Flutter Entertainment plc (FLUT) Q4 2025 Earnings Report, Transcript and Summary

Thank you for standing by. My name is JL, and I will be your conference operator today. At this time, I would like to welcome everyone to the Flutter Entertainment Fourth Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Paul Tymms, Group Director of Investor Relations. You may begin.

Hi, everyone, and welcome to Flutter's Q4 update call. Joining me today are CEO, Peter Jackson; and CFO, Rob Coldrake. After this short intro, Peter will open with a summary of our operational performance in the quarter, and then Rob will update on our Q4 financials and new 2026 guidance. We will then open the lines for Q&A. Some of the information we are providing today constitutes forward-looking statements that involve 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 results materials and our SEC filings. 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, and I will now hand you over to Peter.

Thank you, Paul. I'm pleased to share our strong fourth quarter results and reflect on our strategic progress in 2025. Flutter is the world's leading online sports betting and iGaming company with unique advantages delivered through the Flutter Edge and a proven track record of delivery. 2025 was another transformative year for the company, marked by our strategic execution, continued market leadership and disciplined investment, delivering group revenue up 17% and adjusted EBITDA 21% higher. In the U.S., we maintained our clear leadership position in both online sports betting and iGaming. We also launched FanDuel Predicts in Q4 to capitalize on the emerging prediction market opportunity. In our international business, we strengthened our portfolio with strategic acquisitions in Brazil and Italy, extending our positions in high-growth and exciting markets. We made significant progress on our transformation and efficiency programs, and we are well on track to deliver the anticipated revenue growth and cost efficiencies. Our swift disciplined responses to regulatory changes in India where sudden legislative change forced the cessation of real money gaming and to higher U.K. gaming taxes underscored our scale benefits and business agility. We entered 2026 in a strong position, and I've never had more conviction in our ability to capitalize on the long growth runway ahead. Turning to the fourth quarter. Our Q4 group performance was strong with revenue up 25% and adjusted EBITDA up 27%. In the U.S., revenue growth was 33% with adjusted EBITDA 90% higher, lapping the significantly unfavorable sports results in the prior year. We delivered another superb iGaming quarter. Revenue grew 33%, driven by 18% AMPs growth and an increase in player frequency as our successful content strategy and rewards scheme resonated well with our customers. FanDuel sportsbook Q4 revenue growth was 35% However, Q4 sportsbook trends across the market diverged from expectations. High gross revenue margins were offset by moderating handle performance. As a business, we always consider net revenue as our core revenue KPI, and we, therefore, always consider revenue and handle trends together in conjunction with customer activity levels. This was particularly important this quarter as adverse recycling was a key driver of the lower handle growth with persistently high gross revenue margins leading to lower levels of customer engagement. In addition, the second half of the NFL season saw less compelling content with fewer popular teams and favorite players making the playoffs this season, adversely impacting customer engagement. These market trends were far more pronounced for FanDuel for 2 reasons. First, our significant structural revenue advantage resulted in a greater impact from adverse recycling as FanDuel recorded persistently high NFL gross revenue margins throughout November and December. Overall, we finished the NFL season 100 bps ahead of our expected margin at 19%. Second, our standard generosity playbook proved less effective in Q4 as our investment phasing did not sufficiently align with the pattern of sports results during this period. As a result, we saw a higher churn within our customer base and resulted in loss of market share. We also don't believe prediction markets are having a meaningful impact on our business. As you'd expect, we've undertaken a comprehensive review and found no evidence of material cannibalization on our existing business. And this finding is reinforced by our Missouri launch, where customer acquisition trends exceeded expectations, reaching 5% of the population within the first 30 days, making Missouri one of our best state launches to date. Moderated market handle trends have continued into the start of 2026. We believe these trends reflect the halo impact of the factors evidenced in Q4, and we continue to monitor trends closely. And as set out in our shareholder letter, we have a clear U.S. strategy for 2026. Our market-leading, highly profitable U.S. position is driven by product superiority, enabled by our exceptional pricing capabilities, combined with highly disciplined customer acquisition. This has allowed FanDuel to deliver an estimated 70% share of market EBITDA. However, recent trends have led us to take additional actions to strengthen these capabilities to reinforce our leadership position. We will leverage our scale, proprietary technology and data advantages to deliver experiences competitors cannot easily replicate, including more intuitive bet building, smarter personalization and richer live engagement. In addition, we're enhancing how customers feel recognized and rewarded with more engaging reward experiences, including the launch of a new loyalty program, extending a core part of our casino success into sport. I'm confident that the ongoing improvements to our sportsbook product and generosity strategy will harness our scale and structural advantages, driving a sequential improvement in our performance throughout 2026 and deliver market share gains. Let me now update you on prediction markets and how we're going after this opportunity. We believe that prediction markets will accelerate state regulation of online sports betting and iGaming. This, in our view, is the most valuable long-term opportunity in the U.S. In the meantime, the near- to medium-term growth potential on prediction markets for FanDuel is significant. There is new TAM to go after. Prediction Markets will enable us to acquire new sports and entertainment first customers into the FanDuel ecosystem ahead of potential regulation. We can deliver attractive returns by providing sports markets to the 40% of the U.S. population who cannot currently access online regulated sports books. We are exceptionally well positioned to harness this opportunity, and we launched our own offering, FanDuel Predicts in Q4. Early signals have been encouraging with most activity focused on sports and with average volume per customer in line with expectations. We are also actively pursuing options to leverage our world-class proprietary pricing capabilities for market-making services, and we'll share further details in due course. Rob will update you on our predictions market financial guidance. But as outlined in our Q3, we'll invest meaningfully with ambition to deliver a leading position in this space. The opportunity across prediction markets is certainly far bigger than any potential cannibalization of existing sports. Moving on to our international business. International revenue grew 19% in Q4 and adjusted EBITDA increased 6%. We are making excellent progress on our strategic transformations and integrations, building a strong platform for future revenue growth and delivering cost savings. In the UKI, the Sky Bet sportsbook migration has delivered the expected cost savings, and we are now accelerating customer-facing investment to restore momentum. In SEA, Flutter regained the Italian online market leadership position in Q4. And the results of the PokerStars migration in Italy have been very encouraging with revenue growth of 13% and new customer volumes more than doubling in Q4. PokerStars migrations will continue at pace into 2026 following the successful precedent we have now created in Italy, driving further growth and delivering planned cost savings. The Snai business integration is progressing well. Customer acquisition initiatives, including Sisal's retail sign-up model and restructured generosity to boost cross-sell and reactivations drove all-time record iGaming AMPs and ensured Snai finished the year in revenue growth. The planned platform migration in Q2 will further accelerate this growth by providing Snai access to a vastly expanded product suite, including Sisal's leading products such as My Combo. In Brazil, improved casino and digital marketing capabilities drove a surge in customer acquisition, up 51% since the start of the year. We believe the Brazilian market presents a significant and compelling growth opportunity for Flutter and that the 2026 FIFA World Cup represents a unique moment in a soccer obsessed market to take market share. As a result, we expect to invest more. And while extending our investment time line shifts the phasing of profitability, we have strong conviction that disciplined near-term investments will build a larger, more profitable and sustainable business over the long term. Looking ahead to 2026, I'm confident in our strategic positioning. We have compelling plans in place to strengthen our leadership, unlock future value and deliver sustainable growth. I'll now hand you over to Rob to take you through the financials.

I'm pleased to present another quarter of strong financial delivery. Group revenue increased by 25% and adjusted EBITDA grew 27%, driven by a good year-on-year performance across both segments and the successful integration of our recent acquisitions. As Peter noted, we are making excellent progress on our strategic transformations and integrations, and we are firmly on track to achieve our targeted $300 million cost savings by 2027. We're embedding rigorous cost discipline across the business, identifying new efficiencies and optimizing opportunities to protect margins and fund strategic growth investments. In the quarter, group net income was $10 million compared to $156 million in the prior year as the strong adjusted EBITDA performance was offset by higher interest costs relating to the financing of our strategic M&A and increased tax expense, reflecting the significant step-up in U.S. profitability year-over-year. Earnings per share and adjusted earnings per share declined by $0.50 and $1.20, respectively, reflecting these factors. The group's net cash provided by operating activities declined by $224 million to $428 million, primarily reflecting the cash impact of these increased expenses and a $128 million adverse impact from a lower level of customer deposits year over year. Free cash flow declined by $335 million to $138 million, including the impact of M&A and increased investment in capital expenditure. The higher CapEx was driven by phasing of Italian concession payments and investment in future revenue-enhancing and cost efficiency projects such as our PokerStars transformations. We completed $245 million in share repurchases during Q4, bringing full year 2025 repurchases to $1 billion, in line with our guidance. Our disciplined capital allocation policy provides the flexibility to respond effectively to evolving market conditions and emerging opportunities. We remain committed to our long-term policy of returning capital to shareholders. We now expect to commence returning $250 million in H1 2026, and we'll provide guidance on our future buyback cadence as the year progresses, preserving our flexibility to invest in the business and strengthen our balance sheet. We ended the year with a leverage ratio of 3.7x. Strong profit growth and cash generation will continue to drive leverage reduction throughout 2026, moving us towards our target ratio of 2 to 2.5x over the medium term. Moving now to our outlook for 2026. In the U.S., we expect revenue of $7.8 billion and adjusted EBITDA of $1.05 billion, translating to year-over-year growth of 12% and 14%, respectively. This includes new state investment of $70 million in adjusted EBITDA as we expect to launch Alberta in Q2. The guidance also reflects current trading where the impact on our customer base from the very high gross revenue margins achieved in the second half of Q4, alongside a less compelling end to the NFL season has driven lower customer engagement levels into 2026. Outside of NFL, year-over-year trends improved in February. Although we believe that these market trends are largely transitory, we have taken a measured view of how these trends will progress, including when market handle growth rates will recover from the Q4 recycling impact. We also expect a sequential improvement in FanDuel's relative performance to the market due to improvements to our sportsbook product, generosity strategy and the launch of our new loyalty program during the year. We now expect that our prediction markets investment will be towards the upper end of the previously guided range, closer to $300 million to reflect the significant opportunity we believe exists to drive customer acquisition. While it's still very early days, our view remains that the shape of the profit ramp for prediction markets should be similar to new sportsbook state launches. In International, we expect revenue of $10.6 billion and adjusted EBITDA of $2.23 billion revenue at the midpoint, representing year-over-year growth of 13% and 1%, respectively. We are really pleased with the underlying momentum in the first 2 months of the year, particularly in SEA, where we have extended our online market leadership in Italy. The guidance incorporates an investment in Brazil of approximately $70 million to grow our market position and the previously guided impacts from the U.K. tax increases and the Indian market switch off. We expect our unallocated corporate costs to be $310 million; a $30 million increase compared with the prior year. This reflects an increased 2025 base driven by investment in shared technology, talent and costs associated with our U.S. listing, which will continue in 2026. To conclude and reiterate Peter's conviction, we are excited for the year ahead and look forward to another year of strong execution. With that, Peter and I are happy to take your questions. I'll hand you back to JL to manage the call.

[Operator Instructions] Your first question comes from the line of Jordan Bender of Citizens.

Peter, I want to start with one of the quotes from the press release where it says it's difficult to be definite as to when market growth rates will recover from the impact in 4Q recycling. I guess what I'm trying to figure out here is, do you think any of this what's going on could be structural in nature? And do you ever see this type of phenomenon happen across any of your other sports markets globally? And I guess the second or the follow-up question to that is your sportsbook AMPs were up 4% for the year. The story around increasing penetration into existing states is something that you've spoken to in the past. So I'm curious where you think you stand in terms of net new customers to support this environment where we are seeing handle flow.

Let's start with your question around sort of handle and how that compares with other markets that we operate in. And I think it's worth acknowledging that the period of time we're talking about in the U.S. in Q4 is in the football season. And I've talked before about the very high levels of volatility that we see around football in the U.S. So I think -- when I think about other markets, the soccer-driven markets we see in the U.K. or Italy, racing in Australia, we would see less volatility and less sustained periods of very positive sports results. I can remember this time last year when we're talking about the football season and people were concerned as to whether we could ever see positive sports results in football. Clearly, this season, we've seen very strong results. And as I stated earlier, we've seen a margin of 19% across the full football season. And so when you compare that with last year and the very substantial step-up in margins year-over-year, you would expect to see a commensurate drop in handle, right? It's the math in terms of how it works from the customer play. So that phenomenon of sort of recycling and the impact that margin has on sort of growth of stakes is something that we've seen before. In terms of your second question around sort of AMPs, look, I think the important thing is that our sportsbook AMPs in our pre-2025 states were also growing in Q4. And look, in the combined sports and iGaming business, we saw mid-single-digit growth. So we're still seeing AMP growth in all the core cohorts.

Your next question comes from the line of Paul Ruddy of Davy.

Just on -- it's a little bit of a follow-up that I forget to ask. But on the structural hold piece, it looks exceptionally strong. Has there been any change in strategy around pursuing a more, say, hold positive handle passive strategy in the way you've set yourselves up? And maybe if you could just give if there is any quantification of what you think the actual amount of handle impact might have been year-on-year from that recycling impact?

I think one of the things I'd state is when I think about the NFL season this year. When you look at the sort of the quality of the teams that got into the latter stages of the competition, there were a lot less of the sort of key marquee players involved. And that has a significant impact for us because of our dependence on the parlay market. I actually suspect that we saw lower levels of parlay penetration than we would otherwise have done if we'd have sort of matchups like we'd had last year. So there's nothing -- we've not changed our big or anything like that, we simply saw a very considerable set of consecutively positive sports results. I think 10 out of 11 weeks, we saw very favorable weeks of above-average margin there fell a number of weeks above 30%, which we think has a real sort of impact on customer sentiment when you get to those sorts of levels. And then in terms of the blackout of trying to work out if it were not for that, what would have happened to handle, I mean it's very difficult. And I think there's a lot of -- it's a complex relationship between those things. And of course, you've also got the overlay of what's going on from a generosity perspective as well. So I think it's hard for us to make a full assessment.

Your next question comes from the line of Barry Jonas of Truist Securities.

Can you maybe talk a little bit about the prediction product today and how you see that improving moving forward? And then maybe as a follow-up, curious to get your thoughts on the probability of more U.S. state tax increases here. And is there any scenario where you might exit OSB in any uneconomically viable state to focus more on FanDuel Predicts?

Yes, look, we've -- obviously, we're pleased we got our prediction market product into -- from a sports perspective into those 18 states where we can't currently offer our regulated OSB. Clearly, that's a lot of incremental opportunity for us to go after that otherwise we couldn't have had. We have got good plans to improve the breadth and quality of the product we have over the course of this year. There's obviously the World Cup coming up shortly, which is going to be a very important opportunity for us to showcase the quality of our soccer product, both for the half of America who are in states where there's regulated OSB, where we're very excited about that, but also into the half of America who will be reliant on our Predicts product. Soccer is actually the fourth most popular sport for us by GGR. So I think we're excited about that. And we believe that we have a lot of expertise in that globally and of course, we can couple that together with the quality of the FanDuel brand and our experience from the Betfair Exchange to really push hard. And there's lots of other product enhancements we intend to make over the course of the year before we get to the start of the NFL.

From a tax perspective, we're clearly at the outset of the year and moving into legislative season. As ever, there will be some noise and soundings about tax increases in certain states. I mean on the positive front, actually, just before coming on this call, we've had positive news already, getting a license in Arkansas, which is a positive move for us. And ultimately, if we do see any tax increase, there aren't any that we see with high degree of certainty at the moment. But as a scale operator, we're very well placed to mitigate those as we've proven in the past, and we have levers at our disposal and costs that we will use to mitigate that and work through it.

Your next question comes from the line of Jeff Stantial of Stifel.

Maybe starting off on the handle trends in Q4 and year-to-date. Peter, you talked to some market share loss, which is expected to moderate as the year goes on. But if you look at performance in the Missouri launch, there really doesn't seem to be much dilution to market share at all. So maybe could you just help us reconcile those 2 data points? And then for my follow-up, Rob, it looks like unallocated corporate is pacing well above the '27 targets that you introduced a few years back. Can you just frame for us maybe what's changed, if anything? And where do you go from here?

You're right. We've been very pleased with the launch in Missouri. And as I stated earlier, it's one of our most successful state launches to date in terms of the population penetration. I think we're very pleased with that. I think it's -- and it's down to our excellent new state playbook I think the point I'd make around some of the handle trends that we saw in Q4 last year, it really ties back to some of the stuff I was talking about in terms of the very strong and sustained periods of very high margins, coupled with the fact that we saw less popular teams getting into the playoffs for football. I suspect that there were some of our customers who, to use another sporting analogy, put their queues back in the rack and stopped betting. So look, I think what we'll have to do is reactivate those customers. We're excited about the product changes that we'll be delivering over the course of this year. I mentioned the loyalty program, the changes we're making to generosity, we've got the World Cup coming up. So I think there's a lot of great opportunities with March Madness for us to push hard and get these customers back on our platform.

From a corporate cost perspective, there's a couple of points to make. So we are slightly above our original guide. There's a couple of contextual points to this. The first is we obviously re-segmented the business at the start of 2025, and we saw some additional costs move into corporate as a result of that re-segmentation. The second point with regards to 2025 is we actually had some reduced revenue-driven cost allocations as part of the year-end closeout, which is just kind of left pocket, right pocket. We have been investing in cost in the center overall with the Flutter Edge, and we're seeing excellent payback in terms of the transformation, strategic transformation work that's going on across the group. And what I'd say lastly is actually we've just kicked off a comprehensive cost optimization program across the group, and we are looking to optimize further efficiencies as we go through 2026.

Your next question comes from the line of Brandt Montour of Barclays.

So digging into U.S. revenue guidance for '26, low teens growth expectations. I think we kind of got a sense now for sort of some conservatism around handle. Have you guys changed your philosophy around how you guide for sport outcomes or for structural hold within that guide?

I'll pick this up. So -- no, we've not changed our philosophy. What I'd say in summary for 2026 is we've taken a sensible measured approach to our guidance. The guidance includes 12% revenue growth for 2026 and 14% EBITDA growth in the U.S. We're not including any revenue from prediction markets in that as we want to trade through the period initially before we take a view on that. As Peter mentioned, it's quite a complex relationship between handle and gross revenue margin, and that's why we look at revenue as our core KPI, and we guide to revenue only. We also haven't talked about iGaming yet, but we're assuming that the iGaming growth continues in the high teens, and we'll have double-digit sportsbook growth on revenue. So overall, as I said, it's a sensible and measured approach that we feel comfortable with. We should also see some sequential improvement through the year as we land some of the product and generosity initiatives that we talked to in the shareholder letter.

Your next question comes from the line of Ed Young of Morgan Stanley.

My question is around the less effective generosity playbook. You mentioned phasing, improved competitor offerings and elevated generosity in the market. So my question is, how should we square your commentary around your new generosity strategy, which you said you want to be sort of disciplined but also competitive. Is that you saying effectively that you need to make your scale count by keeping your generosity at higher levels? And then my follow-up is, the commentary is also about the improved competitor's offerings. So what's not worked on the product side to maintain sufficient leadership versus competition? And what sort of additional investment are you making or do you think you need to make to make that right?

Thank you for the question. On generosity, look, I think it is a very important sort of topic for us. I talked about some of these heightened levels of margin that we saw. I think -- look, it's fair to say that we didn't execute our generosity strategy as well as we should have done. We pushed hard in the beginning of Q4. And actually, when you look at what the pattern of gross win margins were throughout the back end of Q4, we just saw this very sustained period, including a number of weeks, as I said earlier, above 30% we should have pushed harder generosity at those points, and we didn't. And that's something that we will address and make sure that we incorporate into our playbook for the future. So this isn't about putting more money on the table. This is about using what we have in a smarter way. And I think tying to that point about being smarter with it, when I look at what we do with our casino business, we get a lot more credit for the generosity we give our customers there as a result of the loyalty program that we have. The rewards program has been a really important driver of the success we seen in casino. And we must be one of the few consumer businesses in the state that doesn't have a loyalty program to full stop for sports. It's been very successful for us in casino. And as I said, we'll bring those -- we'll bring that experience into our sportsbook, which I think will be very important. That's something that we'll do in Q2 this year. So we're going to remain disciplined. We saw a very unusual situation after the last couple of years where we've seen low margins in football sort of very high and very sustained periods of margin, and we didn't have the right playbook or tools really to be able to deal with it.

Picking up on the second part of your question around products. We don't necessarily think this is something that's not worked for us per se, but more a bit of a narrowing of the gap in terms of the product advantage that we've typically held over the last few years. And -- as we think about this, we're looking to double down on the product advantage that we've had previously, and we're working on a number of things, both in the U.S. and in our international business. As we outlined in the release, there's a few specific areas. So we're looking at differentiation and innovation and really enhancing our SGP offering. You'd see actually outside of the U.S. In Italy, our My Combo products working extremely well for us, and that's allowed us to take the leadership position back in Italy. The rewards piece that Peter talked about and also just elevating the core journeys and the personalization and experience of being on the FanDuel site, which we've got a team working on. The other piece, which we obviously talked about a lot previously is our outcome-based pricing and how this really provides the structure and the foundations behind our product innovation and improvements moving forward. And we still remain incredibly excited about this. It's taking a little while to work through. But fundamentally, we expect this to be a significant product advantage for us when we fully land that and roll that capability out.

Your next question comes from the line of Shaun Kelley of Bank of America.

I wanted to follow up on Rob's comment about the double-digit growth you're seeing in sportsbook or you're expecting, I guess, embedded in the guidance. Just Rob, can you help us compare that to the run rates you're seeing in the business right now? I know current quarter is a little harder to comment on, but the market has been so dynamic. It's been a little hard to track. And while we can see handle numbers, it's harder to get that full NGR picture. So any color you could give us there to kind of square what you're seeing in the business with that outlook would be helpful. And then also, if you could just comment maybe high level on what you're seeing share-wise for the NBA because it feels like we've seen that as a product that Flutter has historically done extremely well in, but we've seen some competition ramp up there.

So yes, in terms of current trading, we started off the year with a continuation of the trends that we observed late in Q4. So the closing stages of the NFL season, as Peter alluded to, including the playoffs and the Super Bowl saw some slightly less compelling player narratives and that drove continued low levels of customer engagement into the start of the year. But outside of the NFL, we started to see trends improving month-on-month into February, which is encouraging. We think some of the customer fatigue from the positive sports results persisted into January as well. As Peter said, we had 10 out of 11 positive weeks. We ended up the NFL season with a 19.3% margin on NFL, which is incredibly strong for a season overall. And in terms of February data based on the small sample that we have, the week-to-week volume trends are definitely improving, suggesting that part of this was potentially an NFL season-specific dynamic. But at this stage, it's still quite early. Visibility remains slightly limited on whether the current market dynamics will be short-lived or what we'll see over the next quarter or a few months. But we're quite confident about our Q1 guide, and we'll continue to monitor the trends very closely. We're confident that we have the right plans in place to continue improving our U.S. performance over the course of the year. And we've definitely seen a sequential improvement even over the last few weeks.

On the question around sort of a high level on NBA, look, this has always been an area that's important to us. Again, it's down to things like the quality of the players that we have engaged in the games with the strength of our parlay offering. There are -- there's inevitably a bit of a sort of bleed across between customers who are betting on both football and NBA that if they've seen those very high margins on football inevitably will have some impact on their ability to stake on NBA.

Your next question comes from the line of Jed Kelly of Oppenheimer.

Just going back to your prediction markets. Do you feel like you potentially would want to acquire your own DCM license just to control your own destiny? Or can you just talk about how your JV with the CME is progressing?

We spent a lot of time working out how we wanted to tackle prediction markets. And I think we've got our product into the market. We're into those 18 states that we can't offer our regulated sports betting product in. And look, we're going to make a series of product changes over the course of this year. We're very happy with the CME. We've got a strong pipeline of product improvements coming through. I also referenced some of the stuff we're looking at around sort of market making as well. So there's a lot going on in this space. We're investing -- we plan to invest a lot of money. And look, I hope we sat here in a year's time when we've been able to invest very successfully and acquire a lot of customers onto our platform.

Your next question comes from the line of Dan Politzer of JPMorgan.

I want to go back on prediction markets, unsurprisingly, I guess. I guess what have you seen that justifies the incremental spend there? Because it sounded like things so far were tracking in line with your expectations. And along those lines, how do you think about the competitive landscape evolving if and when we do get perfect regulatory clarity here?

We've got experience of investing organically in our business. I mean I think about what we're doing in Brazil at the moment. I think about all the quarters we had post PASPA being repealed. But we've always taken a very disciplined approach when opportunities arise. And we will make sure that we acquire as much business as we can. Clearly, the phasing of our marketing will align with our sort of product road map and scale over the course of this year. This quarter is more about sort of test and learn to understand how we optimize our spend and drive conversion. We expect to invest heavily in the second half of the year. And look, given the opportunity we see, we expect to be towards the top end of the figures. But I reserve the right to spend more if we find opportunities are bigger.

Your next question comes from the line of Bernie McTernan of Needham & Company.

This is Stefanos Crist calling in for Bernie. Just wanted to follow up on Arkansas. We understand there's a 51% revenue share. Just wanted to ask why launch now and maybe why not do Predicts instead of the traditional sportsbook.

Look, I'm happy to pick it up. And I think what we've seen in Missouri with our new state playbook, I think, is a really good example of when you've given customers or consumers the choice the breadth of offering that you have in a traditional OSB together with the generosity playbook you can provide means it's a much more compelling offering. So look, we're super excited. That's what our sort of true north is for us in the business. We'd like to see more states passing regulation for OSB and indeed, iGaming. Look, it's -- so those 2 areas, we'd love to see more states pass. There are only 2 national players in the state. So look, we're excited to get our playbook going and see what we can do in the state.

Your next question comes from the line of Ben Shelley of UBS.

Do you expect U.S. online sports betting market share to stabilize in 2026? And more broadly, what's giving you confidence in sequential improvement in your competitive position through the year?

We are confident in the quality of the products that we have in the market. We're excited about the introduction of our loyalty program. There is more work we're doing around generosity. And as Rob mentioned on the question earlier, there are enhancements that we're making to our products as well. So I'm very confident in our ability to execute. We have consistently done that. And I think that we will be able to hold our market share. And look, I'd like us to take more market share to the extent that we can get good returns on it, and we will spend that money.

Your next question comes from the line of Clark Lampen of BTIG.

My questions are related to the sportsbook loyalty program. I think, Peter, #1, just for clarification, I think you said that, that was going to roll out in Q2. I wanted to make sure that they had that correct. And then second, I wanted to see if you could give us a little bit of color around when you introduced the same offering for your iGaming business, what the immediate impact was? Was it a revenue driver? Did it help you with promo? I think that that's -- there have clearly been a bunch of questions on the call thus far around the direction of promo. So maybe with that as a reference point, was it helpful to promo? Is that a source of leverage, I guess, for iGaming when you introduced that? Any color that you can provide a reference point would be helpful.

I mean, the perspective from our casino business where our rewards program has been a really important part of the success of that business. We got to a record market share in Q4 with 28%. Look -- and we're still building our loyalty, the rewards program, right? There's still changes we're making. We're still integrating more of the generosity into the program. So we've been at it a long time in the casino business, and there's still a way to go. So it's a little bit like our parlay products. We're never done. There's always improvements and changes we can make. So look, we will launch a loyalty program for our sportsbook. And I think one of the immediate benefits that we've seen in casino is that you get much better sort of saliency from your customers around the rewards that you're giving them. And I expect to see that happen in our sportsbook. I mean there's -- we sometimes describe it sort of link and labeling. And so I think that's the immediate step change we'd expect to see. And so I hope it will help drive increases in wallet share.

Your next question comes from the line of Ian Moore of Bernstein.

One on capital allocation. How would you rank, I guess, the different inputs you're weighing in deciding at one point you become more active on share repurchases through the year? And I guess, any update you're willing to give on progress toward resolution of the FOX option?

Maybe I'll start on the capital allocation question. So as I mentioned in my prepared comments, the capital allocation framework remains consistent with what we outlined at our Investor Day in 2024, and we remain committed to the long-term policy of returning capital to our shareholders. As we often say, we are an and company. So we'll ensure our capital allocation decisions are balanced by the opportunities to invest for growth, but also to optimize for leverage over time. And our current approach really provides us with the flexibility to respond effectively to evolving market conditions and emerging opportunities. And in 2026, we'll prioritize significant capital deployment across both the organic investment in our core business which has historically yielded the highest returns, by the way, and strategic investment in the newly emerging prediction markets opportunity. So there's a lot to go after. We continue to generate a lot of cash in this business, and we can and will delever quickly, but there's lots of interesting and exciting allocation opportunities ahead of us through 2026, which we want to get behind.

There's nothing to say on the FOX option at this stage.

Your next question comes from the line of Robert Fishman of MoffettNathanson.

Any more color you can provide? I think you said high teens growth that you're expecting for the U.S. iGaming in 2026. Just how sustainable do you think that is as we think about the years ahead?

Well, if you think about the iGaming market in 2025, it grew around 26%, and our revenue growth was 33%. I think as the states mature, we'd expect some moderation of that growth, but we feel confident it's going to continue to be mid- to high teens. Therefore, we do expect continued strong growth, and we're excited about the product road map that we've got in iGaming. There's definitely still a long way to go on the penetration rates in iGaming. If you look at what we set out, I think it's 9.5% at the Investor Day, we're about 6.5%, I think, as we stand today. So lots to still go after there, and we're incredibly pleased, as I said earlier, with our iGaming performance.

Your next question comes from the line of Joe Stauff of Susquehanna.

Sorry about it, but I wanted to ask a little bit more just on generosity investments and those returns in -- for FanDuel. So it certainly makes sense, right, in [ iCasino ], you get a higher return, you get more betting events, that makes sense. But do you get a return? -- does that -- that seems to me to be a unique customer, meaning that customer doesn't necessarily cross-promote into OSB. And so your generosity investments in OSB, at least for that, does cross-promote. Is that maybe part, I guess, of what we're trying to figure out and what happened essentially in the third and fourth quarter with respect to like your approach because obviously, you're gunning on the [ iCasino ], and it's worked. I was just wondering if that's part -- if that's a realistic understanding of kind of how you're allocating that capital and why the returns are lower.

Yes, I think there's 2 things going on, and I just make sure I understand your question. I think effectively, we did not deploy our generosity efficiently in Q4. I mean, particularly when you think about the very long sequence of very high margins, particularly with some of those real peak weeks, we were not efficient and effective. We should have been deploying more generosity at those points there. I think separately, we have had lots of success with deploying our loyalty or rewards program into casino. In all of our businesses, we deploy a lot of generosity to customers. And one of the advantages of bundling up that generosity within a loyalty program is consumers understand better what's been going on. And I actually think one of the issues for us in Q4 was there's a bit of a whipsaw where generosity was on, it was off, it's on, and it's off. And particularly at a time when margins were running very hot, I think we're probably causing a bit of confusion amongst our customers, and we're just not deploying it effectively. So that's what we're going to address, get to a more efficient and effective distribution of generosity. And I think that's very important.

Your next question comes from the line of Chad Beynon of Macquarie Group.

With respect to the upcoming U.K. iGaming impact, has anything changed just in the current landscape in terms of how your competitors are maybe running their business, promos, marketing, et cetera? And could this potentially adjust how you're thinking about mitigation?

Well, we obviously laid out our top-level plans for mitigation when the changes were introduced in Q4 last year. And to this point, we're not seeing anything different to what we'd anticipated in terms of activity. But it's actually early days because the tax changes don't actually hit until April. And what we expect will happen is that people will start to moderate behavior from that point onwards. If you think about the market share of iGaming in the U.K., there's a very long tail. So there's circa 30% of the market shares in the long tail with much inferior economics to us given our scale. And actually, we fully anticipate that there will be some changes in marketing and generosity and return to player dynamics as we move through the year. We were reasonably conservative in terms of our view in terms of what we recapture versus the tax increase, and we still remain confident in that.

Your next question comes from the line of John DeCree of CBRE.

Peter, I wanted to circle back to a comment you made in the prepared remarks of your sentiment that we share as well, and that is prediction markets should accelerate OSB and iGaming regulation in the states. So curious if you could share any more color on that view and your perspective. You probably have as good of a view or better than anyone. And what kind of inputs help you feel confident that, that might come to fruition?

We have -- I think we're singing to the choir if you are in agreement with me. I think we do believe that the noise around prediction markets, and it is an opportunity for us to acquire customers in advance of the states regulating, but we do think it will help hasten the regulation of iGaming and online sports betting. We've got an extensive team who are focused on this, and we're having some very fruitful conversations at the moment. Look, we've just had some good news in Arkansas. Who knows where else the next shoe to drop will be. I'm excited to see some iGaming states come along at some point soon.

Your next question comes from the line of Monique Pollard of Citi.

Apologies if I missed it, but I couldn't see anywhere if you could help clarify how much you spent on FanDuel Predicts in the fourth quarter? Just conscious that you didn't have -- it was only a handful of states during Q4 before the wider launch in January. And basically, the follow-up question to that is me just trying to understand how much of the guidance change in the FanDuel Predicts for 2026 to the upper end is just a timing shift versus how much is it that you've seen something in the Predicts customers you've acquired so far that makes you think it's worth pushing more aggressively on that opportunity in 2026?

Yes, it's Rob here. We didn't actually confirm a number in the release, so you didn't miss anything. It is actually lower than the $45 million that we guided at Q3, so ended up spending slightly less than that in the quarter. I think Peter outlined earlier on very well what our intentions are for 2026. So we've now said that we're going to be towards the top end of the range. What I would say is that within that, we retain our right to have flexibility on that spend. It's a very fast-moving category, and our investment will ultimately be driven by the types of returns that we see. But ultimately, both of us would be delighted to be sitting here at the end of the year saying that we've actually invested at the top end or beyond that envelope because that will mean that we're really achieving traction in the prediction market space.

Your next question comes from the line of Ryan Sigdahl of Craig-Hallum.

Peter, I hear you on the NFL playoffs. I know we were all sad Vikings didn't make it. My question is, given the more pronounced moderation in customer activity and the unfavorable recycling in the U.S., I guess, especially relative to your peers, curious how the company -- how you plan to maintain your structurally higher hold while also retaining share of players' wallets.

Ryan, yes, I mean, I think we've discussed some of these factors already. The key issue that we saw in Q4 wasn't that we had over the course of this football season, the 19% margin. That was great. And you look at where the gross win margin was for Q4 and sort of we're in line with what we anticipated doing for 2027. The issue really was how we deployed our generosity. And that's something that we are addressing. I've talked about that. We've got to make sure that the generosity strategy reflects what we're seeing in the market. And those 10 out of 11 weeks with very high and sustained margins and then a number of weeks at 30%, those -- they really impacted our business. And the relationship around what we're doing with generosity with where margins are, the sort of hangover impact that you get for a couple of weeks after those very high margins is something we want to make sure that we address. Personalized generosity is the way to deal with that because, of course, even when we're talking about very high margins, there's still averages and there's customers who've done well and customers have done badly within that. And that's what the team have got a lot of experience of doing in Australia. We're learning from that and deploying it into the U.S. business. So this isn't so much a matter of the issue of the high margins. It's more how we make sure that we spend generosity effectively. Customers understand what's happening, and we don't have the sort of the situation where we're a bit inconsistent and that is not helpful for customers, particularly with these consecutive high margins.

And your last question comes from the line of Richard Stuber of Deutsche Bank.

Just for me, a question on sort of credit cards. I did read somewhere that you now stop taking credit card deposits. I was wondering, have these credit card deposits been largely offset by the same customers using alternative payment methods? Or have those credit card customers broadly left? And is that sort of a similar thing which your competitors are doing in terms of credit cards?

Yes, this is something that we have been anticipating for and also something that we've navigated in a number of our markets around the world, but we're actually anticipating a de minimis impact from this. It comes in at the start of March. It's within our plans, and we're not expecting it to have a material impact.

Okay. I think we are done with the questions. Thank you very much, everybody, for dialing in. Much appreciated.

This concludes today's conference call. You may now disconnect.