Flutter Entertainment plc (FLUT) Earnings

Management highlights

### CEO Transition - Outgoing CEO Peter Jackson will step down at the end of September 2026 after 9 years leading the firm, and incoming CEO Dan Taylor will take over. Jackson stated Taylor shares the firm's long-term value creation mindset and is prepared to continue executing the existing strategy. ### US Business Updates - Implemented a new US leadership structure, completed key milestones of the sportsbook improvement plan, and expanded prediction market capabilities. Expanded the loyalty program to 70% of customers, with 82% of surveyed customers reporting improved experience and over half reporting increased betting activity. - Launched new customer features including BetProtect Plus injury protection and unique World Cup soccer features, and is shifting focus from margin growth to prioritizing AMP and ARPU growth to extend market leadership ahead of 2027. ### Prediction Markets and Market Making - Prediction markets are viewed as an incremental growth opportunity that expands the overall market by capturing new customer demand, rather than significant cannibalization of existing sports betting revenue (cannibalization impact is limited to low single-digits). - Moved all Fangio Predicts sports and novelty contracts to the Crypto.com exchange, while retaining CME for financial markets, to enable faster new product launches ahead of the NFL season. The one-app offering leverages Fangio's national brand equity to drive penetration and marketing efficiencies. - Management expects ~$50 million of 2026 revenue from prediction market making, demonstrating early traction and long-term upside potential. ### International Operational Progress - Completed the SNAI migration in April; after a brief temporary share loss post-migration, performance recovered strongly in June. Italy and Turkey delivered strong H1 performance, giving management confidence for sustained H2 growth. - UK iGaming is adapting to the April 2026 iGaming tax increase; management expects to deliver targeted cost savings and gain market share as competitors adjust to the higher tax burden. ### Cost Transformation Program - Phase 1 of the cost transformation program is delivering ahead of schedule, on track to deliver over $300 million in cumulative savings by 2027, plus an additional $200 million in savings to offset UK iGaming tax increases, also by 2027. - Phase 2, a new broader cost transformation program announced on the call, is expected to deliver an additional $500 million in gross annual savings by 2029. Savings will offset inflation and tax headwinds, free up capital for growth investments, and improve long-term cash generation.

Guidance

- Full-year 2026 group revenue guidance midpoint was reduced by $395 million to $17.91 billion, and adjusted EBITDA guidance midpoint was reduced by $210 million to $2.655 billion. The downward revision reflects proactive incremental investment to strengthen the US customer value proposition, partially offset by $50 million of expected adjusted EBITDA benefit from market making and $45 million of incremental US operating cost savings. - Guidance also accounts for a previously unincorporated one-week delay to the 2026-2027 NFL season, which reduces expected full-year revenue by $75 million and adjusted EBITDA by $50 million. - Capital expenditure guidance was improved to $815 million, reflecting incremental project efficiencies, leading to a reduced depreciation and amortization guidance of $730 million. - Group transaction, restructuring and integration costs are now expected to total ~$500 million, a $200 million increase from prior guidance, primarily driven by initial Phase 2 cost transformation implementation costs and $95 million in historical tax provisions. - Management expects H2 2026 cash generation will reduce year-end leverage, with a return to the target 2.0x-2.5x leverage range expected in the medium term, with timing dependent on the cadence of strategic investments. - Management reaffirmed its expectation for US iGaming to deliver high-teens percentage growth for full-year 2026. For the US, Q3 2026 is expected to deliver roughly breakeven EBITDA, and Q4 2026 is expected to deliver ~$500 million of EBITDA (down from ~$700 million in prior guidance).

Segment performance

Group overall: Q2 2026 revenue grew 3% year-over-year (driven by M&A and strong FIFA World Cup engagement), while adjusted EBITDA declined 45% due to increased UK gaming taxes, planned investments in prediction markets and World Cup marketing. Net loss totaled $296 million, versus $37 million net income in Q2 2025, with a one-off historical tax cost of $95 million contributing to the loss. Ended Q2 with a 4.3x leverage ratio. US: Q2 revenue was 6% lower year-over-year, reflecting a 6 percentage point headwind from customer-friendly sports results during the quarter. iGaming growth remained sustained, with strong sequential improvement in underlying sportsbook metrics aligned with management expectations, and customer engagement was strong during the NBA Finals and FIFA World Cup. International: International revenue grew 10% year-over-year overall, including contributions from the SNAI and BetNational acquisitions. Italy delivered 30% AMP growth in June post-SNAI migration recovery, and revenue grew faster than the market as Flutter extended its market leadership. SEA iGaming revenues were up 34% year-over-year, driven by new exclusive content and expanded product offerings. UK & Ireland iGaming grew 7% year-over-year, with Skybet performance improving sequentially after a UI update. Brazil organic revenue declined year-over-year in line with the broader market, due to challenging macroeconomic conditions. APAC performance was in line with expectations, and Central & Eastern Europe delivered market share gains across all core markets.

Risks & headwinds

- Proactive investment to strengthen the US value proposition and expand prediction markets creates downward pressure on near-term profitability and earnings, even as management expects it to drive long-term value. - US overall online sports betting market growth remains subdued, and has not yet recovered from the disappointing 2025 NFL season; management is prudently assuming H2 2026 market growth will remain consistent with the slow H1 2026 pace. - Prediction market regulation remains uncertain at both the state and federal level, with key issues pending resolution by the U.S. Supreme Court, creating uncertainty around future market access and expansion opportunities. - Brazil faces ongoing challenging macroeconomic and market conditions that have pressured near-term organic revenue performance. - The newly increased UK iGaming tax creates a near-term profitability headwind, even as management expects to offset it with cost savings and market share gains.

Analyst Q&A

• Q: What are the components of the incremental EBITDA investment in the US business, and how should we balance incremental US investment versus higher-return opportunities in international markets?

  A: Management noted the incremental investment is being deployed behind existing strong momentum in the FanDuel sportsbook, which has delivered strong engagement growth across the NBA Finals, FIFA World Cup, and MLB. Returns on current marketing and promotion spend are excellent, so the proactive investment will extend the firm's market leading position. Management added they are already investing behind high-growth opportunities across international markets including Italy, Turkey, CEE, and the UK, and are delivering strong returns from investments in both the US and international segments.

• Q: What is driving softer US market-wide sports betting growth, and has cannibalization from prediction markets and combo betting increased beyond prior expectations?

  A: Management explained that soft market growth primarily stems from lingering effects of the 2025 NFL season, which featured less compelling content that suppressed overall customer engagement. They reaffirmed that prediction market cannibalization is limited to a low single-digit impact, and that prediction markets are primarily incremental, expanding the overall market by capturing new customer demand and allowing customer acquisition in unregulated states. Strong engagement during recent marquee events (NBA Finals, FIFA World Cup) confirms ongoing strong underlying demand for traditional sports betting products.

• Q: What is the long-term outlook for prediction market making, and what is your expectations for H2 2026 volume after Q2's $6 million in revenue?

  A: Management highlighted that Flutter's existing pricing, risk management, and trading capabilities from core sports betting give it a unique advantage in prediction market making, particularly for pricing complex combo markets. They reaffirmed full-year 2026 market making revenue of $50 million, noted H2 volume is trending encouragingly, and expect market making to become a meaningful, high-margin revenue stream over the long term.

• Q: Does the incremental US investment in customer generosity mean US sportsbook will permanently have lower net win margins than mature international markets?

  A: Management noted that structural margins improved in Q2 2026, and there is a clear long-term path to margin expansion in the US. As parlay penetration increases and product mix improves, consistent with the pattern seen across all of Flutter's mature international markets, margins will expand over time. The current incremental investment is a proactive step to build scale and market share ahead of 2027, not a reflection of permanently lower structural margins.