Shares of Flutter Entertainment were falling ahead of the open Wednesday after the company reported mixed second-quarter earnings and CEO Peter Jackson announced his resignation. Dan Taylor, Flutter's current international CEO, will take over at the end of the quarter.
Adjusted earnings came in at 49 cents a share on revenue of $4.33 billion. The earnings figure missed Wall Street estimates of 54 cents, while the revenue beat estimates from analysts surveyed by FactSet of $4.24 billion.
Full-year revenue guidance was $17.91 at the midpoint, much lower expectations of $18.21 billion.
The stock fell 6% to $98.50 in premarket trading.
This is breaking news. Read a preview of Flutter's earnings below and check back for more analysis soon.
Flutter Entertainment, the world's biggest betting company, will have many questions to answer regarding its prediction market investments, international growth, and plans for the coming NFL season when it reports second-quarter results before the market open Wednesday.
Flutter has seen its shares drop 52% since the beginning of the year as growth dries up in the U.S. market, and the company navigates the complexities of prediction markets, which present both threats and opportunities.
Adjusted earnings are expected to come in at 54 cents a share on revenue of $4.24 billion, according to analysts surveyed by FactSet. Wall Street predicts full-year revenue guidance to come in at $18.21 billion -- a slight decline from the $18.31 billion guidance Flutter provided last quarter.
As the parent company of FanDuel -- one half of the U.S. sports-betting duopoly -- Flutter has significant exposure to the stateside market, which is facing major headwinds. Barron's reported in June that year-over-year growth in sportsbook handle, or total dollars wagered, in the sector is plateauing after years of consistent growth. Flutter's U.S. handle was down 9% year-over-year in the first quarter.
However, handle was up 31% year-over-year in Flutter's international business that same quarter. CEO Peter Jackson has said that investors can be "quite myopic," focusing primarily on the stateside business and putting less stock in the performance of Flutter's vast international portfolio of betting brands.
"We like the setup a lot for the international business," says Jeffrey Stantial, a managing director of equity research in the gaming sector for Stifel. As it did with FanDuel in the U.S., Flutter's strategy is to acquire and manage local betting brands; it has done so in the U.K., Ireland, Australia, central and Eastern Europe, and Brazil -- the latter being a "hypergrowth market," according to Stantial.
Investors should also look for updates on Flutter's prediction market business. Investments in FanDuel Predicts, its proprietary prediction market, have been expensive. The prediction market is operated in partnership with CME Group, the derivatives marketplace firm.
Jackson has told Barron's that FanDuel Predicts is primarily a customer-acquisition vehicle in states without traditional legal sports betting, but isn't its only involvement with prediction markets. The company revealed that it "began trialing market-making services on a major, third-party prediction market platform" in April -- essentially taking the other side of prediction market parlay bets.
Stantial says the FanDuel Predicts product still needs work.
"If you go back to Q1, they didn't say this explicitly, but it seems pretty evident that their product isn't where they want it to be, and that's a function of having to rely on a partner for product development" he says. "They've been telling everyone now since Q4 of last year, 'We should be competitive from a product standpoint by the NFL season,' and it seems like they're still pretty far away from that."
There are other signs of strain between CME and FanDuel. During CME's most recent earnings call, outgoing CEO Terry Duffy told analysts that "a lot of these prediction markets on sports are gambling, and I think that that is going to find its way to the Supreme Court, and that is not something that we want to be a part of participating in right now."
That position contradicts CME facilitating those exact sorts of prediction markets on FanDuel.
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