2 March 2023

Flutter Entertainment plc - 2022 Preliminary Results

Exceptional US performance; Strong recreational customer growth across Group driving 2022 revenue

Flutter Entertainment plc (the "Group") announces preliminary results for year ended 31 December 2022.

	Reported1			Adjusted2
	FY	FY		FY	FY
	2022	2021		2022	2021		CC3
	£m	£m	YoY %	£m	£m	YoY %	YoY %
Average monthly players4 ('000s)				10,245	8,146	+26%
Group Revenue	7,693	6,036	+27%	7,693	6,036	+27%	+22%
Group EBITDA5	918	723	+27%	1,045	1,001	+4%	+4%
Group EBITDA excluding US				1,295	1,244	+4%	+2%
(Loss)/Profit after tax	(305)	(412)		336	454	-26%
(Loss)/Earnings per share (pence)	(170.8p)	(236.5p)		189.0p	252.7p	-25%
Net Debt at period end6	(4,644)	(2,647)

Pro forma references include Junglee, tombola and Sisal for a full 12-month period in both 2021 and 2022. Any differences due to rounding.

Operational Highlights:

•     Group: Strong 2022 performance with average monthly players ('AMPs') +26%, due to rapid US expansion, combined with benefit of Sisal and tombola acquisitions (pro forma +15%)

•     US: Scale benefits compounding, continuing to extend leadership position with over 3m AMPs in Q4

-     Clear #1 sportsbook; 50%⁷ Q4 share; Maryland and Ohio most successful state launches to date

-     Improved iGaming proposition driving market share gains to 21% in Q4

-     Positive EBITDA in Q2 and in Q4 excluding Maryland/Ohio investment

•     Group ex-US: Excellent recreational AMP growth

-     UK & Ireland: Product improvements and World Cup driving strong second half AMPs, partly offsetting annualisation of safer gambling initiatives and prior year Covid frequency benefit

-     Australia: Continued strong AMP growth, leading to resilient performance against tough H2 Covid comparatives and highly competitive environment

-     International: At growth inflection point with major regulatory headwinds annualised and exceptional revenue growth in Consolidate and Invest⁸ markets

•     Sustainability: Positive Impact Plan progressing well across all pillars; 40.1% of AMPs using Play Well tools⁹ in 2022, a 7.8 percentage point increase when compared with 2021

Financial Highlights:

•     Group reported revenue and EBITDA growth of 27%, benefiting from tombola and Sisal acquisitions

•     US revenue of £2.6bn ($3.2bn) at upper end, and EBITDA loss of £250m ($313m) at lower end, of guidance ranges

•     Group ex-US EBITDA within range, even after customer friendly sports results in December

•     Group Adjusted EBITDA +4% to £1,045m reflecting:

-     Benefit from Sisal and tombola acquisitions in 2022

-     Strong organic growth offset by £160m of known regulatory changes and safer gambling initiatives

•     Reported loss after tax of £305m (2021: £412m) after £608m charge for amortisation of acquired intangibles

•     Adjusted basic earnings per share reduced from 252.7p to 189.0p driven by higher interest and tax costs

•     Net debt of £4.6bn at 31 December 2022 following Sisal and tombola acquisitions as well as Adjarabet buyout. Pro forma leverage ratio of 3.9 times⁶ (2021: 2.6 times), or 3.2 times excluding US losses

Outlook:

•     Trading in the first 8 weeks of the year in line with expectations:

-     US delivering continued strong growth across existing states and from the very successful launches in Maryland and Ohio. US remains on track to be EBITDA positive for the full year 2023

-     Group ex-US revenues benefitting from strong momentum in UK & Ireland, and International, offsetting the impact of a more challenging environment and tough comparatives in Australia

Peter Jackson, Chief Executive, commented:

"Flutter delivered a strong performance in 2022, continuing to execute on the strategic priorities we outlined last March. Growth in our recreational customer base delivered 2022 revenue growth of 27% and we ended the year with a record 12.1m average monthly players in Q4.

We have an unparalleled number one position in the US where we continue to go from strength to strength. The combined power of the 'FanDuel Advantage' and the 'Flutter Edge' delivered our most successful launches to date in Maryland and Ohio. Leveraging our number one FanDuel brand we had a record Super Bowl and have acquired over 1.2m customers in 2023 so far.

Outside of the US we have been pleased with the performance of the business as we faced into regulatory changes and challenging comparatives. We are well placed to build on gold medal positions in our mature markets while we are delivering very strong growth in a range of attractive high growth markets. We have been really excited to add Sisal, the number one operator in the Italian market, to our brand portfolio, and we are making good progress with our integration strategy.

During the year, we invested £60m in safer gambling initiatives across the Flutter Group and have been really encouraged by the 8-percentage point increase achieved in safer gambling tool usage to over 40% of our player base.

We recently announced that we believe an additional US listing of Flutter's ordinary shares will yield a number of long-term strategic and capital market benefits. We have begun an extensive consultation with our shareholders and early feedback has been supportive. We look forward to continued engagement with investors and stakeholders on this matter and we will announce the results of this engagement in due course.

2023 is off to a pleasing start driven by positive momentum from the end of last year. With our combined US business on track to deliver a positive EBITDA for the full year 2023 for the first time, the Group is currently at an earnings' transformation point and we look forward to delivering future growth and progressing further against Flutter's strategic priorities in the coming year."

 

Analyst briefing:  The Group will host a questions and answers call for institutional investors and analysts this morning at 9:30am (GMT). Ahead of that call, a presentation will be made available on the Group's corporate website (www.flutter.com/investors) from 8:00am. To dial into the conference call, participants need to register here where they will be provided with the dial in details to access the call.
Contacts:
Investor Relations:
Paul Tymms, Group Director of Investor Relations and FP&A	'+ 44 75 5715 5768
Ciara O'Mullane, Director of Investor Relations	'+ 353 87 947 7862
Liam Kealy, Director of Investor Relations	'+ 353 87 665 2014
Press:
Kate Delahunty, Group Director of Corporate Communications	'+ 44 78 1077 0165
Lindsay Dunford, Group Head of Corporate Affairs	'+ 44 79 3197 2959
Rob Allen, Group Head of Corporate Campaigns	'+ 44 75 5444 1363
Billy Murphy, Drury Communications	'+ 353 1 260 5000
James Murgatroyd, FGS Global	'+ 44 20 7251 3801

 

 Business review ^2-5

As the number one sports betting and iGaming operator globally, Flutter represents a unique and compelling investment opportunity. The US market is expected to be worth more than $40bn by 2030, while outside of the US, the market is already worth £263bn, growing at a projected 9% CAGR over the next five years¹⁰. With just 30% of this combined market opportunity currently taking place online, this provides a long runway for future growth.

Flutter has set clear strategic objectives to deliver sustainable value in this market. An unparalleled portfolio of products, diversified geographic footprint and the benefit of the combined power of the Group, the Flutter Edge, provide key competitive advantages which empower Flutter's brands to win in their respective markets.

Within the US, our sustainable leadership position delivers superior economics and will transform the earnings potential of the Group. Outside of the US, our scale and diversified position provides a resilient and robust model for further growth and cash generation through regulatory change. This is evidenced by the Group's strong track record of delivery with 22% compound annual EBITDA growth since 2017.

During 2022, we leveraged our key advantages to deliver a strong performance with excellent progress against our strategic objectives. The US was our largest division by revenue in 2022. FanDuel extended its leadership position with a Q4 online sportsbook market share of 50% (10 percentage points higher than Q4 last year) while growing its podium position in iGaming to a 21% share. Our US business remains firmly on track to be EBITDA positive for the full year 2023.

In our Group ex-US business, we continued to see good growth while facing into the impact of regulatory changes. In the UK & Ireland, we delivered strong recreational customer growth as well as benefiting from the reopening of our retail estate and the acquisition of tombola. Product innovation resulted in an improved H2 performance, driving momentum into 2023. This partially offset the reversion of customer activity to pre Covid levels and the annualisation of our proactive safer gambling measures from 2021. In Australia we drove excellent AMP volumes against a more challenging operating environment in the second half due to the unwind of Covid player engagement and a more competitive landscape.

In our International division we have reached a growth inflection point. The business is set to annualise the major known regulatory headwinds in March 2023. The division is also on a more sustainable footing with minimal single unregulated market exposure resulting in 97% of the Group's total revenue now coming from regulated markets. Revenue in our Consolidate and Invest markets, which represent 76% of the division, were up 22% on a pro forma basis in 2022 and we also secured the #1 position in Italy following completion of our acquisition of Sisal in August.

We made significant strides on our sustainability agenda with our Positive Impact Plan. Under the Play Well pillar, we achieved a 7.8 percentage point increase in tool usage in 2022 to 40.1% and we invested a total of £60m in safer gambling initiatives during the year. Our Work Better pillar also saw positive progress with 33% female representation at leadership level in 2022. Within our communities our pledge to Do More saw over 440,000 lives improved through funding activities focused on sport, technology for good and health and well-being. Finally, we continued to develop our path to zero and Science Based Targets as part of our Environmental goals.

As we look forward into 2023, the Group is at an earnings transformation point, and very well placed to deliver future growth and progress further against our strategic priorities.

2022 review

Flutter delivered strong revenue growth of 22% with AMPs up 26% to 10.2m during the year, driven by our ongoing expansion in the US and the benefit of the Group's acquisitions of Sisal and tombola. On a pro forma basis both revenue and AMPs delivered excellent growth, up 14% and 15% respectively. Group Adjusted EBITDA was £1,045m, 4% higher. On a pro forma basis, Group Adjusted EBITDA was 5% lower after the impact of known regulatory headwinds and safer gambling initiatives of £160m, excluding which EBITDA was 9% higher.

US

The US division delivered an exceptional performance in 2022, with revenue at the upper end and an EBITDA loss at the lower end, of our guidance ranges. Revenue grew 67% to £2.6bn ($3.2bn) with AMPs exceeding 3m for the first time in Q4, while our EBITDA loss reduced by 6% to £250m ($313m). At our Capital Markets Day in November, the FanDuel team outlined how the FanDuel Advantage of (i) acquiring customers more efficiently (ii) retaining customers for longer and (iii) growing customer value better than competitors is driving our significant market outperformance. Underpinned by the Flutter Edge, this continued to play out in Q4 with FanDuel commanding a 50% gross gaming revenue ('GGR') share of the online sports betting market and now number one in 15 of the 18 states in which it is live today. We continued to refine our state playbook. Our sophisticated player acquisition strategy and market-leading product have delivered our two most successful state launches to date in Maryland (Nov 2022) and Ohio (Jan 2023). Both are gold medal positions, with penetration reaching over 6% of the total adult population in those states combined since launch.

We have a clear strategy to improve our iGaming performance and grow our podium position, through increasing our focus on casino direct iGaming customers and improving our product range and player experience. Although it is early days, we are pleased by progress to date. Q4 customer player days were 1.5 times the comparable period last year benefitting from the introduction of our FanDuel casino daily reward machine in Q3. Flutter exited the year with 63% growth in Q4 iGaming AMPs and a 21% share of the Q4 iGaming market, with FanDuel Casino share three percentage points higher than in Q4 2021.

Our flywheel continues to drive efficient expansion. Total operating costs (sales and marketing combined with operating costs) reduced as a percentage of revenue by 19 points in H2. We are also outpacing our competition with Flutter US revenue in 2022 over $900m higher than our next nearest competitor and with one third of the EBITDA loss. We were the first operator to reach profitability in the US in Q2. Additionally, in Q4, Flutter US EBITDA was £31m ($36m), excluding new state investment in Maryland and Ohio. The increasingly profitable progression of our customer cohorts, together with the compounding benefit of our flywheel underpin our confidence in delivering a positive full year 2023 EBITDA.

Group excluding the US

Group ex-US revenue grew 7% with Adjusted EBITDA up 2% to £1,295m, within guidance range even after customer friendly sports results in December which cost nearly £40m.

On a pro forma basis revenue was flat year on year, while Adjusted EBITDA declined 6%. After adjusting for the previously guided headwinds of £160m (i) proactive safer gambling initiatives in the UK & Ireland (£38m) (ii) Australian tax changes (£22m) and (iii) regulatory changes in International markets (£100m), Adjusted EBITDA for the Group ex-US was 6% higher year on year.

UK & Ireland

Online momentum in Q4 was strong with pro forma revenue 14% higher, despite adverse sports results in the quarter, which impacted revenues by £66m. This Q4 performance helped deliver H2 pro forma revenue growth of 4%, reflecting improvements to our product proposition throughout the year, and the actions we have taken to ensure our teams work more efficiently. This compared to a decline of 19% in H1, which was impacted by the annualisation of our proactive safer gambling initiatives taken across 2021 and the prior year Covid-related peak in player days. Full year reported UK & Ireland revenue growth of 4% benefitted from the addition of tombola in January 2022 and our retail shops being open during the year.

Pro forma player volumes increased 4% (reported +18%) across 2022, peaking in Q4 at 18% higher aided by the World Cup. In Sky Bet, two thirds of World Cup customers used the new BuildABet product that was launched at the start of the year, while Paddy Power dominated social media, driving double the Twitter engagement of all other betting brands combined.

Ongoing delivery of new and improved products for customers is a key element in our winning formula. During the second half, SkyBet further enhanced their new BuildABet product making it easier for players to track progress of their bets and updated their pre-game football proposition. Betfair's gaming proposition was refreshed, while Paddy Power launched Wonder Wheel bonus rounds during the World Cup, which helped drive their multi-product players seven percentage points higher year on year in H2. We also launched Paddy Power's first fully native gaming iOS app and additional branded gaming content boosting retention rates. These innovations drove pro forma gaming AMPs 10% higher during 2022.

During the year, we launched a range of efficiency initiatives to further integrate our UK & Ireland brands. We simplified team structures to allow us to operate more effectively. These offset the higher levels of wage inflation to keep pay competitive in light of current macro-economic trends. We improved the effectiveness of marketing and generosity spend by ensuring we more accurately deliver the right value to the right customers. In 2022, pro forma sales and marketing declined 13% or 100 basis points as a percentage of revenue, with further efficiency savings expected in 2023.

In Ireland, we welcome the publication of the draft Bill to establish the Gambling Regulatory Authority, as a consistent supporter of regulation in Ireland. We will work with the Authority as they create the new regulatory framework. In the UK, we believe the proactive initiatives we have taken on safer gambling position us well for the eventual publication of the Gambling Act Review White Paper.

Australia

Sportsbet delivered a solid performance with AMPs up 8% to 1.1m. Revenue was 6% lower, reflecting a Covid tailwind in H1, offset by (i) the H2 unwind of Covid engagement levels against challenging comparatives, (ii) increased competition in H2 and (iii) the impact of event cancellations due to adverse weather conditions. These factors, combined with increased point of consumption ('POC') taxes introduced in July 2022 of £22m (annualised impact: £73m), led to a decline in EBITDA of 13% to £390m.

As the clear market leader with over 48%¹¹ of the Australian online sports-betting market, Sportsbet benefitted most from the retail to online migration during the Covid lockdown periods in 2020 and 2021, growing 1.4 times that of the online market. Strong execution against our retention strategy meant that customer growth has been sustained. We delivered a record 1.3m AMPs in Q4, 1.8 times Q4 2019, positioning the business well into 2023. As retail and society fully reopened during 2022, AMP growth was more than offset by the reversion of online player engagement from peak Covid levels (H2 average player days 9% lower than the same period in 2021) and competitive intensity which stepped up significantly in 2022, particularly in Q4. This led to high levels of generosity with customers shopping around for the most generous offers.

Leveraging structural margin gains from continued product leadership, Sportsbet increased promotional investment and sales and marketing spend during Q4 which contributed to the record AMP levels. We are confident that the plans we have in place for 2023 are the right strategy to drive future growth over the medium term. We will do this through continuing to deliver product innovation and personalised generosity while leveraging our growing recreational customer base, unparalleled local scale and long track record of growing through regulatory changes.

International

International division revenue grew 24%, or 7% on a pro forma basis, reaching a growth inflection point after a period of significant regulatory change. International has four market types: (i) Consolidate existing #1 positions, (ii) Invest for leadership in high growth markets, (iii) Optimise returns, or (iv) Maintain an existing position. Our Consolidate and Invest markets now represent 76% of revenue and grew at 22% on a pro forma basis (reported +68%) during 2022. This highlights the very attractive positions we have in these markets, including India, which grew at 80% and is expected to become our second largest market behind Italy in 2023.

In August, we completed the acquisition of Sisal, the #1 operator in Italy, Europe's largest gambling market with GGR of £18bn in 2022, including lottery. The online market is expected to grow at a compound rate of 9% over the next three years, with just 19% of the market online in 2022¹⁰.

Sisal has significant competitive advantages through its omni-channel offering in an Italian market with advertising restrictions, a nine-year Italian lottery concession and monopoly positions in other markets. Sisal's performance in 2022 was fantastic, growing proforma revenues by 32% to £863m and EBITDA by 22% to £247m. Sisal's online market share increased to 13.4% in Q4¹², 140 basis points higher than the prior year (Flutter combined online market share 22%). This performance was driven by:

•     High levels of cross sell to online from Sisal's retail network of 9.5 million customers, including providing additional opportunities for lottery players to win with an online account

•     Product leadership in sports from the launch of innovative products such as 'Duo', which provides continuity of player bets on a substituted player or the social betting game 'Tipster'

•     Significant improvements in Sisal's gaming offering across 2022, including the creation of a proprietary games' development studio and integration of gaming content onto betting and lottery apps

We provided Sisal with access to the Flutter Edge, which resulted in Sisal being the first operator to launch cash-out in the Italian market following its regulatory approval. We have also supplemented the Sisal team with access to some of our people talent and won a combined tender to be the monopoly Moroccan sports betting operator.

Capital structure and balance sheet update⁶

The Group had gross debt of £5,442m¹³ at 31 December 2022 and a net debt position of £4,644m (31 December 2021: £2,647m), which represents a pro forma leverage ratio of 3.9x or 3.2x excluding the 2022 US EBITDA loss. During 2022, the Group acquired tombola for £410m in January, the remaining 49% stake in Adjarabet for £204m and the Sisal business in August for £1.7bn.

The Group remains committed to its previously stated medium-term leverage target of 1-2 times, at which point the Board will review the Group's dividend policy. The Group continues to generate significant free cash flow and the future profitability profile of the Group, in particular US profit growth, will facilitate rapid de-levering.

Other updates

 

US listing

The Flutter Board has reached a preliminary view that an additional US listing of Flutter's ordinary shares will yield a number of long-term strategic and capital market benefits. As we outlined here, we have begun a consultation with our shareholders to determine whether to put forward a formal resolution for approval. We will announce the results of this consultation, once we have concluded an extensive program of engagement with our investors and stakeholders.

FOX arbitration

As previously disclosed, the legal arbitration process with FOX Corporation remains ongoing. As noted in our recent announcement, in the event that there is shareholder support for an additional US listing, this will take precedence over any plans to list a small shareholding in FanDuel.

 

Current trading/outlook

Trading for the Group in the first 8 weeks of the year has been in line with expectations. Our US division has been delivering continued strong growth across existing states, as well as through the very successful launches in Maryland and Ohio. We remain on track to be EBITDA positive for the full year 2023.

Group ex-US revenues have benefitted from continued strong momentum in UK and Ireland and International from Q4 2022, which has offset the impact of a more challenging environment and tough comparatives in Australia.

For 2023 the Group also anticipates:

•     Capital expenditure of £480m-£500m (2022 reported: £403m, pro forma: £456m)

•     Group Adjusted depreciation and amortisation charge of approximately £480m (2022 reported: £370m, pro forma: £434m), reflecting increased US product investment and Group investment in casino studios and shared platforms

•     A weighted average cost of debt of 5.6%

•     An effective tax rate of 25-27% for the Group ex-US (2022: 22.9%) reflecting the addition of Sisal and the changing mix of taxable earnings across our geographies

 

 Operating and financial review^1-6

Group

	FY	FY		CC
	2022	2021	Change	Change
Unaudited Adjusted	£m	£m	%	%
Average monthly players ('000s)	10,245	8,146	+26%
Sports revenue	4,788	3,774	+27%	+21%
Gaming revenue	2,906	2,262	+28%	+23%
Total revenue	7,693	6,036	+27%	+22%
Cost of sales	(3,164)	(2,262)	+40%	+33%
Cost of sales as a % of net revenue	41.1%	37.5%	+370bps	+350bps
Gross profit	4,529	3,774	+20%	+15%
Sales and marketing	(1,853)	(1,508)	+23%	+15%
Contribution	2,676	2,266	+18%	+15%
Other operating costs	(1,524)	(1,164)	+31%	+25%
Corporate costs	(107)	(101)	+7%	+6%
Adjusted EBITDA2,5	1,045	1,001	+4%	+4%
Adjusted EBITDA margin %	13.6%	16.6%	-300bps	-240bps
Depreciation and amortisation	(370)	(255)	+45%	+38%
Adjusted operating profit	675	746	-9%	-9%
Net finance expense	(158)	(126)	+25%
Adjusted profit before tax	518	620	-17%
Taxation	(182)	(166)	+9%
Adjusted profit for the period	336	454	-26%
Adjusted basic earnings per share	189.0p	252.7p	-25%
Net debt6 at period end	(4,644)	(2,647)	+75%

Acquired businesses Junglee (January 2021), Singular (September 2021), tombola (January 2022) and Sisal (August 2022) have been included on a reported basis. Pro forma references within the commentary for a specified period include Junglee, tombola and Sisal as though part of the Group in both 2021 and 2022 for the entire period. A full analysis of the Group's reported performance can be found at pages 19-20.

Flutter delivered strong 2022 revenue growth of 22%, driven by continued expansion of our recreational base with AMPs up 26% to 10.2m. Our rapidly scaling US business was a key driver of this success with revenue 67% higher. Growth outside of the US of 7% benefitted from the Group's acquisitions of Sisal and tombola during the year.

Pro forma Group revenue and AMPs also delivered excellent growth, up 14% and 15% respectively. Pro forma revenue outside of the US was flat year on year, as we annualised the impact of our proactive safer gambling changes in the UK & Ireland, faced into Covid comparatives and a more challenging environment in Australia as well as the known regulatory changes in our International business.

Cost of sales as a percentage of net revenue increased by 350 basis points to 41.1%. This was primarily driven by our launch in New York, where gaming tax rates are higher, as well as an increase in Australian POC taxes.

Sales and marketing costs of £1.9bn were 15% higher year on year, driven by continued investment in the US. As a proportion of revenue, investment reduced by 150 basis points to 24.1% for the Group.

Other operating costs increased 25% also reflecting US investment, as well as the acquisition of Sisal. On a pro forma basis, costs outside of the US costs increased by 4%, primarily driven by the post Covid reopening of Sisal retail in H1, offset by cost efficiencies in the UK & Ireland.

Group Adjusted EBITDA was £1,045m, up 4% including the £250m US loss. On a pro forma basis, Adjusted EBITDA was 5% lower. Group ex-US declined 6%, but was 6% higher after adjusting for the previously guided impacts of (i) proactive safer gambling initiatives in the UK & Ireland (£38m) (ii) Australian tax changes (£22m) and (iii) regulatory changes in International markets (£100m).

Group Adjusted depreciation and amortisation increased, primarily due to the addition of Sisal during the year and growth in our US division.

The Group's Adjusted effective tax rate in the period was 35.1% (2021: 26.8%), driven by the changing mix of taxable earnings across geographies, including the acquisition of Sisal. The Group ex-US effective tax rate in the period was 22.9% (2021: 18.5%).

Adjusted basic earnings per share reduced from 252.7p to 189p. This decline reflects the increased tax charge, as well as an increase in interest expense, driven by the Sisal acquisition and higher cost of debt in H2.

Net debt at 31 December 2022 was £4,644m. This was £2bn higher than the prior year, due to the acquisitions of Sisal and tombola and the buyout of Adjarabet minority shareholders, which offset the free cash flow generated by the operating activities of the Group during the year.

A full analysis of the Group's reported performance can be found at pages 19-20.

 

US³

	FY	FY		CC
	2022	2021	Change	Change
Unaudited Adjusted	£m	£m	%	US$
Average monthly players ('000s)	2,319	1,557	+49%
Sportsbook stakes	23,550	11,284	+109%	+87%
Sportsbook net revenue margin	7.3%	6.3%	+100bps	+100bps
Sports revenue	1,985	978	+103%	+81%
Gaming revenue	619	413	+50%	+34%
Total revenue	2,604	1,391	+87%	+67%
Cost of sales	(1,306)	(614)	+113%	+90%
Cost of sales as a % of net revenue	50.1%	44.1%	+600bps	+620bps
Gross profit	1,298	778	+67%	+49%
Sales and marketing	(964)	(663)	+45%	+30%
Contribution	334	115	+192%	+158%
Other operating costs	(584)	(357)	+63%	+47%
Adjusted EBITDA2,5	(250)	(243)	+3%	-6%
Adjusted EBITDA margin	(9.6%)	(17.5%)	+790bps	+750bps
Depreciation and amortisation	(78)	(47)	+68%	+50%
Adjusted operating loss	(328)	(289)	+13%	+3%

The US division includes FanDuel, FOXBet, TVG, PokerStars and Stardust brands, offering regulated real money and free-to-play sports betting, casino, poker, daily fantasy sports and online racing wagering products to customers across various states in the US and in Canada.

Revenue grew 67% to £2.6bn ($3.2bn) during 2022 with an Adjusted EBITDA loss of £250m ($313m). This reflects a 6% reduction in our EBITDA loss, while continuing to deliver significant growth within the business. FanDuel Group represented 97% of US revenue and 70% of the Adjusted EBITDA loss.

Sports revenue grew 81% with sportsbook up 115% while DFS and TVG (now less than 10% of total revenue) declined 12%, driven by successful conversion of our DFS customer base to our sportsbook product.

Sportsbook performance was also driven by:

•     Excellent staking growth of 87% through further expansion of our online footprint to five new states (New York, Louisiana and Wyoming in Q1, Kansas in Q3 and Maryland in Q4). We also benefited from continued strong growth in states launched before 2021 with staking and revenue up 24% and 42% respectively

•     Net revenue margin growth of 100 basis points, driven by a significant improvement in structural margin, due to our market leading pricing and risk management capabilities and superior product proposition. This funded a step up in efficient generosity spend in new and existing states, which continues to deliver a good return. Sports results were broadly in line year on year, with unfavourable results in H1 largely offset in H2 with bookmaker friendly outcomes

iGaming revenue increased by 34%, due to strong player growth and higher levels of engagement. This was particularly the case in H2, with revenue up 37% (H1 +31%). Our focus on acquiring direct casino customers, our broadened product portfolio and the new FanDuel Casino brand strategy led to a step up in momentum, exiting the year with iGaming AMPs up 63% in Q4.

Cost of sales was 620 basis points higher at 50.1% of revenue, driven by our launch in New York in Q1 where the gaming tax rate is unusually high. Excluding New York sportsbook, cost of sales would have been 43.8% of revenue during 2022, compared with 44.1% in 2021.

Sales and marketing costs increased by £301m to £964m ($1.2bn), but declined as a percentage of revenue by almost 11 percentage points. This is driven by a greater proportion of our business coming from existing states where the proportionate levels of marketing spend are lower. Additionally, our footprint is also expanding across the US, meaning we can benefit from the efficiencies of national advertising.

Operating costs increased by 47% reflecting ongoing expansion, delivering good operating leverage when compared with revenue growth of 67%, which was 20 percentage points higher.

 

UK & Ireland

	UK & Ireland Total				UK & Ireland Online				UK & Ireland Retail
	FY	FY	CC		FY	FY	CC		FY	FY	CC
Unaudited Adjusted	2022	2021	Change		2022	2021	Change		2022	2021	Change
	£m	£m	%		£m	£m	%		£m	£m	%
Average monthly players ('000s)					3,710	3,153	+18%
Sportsbook stakes	9,981	11,376	-12%		8,633	10,473	-17%		1,348	904	+48%
Sportsbook net revenue margin	10.6%	9.9%	+70bps		10.1%	9.7%	+40bps		13.5%	12.6%	+90bps
Sports revenue	1,181	1,282	-8%		998	1,168	-14%		183	114	+60%
Gaming revenue	963	781	+23%		873	721	+21%		90	60	+49%
Total revenue	2,144	2,063	+4%		1,871	1,889	-1%		272	174	+56%
Cost of sales	(653)	(621)	+5%		(592)	(581)	+2%		(61)	(40)	+54%
Cost of sales as a % of net revenue	30.5%	30.1%	+30bps		31.6%	30.8%	+80bps		22.5%	22.9%	-30bps
Gross profit	1,490	1,442	+3%		1,280	1,308	-2%		211	134	+57%
Sales and marketing	(381)	(391)	-3%		(374)	(384)	-3%		(6)	(6)	+4%
Contribution	1,110	1,051	+6%		905	923	-2%		204	128	+59%
Other operating costs	(455)	(435)	+6%		(293)	(298)	-%		(162)	(138)	+18%
Adjusted EBITDA2,5	654	616	+6%		612	626	-3%		42	(10)	-551%
Adjusted EBITDA margin	30.5%	29.9%	+50bps		32.7%	33.1%	-60bps		15.4%	(5.6%)	+2,080bps
Depreciation and amortisation	(136)	(126)	+8%		(89)	(85)	+5%		(47)	(41)	+15%
Adjusted operating profit	519	490	+5%		524	541	-4%		(5)	(50)	-90%

The UK & Ireland division operates Paddy Power, Betfair, Sky Betting & Gaming and tombola brands online, as well as retail operations in the UK & Ireland. tombola was acquired in January 2022 and pro forma references within the commentary include tombola as though part of the division in both 2021 and 2022 for the entire period.

Total UK & Ireland revenue grew 4% and Adjusted EBITDA was 6% higher at £654m. This reflects (i) the acquisition of tombola in January 2022, (ii) our retail business being open for the entire year, compared to the Covid-related closures of the prior year and (iii) an improved product offering, particularly in H2. This was partially offset by a return to player activity closer to pre-Covid levels and our safer gambling measures. On a pro forma basis revenue was 4% lower with EBITDA flat year-on-year.

UK & Ireland Online

Player momentum remains strong with AMPs up 18% (pro forma +4%), including 18% pro forma growth in Q4, aided by strong engagement during the World Cup.

Revenue was 1% lower for the year with sequential improvement from -12% in H1 to +15% in H2 (pro forma FY22 -9%, H1 -19%, H2 +4%). The growth in players, improved momentum across H2 and addition of tombola was offset in H1 by the 2021 peak in Covid related player engagement and the annualisation of our proactive safer gambling measures introduced during 2021.

Sports revenue declined by 14% (H1 -24%, H2 +1%) reflecting these challenging comparatives. World Cup sportsbook stakes were in line with the prior year's European Championships, while sportsbook net revenue margin increased 40 basis points, reflecting structural gains following the launch of Bet Builder products during the year. Sports results were slightly adverse for the year, including 300 basis points of adverse Q4 results mostly offset across the earlier quarters.

Gaming revenue increased 21% (pro forma -1%) including 34% growth in H2 (pro forma +8%). This was driven by strong player momentum throughout the year and consistent delivery of product improvements across all our brands.

Cost of sales as a percentage of revenue increased by 80 basis points to 31.6%, reflecting higher transaction fees and streaming costs.

Sales and marketing decreased by 3% (pro forma -13%) to 20.0% of revenue. This was 100 basis points lower than the prior year on a pro forma basis, from the delivery of efficiencies within our marketing spend. Other operating costs were in line, but 10% lower on a pro forma basis. This reflects cost efficiencies, along with the one-off benefits from the sale of Oddschecker in 2021 and lower performance related pay, being partially offset by inflationary increases in employee pay and data.

Online Adjusted EBITDA declined £14m year on year to £612m, with a 35% increase in H2 being offset by a H1 decline of 24%. This trend reflects the revenue performance outlined above and consistent cost reduction throughout the year.

UK & Ireland Retail

Retail revenue grew 56% with our estate open throughout the year, generating Adjusted EBITDA of £42m. This compared to an Adjusted EBITDA loss of £10m in 2021, when our shops were closed from January to April in the UK and to May in Ireland due to Covid-related restrictions.

Revenue and Adjusted EBITDA have returned to 87% and 55% of 2019 levels, respectively reflecting the slower return of footfall in Ireland post-Covid restrictions and inflationary cost pressures. UK revenue is in line with 2019, with strong performance from betting and gaming terminals, while the Irish estate is at 70% of 2019 revenue.

Other operating costs increased by 18% year on year, reflecting our shops being fully open for the year and inflationary cost pressures.

At 31 December 2022, we had 608 (31 December 2021: 625) retail outlets with 356 in the UK and 252 in Ireland.