Flutter Entertainment plc 2026 Q2 Earnings Call

Paul? Hi everyone, and welcome to Flutter's Q2 update call.

With me today are Flutter's CEO, Peter Jackson, and CFO, Rob Coldrake. After this short intro, Peter will open with a summary of our operational progress, and then Rob will go through our Q2 financials and our updated guidance for 2026. We will open the lines for Q&A. Some of the information we are providing today, including our 2026 guidance, 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 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 statement 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. I will now hand you over to Peter.

Thank you, Paul. Good morning, everyone, and thank you for joining us. Before we get into the results, I wanted to say a few words about the announcement we made this morning. After nearly nine years as CEO, this is the right time to hand over to Dan, and I'll be stepping down at the end of September. It's been an enormous privilege to lead this business, and I do so with tremendous confidence in Flutter's future, in the team we've built, and in Dan's leadership. One thing I've always tried to do throughout my time as CEO is to take a long-term view of how we create value for shareholders. That has sometimes meant making decisions that weren't universally welcomed in the moment because we believed they would strengthen the business over the long term.

In 2019 and 2020, for example, we continued to invest heavily in FanDuel at a time when many questioned those decisions because of the impact on near-term earnings. Looking back, those investments proved to be the right thing to do. They strengthened our competitive position and laid the foundations for the business we have today. We're making the same type of decision again today. We see a significant opportunity to invest behind our leadership in U.S. sports betting and iGaming, strengthening our proposition and positioning the business for future growth. We recognize that this weighs on near-term earnings, we're convinced it's the right thing to do to maximize long-term shareholder value. With that, let me turn to our results. We've delivered an encouraging quarter relative to our expectations, I'm pleased with the progress we're making across the business.

In the U.S., we've implemented our new leadership structure, made good progress on our sportsbook improvement plan, further expanded our prediction market offering and capabilities. For H2, we'll be delivering an improved value proposition for our customers, a move we believe is critical to strengthening our number one position in the highly competitive U.S. market, aligns with our new customer-first strategy, better positioning the business for market share gains in 2027 and beyond. During Q2, U.S. revenue was 6% lower year-over-year, reflecting a six percentage point growth impact from customer-friendly sports results as the Knicks legendary win in June put some cash back in our customers' wallets in time for the World Cup. Customer engagement was excellent throughout the NBA Finals and the FIFA World Cup.

Even when you adjust for these marquee events, underlying sportsbook trends were in line with our expectations as our sportsbook improvement plan continues to deliver. We continue to see a limited cannibalization impact from prediction markets on our existing customer base in regulated sportsbook states. We believe FanDuel's operational execution and outperformance, both in recent state launches and during key marquee events, confirms the strong demand for traditional sports betting products when sports content is compelling. We expanded our loyalty program to 70% of customers this quarter, which has helped with engagement metrics, with 82% of customers surveyed saying the rewards club improved their experience, more than half saying it lifts their betting activity. We also introduced Bet Protect+, our best-in-market injury protection feature, enhanced our soccer offering for the World Cup, leveraging the Flutter Edge to offer unique features such as Super Sub.

While FanDuel trends have been encouraging, the market continues to be subdued, we estimate that the market grew by around 5% in H1. Although we continue to closely monitor the implications of the growth in prediction markets on the broader online sports betting market, we believe the market is yet to rebound from the disappointing NFL performance experienced in Q4 2025. We firmly believe market growth will ultimately return to higher levels, with more compelling content driving stronger customer engagement, though our forecasts prudently assume market growth rates in H2 will be broadly consistent with those seen in the first half. The U.S. leadership changes we recently implemented are working, we are well positioned to deliver improved performance through a more competitive customer-led proposition. In fact, the encouraging underlying signs we're seeing give us the confidence to increase generosity to customers and improve our value proposition.

While this proactive action will result in a reduction in near-term profitability, investing behind customer momentum is an approach that has consistently served us well. This momentum and the current market dynamics mean now is the right time to move from a focus on margin growth to prioritizing AMPs and growing ARPU. This will position us well to extend our leadership in the U.S. market and capture further share in 2027. Turning now to prediction markets. We view prediction markets as an attractive opportunity. While we are closely monitoring their impact on the broader online sports betting market, we continue to see prediction markets as incremental to sports betting and iGaming, growing the overall market by capturing new demand. Our own prediction market offering, FanDuel Predicts, allows us to acquire customers ahead of sports betting regulation in new states while delivering incremental economics in the meantime.

While operational progress in H1 was slower than planned, we are gaining traction and have a clear roadmap for improvement. The integration of the Crypto.com exchange to expand our sports offering ahead of the FIFA World Cup has significantly enhanced our product proposition. In coordination with CME, we have agreed that all FanDuel Predicts sports and novelty contracts will now be moved to Crypto.com while continuing to provide our customers access to CME's extensive financial markets. This new exchange arrangement will ensure we can deliver new products at pace ahead of the NFL season start. Our One App offering is also enabling us to leverage FanDuel's nationwide brand equity, driving both accelerated penetration and marketing efficiencies. We believe we are also uniquely positioned to provide liquidity for combination markets across different prediction market platforms with a market-making offering that can scale rapidly and at low incremental investment.

It is very early days, but we already expect to generate approximately $50 million of revenue from market making this year, demonstrating both the good progress made so far and the potential opportunity. Turning now to international. We've made good progress in the quarter. We've strengthened our market-leading position in Italy and leveraged the power of the Flutter Edge to drive record engagement during the World Cup. As a result, revenue grew 10%, including the benefit of our SNAI and Betnacional acquisitions. AMP growth in the quarter was impacted by the closure of our India business last year. Italy continues to deliver exceptional levels of growth across both sportsbook and iGaming, and our revenue performance continues to outpace the market as we extend our market leadership. This was despite the short-term impact from the SNAI migration, which we successfully completed back in April.

As expected, the migration resulted in a brief period of share loss, but performance recovered strongly in June as customers embraced a significantly expanded product offering, with AMPs increasing 30% in June and strong parlay penetration during the World Cup. SEA iGaming revenues were up 34%, driven by new and exclusive content in Italy and an expanded product offer in Turkey. The post-migration recovery in SNAI and the strength of our first half performance in both Italy and Turkey give us confidence in sustaining this strong growth in the second half. In the UKI, Sky Bet customers are adapting well to the new highly rated user interface, driving a sequential improvement in Sky Bet performance, while overall iGaming growth in the UKI remains robust at 7%. The increase in U.K. iGaming tax became effective in April.

As a leading operator in the market, we are confident in the delivery of our first-order cost savings and in our ability to gain share as other operators begin to react to this increase. In Brazil, good operational progress, including the integration of Flutter's product and pricing capabilities into our local platform, was offset by more challenging market conditions driven by government socioeconomic measures. This resulted in Flutter Brazil organic revenue declining year-over-year in line with the market. We will continue to enhance our sportsbook product offering with further product rollouts enabled by the integration and improve iGaming generosity mechanics in the second half of the year. Brazil remains an attractive long-term opportunity, and we are focused on building a market-leading platform that scales our customer base and delivers strong returns.