Flutter Entertainment plc ($FLUT)

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Good morning, everyone. I'm Dan Politzer, JPMorgan Gaming and Lodging Analyst in the U.S. I'm joined today with Estelle Weingrod, the European Gaming and Lodging Analyst and Leisure Analyst here at JPMorgan, as well as we're thrilled to have the CEO and CFO of Flutter Entertainment, that's Peter Jackson and Rob Coldrake, here today to join us. I think that we can kind of get it started kind of high level. I'll focus on the U.S. and then Estelle will run through some of the International questions.

But I guess, Peter, Rob, whoever wants to take it, if we just kind of start high level. In the past 6 months at FanDuel, can you kind of walk us through what in your view has gone right, what has gone wrong? And can you talk through the changes in your approach or execution, whether it comes to any new products or the manner in which that you're promoting?

Yes. Good morning, Dan and Estelle and Evans on the call. Thank you so much for having us. Yes, I'm not going to go through all of the history of Q4 for FanDuel, but we know that we didn't operate as effectively as we should have done. And so we exited 2025 with a smaller business than we would have planned to have. The issues, particularly around generosity, were a problem. So we saw very high margins in Q4, which, to some extent, supports our view where our gross margins can get to, but we didn't execute well on generosity. So we ended up starting this year with a smaller customer base than anticipated. So those challenges are well known and we've talked about it. I think that we have then, subsequent to that this year, we've been focused on 3 things which we're doing to face into it. The first thing that we've done is we've made some changes to the organizational structure. We announced new leadership of FanDuel last week, but we've also got revised structure underneath that within the commercial functions. So we have [ Caroll ] leading the sportsbook with all of the capabilities he needs, so there's a bunch of other sort of organizational changes that we've made, which I think really will sharpen our focus on execution and delivery, which ultimately has been one of our challenges. But then what have we done, what are we doing about it to get ourselves on the front foot? Because we feel like we're getting a little bit more onto the front foot. I think the first thing is that we talked about the success we've had in loyalty in our gaming business, and that's something we've now bought into sports. Belatedly, but we've now brought it into sports. So we rolled it out in April. So obviously, we're effectively a month in, sort of cycle through for small cohort customers. I think the reason we're feeling good about it is we've got customers beating the door down wanting to be included in the loyalty program. So it feels like we've really identified something that we need to address. By the time we get to the start of the football season, that will be fully rolled out to all of our base. And I think it will give us a really good mechanism for being able on the right side of the discussions we have with our customers around generosity, particularly when margins are moving around. The second thing that we did last year was we watched a number of people come into the market with products around protecting players when they were -- protecting customers from players with injured. And we had an okay offering, but we've come out with [indiscernible] which we think is the market-leading product now, charging customers a small fee for that sort of insurance. And we've seen a much bigger uptick for that product than we thought. I think the final thing that the team are doing is we've just got a much better sort of focus on our trading and sort of the cadence of getting stuff out into customers' hands. We're thinking about taking a much more customer-centric, so back-to-basics approach for customers. And look, when Wemby got injured, we were out there refunding customers. We had -- I mentioned on the call last week, we had a bit of fun with the Mets on their losing streak. So we're tapping into this sort of being a bit cheeky, into this where the conversations flow from a customer perspective. I think that's really important. And we're seeing sequential improvements in our KPIs, which I think is giving us conviction that we're focusing on the right thing. I think I would answer your question about what's gone right with gaming. I think we're very pleased with our performance in gaming. Obviously seeing strong growth in the first quarter. And that was despite having a smaller sports base to cross-sell into. So our performance actually amongst direct casino customers, I think, was up to around 24% year-over-year. That part of the business is performing really well. And I think we've got really good traction in there. And of course, the other thing that we should also recognize is the progress we're making on prediction markets as well, but I'm sure we'll end up spending more time talking about that.

So I guess if we're sitting here having the same conversation in 6 months, what are some of those KPIs or metrics or things that you want to see the team having achieved with Christian and Dan now in the leadership seat?

Yes. I'd like to see us continue with this focus [indiscernible] execution, right? So in 6 months' time, we'll have fully rolled out the loyalty program, I think we'll see this injury stuff [indiscernible] and I think we'll be much more on the front foot from a sort of trading perspective. So this customer-centric approach, I think, will be something that we'll really lean heavily into it. And I think we'll see the benefits of that in our KPIs. Of course, we also -- sure, we'll continue for looking 6 months into the future. I think we've got to keep the momentum going in iGaming as well. And I think [indiscernible] quite an interesting point in prediction markets. When I think about the opportunities we have to be able to go after supporting the FanDuel customers wherever they are in America with a great sports experience for the customer, delivering that, and we're making money and market making already. So that's -- we're probably one of the few people who's making any money in our prediction markets at the moment.

That makes sense. And then, I mean, I think this is probably one of the most prolific topics, but maybe not your favorite, is the handle discussion, right? So industry in the U.S., it's obviously decelerated. What do you attribute the slowdown to? Recognizing prediction market cannibalization. It does seem to be generally understood to be fairly modest. And you've also talked about handle trends improving from down 10% in January to growth in March ex March Madness. So I guess, can you give us a sense on what's been happening overall with handle and maybe any sense on April or May to-date trends and how you envision it, kind of the trajectory over the rest of the year for handle?

Yes. Why don't I answer the first part of that down and then Rob can talk a little bit about recent trends and how we're thinking about the full year? I think it's important to recognize that when you're looking at handle performance year-over-year, you've got to acknowledge that big swings in margin have a big impact on what you see in handle. And it's been a particularly noisy 2 quarters for the industry when you think about Q4 and Q1. We saw in Q4 '25, we sort of particularly strong gross win margins in NFL, which contrasted with low for the prior 2 years, right? So consumers suddenly saw a big flip in how they were feeling about their waging from NFL. If margins went -- if margins move from 10% to 20%, it halves the amount of handle you generate. So this is really material in terms of the impact it has on handle generated. And then again, this year, we actually made good margin in March Madness. And last year, we made, in $1 billion of handle, we made nothing -- less than $10 billion. So to try and get to too forensic about what's happening month-to-month is tricky because there's a lot of noise. I think we saw the market delivering good growth last year. I think there are questions around whether it has slowed down at all going into the back end of the year. I think it's hard to read it. I think we'll know more as we get into the back part of this year. But Rob, do you want to?

Yes. I think as we've said consistently done, we tend to think about handles as one component of revenue, but we're looking at broader stuff, KPIs and Peter alluded to those. It's fair to say that at the start of the year, we had some softness in the top line coming out of Q4 on some of our execution there. As we move towards the end of Q1, we certainly saw some improvement in March. So we saw ramps coming back on to the platform and some positive year-on-year movement in terms of apps, which we've retained into the NBA playoffs, which is encouraging. We also see some improvement in handle [ wave ] over that period. And we're getting some real good engagement behind NBA, which is clearly one of our key sports, actually our top revenue sport when you look calendar year-round. So we're feeling reasonably sanguine about some of that underlying improvement we're seeing in the end of Q1 and Q2. When we think about that through the rest of the year, as I mentioned on the call last week, with -- we've baked in a graduated improvement through the year. It's not heroic assumptions. It's a gradual improvement. And we've got a number of products and generosity initiatives landing over that period. So by the time we exit Q4 this year, we're looking at a modest handle improvement year-over-year, which we think is very achievable given the product and generosity improvements we've got in the pipeline.

Got it. That's helpful. And then if I think back to 2024 in your Analyst Day, one of the things that really stuck out to me was this kind of formulaic 16% structural margin, 4% promotions, equals 12% net win margins, right? That was, I think, kind of a goal to where you get to. And I think that in Australia, the kind of formula there is 18% structural wins, like 6% promotions gets you back to, I don't know of it's a magical number of 12%, but for whatever reason, it's 12% too. I guess as we sit here today and the way -- I think in the first quarter, your structural hold was down a little bit just because the sports mix. Like what is kind of the path to getting longer term to that 16%, minus 4% equal 12%? Is it a different formula that gets you to 12%? But I guess how do you get there and how do you think about that kind of formulaic dynamic in terms of promotions and overall win margin?

Yes. So there's probably a few key parts to this that we should touch on. One, as we've seen an experience throughout the world is parlay penetration, and we're expecting that to continue to improve this year. We don't think we're at the ceiling yet in the U.S. So we think there's definitely some room to go in terms of parlay penetration. There's obviously been some sports mix dynamic in terms of results, and that's kind of carried into the first half of this year, but we expect that to be more temporary and transient in nature. I mean for us, getting the right balance between structural hold and net revenues is kind of the key barometer that we look at. And obviously, a key part of that is our promotions. If we look back at last year, it was very evident, with the benefit of hindsight, that we were slightly inefficient in our generosity approach and laid out our generosity last year. So actually, as we come into the second half of this year, we'll be comping that and be slightly easier comps for us as we get more efficient with that later. Add to that the new loyalty scheme, which we've launched, it seems to be getting good traction initially, being in full flow by the time we get to the NFL, and the fact that we are trialing our model-driven generosity that's been delivered in Sportsbet. We've got our team from Sportsbet overall working with our FanDuel team to make our generosity [indiscernible] more efficient, so we get more bang for our buck in the U.S. That all gives us a high level of confidence that we can hit that 16%, 4%, 12%. And whether it's 16%, 4%, 12%, or 16.5%, 4.5%, 12% or it's 17%, 4%, 13%, we're very confident that's going to grow from where it is today. I think from a handle perspective as well, we're confident, as I said in my answer to the earlier question, that we're going to see some sequential growth as we move through the year given some of these initiatives that we're going into [indiscernible].

So even in a world where you have those net win margins of 12%, handles should theoretically still be growing at some level. Is that a fair assumption or a fair conclusion from that?

Yes. We don't think we've reached anywhere near the maturity of penetration in the U.S. market, which absolutely gives us confidence that there's still headroom to grow the top line.

Dan, we've seen similar situations in penetration rates in markets like the U.K., where the penetration rates slowed down a little bit and then [indiscernible] driven back up again, when people develop better engagement into [indiscernible] for more recreational customers, and I'm sure we'll see similar things happen in the U.S. .

This is more near term, but I think it will just be helpful for all the listeners. Just the second quarter EBITDA guidance, I think it threw people, the implied guide is about $104 million of EBITDA at the midpoint. Is there any way to just walk us through the moving pieces? If we started the second quarter of 2025, I think your EBITDA was around $400 million. Can you maybe bridge us to where the $300 million year-over-year decline gets -- comes from?

Yes, sure. So the first point I'd mention here is that nothing has materially changed from our perspective. We always assume that Q2 this year would be a little bit lighter from an EBITDA perspective than Q2 '25. There's a few things to bear mind. Firstly, sports results. So last year, we had about $90 million of positive sports results in the numbers. That's $90 million revenue, $70 million EBITDA. We've got the Arkansas launch this year, so we're factoring at about $20 million of investment in Arkansas. We're also factoring in investment in prediction markets. So roughly, we've got tacked about $60 million to $70 million for production markets in Q2. As we mentioned on the call last week, we've now got PokerStars North America in the U.S. numbers, and that loss is slightly skewed towards Q2. So that's in there as well. And then you've got some smaller factors such as the annualization of some of the tax increases that we saw last year. When you roll all of those up, they form the majority of the bridge year-on-year. And then you've got a bit of a mix impact where we've got more iGaming growth coming through this year relative to sports, that has a bit of a change in the mix. And then probably the last point to mention is the World Cup, because I think there's a bit of a misconception sometimes that the World Cup is a huge profit-making machine for us. We view it more as a customer acquisition event. We're very excited about it, but we think we're going to get great engagement from our customers and we think we're going to get new customers as well around the World Cup. But that doesn't tend to drive incremental EBITDA, and we've put a fair amount of investment behind it from a marketing perspective as well, some of which will be in Q2. So they're the main bridging elements. But as I say, nothing has really changed with regards to how we're thinking about Q2. That's not a recent change.

So does the second quarter embed much organic growth in there?

So the second quarter has got organic growth in iGaming. From a sportsbook perspective, we're still modestly behind last year from an underlying perspective. And then I say you've got those other factors that I mentioned on top.

No, I appreciate the clarity there. And then a lot of the -- a lot of your call last week, you talked about sequential improvements. It does sound even this morning, like the worst is in the rearview for all sports betting. Recent data points have certainly been a little bit more positive. Can you maybe give some of those monthly KPIs that give you confidence in that kind of full year guide and how the team is executing. It's just one of those things -- this is the last question, I promise, on this year's guidance. If we just kind of think about the first half of the year, I think revenue growth -- revenue is declining about 8%, trying to adjust for hold. The second half implies somewhere in the mid-teens revenue growth. And it's just kind of a big difference. So I mean is this just those -- that sequential improvement kind of -- those sequential improvements gaining momentum? Or is there something else embedded in there with the comparisons?

Yes. So there's a couple of factors to bear in mind. One factor you didn't mention there is actually sports results year-on-year. So when you look at 2025 as a whole versus our expected margin, we were up $200 million plus underwater from our expected margin based on sports results. A lot of that was in Q3 and the start of Q4. So that will actually naturally come back this year if we're on or around our expected margin. When you look at top level handle improvement year-on-year, the phrase I'm using in terms of our assumptions are they're not heroic. So actually, we started off the year with a slight down break year-on-year in terms of revenue from -- and that was the overhang from Q4, as I mentioned. In Q2, we still think from a sportsbook perspective, handle is going to be slightly negative year-on-year. As we get to Q3, we expect it to be more neutral, and that's then into modest improvement. If you zoom right back out and think about our assumptions from a net revenue perspective, iGaming is in the mid to high teens, which we're hitting that run rate and we're feeling very confident that our [indiscernible] acquisition strategy continues to work pretty well for us. From a sports book net revenue perspective, including the [ Luck ] element that I talked about before, we're at high single digits or just into double digits if you exclude the [ Luck]. So all of it feels very achievable. And that's also underpinned by some of the generosity efficiency that I talked about where we're slightly inefficient last year, and we've got a bunch of efficiency measures coming into play on our generosity playboook this year. And then the last thing I'll also mention is OpEx. So we're really laser-focused at the moment in terms of cost discipline. We will be driving more leverage we go through the year. We've also been looking very closely again at our cost of sales, and there's a number of initiatives around cost of sales, which we'll take as we move into the second half of the year and we'll be lapping slightly easier comps. So we're feeling pretty sanguine about the guidance. As we've said continuously, we think it's a sensible, measured guidance for the full year.

Got it. And I recognize this is not the forum for '27 guidance changes and I'm not going to ask what that might look like. But I guess if we just think about the moving pieces from when you talked about how you envision '27 to versus where you are today, a lot has changed on the tax front, so -- and certainly, even in the fundamental picture. So I think it would be helpful if you can kind of walk us through what's been tracking better maybe than what you had originally forecast as you were thinking about '27, what's been -- and where there's maybe room for improvement? And what are the other big kind of moving pieces that just you couldn't necessarily forecast like taxes and maybe a few other things?

Yes. I mean as you say, Dan, we need to trade out this year to see where we are from a timing and a phasing perspective. If I reflect back on that the foundational blocks that we laid out at the Capital Markets Day, I mean, firstly, you've got the structural revenue margin, where we said by '27 we'd be 15% target, longer term 16%, that we talked about earlier. We're very confident about that. We continue to see improvement in our structural revenue margin. We've got that playbook from the rest of the world, and we're very confident in terms of our delivery in the U.S. From a map expansion perspective, we said 2% a year on the sportsbook. We've been hitting our straps on that. I think it's quite interesting with the emergence of the prediction markets, I think, if anything, they should have a net favorable impact in terms of the cadence of new sportsbook [indiscernible] over time. From a map expansion iGaming perspective, we said 1 new state in the next 3 years. I think there's some good pressure building around that and the monies that we're investing behind the SuperPac of laying some good green shoots for us. And I think in time, we'll have some progress on that front. The performance of our iGaming business has been stellar, and that's actually ahead of our expectations and we continue to see headroom there. And from an operating leverage perspective, I think trust is on our track record there. We've delivered good operating leverage around the world. And as Peter mentioned earlier, we've got some plans that already we're going into play in the U.S. this year. And we'll continue to get that operating leverage over time, we're demonstrated on, through the P&L and things like sales and marketing, we will get that over time. So I think to summarize, we're probably slightly behind where we thought we'd be from an overall sportsbook perspective, and that's moved left to right. But I think judge us at the end of the year as we've traded out this year, we'll be able to give a bit more color in terms of where we are on timing.

That's fair. iGaming, that's been obviously a big bright spot for the company. Your market share is up, you've been gaining AMPs. And it's an interesting dynamic as we look at it because you've been gaining a lot of momentum. One of your other competitors has been gaining momentum, and then there's another 2 that have been losing a little bit. Can you maybe talk about what you're seeing across the competitive environment? Is it a product differentiation that's driving this dynamic? And I guess, how do you think about overall industry growth in the coming years, acknowledging, Peter, your comments on the call that you can't just underwrite 30% growth in perpetuity?

I do think it is important to think about iGaming and compare it with sports. There are some fundamental differences. I mean in sports, you're subject to someone else's calendar, right, and there's a World Cup, soccer this year. The football season starts at a certain day and you may get this many games in the NBA playoffs, et cetera. And in gaming, you make your own calendar. You have your own opportunity to draw that, particularly amongst the direct casino customers. And that's been a real area of focus for us. I think the team has done a great job of executing around delivering exclusive content. I think the loyalty program is working really well for us, and we just got to the second year anniversary of that. And just getting all the basics right from a customer perspective. And I think in a very, very competitive environment, and it has been very competitive, I think the team have performed very well. It makes me feel old because I can remember when we first launched our original casino operation in New Jersey back in sort of 2013. Look, we're still growing, right? Look at the growth rates in New Jersey, and it's because the penetration rates have still got a lot way to go, right? There's still another 50% [indiscernible] on penetration rates. So I think growth isn't going to be a sort of 38% we delivered last year. And I think we -- as I said, we can't [indiscernible] that forever, right? We are expecting high teens growth this year. Q1 would have been higher were it not for the fact that we came in with a smaller sports base, which has impacted our sports cross-sell. So look, if I look at our international business, and maybe here's a plug for what we're doing in our international business, a lot of very mature, so-called mature markets there, we still grew gaming 15% in Q1. And so I think iGaming is exciting. I think there's lots of structural tailwinds. It's the one area where U.S. consumers spend time going to physical casinos, and this is the sort of natural conversion from land based to online. We're super excited about new states coming on stream. One of my favorite stats is when the day comes and we get iGaming in New York, it's a bigger opportunity than sports betting in California.

Interesting. Yes. I guess that makes sense. We'll see. As a native New Yorker, I'm skeptical on the time line. All right. Let's move to prediction markets. We want to make sure, obviously, we cover that. There's a lot of ground there. I mean look, it sounds like market making has become very quickly and quickly profitable emerging kind of area that you're talking a lot more about, as well as your peers. But as you think about overall the prediction market ecosystem, where do you see the greatest opportunity just given your skill set given the background and kind of the competitive advantages you bring to the table?

Yes. I think it's important when we look and talk about this, just to make sure we're also in the same sort of language perspective. Because when we talk about market making, we're actually on principal risk. So it's actually no different really to a lot of the [ foot-making ] activity we'd undertake for a regulated OSB, again, we're sort of taking principal risk, and we can leverage a lot of our pricing accuracy capabilities in both areas. So there's a natural opportunity that the businesses that are best placed like we are and have the highest gross margins ought to be very good in the market-making opportunity and positions. And that's why we're leaning in heavily into it, where we can particularly leverage our capabilities around parlays to get into the combo space. And it's -- that is an area where we have a lot of expertise. And of course, as you were saying, Dan, we're making money there already. There's no complexity around sort of managing sort of lifetime [indiscernible] customers. We can switch it on, we can price and we can immediately make money. And so there's a lot of opportunity there for us, which I think is exciting and there's very, very little about in our guide for the year ahead. I think when you then look at what are we doing with the core [indiscernible] customer acquisition [indiscernible] what's the point in that? Well, now that we've got our unified app in place, right, so if you open your FanDuel sportsbook app, when you travel to Florida or California, that you're using in Manhattan today, Dan, you'll find that the Predicts product launches in there now. So we've got that unified experience for customers. We will soon have a sort of integrated experience. So our Predicts product will look very similar to what we do from a sports standpoint, albeit the cash will not be as extensive. And so we want to make sure that we are there for our customers wherever they go in America. I'm focused on delivering great sports experiences for FanDuel customers. And so it's principally around sort of customer acquisition, and that's how we're thinking about it. And ideally, we'll be acquiring lots of customers in the states where we'll be able to ultimately launch regulated OSB, which is what our sort of true north still is for this business.

Is there a scenario where at some point you're going to be disclosing some of the prediction market volumes or trading activity or any of those metrics explicitly?

We need to think about what we're going to do from a disclosure perspective. And I think at some point, it's going to be helpful for people to understand how to translate between the difference of volume metrics. Because, of course, $1 million of handle in a sort of OSB, an odds of 8:1 translates into sort of $8 million of volume in prediction market. So it's not all apples-to-apples with some of the comparisons that people see. But look, we're thoughtful about what are the right metrics that we can have to talk about what we're seeing in our business and the different parts of it.

Is there any way to think about that opportunity over time for market making? Obviously, it's early days, but we -- publicly, we only see big volume numbers coming out of the predictive market operator. So it seems like a ripe opportunity. And obviously, it's profitable. So it seems like a bright spot. I don't know if there's any way kind of longer term to think about it or frame that opportunity.

I am excited about it. I think for us, the opportunity is in the combo space. I mean, I think that you'll have seen from some of the public commentary from [ Tarek ] around what cash you would do and what proportion of their business is combos, and you can work out what would be a reasonable share of that for us to take or what would the margin be. And you can get to some big numbers, right? And so to some extent, if the VCs are pouring money into customer profits, then we can take that through the combos, we'll have it.

All right. That makes sense. It will be interesting to see how it plays out. For the direct FCM license, how do you view the strategic optionality of having that? And is this something you would do alongside the CME partnership? Or is it kind of an independent endeavor?

We need to make sure that we have the right flexibility in our operating model to adapt to this environment, which is moving very quickly. I mean it wasn't -- we weren't talking as excitedly about market making such a long time ago, and we're now live in the market. I think the strategy for having a unified app is the right one. But that wasn't always clear to speak with them, and we've got it in place. So we'll adapt to make sure that we can win for our -- win in this space. We're working with the CME to ensure that we're aligned on what's required for our partnerships to be a success. The [ CME ] obviously gives us access to the leading financial market products and capabilities. As far as our relationship and agreement with them, we can use other venues of sports in certain [indiscernible] to say that they don't have the coverage that our customers need, we can get to other venues. And so that's something that we're looking at to make sure that we can deliver a good experience for our customers. And yes, an [ SCL ] license application provides us with further optionality. So we're just making sure that we're there in this rapidly evolving environment to win.

Have there been any limitations in terms of the partnership thus far in terms of just getting the product out there that you want to have? What are kind of the advantages as you think about to kind of more owning the rails, so to speak?

Well, I think you need to look at this product in 3 ways. I mean I think we're going to be able to make money through market making, which is something where we can leverage all of our sort of core pricing and trading expertise. And that's something where we've got a lot of experience there. We've developed and deployed a reasonably early prototype from a product perspective, but we'll soon have our fully-fledged platform live. And then really, I think you've got to distinguish between what the user experience looks like within this sort of unified app. It's very clear to us that we want to launch an experience that looks very similar to the FanDuel sportsbook. We know that's what people know and understand and like using. And so we're on our way with a sort of unified code base for us to deploy that. And then when we find things that work well, everybody gets the benefit of them. So that's something that is actually independent of the rails that you operate on. I think the question is whether you are able to sort of stand up the breadth of market that you -- whether we can sell it in the breadth of market that we need with our relationship with CME. And that's where I think the optionality of alternative venues comes into play for us. So I think we'll continue to work through it, but I think we're pleased with our sort of positioning that we have in the market.

And these market-making capabilities, when you start integrating those into your own product, does that change those customer unit economics at all or the generosity equation? It's just -- we're trying to reconcile, it seems like you're playing a lot of different areas here. So from a customer standpoint, how should we think about what that experience is going to look like in terms of generosity or kind of just playability or betting options?

One of the challenges in prediction markets is the lack of generosity. And we know from operating [indiscernible] around the world that when you are severely constrained in your ability to offer customers generosity, it has a real impact on customers' longevity and frequency of [indiscernible] and all those sort of things. So this is a real issue that we are -- that we've seen elsewhere. We're focused on the sort of the twin track of making sure that we can leverage our capability in market making, and I think that with combos on third-party platforms as well as our own. And we're also going to make sure that our FanDuel customers have a great experience wherever they are with this unified experience. I think the question as to whether you can start [indiscernible] the 2 up and what happens if you are market-making when you are in the platform? You can't guarantee that you're going to win the bid, right, when someone is requesting [indiscernible]. So it's one of the issues and one of the reasons why prediction markets don't have that sort of same clean-cut approach to generosity that you do in an OSB.

Got it. So we think about, I guess, the next few years for prediction markets. It's still early days, and I recognize that 2026 revenues are modest and investments are probably somewhere in the $300 million neighborhood. But I guess directionally, how do you think about the contribution in '27, '28? Is it safe to presume that '26 is going to be a peak investment year?

Yes. I mean we've always said consistently that this is the [indiscernible] year, if you like, in terms of investment. And that's why we've maintained that we'll will be towards the top end of that $200 million to $300 million range that we talked about. As you move out in time, we've always said that we think the prediction markets will reflect similarly to new sportsbook stakes in terms of profitability. So getting moved to contribution positive after a year or so and then cumulatively contribution positive after a couple of years. I mean, as Peter said, it depends slightly on the regulatory landscape and how that develops alongside. So there could be a slightly shorter or longer inflection profile when you look at that. But what gives us a high degree of confidence at the moment as well is we think this $300 million envelope will be pretty synergistic across our sportsbook as well. And in time, if we develop this product with a go-to sportsbook across regulated OSB states and other states, that actually we'll have a huge opportunity to use our marketing on a national basis synergistically across sportsbook and prediction markets and so we'll be able to interplay for us, which is great. And then you add to that the market-making opportunity that Peter referenced earlier. We're feeling quite encouraged by what was -- ultimately here, as we always maintained, our #1 objective is to acquire customers and to build a database to actually sell regulated sportsbook to in time. And that's our north star in this space. Hopefully, we can make some money along the way, and we'll see how the regulatory landscape plays out.

I have one last one on prediction market, I promise, and I'm going to hand it over to Estelle for more of the International side of the business. So from a product perspective, you rolled out your combined app. You added more markets in recent months. I guess what are the next goalpost that we should be thinking about from that product perspective to see that you're showing progress and in terms of the timing of the customer acquisition ramp? What are the hurdles or kind of opportunities that need to be passed to kind of get to where you need to be?

Naturally, when we look at this through that sort of sports-first lens, we've got some exciting opportunities coming up. There's the World Cup and then there's the really biggie, which is the launch of the football season. So we're really focused on sort of how we can prepare ourselves for those things. And really trying to deliver a continuous set of product innovations along the way, as we do with any of our businesses. I think there's a few things that we will want to deliver. I think we want to deliver an integration of the wallet experience. I think there's always going to be questions of commingling funds which is complex, that we need to deal with. But I think having an integration of the [indiscernible] will be important. We clearly need to expand the catalog, right, that we have available to customers, particularly around player [indiscernible] which we know is something that's very important. And as the people who developed the parlay, we know how [indiscernible] combos are. So that's something that we have to make sure we're there delivering on, in the same way that we deliver for parlays from our customers in the [ OSB ] space. So I think there's a lot of that stuff going on. And then ultimately, to have a UX which looks and feels like our experience in our sports space is going to be very important, because we know that works well for us, and we [indiscernible] and can get that around the navigation, so we want to leverage that.

Okay. That's great. Thank you for all the insights and comments. I'm going to hand it over to Estelle now for the international. Thanks, guys.

So International now. FY '26 guidance implies EBITDA flat year-on-year, also more Q4 weighted. What are the biggest drivers keeping EBITDA flat? Are we talking, I mean, [indiscernible] investment [indiscernible] changes, COGS mix? And can you outline the bridge to flat and where you see the most upside/downside, please?

Yes. There's a few parts, Estelle, in terms of the EBITDA growth, the limiting factors in '26, where we think we'll be able to kick on and inflect from '27 onwards. Clearly, that the U.K. tax increase is, as you mentioned, the gaming tax increase from the 1st of April, so we're working through that. As we said at the time of the increases, we think we'll be able to mitigate circa between 25% and 30% of that this year and then 40% of annualized kind of run rate. Our Indian business, obviously, we had to shutter of last year, so you've got the year-on-year impact of that and the EBITDA that we're making there. Last year we continue to invest behind Brazil, which we're very excited by, but this is another investment year for us in International in Brazil, that will reflect to profitability in time. And then we've got the World Cup investment in Q2 and Q3, which we alluded to earlier, that again, that should result ultimately more customers on the platform and future revenue growth in time. And when you look at the second half of the year, we're lapping some easy comps in terms of some of the cost initiatives that we've got in play and some of the transformation initiatives that we've already delivered. And then we also had some adverse luck in the international business last year, so then we had about $110 million of adverse luck in 2025. So when you put all of that together, the international EBITDA is obviously broadly flat year-on-year. As we move into 2027, we will be stepping up again in terms of overall profitability.

On the U.K. iGaming tax, so yes, you mentioned almost doubling of the tax from the 1st of April. You expect some sort of like first order mitigation and second order share gains, but also the risk of customer shift to unregulated operators. What is your mitigation toolkit [indiscernible] more product marketing and how will you measure and limit the trade-off between profitability and channel migration?

Yes. I mean ultimately here, we're quite well-insulated by virtue of our scale. And actually, when you look at the gaming market in the U.K., there's a very long tail of subscale operators. I think those are the ones that ultimately will be most impacted by us and have to cover deepest in order to be able to live with the tax changes. As we said at the time, we think there will be some leakage to the black market, but I suspect that most of that share donation will come from that longer tail. With regards to our position on this, we're very confident about our plans because a lot of that comes from the first order mitigation. But we've seen with these kind of tax changes over time in different markets around the world that there does tend to be second order mitigation. The time line of that we can't always be 100% accurate, but it will happen over time as some of these smaller players adapt to deal with the changing economics that we're seeing. But with regards to the plans that we laid out in terms of tax mitigation in the U.K., we still feel very confident about this.

Okay. Now in Brazil, sorry, I'm moving from countries to countries. You talk about [ bet national ] AMPs, it's like 40% up, and the upcoming integration of proprietary pricing to unlock the [indiscernible] advantages ahead of the World Cup. What is the time line of KPIs for the integration? And what incremental uplift do you expect in H2 performance?

Well, it's obviously -- I mean, yes, religion in Brazil is soccer. I mean I can remember being there when the soccer World Cup a couple of times ago, and I mean there wasn't even a dog on the streets. So to say the Brazilians get excited about this when the games are being played is an understatement. So we're very excited about having this integration in place. And as you say, it will bring an improvement to the product and pricing for customers, particularly giving them access to more multis, and that sort of parlays journey that we've been on in America. The integration is on track to deliver ahead of the World Cup. So the first phase is lined in production, and we'll complete the products rollout in May. And in terms of what we expect to deliver, it's not going to deliver us a huge step changes, but we should expect to acquire a lot of customers in the World Cup. That's always a focus for us around the world. But we expect to see a steady ramp-up in performance across the second half as the performance of the pricing capability and the frictionless customer experience improves. It is also a place where we haven't historically had a lot of sophisticated generosity. In fact, at one point there was no sort of bonusing capability. So there's a bunch of features and capabilities we're bringing to [indiscernible] and I think we're excited to see what we can do with that business.

Okay. And in terms of the cost efficiency program, you're making good progress on the $300 million '27 cost efficiency plan, with the full rate savings expected to be achieved by year-end. How much is already effectively delivered versus still to come? And where will savings land in terms of cost of sales versus OpEx? And I guess, last one, how would you ensure savings on slow product delivery?

Yes. So we're really pleased with the progress that we're making around the cost transformation. As a reminder, in terms of the buckets within the $300 million, we have $120 million in terms of [indiscernible] transformation, $80 million for the Snai synergies in Italy, $100 million for the UKI efficiency program and $30 million for the UKI platform integration. And taking each of those, the PokerStars transformation, we've made great progress, and it's probably more advanced than we thought it would be at this stage. We've had proof of concept in Italy. We've now got pooled liquidity with Sisal, and PokerStars, that poker business is performing as well as it ever has. And actually, it's outstripping COVID times in terms of the poker revenue that we get, we've gained market share. So not only are we getting cost savings, but we're proving that this is additive on the revenue line as well. From a Snai perspective, we've just very recently completed the migration onto the Sisal platform at the end of April. So again, that gives us confidence about delivery and actually overachievement of the $80 million envelope, and we'll start to see some revenue benefits as well as the cost synergies and times we can roll out our Sisal blueprint there in the U.K. The new operating model is in place under Kevin Harrington, making very good progress on that. We've migrated the SkyBet technology are the core UKI platforms. We've been in a period of of transformation flux there, but now we're out of that. We're seeing some green shoots in SkyBet, as Pete mentioned earlier. So when you look at run rate by the end of this year, we're actually run-rating towards that $300 million, and I'm actually reasonably confident that we'll end up exceeding the $300 million. And now Bettor Never Stops as far as cost is concerned, we're really still focused on what we can do next. So we're onto the next phase of cost transformation, and we're looking at costs, both in our U.S. business, what else can be done in International, but also at the group level as well. And we expect to be able to talk a bit more about that at Q2.

And perhaps just to come back to the U.K. In Q1, you had negative FX trends and you called out SkyBet being behind expectations plus migration, although improving. What is structural versus transitory in the U.K. Snai softness, [indiscernible] versus migration product versus competitor behavior perhaps? And what are the specific KPIs you expect to improve in Q2 onwards?

Yes. I mean most of this is transitory as we navigated the Sky migration, both the bet and gaming business that we migrated last year. It took customers a bit longer to adapt to the new interface, probably took some of our colleagues who are running the business a bit long to adopt it as well, which is -- but not something that [indiscernible] familiar where they happen with Paddy Power. I do think it's worth acknowledging, the customers now have access to the full extensive Flutter product suite that we have available for our U.K. consumers. And I think we've seen momentum improve across the quarter. And if I look at it from a betting perspective, we had our highest customer acquisition in January for 5 years. We had $1 billion customer at Cheltenham, which is the big horse racing festival. And actually, the underlying sports book was showing -- was back showing growth in March. So all important KPIs for us. I think if I look at our gaming business, I think in March, the first time we had more than 1 million customers on the platform. So when we look at the sort of leading indicators, I think we're feeling good about it and we're confident that this will continue to improve.

And we have not covered Australia yet, so just one question here. You just -- I mean, under the new advertising regime, what are your expectations for Sportsbet's growth trajectory for FY '26? And maybe more specifically impacts to CAC, competitive intensity, net revenue margins? Just want to understand a bit better how to look at Australia for the remainder of the year.

Yes. I mean the measures have been discussed and debated for a long time. So this has not been a surprise to us. And I don't think we foresee a material impact on the business. Like a lot of these regulatory changes, we've been trying to position ourselves as well as we could have done. We removed dogs from some of the advertising that we have in live sports. We've also been reducing our [indiscernible] volumes as well. And this stuff doesn't come in place until the 1st of January 2027 anyway. What we found in other markets around the world is that the scale operators often benefit from any restrictions around sort of advertising, saying that we are the scale operator in Australia. Look, I think we see -- we ultimately see a potential for a return to net revenue growth from H2 onwards in the business. We've got good momentum in higher-margin sports. All the stuff we're doing around model-driven generosity where we're really pushing the boundaries using technology to deploy generosity more effectively. We're doing that in Australia first, learning benefits from it. And I think we'll see that start to come through in the business in the second half.

And the last question from me on capital allocation. How do you see -- how you think of your capital return priorities versus deleveraging in M&A, particularly with your shares at these levels?

Yes. I think Pete mentioned this in the call last week that we're focusing on delevering the balance sheet a bit at the moment. I mean we've always said with our capital allocation framework that we've got the flexibility to dial up and dial down as we see fit in the moment. And we'll always focus on deploying the capital to the areas that generate the highest returns. Thinking about that in the short term, we're obviously focused on investing behind our prediction markets product, as I talked about earlier, but also strengthening the balance sheet. And if you think about the leverage guidance that we set out previously, 2 to 2.5x, we're focused on getting back within that. We think based on our current cash flow trajectory, that would be more towards the end of 2027. But actually, if you look at the runway of cash growth in this business over the next few years, we feel really confident about, we've seen significant cash generation, we will delever the balance sheet and that will give us more opportunities to look at things inorganically in due course.

Yes. I think one last question. I think we're at time. This is just kind of a high-level subjective one. I guess the stock obviously has seen better days. I guess as we sit here today, what are kind of the key points that you feel like investors need to understand or that you're trying to get across as we kind of think through the opportunity set here?

Well, I appreciated the chance to talk about our International business because I think people sometimes skip past that, and it's a profitable part of the group. I think we're incredibly well-placed with a lot of very exciting opportunities in front of us. And when I look at the growth that we're delivering in places like Italy or Turkey, I think we've got a very exciting few years ahead of us. And so the cash flow conversion is going to really improve as a result of all the cost-out issues we're doing. So I think when you look at underwriting the business, the International part is a very large component of it. And then I look at the U.S. and look, I think we are continuing to execute very well in iGaming. That is part of the business, which is going to continue to grow. And I think we're incredibly well-placed to use our scale there. I think from a sports perspective, there were a few things that we didn't execute on very well last year. I think we've actually -- we've identified that. We recognized that we got to grips through with it. We've made the changes. And we've got the sports improvement plan in place. And I think we're beginning to see the benefits of that come through. And I think the investors obviously want to see us continue to execute, but we are still the largest player in America, we're profitable, and I think we will -- we're determined to get the business not just back on the front foot, but we need to get our mojo back and show that we can keep growing our share and help grow the category. And then the final piece is prediction markets. So I look at that, and I'm very excited around the money we can make in market making using a sort of core capability that we've shown time and time again around the world we're best placed to deliver on. And I think ultimately, this just gives us all incremental talent that we could not access before, which is tremendous. I think we showed in March when we did a small bit of generosity that there's a real appetite, real latent demand for the FanDuel-branded sports, and we're going to lean into that and take advantage of it.

All right. I think that did for me. Estelle, any last burning questions?

That's it for me too, all good.

All right. Great. Thanks so much, Peter and Rob. We really appreciate it. We'll talk soon.

Thank you.

Thanks, guys. Bye.