Unchanged guidance depends on sustained U.S. sportsbook KPI improvement and successful second-half execution.
| Quarter | Q1 FY26 |
|---|---|
| Call date | 2026-05-06 |
| Results reported | 2026-05-06 |
| Length | 67 minutes |
| Speakers | Paul, Investor Relations; Peter Jackson, CEO; Rob Coltrake, CFO |
Results, guidance and Q&A analysis for this call
Operator (Operator)
Hello everyone. Thank you for joining us and welcome to Flutter Entertainment Q1 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press Star one to raise your hand. To withdraw your question, press Star one again. I will now hand the conference over to Paul Timms, Chris Group Director of Investor Relations. Paul, please go ahead.
Paul (Investor Relations)
Hi everyone and welcome to Flutter's Q1 update call. With me today are Flutter CEO Peter Jackson and CFO Rob Coltrake. After this short intro, Peter will open with a summary of our operational progress and then Rob will go through our Q1 financials and our updated guidance for 2026. We will then open the lines for Q and 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
Peter Jackson (CEO)
indicated in these statements.
Paul (Investor Relations)
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 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
Peter Jackson (CEO)
Investors section of our website and I
Paul (Investor Relations)
will now hand you over to Peter.
Peter Jackson (CEO)
Thank you Paul. I'm pleased to share our Q1 results and update you on the progress made against the key strategic objectives we outlined in February. But first I wanted to address the management changes we've announced today. Amy Howe will be leading the business. I'd like to thank Amy for her contributions to Flutter and Fangil and recognise the impact she's had on the business since joining in 2021. We wish her every success for the future looking forward. The US market and Fangil's number one position within it represents one of the most significant growth opportunities in our industry and it is essential that we have the right structure and leadership in place to fully capitalise on it. Dan Taylor's track record of driving growth and executing on complex strategies make him ideally suited for his expanded role. Christian Jelecki has proved to be an exceptional leader, has been instrumental in scaling the Fangil business and market leadership. These changes will sharpen our focus on the U.S. sportsbook, strengthen the connection between our U.S. and international divisions and fully leverage the group's expertise, capital and strategic ambition. I'm confident this gives us the right structure for long term success and strengthens our ability to deliver sustained long term growth. Now turning to the results in the quarter in the US we saw encouraging signs in underlying growth in Q1. Overall AMPs were 1% behind last year and revenue grew 6% with headline KPIs improving as the quarter progressed. As outlined in February, overall sportsbook performance was adversely impacted by NFL Trends observed in Q4 where persistently high gross revenue margins negatively impacted customer activity, leaving us with a smaller player base. As we enter 2026. We outlined our Sportsbook and Generosity improvement plans to maintain our leadership position in these areas and we're now executing against them. From a generosity perspective, we are focused on delivering a truly customer first proposition. Examples include the launch of early win promotions during March Madness and opportunistic payouts to capture the social side of betting which aided engagement. Mets fans will know what I mean. In April we began rolling out our
Rob Coltrake (CFO)
SportSport loyalty program which has had a
Peter Jackson (CEO)
very positive response from the initial cohort of customers. To gain access to the program, we also launched BetProtect plus, an industry first generosity mechanic allowing customers to insure their bets for the full game for small fees. The initial response has been excellent with adoption rates double our expectations and continuing to grow. From a sportsbook perspective, product enhancements in the quarter included expansion of our popular path, a leg feature to super bowl, more personalised and simplified NBA same game parlay building with Betis again and full screen streaming for key sports and these changes are gaining traction with our customers. Underlying trends across our headline KPI's have been positive with amps handle and structural revenue margin all improving through the quarter. Looking ahead, we have a strong pipeline of improvements planned and we expect these positive trends to continue into Q2. This includes significant expansion of our new loyalty program through Q2 and Q3 ahead of a full rollout of the NFL 2026, 202027 season and new soccer product features ahead of the World cup in igaming, Fangil delivered another strong growth of quarter, another strong growth of growth, another strong quarter of growth.
Rob Coltrake (CFO)
Sorry.
Peter Jackson (CEO)
With amps up 10%, expansion of our direct casino player base coupled with improved frequency among higher value cables drove revenue growth of 19% year over year. This was driven by enhanced rewards delivered through our loyalty program including daily reward boxes and the continued rollout of new and exclusive content. At the start of April, we migrated PokerStar's customers to the Frangil platform, unlocking improved product and cross state liquidity for poker customers. Turning now to prediction markets first, we continue to see limited cannibalization impact on prediction market operators on our sportsbook growth. We believe this is attributable to the fundamental differences in product propositions between sportsbook and prediction market platforms, customer age profiles and concentration of prediction market activity amongst entertainment first and low value users. However, we continue to monitor the impacts of prediction market operators in the broader sports betting ecosystem second. In terms of the opportunity, we continue to view prediction markets as an attractive incremental customer acquisition opportunity ahead of sports betting regulation in new states. The fast moving and complex regulatory environment has at times made product delivery timescale challenging. However, we are prioritising new product rollouts and focused on building the operational flexibility required to deliver our ambitions. In March and April we widened our range of sports markets and early testing of our generosity capabilities saw encouraging returns with strong app downloads through March Madness. We launched the Fangil one app at the start of April, dynamically serving customers, sports betting in sportsbook states or prediction markets in non sportsbook states. Critically, this now allows us to leverage FanDuel's strong nationwide brand awareness where just one app delivers access to an increasingly compelling sports experience. While Q1 revenues were modest reflecting the early stage of the journey, we are focused on delivering the improvements needed during 2026 to serve customers an exciting sports led experience by Q4. The 2627 NFL season launch will be a major milestone with further improvements planned for the FIFA World Cup. We believe our world class proprietary pricing capabilities can also unlock significant market making opportunity. We began market making services on a major third party prediction market platform in April. Early indicators have been encouraging and we expect to launch the initial phase of our market making platform in the coming months. Turning to our international segment,
Unknown (Analyst)
our performance
Peter Jackson (CEO)
in Italy has been extremely strong. We are the clear number one operator online outgrowing the market and our main competitors. This performance is even more remarkable given the drag from our SNI business which while in growth during the quarter had yet to benefit from the migration onto the sea platform which successfully completed at the end of April transitioning around 2 million accounts. CSAL's Market First Mycombo product saw excellent engagement with multi leg bets contributing half of pre match soccer handle with over 30% of bets carrying five or more legs and this drove a significant step up in parlour penetration and structural margin in iGaming. CSAL benefited from the continued rollout of exclusive content. I'm very excited about the outlook for the rest of the year in Italy with CSAL's ongoing exceptional performance and the unlocking of CSAL's market leading product for SNAI. Following the platform migration in the UKI, strong double digit iGaming revenue growth was delivered across Paddy Power, Tombola and Betfair driven by new slots, content and robust retention. Although SkyBet's performance has been behind our expectations as customers adapted to the new user interface post migration momentum has improved with its highest customer acquisition volumes in five years in January and underlying sportsbot revenue returning to growth in March. Market competitiveness remains stable ahead of the UK igaming tax increase to 40% on the 1st of April. We now expect less profitable operators to begin adjusting marketing and generosity strategies as the leading UK operator, Flutter is well placed to deliver material first order mitigation as previously outlined and to benefit from second order market share gains over time. In Brazil, performance remained encouraging with Bet Nathaniel amps over 40% higher year over year. We will soon integrate our proprietary pricing capabilities unlocking a best in class parlo product and promotional improvements ahead of the FIFA World cup in June. In APAC we saw modest year over year growth in sportsbook, amps and handle and racing excluding greyhounds while still declining year over year was ahead of our expectations. We also welcomed the advertising restrictions announced in April and believe sportsbet is well placed to build on its market leading position. Overall, I'm pleased with how we've executed on our priorities across the group and particularly in the US. We've made significant progress embedding the improvements discussed in Q4. Fangil predicts is building momentum and I'm excited about our market making opportunity internationally. Our SNI and NSX integration is progressing well and we are investing with conviction in Brazil. We now have the right organisational structure in place to deliver against our strategic priorities, giving me confidence in the outlook for the year and our ability to deliver sustainable shareholder long term value. Finally, I wanted to note our plans to review our London Stock Exchange listing as we consider streamlining the dual listing. We expect this review to conclude during Q2 and we'll update on our findings at that time. I'll now hand you over to Rob.
Rob Coltrake (CFO)
Thanks Peter and good afternoon everyone. Group delivered 17% revenue growth in Q1 2026 with adjusted EBITDA up 2%. This reflected contributions from our SNAI and Betnafenau acquisitions and a positive year over year swing in sports Results. Performance included 10% sportsbook revenue growth with excellent underlying momentum in SEA and the US showing encouraging signs of improvement as Peter outlined. We also delivered continued strong IGaming performance across the US, Sea and Uki with total IGaming revenue growth 28%, net income of $209 million declined $126 million year over year driven by a 71 million increase interest expense and $122 million increase in depreciation and amortization. These were partially offset by an $88 billion non cash year over year benefit from the Fox option. Fair Value Adjustment earnings per share and adjusted earnings per share declined to $1.23 and $1.22 respectively reflecting the factors mentioned above and $61 million year over year non controlling interest benefit. As we lap the prior period, this included an expense reflecting Boyd's 5% ownership of foundry. Net cash provided by operating activities increased by $142 million or 76% year over year, primarily driven by a positive year over year swing in player funds of $153 million from an outflow in the prior year related to a CISAL lottery payout to an inflow in the current quarter. This more than offset higher tax interest payments and a Super PAC contribution in the period to support our US Advocacy initiatives. Capital expenditure was higher year over year due to lower prior year phasing in the quarter. As a result, free cash flow including financing capex and excluding player funds declined by 46%. There is no change to our full year 2026 capital expenditure guidance. Our disciplined capital allocation policy provides flexibility to respond effectively to evolving market conditions and emerging opportunities. We continue to prioritize organic investment in our core business and strategic investment including emerging opportunities such as prediction markets which we continue to view as an optionality driven investment within a defined cost envelope. While deleveraging is now priority, buybacks also remain an important part of our capital allocation policy. At our Q4 earnings in February, we communicated our plan to return $250 million to shareholders commencing in H1. This tranche began in Q1 and remains ongoing. As of May 1, $190 million has been returned to shareholders. Consistent with our flexible approach, we will continue to evaluate the buyback program as we progress through through the year. From a leverage perspective. We ended Q1 with a leverage of 3.7 times. We expect leverage to decrease by the end of 2026, initially increasing through Q2 and Q3 reflecting the profitability profile of the business before reducing in Q4 and moving us towards our target ratio of two to two and a half times over the medium term. We also continue to drive efficiencies across the business and have already embedded significant cost savings through our ongoing cost transformation programs in international. We are on track to Deliver the full $300 million run rate from our cost efficiency program by the year end, with most major milestones already achieved. We are now actively defining the next phase of cost transformation into 2027 and beyond, with a clear emphasis on sustained cost discipline and operating leverage. In the US we are equally focused on cost efficiency with 2026 savings realized across initiatives including payment provider efficiencies, improved supplier rates and overall process optimisation. This includes the closure of our FanDuel TV Racing Network and FanDuel Pix product in 2026 in order to optimize costs and ensure investment is directed towards the highest return areas. Moving to our 2026 outlook, we are pleased with the trading momentum in April and our full year guidance is unchanged on an underlying basis, adjusting only for unfavourable Q1 sports results in the US and international and launch costs in Arkansas not previously. Included Guidance also reflects the internal transfer of management of our Polk Stars North America business from our international business to the US group. Revenue is now expected to be $18.3 billion at midpoint with adjusted EBITDA of $2.865 billion for the year, representing 12% and 1% year over year growth respectively. Additional detail and guidance is available in today's release. To reiterate Peter's comments, I'm encouraged by the positive operational signals we are seeing which give me conviction in our full year outlook. Peter and I are now happy to take your questions. I'll hand back to Samantha to manage the call.
Operator (Operator)
We will now begin the question and answer session. Please limit yourself to two questions. If you would like to ask a question, please press Star one to raise your hand. To withdraw your question, press Star one Again. We ask that you pick up your handset when asking a question to allow for optimum sound quality if you are muted locally. Please remember to unmute your device. Please stand by while we compile the Q and A roster. Your first question comes from the line of Jordan Bender with Citizens Jordan, your line is open. Please go ahead
Unknown (Analyst)
everyone. Good afternoon and thanks for the question. I do want to start, I guess the management changes over the last couple months, but including today from, you know, from our perspective and I think there's some of the questions we're getting, like how should we be viewing kind of these changes in real time? Is this an effort to kind of get back to where we were, maybe to start the NFL season with Christian Dan? Or is this kind of a change in strategy on what you're trying to do, including maybe like willingness to spend on generosities? And then the second question, Robert Peter, you know 2Q EBITDA, about 104 million by my math. Can you maybe just help us with some of the inputs too? You have a lot of moving pieces in the quarter. Just kind of how we get to that number. Thank you.
Peter Jackson (CEO)
Hi, Jordan. Afternoon. Look, I'll take the first question. I think Rob will probably pick up the Q2 EBITDA one. In terms of the management changes, now's the right time for us to put in place new leadership in the business. I'm excited to see what Christian and Dan can do. We're getting onto the front and foot as a business. The sports book improvement plan is working. We're starting to see some of those sequential benefits of it in the quarter. And look, I'm excited to see what we can do with our loyalty program if that launches and rolls out through the course of the year. I think we've been trading the business harder. I mentioned that the stuff we've been doing with the Mets and some other things I think the team have been doing to get on the front foot, which is working and I'm pleased with the progress we're making with BetterProtect. So look, there's no change in our strategy or posture in the business.
Rob Coltrake (CFO)
Just picking up on your Q2 question, Jordan, in terms of where we are. So there's no change in our expectations for for Q2 from where we were previously. And actually if you look at our trading at the moment, we're trading in line with our expectations and we've actually seen some slightly favorable sports results in recent weeks. I think if you look at consensus, there's potentially some adjustments that need to be made to the phasing within that where it's slightly too high in Q2 and too low later in the year. The main things to consider in the year on year bridge when thinking about Q2 would be the prior year included about $70 million from sports results. We've also got some prediction market spend in the forecast for this year in Q2, which we expect to ramp up slightly from Q1. And then we've got some marketing around the World cup which will kick off in Q2. And that's in addition to the new states investment that we'll continue to lay down around Missouri and Arkansas. And just from an underlying perspective, clearly as we said in Q1, we've got a slightly lower player base that we started the year off with and that flows through from an underlying perspective. But ultimately no change in Q2 from our previous expectations.
Unknown (Analyst)
Thank you very much.
Operator (Operator)
Your next question comes from the line of Barry Jonas with Truist. Barry, your line is open. Please go ahead.
Unknown (Analyst)
Great. Thank you. Hey guys. The prediction legal environment remains pretty active, I'd say. Curious to hear your expectations for how you think this plays out in the courts. And does that weigh into how you think about your investment spend going into next year and beyond?
Peter Jackson (CEO)
Thank you. Sorry. Well, you're certainly right that the. There's a lot of noise around the legal positions concerning markets. I think it's important that we remember a few things. First of all, I think the team have made good progress recently. I think launching the market making capabilities, the One app which allows consumers wherever they are across America to access support on FanDuel, I think is important progress. And I think we demonstrated the strength of our brand. Some of the stuff we did around March Madness. So I'm excited about the incremental opportunity this presents for us until we get through and understand ultimately what the Supreme Court say. I think we're going to live with this uncertainty, but I think in the meantime we're going to continue to invest in the market making. I think we're really pleased with the early indications we're seeing from that and it's a good opportunity for us to monetize this business and then from the core predict product. Look, ultimately we want to acquire as many sports customers as we can ultimately onto our regulated OSP products. And that's what our real focus is. And so our intention is to build a great sports experience experience for customers wherever they are in America. And that's what we're going to do with the One app.
Unknown (Analyst)
Got it. And just for a follow up, you know, I think a lot's happened since your 2024 analyst day and street numbers have certainly adjusted. But I'm curious to get your thoughts at a high level, if you know how you think about the path and timing about ultimately hitting those original targets. Thank you.
Rob Coltrake (CFO)
Yeah, let me pick that one up very soon. Ultimately, we still see a very compelling pathway to growth in the short to medium term. Obviously from the targets that we set out at the capital markets day in 2024, it's right to assume that things have moved out to the right slightly given some of the underlying changes in the business since that time. But if you think about some of the key structural foundations that we set out at the investor day, we retained confidence on those. We we retained confidence in our ability to be able to increase structural margin. We continue to see higher penetration. We continue to see a move into new, new states in terms of regulated OSP, we said that would be 2% a year. We're broadly, we've already seen that. Since we said one new igaming state in the next three years, we're actually seeing some encouraging conversations and hopefully the mood music moving in the right direction there. So we're still feeling very confident about the longer term plans. We need to trade through the next couple of quarters and see where we're exiting 2026 and we'll be able to give a bit more color at that point in time.
Unknown (Analyst)
Perfect, thank you.
Operator (Operator)
Your next question comes from Jed Kelly with Oppenheimer. Jed, your line is open. Please go ahead.
Unknown (Analyst)
Hey, great. Thanks for taking my question. Just going back to the market making and as you're able to integrate that into your product, can you talk about does that just give you the ability to merchandise that product better either through customer credits or other things you can do to drive engagement? Can you just talk about the importance of putting market making behind that
Peter Jackson (CEO)
judge? You're right that market making is an exciting opportunity and I think it's a great way that we can showcase the quality of our pricing capabilities that we have in the business more generally. And so, you know, when we think about the opportunities principally around the combos, we're going to be market making in as many, on as many platforms as we, as we can. I think it's a good opportunity for us to monetize our pricing expertise in doing so. I think the point you're raising is the extent to which if we're doing it on our own platform, it may allow us to change the dynamics of a customer objective. I think there are some, there are some interesting possibilities to that that we're of course we're considering.
Unknown (Analyst)
Got it. And then just as a follow up, just philosophically in the U.S. how do you guys kind of toggle, you know, maximizing for net win margin versus trying to drive maybe more players? Do you ever think about toggling down the net win margins maybe to get more players? And maybe the net win margins in the US for whatever reason might not be as high as other, other countries.
Peter Jackson (CEO)
Thanks. The biggest, the biggest driver of our net win margin is really the fat mix and the extent to which customers are building their same game parlay products. And this is something that people want to do and that's we're simply meeting that customer need. You then have to look at the relationship of course, between the structural gross win margins of generosity and you've got to get the balance right between them. As we know, if you don't get the balance right, you can see customers quickly become dissatisfied and not have that good experience. Now, we've got lots of experience of that around the world, and I think we're well placed here in the States to deliver great experiences for our customers.
Unknown (Analyst)
Thank you.
Operator (Operator)
Your next question comes from Trey Bowers with Wells Fargo. Trey, your line is open. Please go ahead.
Unknown (Analyst)
Hey guys, thanks for the question. I just wanted to revert back to kind of the cadence in the U.S. you know, as I just run the Math on the second half. Loading. It looks like Q2, the expectation is slightly down revenue and you know, EBITDA down 75% year over year. But then the back half is 25% revenue growth and 100% EBITDA growth year over year. So if you guys could just kind of dig in a little bit on another layer of kind of expectations, I don't know, around promotional activity or just some of the signposts we should look to, that should help give confidence that that back half loading is, you know,
Rob Coltrake (CFO)
doable at this point. Yeah, let me pick that up, Trey. So first of all, I'd say that we set this up with Our initial guidance Q4 A couple of months ago. We said we anticipated sequential improvement as we move through the year on the top, top line. And that's something that we're, we're starting to see already. I think the best way to look at this simplistically is to view the year in two halves and in H1, broadly a continuation of the trends that we're seeing. As you said, we exited 2025 with a slightly smaller customer base and we're seeing handles slightly down year on year, albeit with some improvement in Q2 versus Q1. We've also had some slight amends to structural margin impacted by the the sports mix with the new launches in Arkansas that we talked about previously and also with Alberta in July in the World cup, but also see a slightly higher generosity in the in the first half. But actually for the year overall, we're anticipating a broadly similar generosity envelope. So then into the second half of the year we do lap a weaker prior year NFL performance and we are expecting handle and structural revenue margin to move to some modest growth year on year. We also expect to get some significant efficiency in our generosity as we lap the launch of Missouri last year. And we also get the benefits from the loyalty program that we've launched that we're already starting to see some green shoots from. So to put it all together, we feel very comfortable. I think, as I said in the answer to the previous question, we've not moved from where we previously were. And actually we always said that we'd have some sequential improvement as we move through the year and we're starting to see that at the start of Q2, so we're quite comfortable with our position.
Unknown (Analyst)
And then just as a follow up on the prediction market side, given you're up in the investment a little bit for the year as we exit this year, what would you guys view as a success in terms of kind of user levels in the non licensed states to prove out that the investment's playing out like you would like? Thanks, Trey.
Peter Jackson (CEO)
You know, we're not upping the level of investment, but I think what I'd say around we're doing with prediction markets, there's opportunity to monetize this category through our market making capabilities, particularly in combos and that's something you'll see us do. And then I think we are focused on delivery of the one app. It's in the market now and that lets us utilize and leverage the Fangjul brand nationally. So wherever you are, you can open the FanDuel Sports app up and access either regulated OSP if you're here like I am in Manhattan, or if you're in California, you'd access our products. I think we want to acquire as many customers as we can on that through that platform and I think leverage the national marketing that we already have. We know the Fangil brand resonates very well. We're building out improving the quality of our PIDX experience for customers. We know how to do this and we will expand the catalog and deliver a much better experience for customers. And so that's what we're focused on delivering this year.
Rob Coltrake (CFO)
It's worth also building slightly more. Peter said to say that we will remain very disciplined in terms of our investment around prediction markets and we'll invest more if we see opportunities to do so. And it'd be a great position to be in at the end of the year if we're getting real traction and we really want to put our shoulder behind the wheel with this. But equally we will follow the same rigorous framework that's driven our success in the sportsbook business. And we will continue to monitor the returns and the CACs to LTVs as we move through. But certainly when the improved product is in place for the World cup and then start the NFL season, we certainly see some exciting opportunities.
Unknown (Analyst)
Appreciate the question, guys. Thanks.
Operator (Operator)
Your next question comes from Jeffrey Stanchel of Stifel. Jeffrey, your line is open Please go ahead.
Peter Jackson (CEO)
Hi, can you.
Unknown (Analyst)
Hi, can you hear me?
Operator (Operator)
Yes, we can.
Peter Jackson (CEO)
Yeah.
Unknown (Analyst)
Okay, great. Good afternoon everyone. Thanks. Sorry about that. Two from us. First Peter, you mentioned in the release some challenges shipping product for prediction markets just at the velocity you would have expected or consistent with sports given some regulatory constraints. Can you just talk about or clarify sort of where this bottleneck is most pronounced? Is this sort of a function of the JV partnership? Is this more the lack of guardrails that you're seeing from the cftc? Just sort of what explains this restriction to product development pacing? And then second, just a clarifying question. The release does note revenues were about 90 million ahead of your guidance in Q1, if you exclude the 45 million of of hold impact. Can you just clarify where is this 90 million coming from? Is this sort of core sports, core casinos is Arkansas or prediction markets? And then the decision not to sort of flush this through to the guide. That's all.
Paul (Investor Relations)
Thanks.
Peter Jackson (CEO)
Okay, I'll pick up the PIVX product question. First of all, I think we have made some good progress in the first quarter I referenced. I think the fact that we are now aligned with our unified OR one app is important and I think is a great step for us and we've also launched the market making capabilities. I think we are working hard to improve the breadth of sports coverage we have particularly around combats and there have been some, as I said in the beliefs and challenges around that. I think it's principally around our ability to access the range of content on our rather than a product front end issue and I'm confident that our teams have the capability to deliver great user experience and products for our customers. If you look at actually the betfair Predict product which is live in the uk, I think it's a fantastic example of what the teams can deliver. I know that there's a lot of work going on to make sure that we can expand the range of product, particularly from a combo perspective, onto our own platforms and we will make sure that we adapt as we need to in order to win in sports.
Rob Coltrake (CFO)
Picking up on your question around the underlying. Yeah, so there were a couple of factors, but we certainly saw some strong NBA handle in the quarter which helped us offset the impact of slightly unfavourable sports results and the Arkansas launch. Thinking about the years as we set out our guidance a couple of months ago, we did say that we're taking a sensible and measured view to the guidance. It's early in the year. Encouragingly, we are seeing some early signs that our plans are gaining traction, but given it is early in the year, we're not going to be updating the guidance at this stage, aside from the technical factors mentioned in the release.
Unknown (Analyst)
Thanks very much.
Operator (Operator)
Our next question comes from the line of Bernie McTernan with Needham and Company. Bernie, your line is open. Please go ahead.
Peter Jackson (CEO)
Great.
Unknown (Analyst)
Thanks for taking the questions first. Just wanted to follow up on the continuing theme on the second half ramp. Just maybe any building blocks you can give in terms of how you think you're going to get back to year over year handle growth in the second half of the year. And just by the response of the last question, it sounds like NBA is trending positively. Would it be possible to see if any sort of quarter to date trends on handle just so we can compare versus the 1Q result and then I
Peter Jackson (CEO)
have a follow up?
Rob Coltrake (CFO)
Yeah. So as I mentioned, Bernie, we're pleased with the momentum that we're seeing at the moment. We're seeing some positive year on year handle trends in mba. As we've talked about many times before on this school, we're not looking at handle as the 1 metric and that's one of the factors and building blocks for the full year. But we don't actually need to see a huge incremental improvement from where we are in the year on year handle variance for us to hit the targets that we set out and the guidance that we set out. We're also anticipating a small amount of structural margin expansion as we move into the second half of the year, which should be helped by the mix of sports and as I said for the overall generosity envelope for the full year, we're expecting that to be broadly in line. But I say in the short term we're seeing some encouraging trends and it's absolutely in line with our expectations and the phasing that we've internally set out when we look at our guidance.
Peter Jackson (CEO)
Bernie, I think when I look at the sportsbook improvement plan, the changes that we're delivering, the benefits we're seeing through, things like the ALTI already, the perception data that I'm seeing clearly demonstrates the benefits we're getting from the very early cohorts onto the program. Excited to see what happens when we when we roll that out for the full year. The better protect stuff I think is getting real traction. So there's a lot of good things coming down the track which I think we see the benefits of already. And as we get to the back half of the year, I think we'll see those in full rollout and we'll get the full benefit of.
Unknown (Analyst)
Okay, thank you. And then just one financial question. Just gross margins in the US were almost 200 basis points lower year over year despite revenue growth. What was the major driver there? Any one timers was this just launch impacting the promotional spending? Just any puts and takes you provide there would be helpful. Thank you.
Rob Coltrake (CFO)
Yes, there's a couple of factors. I mean one would be the tax increases that we've seen year on year from a state perspective we have New Jersey, Illinois, Louisiana, a couple others which is approximately 220 basis points of total. So that's probably the main moving part. And of course when you look at this year on year there's sports results impact to take into account. We're making great progress, progress as we've said before on things like payment and fraud costs and we've really got, you know, cost of sales in our crosshairs in terms of how we make more efficiencies as we move forward. But the main movement, margin wise, year on year will be down to the tax changes.
Peter Jackson (CEO)
Got it.
Unknown (Analyst)
Thank you very much.
Operator (Operator)
Your next question comes from the line of Ben Shelley with ubs. Ben, your line is open. Please go ahead.
Peter Jackson (CEO)
Hi, good afternoon. Good evening guys. Thanks for taking my questions.
Unknown (Analyst)
I've just got two.
Peter Jackson (CEO)
One on US promotions, I'd like to understand more about how US online sports betting promotions in the quarter, excluding state launches, how did they fare on a same state basis? And then with regards to prediction markets and CAC inflation, can you comment on whether you're seeing any inflationary impact on customer acquisition costs from prediction market related marketing spend? Thank you. Hi Ben, why don't I pick up the question around the prediction market inflation And I think from our perspective we are not seeing any sort of any change in terms of the competitiveness we have in the market. We have reasonably long term deals in place for a lot of our marketing deals with our partners and so we're not subject to sort of vagaries of short term fluctuations and people trying to spend more money or not. So you know, I think it's, it remains a very competitive place but it has been for some time and I think the nature of our national partners and deals that we have put us in a good place.
Rob Coltrake (CFO)
Yeah, when you look at the generosity year on year you have to take in probably about 50 basis points from the new states. I think our focus at the moment is on how do we get the biggest bang for our buck from our generosity lay down across our customer base. And Peter outlined earlier, I think we've seen some really encouraging response so far from the changes that we've made. And the customer feedback's been incredibly positive from Protect plus and also the early days of the new loyalty scheme on Sportsbook that we've launched. So we're really positive about that. We've said previously that our generosity envelope for the full year we anticipate being broadly in line with 2025 and we've not changed our view on that.
Peter Jackson (CEO)
Thank you guys.
Operator (Operator)
Your next question comes from the line of Brandt Montour with Barclays. Brandt, your line is open. Please go ahead.
Unknown (Analyst)
Hey everybody, thanks for taking my questions. The first one's on prediction markets. How do you think about the cadence of the spend on prediction market markets? 2q3q4q in light of the fact that I assume that the one is not necessarily where you want it to eventually be in terms of the product level, but then also the sports calendar, do you need to be there in a big way for World Cup? Do you want to wait and save dry powder for NFL? And how do you sort of balance that sports calendar as well against that?
Rob Coltrake (CFO)
Yeah, let me pick up on that, Brant. In terms of how we're currently thinking about that. So starting off in Q1, that was really about testing and learning for us, really in terms of generosity and marketing around our predict products and demonstrating our ability to be able to acquire customers and actually establish some presence in the category. We spent circa $40 million in Q1. As I said in my previous answer, it's pretty early days, but actually we've always said consistently that we anticipate the majority of our spend on this to be in the second half of the year and our views not change. So we will invest behind the World cup and we expect to ramp our spend slightly from where We've been in Q1 in Q2, but we'll say really retain the right to flex that, as I mentioned earlier, because we're going to closely be looking at the returns that we're getting on a CACS and LTV basis on the prediction customers that come into our ecosystem. And then we really want to get behind the start of the NFL season in the second half year. But we need to make sure that we've got the right products in place to do that. And we'll be looking at the prediction investment envelope alongside what we're doing in our core sportsbook as well. And as we've always said with our capital allocation framework will be investing where we see the best returns in the business, but we don't see the overall Envelope changing from where we were previously at, we predict at this point in time, but it's an evolving picture. As I said earlier, it would be great to be here at the end of the year saying we're actually spending more because it's really taking off behind NFL in the second half of the year.
Peter Jackson (CEO)
Okay, great.
Unknown (Analyst)
And then just a separate question on. I mean, that market in the US Slowed a little bit sequentially. And one of your key competitors, you know, hinted at that being a tougher competitive environment, yet you guys outgrew the market and gain share. You know, how sustainable is that sort of performance that you saw? And do you also think that the market's gotten any either less growthy or more competitive sequentially?
Peter Jackson (CEO)
We were really pleased with the igaming performance in Q1, amps were up 10%. Revenue was up 19%. Revenue growth from the direct casino customers was even higher. So to some extent, our performance was impacted by the fact we came into to the year with a. With a smaller sports business. I think, you know, the focus we've had on our rewards club and this is the sort of second year we've had the program, the focus on exclusive content relationships we have with the key influencers has been really important for the business. And I think the team are doing a great job executing as it relates to market growth. The market can't keep growing at the same percentage rates because it becomes as the market grows, you'd inevitably see some slowdown. But when I look at the market penetration level, there's still a long way to go. So I think the team are executing well. We've got the leading position in igaming and we're performing well. Great.
Unknown (Analyst)
Thanks, everyone.
Operator (Operator)
We now ask that each analyst limit themselves to one question. Our next question comes from the line of Joe Stoff from Susquehanna. Joe, your line is open. Please go ahead.
Peter Jackson (CEO)
Thanks. Just in time.
Unknown (Analyst)
I wanted to ask on your generosity, Investment Reinvestment and FanDuel OSB, is it fair to say that, you know, that largely started in March and wondering if amps grew in April?
Peter Jackson (CEO)
Did you have a second question, Joe, or you just taking one?
Unknown (Analyst)
Yeah, sure. For the World Cup. Peter, you had mentioned another exchange that you could plug into. Will. Will you be plugged into that you know, more than the CME going into the World Cup?
Peter Jackson (CEO)
Let me take the. I'll take the World cup question and then follow up on your first question. We, we want to make sure that we have as compelling sports offerings for our customers as we can. You know, we have got a very exciting set of products we'll bring to our regulated rsp, leveraging the flutter edge and the global expertise we have in soccer. So, you know, we're excited about that opportunity to bring customers onto the platform. I think from a predictive product, you know, we. We do have the right to connect up with other venues. It's something we are focused on and the timing of it is tight, but we'll see where we can get to in terms of that for the World Cup. Yeah.
Rob Coltrake (CFO)
On your first question, Joe, from an Amps and Geno perspective. So, as we've said, we're laying down a number of new initiatives which we're really pleased with, with some of the traction that we're getting. And we are seeing sequential improvement in a number of our KPIs from, from Q1 into Q2. And we're not getting overly hung up on any one metric, but across the board we're seeing a lot of green up on the dashboard, which is helpful. We also have some noise. We said we'd see this around March Madness, where we had a very customer friendly period in the prior year, and you always get some noise around handle and amps as you move through that period. But actually we'd be taking the March Madness that we had this year over last year every day of the week. So we're quite pleased with the way that that played through for us and we're pleased with the momentum that we're now seeing into Q2.
Peter Jackson (CEO)
Thanks, guys.
Operator (Operator)
Our next question comes from the line of Ed Young with Morgan Stanley. Ed, your line is open. Please go ahead.
Unknown (Analyst)
Good evening. In your shareholder letter, Peter, you said that you've got a clear plan of improvement for the sportsbook and you've laid out a lot of the product and kind of iterations that are coming. But I wonder if you could sort of help us take a step back and give a bit more of the diagnosis of what you think has gone
Rob Coltrake (CFO)
wrong within the business.
Unknown (Analyst)
Obviously, you've made some changes and it's good to see some decisiveness there. But on a bigger picture level, you know, where is the business not been doing what it should have been doing? And are there any kind of, you know, beyond organizational changes, any kind of macro changes in terms of how FanDuel needs to approach the market, in terms of, you know, competitive intensity or promotional intensity? It doesn't sound like that's what you're saying, but you're also saying that, you know, Dan Taylor's coming in to sort of review and oversee the business. So complete is Your diagnosis and perhaps could you share some of it with us today? Thanks. Evening.
Peter Jackson (CEO)
Well, evening your time, Ed. I think we've been pretty clear around what the issues are for us from a sports perspective in the US and look, I would describe the intentions of the team as being one where we just, we're getting back to five focus on the customer first approach. And we've seen that with the way in which we've been trading the business in the last, in this last quarter where I mentioned in my opening remarks the stuff we've been doing around the Mets. I think there's been some good justice refunds the team have been doing and I think it's engaging and it gets you on the front from a social perspective and that's important to do. And I think it's something which we do around the world. I think the better protect product was important as we needed to deal
Unknown (Analyst)
with
Peter Jackson (CEO)
the issue of injuries, which has been a real challenge for us in the market. And I think we've got a great solution in place. As I mentioned, we've seen twice the levels of engagement that we had expected with that product already. And there's certainly plenty of ways in which you can see us evolving it in time. And clearly one way we can evolve it is with the launch of the loyalty or reward program. There may be tiers of it, for example, where we can give customers access to free vet protect. And so the integration of all of the different aspects of the product is something which is going to be really important for us to make sure that we're offering great value to our customers. So this isn't about a fundamental change in posture of margin and generosity or anything like that. I think we, we know what we need to do around loyalty, we know what we need to do around the injury stuff. We are getting better on the front foot from a trading perspective and I think we're making lots of progress there. I think the two other things I'd call out from a product perspective is we have superior structural growth margins in comparison with everyone else in the market. And that's something which doesn't have backs. And I think it's as a result of the quality of our accuracy of our pricing. And that's something that's really important and it's something that we intend to continue to invest behind and sustain. And I think that is a feature that you see from us in all of our markets. And the other aspect I'd pick on is there's a lot we're doing from a core product hygiene Effort, perspective, you know, and it, you know, it's, it sounds like, you know, these are simple things. You know, the iOS launch time is now less than two seconds. You know, we've got full screen streaming available for key sports. You know, we've upgraded some of our live betting. We're simplified, same game parlay buildings and yeah, you can track five bets on the lock screen. So there's lots of small enhancements like that that we would continue to roll out and deliver. And actually the cadence of delivery of this stuff is all being improved with investment and focus in AI. So the throughput we're seeing from a product perspective is stepping up material and it's really exciting to see that translate into the product that customers are seeing in their hands on their phone. So there's no change in strategy. I think we've got clarity, I think we're putting customers first and we're getting back on the front foot and we're starting to see the sequential benefits of that.
Unknown (Analyst)
Thank you.
Operator (Operator)
Your next question comes from the line of Estelle Weingrod with JP Morgan. Estelle, your line is open. Please go ahead.
Unknown (Analyst)
Hi, good evening and thanks for taking my question. I've got one. In the UK, sports handle was a negative 5%. You mentioned in your remarks an improving momentum in March. Could you elaborate on the actions you are taking in the UK in that segment? And all these improvements confirmed and sustained in April and May. Thank you.
Peter Jackson (CEO)
The biggest drag on performance in the UK is Sky Bet and.
Unknown (Analyst)
But we are.
Peter Jackson (CEO)
It's an area where we're seeing now sequential improvements coming as time passes by. Since the migration, we've seen a big step change. If we look at revenues up 9% on a normalized basis in March, which is compared with flat for the Q1 period as a whole. So good sequential improvements in sports. And I think from a gaming perspective, we're also making progress. And if I look at the leading indicators, we've had the highest customer acquisition volumes for five years onto the brand. Sky Gaming has now got more than a million customers, which is the first time ever. And that happened in, in March. And actually the Eyelers and Crycheck rank the app second. So there's been a big step up in how that's perceived from a customer perspective and it's number one for better interface and aesthetics. There's been a strong Cheltenham, lots of other metrics we could talk about. I think from my perspective, it just feels very similar to the experience we had post the PADI Power migration, where there was a first year Sort of reset and then we've obviously seen very strong performance from Padi subsequently, but we've now got great product for the sky customers. We've addressed some of the issues that we've seen post migration and I think we're starting to see some of the green shoots come through.
Unknown (Analyst)
Thank you.
Operator (Operator)
Your next question comes from the line of Paul Ruddy with Davey. Paul, your line is open. Please go ahead.
Rob Coltrake (CFO)
Hi, good evening, guys.
Unknown (Analyst)
Just one follow up on the US generosity and customer acquisition journey. Just regarding paybacks on the state launches and I suppose the customers are trying to reach.
Peter Jackson (CEO)
Paul, we've lost you. Sam, are you still there?
Operator (Operator)
Yes. We will move on to the next question and reconnect Paul when we can. Our next question comes from Chad Banon with Macquarie. Chad, your line is open. Please go ahead.
Unknown (Analyst)
Hi. Hi. Thank you very much.
Peter Jackson (CEO)
Just one for me.
Unknown (Analyst)
Just given your previous success and in acquiring brands, most of which had podium positions, given the stock dislocation right now in our sector, whether it's B2C, B2B
Will (Analyst)
sports data affiliate, what's your appetite to
Unknown (Analyst)
maybe do another deal at this time given depressed valuations in the market? Thanks.
Peter Jackson (CEO)
We have done plenty of deals, as you say, Chad, and I think we've been really pleased with the progress we're making with the integration in Brazil. You know, it's going to be great to see the benefits of the pricing and promo capabilities go into that business ahead of the soccer World Cup. I think it's going to be super exciting to see what SNY do with all of the capabilities we'll give them access to. Now that the migrations happen successfully there, there's a lot for us to go off across the business. We are always open to M and A if we think that the prices are right. I think right now for us, we are continuing to focus on those integrations and there's a lot to do in the US business. We also need to acknowledge our sort of leverage and I think there's a focus at the moment on deleveraging. Thanks, Peter.
Operator (Operator)
Your next question comes from the line of Ryan Sigdal with Craig Hallam. Ryan, your line is open. Please go ahead.
Will (Analyst)
Hey, good afternoon, this is Will on for Ryan. Just wanted to ask on sort of some of the portfolio optimization we've seen lately. You shuttered FanDuel picks last month. FanDuel TV racing is shutting down. I think Betfair in Mexico has also ceased operations. Just curious if there's an increased focus on sort of portfolio and resource optimization and if there are any other Products and or markets that are being considered. Thanks.
Rob Coltrake (CFO)
Yeah.
Peter Jackson (CEO)
Hi Will.
Rob Coltrake (CFO)
I mean, this is a constant focus for us in terms of optimization and efficiencies and the decisions that we took around Fanjul TV pix were relatively easy for us in terms of where we want our focus to be in the US with FanDuel at the moment and actually in particular with Fangil TV, that delivers some good cost efficiency for us. I think with regards to the. The broader portfolio across the group, you know, we will continually review. But as we sit here today at the moment, the majority of our brands are performing extremely well for us and you know, that's not a problem that we have in the near term. So, you know, we'll continue to focus on costs and where opportunities present themselves will lead into that.
Unknown (Analyst)
Great.
Will (Analyst)
Thanks guys.
Operator (Operator)
Our next question comes from the line of Sean Kelly with Bank of America. Sean, your line is open. Please go ahead.
Unknown (Analyst)
Hi, good evening everyone. Thanks for taking my question. So, Peter and Rob, just maybe super high level, we noticed that there was an application for a direct FCM license recently. Just wondering if any of the management changes made allow for a bigger or slightly bigger rethink on strategy in your approach to vertical integration in prediction markets. And then Rob, if we could just get a little color for the second half on sort of your thoughts around revenue contribution and what's baked into the guide directionally. Obviously not solid numbers, but directionally for production markets in terms of contribution in the second half. Thanks. Sure.
Rob Coltrake (CFO)
We'll be very brief because you've asked
Peter Jackson (CEO)
two questions, but on the license application, I think in general I'd go back to what I was referring to earlier on the call. We want to make sure that we can adapt and do what we need to do in order to win. I think we're very much focused on ensuring that we can build a great sports solution for customers wherever they are. And we need to make sure we've got the right range of product available to them. We're connecting to other venues at the moment, but of course we have made an application which provides us with further optionality. We've got to adapt and do what we need to do in order to win for our customers.
Rob Coltrake (CFO)
And on the prediction market revenue contribution, we're not guiding in detail at this stage. I think that the best indication that you can take, Sean, is what I mentioned earlier in the sense that we intend to step up the spend as we move through the year. So we'll see some upticking in Q2 and then we'll intend to do more behind the NFL in Q3. Give more detail in time.
Unknown (Analyst)
Thank you.
Operator (Operator)
Your next question comes from the line of John decree with cbre. John, your line is open. Please go ahead.
Unknown (Analyst)
Sure. Thank you. Thanks, Peter and Rob for taking all of our questions. Maybe an easy one. I think there was a comment about reduced cross sell From Sportsbook to iCasino in the US obviously good iGaming results kind of offset that. But we kind of assumed that might just be the lower amps in the sports platform in the quarter. But curious if there was any change in behavior among cross sell.
Peter Jackson (CEO)
You answer the question, John. That's exactly the point. We've seen very strong performance in the direct casino part of our business as we always have. And with a smaller face coming into the year, it impacted this denominator effectively. So this is not an issue in terms of any change in behavior other than that.
Rob Coltrake (CFO)
And we continue to be the top brand for awareness and preference on direct casino customers. So we'll continue to harness that.
Unknown (Analyst)
Great. Thanks for clarifying. Appreciate it. Guys.
Operator (Operator)
Your next question comes from the line of Monique Pollard with Citi. Monique, your line is open. Please go ahead.
Unknown (Analyst)
Hi. Afternoon everyone. Thank you for taking my question. I just had a question on this market making capability in the US around prediction markets. Obviously you're trialing it and then you're going to be launching it later in the year. It feels to me like potentially that could be quite a material opportunity. So just trying to understand if you think it can be quite material over time and Whether in that second half U.S. adjusted EBITDA guidance, anything is baked in for that market making capability as it ramps up through the year.
Peter Jackson (CEO)
Hi, Monique. I spent time with the team who are doing this market making. It's like I'm excited about it, you know, I mean, it's great. We're making, you know, money today from offering this capability, particularly focused on combos and leveraging the pricing expertise we have. It's, it's small scale at the moment and we will launch our own platform in the coming months and I think we'll then be able to step up the volumes that we're doing. The only bit that's factored into our guide at the moment is the investment. And look, we need to wait and see how successful we are and then we can talk to you about the revenues that we're generating. But I think we've got conviction around our ability to offer a very competitive, compelling service in this area, leveraging the pricing expertise that we have.
Unknown (Analyst)
Okay, thank you.
Operator (Operator)
Your next question comes from the line of Robert Fishman with Moffitt Nathanson. Robert, your line is open. Please go ahead.
Peter Jackson (CEO)
Hi, good afternoon.
Unknown (Analyst)
Just curious, how does CalShe and polymarket striking partnerships with the major US sports
Peter Jackson (CEO)
sports leagues impact how you plan to partner or approach the leagues going forward?
Unknown (Analyst)
Thank you.
Peter Jackson (CEO)
There's. Yeah, I think from our business perspective, you know, we have relationships with lots of leagues and sports bodies and teams, you know, across the country. You know, we want to be the, we are the number one place for people to go for regulated online sports betting. And I think we want to be the premier destination for sports, whether that's through OSP or the prediction market Rails. And I think our one app allows us to do that dynamically. So wherever you travel across America, you better access our product and capability and I think we can leverage our national of advertising as a consequence of that. And I think there'll be some interesting questions and conversations for us to have with those leagues and supporting bodies and other relationships we have. Okay, I think we have no further questions now. So I'd like to thank everybody for dialing in and asking us all the questions. Much appreciated. If you have any follow ups or other questions, please let us know afterwards. Thank you.
Operator (Operator)
This concludes today's call. Thank you for attending. You may now disconnect.
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