nature of content and new games always coming out, that will always remain a relatively small proportion. And that's something we've got in our international markets and something that we're hoping to bring to the U.S. in due course, which reduces rev share and has other benefits as well as kind of driving the top line.

Thank you. If I may, I know last quarter wasn't the best time to sort of discuss a lot of bid because we are right in the middle of that sort of bidding process. But now that that's behind us, I'm curious if you could potentially give us a sense of the strategic merits, what sort of compelled you to bid for it? Is the contract sort of high NPV or high IRR on its own? Or were you bidding for this mainly for the cross-sell opportunity? Any color you could provide would be very helpful. Thanks.

Yes. So the best way to characterize the lotto opportunity, it's a really unique and sizable opportunity to cement our leadership position in Italy. And as Peter mentioned in his opening statement, we have made a bid in a consortium with Scientific Games, and we think we'll bring significant expertise to the consortium, and we're expecting to hear the outcome in early Q3. In terms of our strategic rationale, this lotto is the largest draw-based concession. It's low risk and it's highly profitable in its own right. if you look at the digitalization of that product at the moment, it's low single digits versus 30% plus in France and 60% plus in the U.K. So there's really unexploited growth potential from a digital perspective. And yes, you're right, cross-sell is a key component that we will look at as well, and that's an area where we've had success with the SuperEnalotto product already in Italy. And through the consortium, we'll share the capital outlay. And as we've said, the deal would be highly synergistic and the financial returns, we think would be very compelling if we were to win the bid.

Thank you, Rob.

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

Good afternoon or good evening, everybody and thanks for taking my question. So the first question is on the prediction markets. Hoping, Peter, you could just address all the chatter out there and with the roundtable canceled, what is the next sort of milestone or event that we should all sort of be keen in on in the next, I don't know, weeks and months? And then the second question is another question you were asked earlier, just to ask it a different way. This is - the first quarter was a second quarter of very better favorable results. So there's a lot of betters out there with a lot of cash in their accounts. Is it wrong to look at that as sort of de facto added resiliency in the balance of your guidance and your operational sort of outlook, knowing that those folks have flush accounts?

I'll take that. And let me start with the prediction markets question. It's - I've said this to people before, but it's worth reminding you, we do operate the world's largest sports betting exchange. So we know this space well. The Betfair Exchange has, for many years, given us very good insights in terms of how this stuff can play out. And look, I think it tells us that you've got to be quite thoughtful about how exciting the exchange product can be when you have a fully fledged sports betting product available to you. We can see how important the parlay mix is to a U.S. audience. And of course, you can't access that in the same way with something like the exchange. So we're very thoughtful about it, particularly having seen so much success in terms of having the best product in the market. And I think that for existing states where sports betting is allowed, I'm not that confident that this is - will have a significant impact. But I think, look, there are new markets which could become available to customers in states where sports betting is already allowed. The political stuff is something that people talk about and other gamified [ph] markets as well. So look, we're interested in the potential opportunity. We have brought some of our team who have experience in building these products and services from the Betfair Exchange business and put them into FanDuel to help us evaluate the opportunity. So look, we're working through it. I mean, clearly, in states that haven't regulated, there's a sort of prime the pump type of opportunity that is not that dissimilar to some of the DFS stuff. Albeit it's worth remembering that DFS is a really good precursor to the parlay product, whereas the prediction markets are quite limited. So look, it's - we're interested in potential opportunity. There's puts and takes, and we're working our way through it.

Maybe picking up on your second point, Brandt, in terms of the couple of quarters of favorable results and whether or not that has resilient. It depends on a number of factors. It depends who the winners are, the mix of those winners, how much they're winning. But ultimately, customers having more back in their wallets can't be unhelpful to quarters still to come. So we'll monitor that and see. I think the point to reiterate here is that we've got absolute conviction in our pricing and our structural margin assumptions and that we're getting that right. It's not the first time in history that we've had a period of customer-friendly results. And as Peter mentioned in his introductory comments, that's why we've got a business at the end of the day and people keep coming back because of the unpredictability of sports. And there's been similar examples in the UKI market, for example, in the past, where we experienced 2 or 3 successive negative results in Q4. The very positive results in Q4 last year. And if you look on a net basis over a 3-year period, the margin was actually marginally favorable. So it's not the first time we've seen this and probably won't be the last time, but we're very confident in our underlying kind of pricing and structural margin.

Thanks, everyone.

Your next question comes from the line of Paul Ruddy with Davy. Please go ahead. Paul, your line is open. [Operator Instructions] Your next question comes from the line of Barry Jonas with Truist Securities. Please go ahead. Barry, your line is open. Your next question comes from the line of Joe Stauff with Susquehanna. Please go ahead.

Okay. Great. Peter, Rob, can you hear me?

We can. Thank goodness. I thought...

One in a row. Okay. I wanted to ask you about - for FanDuel in the U.S., are there any states where you can reasonably assess that you're approaching maturity in terms of customer penetration and whether that's a comparison with your Australian market or maybe the U.S. market could be higher level penetration. That was the first question. I think I'm limited to two questions, but I was just wondering just a quick one on the exchange. Is it fair to consider, I guess, one of your scenarios that you're considering in terms of Betfair to register Betfair as a national exchange with the CFTC. Thank you.

We're not going to take you through all the details of how we're thinking about attacking the prediction market. There's a bunch of different ways we can think about it. And when we're ready to share that, we'll tell people what we're going to do. From a penetration perspective, we're not seeing any state yet where we've reached the point where we think we've attacked out. I mean you have to remember every year, a new group of people become eligible from an age perspective. And there's - even without that, we're continuing to see good growth in penetration in the existing states. So there's nothing that we would point to as an area where we've hit saturation or anything like that.

On the exchange rates, Peter, we're not going to share any details, but we've clearly got the in-house expertise with Betfair, and we're looking at the options closely. There's a number of routes to market. We think we could access quite quickly if we needed to.

Understood. Thank you.

Your next question comes from the line of Monique Pollard with Citi. Please go ahead. Q - Monique Pollard Hello, evening. Can you hear me?

We can, Monique.

All right. A couple from me. The first was just on Brazil. Obviously, growth was quite materially negative this quarter. I know that your existing Brazil business is quite small. And I know there were challenges with registration at the beginning. But just wondered if you've seen an improvement there and sort of what you're thinking about what happened in the first quarter there? And then the second question, also ex-U.S. is on the U.K. Do you think you're losing share in the U.K. market this quarter with some competitors admittedly from a low base doing a bit better? Thanks.

Let me start on Brazil, Monique, quickly. So we have seen a few challenges with Betfair in Brazil due to the changes in the regulatory environment. That's mainly around some friction in the sign-up process for customers. So we've seen that impacting on activation. But we have actually encouraged seen some uplifts in ARPU, which is good. That's in the Betfair business. Clearly, the NSX business, which we hope will be coming in later this month is performing really well and in line with our expectations. So it's over 20% up in Q1 on a year-on-year basis despite some of those regulatory kind of friction challenges. So we're really pleased with what we're seeing so far in Brazil.

In the U.K., Monique, I'm pleased with sort of gaming year-over-year. I mean let's not forget, we've had a couple of very strong years of performance in the U.K. And I think some of our competitors have got some significantly softer comps than us. So I think you're seeing a little bit of that really come into play. I encourage you to maybe look at some of the year over 2 years and metrics like that.

Yeah, okay. Thank you.

Thanks.

[Operator Instructions] Your first question comes from Robert Fishman with MoffettNathanson. Please go ahead.

Thank you and good afternoon. One follow-up on the prediction and Sweepstakes [ph] products in the U.S. Just curious if you've had to adjust any of your FanDuel pricing to compete? And do you think this is actually an opportunity to push the states for quicker legalization or any other thoughts on how legalization can regain momentum? Thank you.

Hi, Robert. Look, on the sort of legalization rollout, when we had our Investor Day, we talked about a couple of percentage points of adult population in this year, next year and the following year. And I think we remain confident we're on track with that. So I think we feel reasonably good about that. If there is any benefit that we get from prediction markets encouraging faster rollout, we'll take it, right? We would love to make our product available more broadly to more customers. And then we offer the best prices for FanDuel in the market. I think it's an important part of our strategy. And we haven't - I don't think we feel like we've seen any impact from the prediction markets. Don't forget though, the vast, vast majority of people are betting on parlays, and this is just not something you can get close to experiencing in the state if you look at the way the cushion [ph] markets are set up.

Your next question comes from the line of Barry Jonas with Truist Securities. Please go ahead.

Hey, guys. Just wanted to follow up on the Italian lotto commentary. Are there other U.S. or international lotteries that you're thinking about bidding on as well in the years ahead? Or is this really just unique to Italy? Thank you.

I'm happy to give some thoughts on this, Barry. We've seen a really good example in the Italian market of being able to use our retail locations to cross-sell into online lottery and then actually to be able to expand the products available to customers from lottery to gaming and ultimately sports. Some of those routes are not available in other markets. If you operate a lottery in the U.K., for example, yes, you can drive cross-sell from retail to online, but you can't then cross-sell into other gaming or sports-led products. So the situation in Italy is pretty unique. Also remember, there's no advertising allowed. So this is a great way of acquiring online customers. And I think that's why we're so focused on the opportunity there.

Your next question comes from the line of John DeCree with CBRE. Please go ahead.

Hi, guys. Thanks for taking my question. Maybe one big picture, I'm not sure, Peter, if there's much to add here, but you've mentioned that in your experience in your international markets during periods of economic softness that there was really no discernible impact. So wondering if you can elaborate on that or if you have any anecdotes you could share? And I guess I'm most curious about is there any optionality or potential to kind of have any softness as a customer acquisition event for you if people are looking for substitutes versus perhaps going out. So if you could add anything on that, that would be helpful. I appreciate it.

I think there's a couple of places that we could point to. We have most recently in the U.K., seen some challenges from a cost of living perspective with energy prices and stuff. And over that period of time, we saw really strong growth in our tombola business with no impact really discern or in fact the business grew stronger than it had done historically. And that bingo product is something that's focused on the lower social demographic segments, which you would ordinarily have anticipated would have been impacted by the sort of inflationary pressures that were in the U.K. at the time. So that's one example. But there's plenty of others we could point to around the financial crisis and how that impacted the businesses in the U.K., Ireland, Italy, et cetera. It just didn't cause any issues. So I think your point, though, is the right one, which is that consumers can trade down and still enjoy a bet, right? So you could have you go and watch a game and a bar and pay bar prices for your beer or you can buy the beers and have them at home and still watch the game and enjoy a bet. And we bring Simon [ph] to life, you put your parlay on and you cheer your players on. And I think that that's what we've seen historically, and I think we would expect to see here as well.

Your next question comes from the line of Ryan Sigdahl with Craig-Hallum. Please go ahead.

Hey, good afternoon. This is Will on for Ryan. Just a quick one here. You launched FanDuel Picks pretty recently. Curious what made the timing right for now? And how do you think about differentiation in that business versus the competition? Thanks.

Hi. Will, on for Ryan. Yes, look, we obviously have to be thoughtful about the regulatory position. And I think from our perspective, we think that the law in many states has now been settled. Peer-to-peer DFS is legal. And I think that, that gave us the confidence to launch the peer-to-peer pick and style products in a handful of states. We'll see how it works. It's a separate app using the same sort of log-in details, but we'll see what happens.

Your next question comes from the line of Adrien de Saint Hilaire with Bank of America. Please go ahead.

Yeah, thank you. Thank you for squeezing me in. So just one for me. You seem to have suffered more than the broader market in the U.S. from unfavorable sports results. I suppose that's partly a function of your mix of parlay in there. Could that potentially lead to a change in your approach as to how you push parlay? It seems like the other operators are handling the sports results slightly better right now.

Hi, Adrian, it's Robert. The answer to that is no. As I mentioned earlier, we've got absolute conviction in our pricing and structural margin assumptions, and it's the parlay and the same game parlay that help compound up to why we've got the structural - best structural margin in the sector. Volatility is something that will come with that. And we accept that we don't try and kind of hedge that volatility because we're true proper sportsbook. And the approach to this, we're not intending to change. It's worked for us so far, and it will continue to work for us in the future.

Your next question comes from the line of Robin Farley with UBS. Please go ahead.

Great, thanks. I wonder if you could just talk a little bit about the timing more broadly for the rollout of Your Way. You mentioned now live for NBA. Kind of time frame-wise, when do you think that will be in all of the major products that you'd like it to be and we could kind of think about seeing that impact? Thanks.

We're not going to share all of our plans for the rollout of all of this new sort of pricing capability, Robin. I mean I talked earlier about the fact that this is a sort of - Your Way is one component. And of course, we will make sure that when we get into the next season, it's more extensive. But it's also just going to be the first of many initiatives that we land. I don't want to sign post everything we have up our sleeves to our competitors, but we've got some exciting cool stuff that we're bringing to market.

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

Afternoon. Thanks for taking my question. On the back of record Kentucky Derby viewership, I wanted to ask about that that partnership, how it's going? And any numbers or statistics you can provide just in terms of cross-sell, given that I believe you're the only operator with a single platform with the horse racing offering. Thank you.

Chad, I'm pleased you spotted. We are the only people who offer that sort of integrated ADW for our customers. And I'm very proud of what we do to support the racing industry here in the U.S. It's a legacy of our original acquisition of TVG all those years ago. And despite the weather, we were pleased with the way that the team delivered and performed in the Derby. We had good market share. I think it's around 24% and good growth year-over-year of 8% up in actives. Robert, I don't know if you got any more details, but we're not disclosing the cross-sell. But I think it's an important component of the overall experience for consumers for FanDuel.

Yeah. And these type of big events are great. They bring different types of customers into the ecosystem. But we had almost three fourth million actives for Kentucky Derby, which is an impressive number. And yes, there certainly would have been some cross-sell benefit from that.

And that concludes our question-and-answer session. And I will now turn it back over to Paul for closing comments.

Okay. I'll make the closing comments, Krista. Look, thank you very much, everybody, for joining. I know there was a couple of people who we struggled to get onto the line. So we apologize and please call us afterwards, and we'll speak to you. But thank you all very much for joining. Much appreciated.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.