Flutter Entertainment PLC (FLUT) 2021 Q2 法說會逐字稿

Good morning, and welcome to the Flutter H1 results update call. My name is Joe, and I'm your operator today. (Operator Instructions) Today's call is recorded. (Operator Instructions) But first, I will hand over to Peter Jackson, Group CEO of Flutter. Please go ahead, Peter.

Thank you, Joe. Good morning, everyone, and thank you for joining us. With me today is Jonathan Hill, our CFO.

Hopefully, you've had a chance to read our announcement and watched the presentation we released this morning. But for those who have not yet, I'll just cover off a few of the key points.

Firstly, we're very happy with the progress we've made in continuing to scale our U.S. business. Flutter U.S. is now 50% bigger in revenue terms than our next nearest online competitor, with a gap between FanDuel and each of its competitors widening during the first half.

Our sports betting and gaming customer base is now 3x as big as it was just 12 months ago, having added 1.7 million customers in the last year alone. We believe that our superior sports products and the strength and reach of the FanDuel brand have been the key drivers of this growth.

In Q2, we crossed $0.5 billion mark in quarterly U.S. revenues for the first time with our U.S. division, now their second largest in revenue terms within the Flutter Group. As a result of our strong customer acquisition and retention, we now expect to generate between $1.8 billion and $2 billion in U.S. revenue this year.

While delighted with the performance of the business as a whole, our market share in sports betting particularly stands out. We finished Q2 with a 45% share at the U.S. online sports betting market, leading in new and more mature states alike. And while we believe there are good opportunities for us to grow our gaming share as we better leverage more of Flutter's in-house capabilities, it is the shape and pipeline of new state regulation with its emphasis on sports betting that is particularly exciting.

We now expect up to 9 further U.S. states to regulate mobile sports betting by the end of 2022, close to doubling the proportion of the U.S. population that will be able to sports bet legally online.

And of those 9 states, just one is expected to regulate gaming initially. Given the strength of our sports betting offering and the key competitive advantages we enjoy in this space, we feel this positions FanDuel very well to compound its leadership position.

Secondly, our performance outside the U.S. has exceeded our expectations during the first half. In both our U.K. and Ireland and Australia divisions, online earnings grew by more than 50% year-on-year in the first half. This is being driven by recreational customer growth. We grew our average monthly players, or AMPs, by 44% in the U.K. and Ireland and by 52% in Australia in H1. These growth rates reflect an ongoing shift for customers from retail to online.

In the U.K. and Ireland, where we have only emerged fully from stay-home restrictions relatively recently, it is probably a little bit soon to say definitively how firm that shift in player behavior has been.

But in Australia, which was largely unaffected by COVID for much of H1 and where our retail competition was open, we now believe that the events of the last 18 months have resulted in a permanent step change in the size of our business there with customer retention that has exceeded even our most optimistic expectations.

In international, the revenue decline following the spike in player activity in H1 last year was less pronounced than we expected, albeit the division did continue to benefit from a tailwind from ongoing stay-at-home restrictions in parts of Europe.

We are transforming the shape and quality of our International division by investing more in regulated and high-growth markets with encouraging early signs. Our customer base in H1 was just 3% below the elevated levels of H1 last year. What this all means is that we have today issued 2021 EBITDA guidance for the group ex U.S. of GBP 1.27 billion to GBP 1.37 billion, materially above current consensus.

Finally, we've announced this morning that we now believe our U.S. business will be profitable in 2023 based on the expected timetable for new state regulation. We believe this will have a transformational impact on the overall earnings, cash generation and balance sheet profile of the group.

To be clear, we are not setting a target day for profitability. The date our U.S. business turns profitable remains an output for us. We remain entirely focused on growing the embedded value of the business by acquiring as many customers as we can as long as we can generate attractive returns on investment.

The 2023 projection instead reflects simple mathematics. We now believe we'll reach a tipping point in 2023, where the sheer scale of our existing U.S. customer base and the positive contribution those customers generate will more than offset the cost of acquiring additional new customers and the more fixed operating cost base of the business.

Slides 29 and 30 of our presentation cover this in more detail.

Our projection assumes that none of California, Florida or Texas launch online sports betting/gaming before 2024. Should one of those large states regulate sooner, our level of investment in new player acquisition would be higher and profitability could be delayed. But such a scenario represents a nice problem to have as it mean our TAM will be bigger again.

If the U.S. does turn profitable in 2023, it is not difficult to see what that would mean for Flutter's overall earnings and cash flow profile and the leverage benefits that would bring.

Overall then, I'm delighted with how the business is performing and the longer-term prospects for the group. With that, I'll be happy to take any questions you have. (Operator Instructions)

With that, I'll hand over to Joe.

(Operator Instructions) Can we have our first question, that's coming from Michael Mitchell from Davy.

Peter, Jonathan, two, if I could. Firstly, on the U.S. And one of the more notable features of your performance in market share terms for us has been what appears to be a strengthening [hat] in your position as each day becomes more established and you can comment in terms of market share kind of across New Jersey, Pennsylvania and Indiana being 51% in the period. I wonder if you could comment on that dynamic, and why you think the gap between FanDuel and other competitors tends to widen and how sustainable those structural drivers are.

And then secondly, on Australia, if I could. Despite snap lockdowns of the country, that country did emerge from the more sustained COVID disruption 7 or 8 months ago and yet AMPs in Q2 were up 61% year-on-year against a high watermark.

And I wonder, could you comment again just in terms of how -- why you've been so successful in retaining what looks to be the majority of the retail customers you acquired through the COVID disruption.

Thank you, Michael. Look, I think the question you asked about the U.S. is an important one because it is true that we are seeing our position strengthening in sports. And I think it's down to the factors that we've talked about for a long time. We do have a fantastic product. And we do benefit from having brilliant pricing and risk management capabilities, not just in FanDuel, but ones which we can leverage from across the globe as well.

And if I reference a few pages in the presentation, if you look at Page 33, for example, and you look at the benefits we're getting from Same Game Parlay, as an example of what we're doing from a product perspective, I think that's a really good example. And it's one thing towards us buying these products externally, which often leaves them so [satedness] of the size of the products, but another thing to actually develop it in-house as we've done and have it an integral part of the customer experience. And I think that is important.

If you look at Page 35, you can see that we've seen some very structural benefits from margin, which have actually only grown in recent times as actually customers have taken advantage of some of the range of products we have.

And I think one of the things that we're showing today that we haven't commented on before, you see on Page 37, is actually the database we have for DFS has almost doubled since 2017. And that's as a result of the sort of big investments we've been putting into the FanDuel brand.

So I feel like a lot of this stuff is sustainable. We are continuing to invest in product. We are bringing more of our markets that we're managing from a pricing risk management perspective in-house. And we are continuing to pour more money into building and developing the FanDuel brand with all the benefits of that drive. So I think we're in a strong position.

With regards to your question about Australia, it is true that the Australians have had a very different sort of path through COVID than a lot of the rest of the world. Unfortunately, a lot of them are now back into a lockdown there. But look, I do believe we have seen a permanent step change in the size of the business. And whilst last year there was not a lot of sport going on, but racing continued.

And so that has led to growth in AMPs. I think what we're seeing is a lot of customers trialed and sampled our online product in the period and actually found that they really liked it. We've got some fantastic public innovations in the Australian markets. We just launched Bet with Mate, which has been a fantastic way of bringing in another wave of new customers. And of course, we're offering generosity and value to our customers in the market in ways that the retail monopoly provider can't do.

So I think that's what's leading to us having us a permanent step change in the size of the business. And of course, we're getting brilliant operating leverage off the back of that as well as we haven't had to sort of grow our business at the same time. And we'll talk more about that in September on the 22nd when we do our Investor Day. So it will be a good opportunity for you to talk to Barni and the rest of the team.

The next question is coming from Ed Young from Morgan Stanley.

And thanks for the additional disclosure on the U.S., very useful. My first question is on the U.S. You mentioned a couple of times, Peter, direct casino acquisition. And I note your well-made point around the next wave of states being sport. Most of what you spoke about in the presentation was -- it sounded like the pipeline of product improvements, you expect to put into that area. But can you talk a little bit more about brands. I appreciate you've got Stardust, and perhaps you could touch on that. But do you think you need another direct acquisition brand? How you think about casino or gaming databases in the states?

And then my second question is on the international, sort of the near image of the rest of the group in terms of sort of gaming versus sports, I guess. I think some of your launches over the last year have been, even on third-party platforms, I guess, were sort of paced and you're going to move to in-house. So can you talk a little bit about that transition, how you think sports and international growth in general might look and what the time line for is that. I know you said it won't be overnight, but just to give us an idea of when growth in that area might look a bit more like growth in some of your other markets on the sports side of strength on that side. That would be very useful.

Thanks, Ed. And I realize we've put a lot of information out to you all earlier this morning, so apologies if I've ruined all of your breakfast, but there was just no other way for us to do it, I'm afraid.

As it relates to the U.S., I think it is right that we've got a very strong position in sports. FanDuel has always been synonymous with that. The DFS database has given us a strong advantage, which has allowed us to build to the position that we've got to.

I think it is also worth remembering that when we think about casino, we run the world's largest online casino business and have tremendous capabilities, knowledge and know-how in doing so. And so the plan that we have for the U.S. is to make sure that we can bring a lot of that expertise into the U.S. market. And we will continue to do so, whether it's the products that we've developed and grown in-house.

And actually, when I look at the proportion of our revenues in the international casino business that comes from our own products, it's now sort of approaching 20%, which I think positions us well and shows we're good at building our own products out. So that's one thing.

But we're also getting much better at improving the cross-sell journeys that we see in the U.S. So for example, we were able to offer some promotional mechanics to users of the Same Game Parlay product that gave them, in states where it's relevant, access to some free spins in casino.

And having the largest user base of sports betters gives us a tremendous ability to cross-sell into casino in the U.S. You're right, we do have the iconic Stardust casino brand, which we're using in the U.S. market. But I think it's -- there's a lot of plans, and we've got a lot of (inaudible) opportunity to extend and improve what we do for the FanDuel brand as well. But I think the most important points is actually the fact that we continue to lead in sports and that gives us a great platform to grow from in casino. And of course, 8 of the 9 next states to launch are going to be sports only.

I mean I'd probably add that you remember that where we have states where we're doing gaming as well as sports betting, we have market access partners like our friends in Boyd. We worked very hard in terms of cross-sell from those off-line databases to online as well. So we do access through our market access partners, more online potential customers as well. So that's another area where we're working very hard.

And look, regarding your question about international. Look, it is right that we have used some third-party platforms. So we've done that recently in Colombia, just to give us the ability to get into market quickly. It's not dissimilar to what we did in the U.S. market, remember, where we used third-party platforms. And when the time is right, we've moved that business over onto our core platform.

You'll also have seen that during the period, we announced the acquisition of Singular, which is the technology stack that powers Adjarabet in our business that's so successful in Georgia, Amino -- that gives us an additional sets of capabilities that will be useful for us in that part of the world and, indeed, possibly elsewhere. So we have -- we are developing out our capabilities in-house.

As it relates to putting the global betting platform into the international business, we hope that we'll be able to trial a small -- some markets towards the end of this year. But as you say, it's going to take a while before we get that fully rolled out.

The thing I'd focus on in international is the success we're seeing actually in casino. The business is doing incredibly well there. It's now become our biggest vertical. And the investments we've been making to grow that business through things like affiliates and the -- and some of the campaigns that put on have been very successful, 5x the number of customers coming direct into that business than we saw pre-COVID. We're pleased with the progress we're making in International and casino as well.

The next question is coming from Kiranjot Grewal from Bank of America.

I think just building on that question on brands. We saw drop teams acquiring [Bolton Mali] yesterday. You've Goldfire brands already in the U.S. So maybe could you comment on the rationale and potential benefits of having the several brand in the U.S.? Is there any time where you ramp up investment or focus into other brands other than FanDuel?

And then the second question is around your U.S. 2023 positive EBITDA. That's really encouraging. I know in the past you mentioned the potential IPO for the U.S. Do you still see like virtually splitting out the U.S. beyond just the potential valuation crystallization? And if the U.S. work to separate, would you expect the U.S. EBITDA to come down, say, losing some of the benefits of having clusters group scale benefits?

Okay. So look, we've obviously shared quite a lot of information with the market today in terms of how successful we've been using the FanDuel brand for customer acquisition. And you can -- if you look at the chart on Page 27 of the presentation, you can see, as we've grown through the number of states, the number of customers we've acquired, and we've now got over 2.2 million sportsbook and gaming customers as a CPA of $291. So whilst we continue to see the results that we're seeing, we are going to invest very heavily behind the FanDuel brand, and that's very successful for us.

You are right that we have a number of other brands available to us in the market, and we will continue to push on those as well. And I think TVG is a good example where we've seen real benefits as we help grow that business. But we've also launched racing under the FanDuel brand as well. And we have, as we were just discussing with that, the Stardust brand.

So I think we have -- we like operating, if we can, in markets with multiple brands. I think it gives us a good opportunity to target different groups of customers who've got different needs. And we'll continue to do that and invest as much money as we can when we see a compelling set of acquisition cost to lifetime value dynamics, as we shared with you in the presentation.

I think it -- as to the second part of your question, I think it would be worth making a very important point of clarification. Whilst we have been contemplating an IPO of a small stake of FanDuel, we -- if we were to do that, we would consider it to continue to be a sort of controlled subsidiary of the group. And therefore, nothing would change in terms of the way in which that business would operate, in terms of it continuing to provide support to the rest of the group through things like its pricing risk management capabilities and enhancements it builds to things like the global betting platform and nor would anything change in terms of that part of the business being able to benefit from the broader Flutter family.

And I think one of the undoubted things that's helped driven the success of the FanDuel business over the years since we've owned it is the fact that we've had so many chair leaders on the side supporting it. There's 5,000 engineers across the rest of the divisions in Flutter who are helping support the FanDuel business, and that's a very important part of it.

If we were to go down a path of an IPO, it would only ever be for a small stake, and it would be important it would be continued to be as a controlled subsidiary. And that and that would allow us to maintain the sort of symbiotic relationship that we see between that division and the rest of the group.

The next question is coming from Simon Davies from Deutsche Bank.

Two for me too, please. Firstly, you talked about 160 basis point decline in net revenue margin across the group. Can you talk a bit about how that breaks down, i.e., how much of that down to bonusing increases? How much down to pricing? And can you give us a bit of a feel in terms of your pricing strategy in the U.S. now? Are you still increasing bonusing or suppressing pricing to support growth rates there?

And my second question is on the international division. Obviously, a big impact from online poker. Can you break out what percentage of revenues now come from online poker? And has that business finally stabilized year-on-year? And roughly, how is it running as a percentage relative to pre-pandemic levels?

So maybe, Simon, I can deal with the first question. So we talked about the 160 basis points reduction. Actually, about half of that was due to reduced luck across the group, reduced positive sports results. So while still positive about 120 basis points in the half year period in 2020, it was actually 200 basis points of positive sports results.

And secondly, we have invested more in generosity, which is the other element. And that's helped us drive the fantastic performance we've seen in terms of our AMP growth across the group. So we continue to work on optimizing the right level of generosity versus -- and how that plays into driving the top line. So those are, to me, the critical points.

And look, as it relates to our pricing strategy in the U.S., when you look at the page in the presentation on margin, which is on 35, don't think the fact that this line is heading upwards is anything to do with us moving out of core underlying pricing. We're not moving our sort of big or overrounds, depending on whether you want to take us as an American looking way of it or a European way of looking at it. We've maintained our very, very tight pricing. It's actually through product mix that we've actually seen those margins change.

I think the other thing to -- the other part of your question was around the International division.

Can I just add one other point, because of our tight pricing in the U.S. and because the U.S. is becoming such a -- so much bigger component of the group. Actually, our expected margin was down marginally in the first half over the first half the year before, only because of the very aggressive pricing we've got in the state.

So there's sort of three components, a little bit more aggressive -- a little bit more -- a bit -- a small reduction in expected margin due to the U.S. becoming a greater component, a bigger step down in luck, which is the bigger element, and then a smaller increase in the promotional spend, just to give you three moving parts in terms of the overall group.

Okay. And Simon, in terms of the second part of your question around what's going on from a poker perspective. Look, I mean, if you look at the gaming AMPs in the first half and compare them with the prior year, it came with a very tough comparative period, they're down 9%. So we still maintain 91% of our customer levels in 2021.

We had our second largest tournament ever in Poker with Sunday Millions in the period. I think we're doing great things around lives -- the live streaming category in Poker where PokerStars' branded and sponsored content had around 2/3 share of all poker views on Twitch.

So that part of the business is doing well. I'm pleased we're making some changes to the way in which we look at reward and generosity for those -- that part of the business. So we're trying a new reward scheme. But I think we said today that we've seen that business perform better than expected [each day]. I think we saw a large influx of new customers last year, and we had expected volumes to be -- to be off more than they have been. And I think the team has done a great job in retaining those customers into things like casino and some of the sports. We know there's a lot more to do, particularly in sports.

And can you split out what the focus component is within international and whether that has stabilized?

Can we disclose that? Simon, we'll come back to you. I don't have the figures to hand.

I mean I think the easiest way to look at it, Simon, is that the -- in terms of the gaming revenues in H1, it's roughly equal between the [2], but actually casino overtook poker in the second quarter.

The next question is coming from Joe Thomas from HSBC.

Couple of questions, please. One is the U.K. responsible gambling initiatives, I think you said that's going to be ramped up in the second half of this year. I'm just wondering if there's any sort of further quantification that you can give as to the drag that the (inaudible) having and perhaps a tailwind as we go into next year as these as sort of comps normalize. And indeed, whether that's going to be rolled out further across the business beyond U.K. and Ireland.

And then second question. I'm intrigued by some of the news out of India recently in Tamil Nadu in particular. And I'm just wondering if there are any sort of high-level thoughts that you could give us about the scale of the market opportunity there and further changes.

Joe, so look, we're not putting a number on the changes that we're making around RG is captured within our guidance. I think it is worth just reflecting that when you look at the brands that we have operating in the U.K., particularly think about Sky Bet and also with Paddy Power, we have the very, very recreational focused brands in the U.K. And I think we are continuously looking for additional things we can do. But I think when I look at how the market could evolve and what the Gambling Commission may decide to do, I think we're very well placed.

Your question about whether we'll be sort of rolling these things out further, look, I think if you look at what we're doing, what we've done recently in Ireland, we've actually decided to introduce a number of changes which I think are the right to put in, in that market, which we haven't been asked to do. So for example, the moves we've taken around credit cards. In Australia, we're undertaking a number of activities there specific to that market.

I think it is important that we look at this on a sort of market-by-market dynamic, whether that's the focus we've got around sort of deposit limits or the work we're doing around affordability, there are different ways we need to sort of manage this. And of course, where we get learning from some parts of the world, we'll take those elsewhere.

Your question about India and Tamil Nadu is a good one. So for people on the call who aren't aware Tamil Nadu have recently published a change in their view around legislating skilled games, which particularly positively benefit our business there. It is a large part -- well it used to be a large part of the market in India before it was temporarily closed down. So we're excited that it comes up again. And we think we have a well-placed brand to capitalize on it.

Is that just the (inaudible) ? I mean is there any sort of quantification you could give us on or views on where that might end up and impact on different states, et cetera.

Yes. I think what we prefer to do is it's a relatively small business at this point. We are very excited about the prospects for it. And at a time when we think it should be on the radar, we'll certainly bring it forward. But I think it does start to set an interesting legislative framework in one state, and we hope that, that might, therefore, push out across other states, which potentially have a best positive view on skill games.

I mean, look, we have a podium position with Junglee in the market, and we're taking share. And I will tell you that, Joe.

We'll come back with more detail later. We'll leave it at that, I think.

The next question is from Gavin Kelleher from Goodbody Capital Markets.

Just my first question on the U.S. Obviously, great detail today in the release and the presentation with an all guess at the multiple competitive advantages you have on the scale advantage. Just on CPAs, you mentioned the $291 and CPA you've seen. Can you give any sort of comment on how this is the pace of trends in the business?

And then how they're trending, let's say, across states. Obviously, gaming state is probably different to sports, but how CPAs are panning out across different states. And then as you look forward to this NFL season, do you expect a big increase in competition? Are you building in a big increase in competition around marketing, et cetera?

Yes, Gavin, we give you one bit of detail and you want to know the next bit. I mean I think the most important thing is to look at the stat that we published, that we get a 1.2x payback on those $291 CPAs. And the fact that in the second year, albeit this is -- we don't -- we haven't had that many customers in the second year, but the data we have for the second year shows that actually the contribution we get from the second year is greater than it was in the first year.

So I think when you extrapolate that and start thinking about what that means the lifetime value of those customers are and how they compare CPAs, you can see why we're very pleased with the sort of the embedded value we're creating in the business and why we've been acquiring as many customers as we can, frankly, and we'll continue to do so.

Realistically, Gavin, we don't obsess about CPAs, what we obsess about is CPAs versus LTVs. And that is completely our focus. And if we have to spend $400 in one state and $150 in another state because that's the right CAC-to-LTV equation then that's what we do. We analyze it on that level. So we are -- almost the CPA is an outcome of how we invest against the LTV.

That's perfect. Very clear. So just one small follow-up question on the U.S. The Golden Nugget and DraftKings deal yesterday, does that have any implications for your New Jersey license agreement?

You're referring to the fact that we use the Golden Nugget for [market assets]. Look, the DraftKings have acquired the online businesses from Golden Nuggets, so we don't believe it has any bearing on our licensing. It's an expensive way for them to see our market share data.

The next question is coming from Joe Stauff from Susquehanna.

I wanted to ask a couple of questions, if I could, on the U.S. With now the migration of your in-house sports platform completed, I wanted to ask how to think about maybe the growth in products that you might be able to offer, especially the sort of football season (inaudible) season in the U.S. this second half?

And then the second question was, you provided a lot of data in the slide deck as well as the press release. And you indicated, just this is a question on kind of sourcing new OSB customers in the U.S. You had indicated about 40% of your OSB customers came from your daily fantasy database. And you indicated about 1/3 came from, I guess, overall marketing efforts. I was wondering if the difference in terms of the rest of customer acquisitions came from your TVG database.

Okay. So Joe, look, the -- to take your second question first, we have acquired, as we said, 40% of our customers from our DFS database and a big chuck from marketing. The balance isn't coming from TVG. I mean there is some degree of cross-selling there.

But I think the thing that actually we're finding that's really beneficial is a lot of businesses coming to us through sort of refer a friend type of mechanisms, and the Spread the Love campaign has been very successful for us in terms of that type of a viral acquisition which is helping us.

When we think about the benefits we get on our business and having the platforms all in-house, there's a multitude of them. We had some advantages in the last football season because, frankly, the volumes we're pushing through the third-party platforms, they just couldn't cope with it.

So we are hoping that now that we have everything under our own control, we'll have much better stability going into this season. We can obviously bring a lot more of our pricing in-house, and it's something that I referenced in the commentary I gave over the presentation in terms of the proportion of our -- of our products that we can price and put in house. And there are benefits to that in terms of our ability to then manage the models and ensure that we increase the proportion of things like cash out.

So there's lots of things that we have on the product road map, and there are some things we wouldn't want to share with our competitors, frankly. But having in our own gift because there's a lot more control.

And also, I mean, the amount of tech effort that it's taken to actually get all of this stuff down and get across the GBP, we can then repurpose that and get it focused on really making sure that we can develop all of those bells and whistles for our customers.

I can appreciate that. If I can squeeze one additional -- maybe the win rate is very high in the second quarter in the U.S. in a seasonally weak period. Is it fair to assume that -- what's the right way to think about that, I guess, kind of going forward in the second half, especially maybe the third quarter?

Yes, sure. About half of -- so we increased our structural margins very positively in the second quarter over the second quarter in the year before. A big uplift in structural margin is really driven by that same game parlay product. But -- so that was about half of the uplift. Then the other half was sports results, which obviously get magnified by the Same Game Parlay effect. So it's just kind of a double positive there.

But the more we can keep the penetration increasing in Same Game Parlay, the more we can improve the structural margins. And this is what we've seen in other markets. And in Australia, we still see the penetration going up in Same Game Parlays, in the UK & Ireland it's sort of bet builder products, which are almost more sort of do it yourself, build your own bets. So we think there's a long way to go on this. So we've certainly -- we're in the first base, I think, in your terms in terms of where we're getting to in terms of the development of the product and the penetration into the customer base.

(Operator Instructions) The next question is coming from Richard Stuber from Numis.

Just two questions from me, please. The first question in Australia. The average player is up 52%. I think you've implied that a lot of it comes from retail customers. Do you think you've also taken any market share from the other online bookmakers over in Australia?

And the second question on the U.S. I guess as you sort of mentioned on the call, there's been lots of M&A activity in the U.S. in the last few weeks. Do you think there's any good product or technology deficiencies within your financial offering which could benefit from bolt-on M&A? Or is it of outstanding litigation with Fox or balance sheet, is that a current impediment to M&A?

Right, Richard. In terms of the question, look, we've definitely taken market share in Australia. So that's the simple answer to the question. The slightly more difficult one is precisely where those customers have come from.

Now we can see a lot of those customers are sort of exhibiting behavior and profiles where we believe that they have come from using the retail monopoly service in Australia. And we definitely have benefited from those customers trialing our products in a way that they may not have done in the past and finding that they enjoy it and like the value and generosity we provide them as well as the enhanced product experience.

Yes, there's almost certainly been some gains in online. But it's very hard to sort of gauge it when you compare this year with last year because of the fact that the sporting calendar is so different.

When we look at our business and compare with a couple of years ago, to see that the level of profitability is nearly 3x. And actually, even if you just look at the growth we've seen in customer numbers year-on-year, [50%], I think the team in Australia has done a great job, and we'll hear much more from them on the 22nd of September.

When you look at the U.S. business, I suspect that our continued growth and strength in our position we have in the market is what's driving people to take M&A activity in a way to try and give themselves some capabilities to catch us. And look, we will work very, very hard. And we have done ever since we first decided to go hard after America in January 2018 to make sure that we have all the capabilities that we need to set ourselves up to win in the market. And at this moment, we think we have everything that we need and you can see the success that we're seeing in the business. I think there's a -- there's a lot of exciting opportunities in front of us. There's 9 new states which are opening up. We've got everything sat on our tech platform. 8 of those 9 states are sports-focused. And the size and scale of the FanDuel organization now is at a completely different level to any of the other competitors in the market. So we're getting our flywheel going as fast as we can.

And look, we're investing a lot of money in developing product services and capabilities around it. And if we identified something that we thought we needed to acquire as a bolt-on, we would do that. There's nothing that was getting our way at the moment.

That's great. And can I just ask a follow-up. Obviously, FanDuel's going phenomenally well. Are there any metrics you could share in terms of FOX Bet, how that's going. And what sort of revenue that achieved in the first half or EBITDA.

I think what we shared was that FanDuel made up 93% of the revenues in the first half, and we don't split out the EBITDA performance by the businesses.

The next question is coming from James Rowland Clark from Barclays.

Just two questions, please, on the U.S. The first, are you pleased to finding a new CEO for the FanDuel?

And then secondly, I wonder if you could just provide a little bit of color on what you're seeing in terms of the competitive environment going into the NFL season given the number of sort of medium-sized players you want to have a good crack in the market. And should we be surprised at all if we see your highly, very strong market-leading sports betting market share drop off a tiny bit during the autumn.

Well, James, if you're wanting to put your name forward for the CEO job, it's probably not -- you wouldn't want to do it in this public forum, but there have been a lot of people who have come and talked to me about it. It's a very exciting job, I think. In fact, I don't think there's many better jobs in sports and entertainment in the United States.

So we've met an awful lot of people, and we are close to putting in place our long-term CEO in the business.

I will say, Amy has done a very good job for us since she picked up the reins from Matt. As you can see, the business hasn't missed a beat.

In terms of the competitive environment, I remember talking about the competitive intensity that we expected to see coming when we did our first Capital Markets Day at the Netherlands. And we're saying that we expected it would be harder with the next season.

And that's the way that we continue to think about. We are not at all complacent. We are completely paranoid. We're regularly waking up in the middle of the night panicking about how people are going to attack us. And state by state, we're taking them on and working at how we continue to win. And that's the way that we're thinking about it.

And look, we've never set ourselves a market share target. If we had done, we would never have set ourselves the levels that we find we're achieving. What we will continue to do, as Jonathan mentioned earlier, is we'll look at it on a state-by-state basis and look at the amount of money we can spend based on the returns that we're seeing from the customers.

I think the -- the one thing that we would wish that we had done was we would wish that we had realized that the customers were going to be as valuable as they've turned out to be because we've seen better levels of retention from them. We're seeing higher levels of cross-selling from them. And we're seeing a high usage of the product and actually better margins because of the mix. So actually, the customers have ended up being more valuable than we anticipated. And it probably means we should have spent even more money initially acquiring even more customers. But we'll try to rectify our models and improve them and make sure we acquire as much business as we can.

And the point at which we get to profitability or the market share stuff are all outputs for us. It's the math that drives us to that point where we'll see profitability in 2023 because it will be the ratio between the number of existing customers we have and the embedded value that they have in the business, the contribution they're generating and the ratio of them to the volume of new customers we get to. And once you get past the tipping point, then of course, the business becomes profitable.

That's not our focus. Market share is not our focus. It's building as big a business with the return characteristics that we can see today as we can. And of course, we're in a nice position and we've got operating leverage in the business. So we can add in those 9 new states that we'll launch in, in the next 18 months without having to add huge amounts of operating costs. And clearly, there'll be extra marketing investment. We have the risk -- we got the pricing risk management teams. We've got big marketing capabilities. We've got big commercial functions.

Just to reiterate the point, market share is a function of two things. It's a function of how successful you are in acquiring customers, and that's obviously driven by how much you spend and how well you spend it. But the revenue is driven by the quality of your product, the retention and the stickiness of that product and, therefore, the wallet share that you gained from the customers who are in the market and are accessing your product. That's why we talked so much today about the product because it is critical in winning in the market. You can acquire as many customers that you want, but you need the product to be able to make sure that customers have a great experience and stick around.

The next question is from Christine Zhou from RBC.

So my first question is just on the percentage of regulated markets. And you said in the presentation that you've seen that increased from 82% to 90%. Do you expect that to increase more in the future? Or are you sort of happy with where that is at the moment?

And just a second question on the U.S., specifically on your sort of media partnerships and partnerships with sports teams and sports leagues, et cetera. I think on Page 38, you mentioned that you believe you have the highest share of voice on some of the regional network.

Just wondering if you could give a bit more color just in light of the fact that we're seeing lots of competitors signing a lot of deals with various teams, leagues, et cetera. Do you think you've got more partnerships versus others? Or is there something else that's giving you the highest share of voice and how important do you actually think these are and given that you've got the FanDuel base, et cetera. So any more color on that would be very helpful.

Christine, in terms of your first question, we said naturally it would increase from 82% to 90% just because, at that time, we knew the U.S. would make up a greater component. Obviously, you can see on one of the first charts in the presentation that the U.S. is already in a move to be our -- effectively our second biggest division by revenue in Q2. And as the U.S. grows significantly, that will mean mathematically, that will increase regulated.

The other point to note is that of our unregulated markets, there are three of our top markets, Canada and Netherlands and Brazil, which are in the process of going towards regulation. So naturally, our percentage is going to move up towards 95% in the short to medium term.

There will always be a series of markets whereby they are moving towards regulation and haven't regulated. So do I ever think it's going to be 0? That's a very long way off. But I'm very comfortable with having a pipeline of markets which sit within our regulated that are moving towards regulated.

Yes. And look, Christine, in terms of your question about what we're doing with all the sort of different media assets that we have, the deals with leagues, teams and stuff, we spent more than $300 million in the first half, which is greater than the revenues of most of our competitors.

So it's the scale, it's the breadth, it's the depth of the assets that we have that we'll continue to invest behind. And where we find one that works, we'll spend more on it. So there's a lot of flexibility built into this. So there's not one of those that I'd necessarily call out aside from the quality of our team in the U.S. who are executing so well for us. So I think they spent the money very effectively and efficiently. And you can see that from the CPA figures and the numbers of customers that we've acquired. And we will continue to innovate and push forward going into this next football season where everything starts again really.

Okay. Joe, I think we are done on questions now. So thank you very much, everybody. And I appreciate your time this morning and particularly the time listening to Jonathan and I take you through the presentation. I think there is some very important information that we have shared in the market or we shared with the market today.

So if you haven't had a chance, I'd encourage you to spend some time listening to and going through the materials. Thank you all very much for your support.

Thanks.

Thank you. Thank you, everyone. That does conclude your call for today. You may now disconnect. Thanks again for joining and enjoy the rest of the day.