Flutter Entertainment PLC

LSE:FLTR

Earnings Call Transcript 2022-Q2

[Jeremy Jackson, executive]

Good morning, everyone, and thank you for joining Jonathan and I for our interim results presentation. We're presenting to you virtually today, but I'm looking forward to seeing many of you in New York for our U.S. Investors Day. It will be a great opportunity for us to shine a light on the terrific performance we're seeing in our FanDuel business. It will also give you a great chance to meet Amy and the rest of the management team, who are delivering the terrific results we're seeing in America, and I'm very excited to talk to you about it.

Today, I'll start with a brief overview of the first half performance and the group's strong position. Jonathan will then take you through the financials, before I provide an operational update. We'll be holding a call for Q&A at 9:30, where we look forward to taking your questions.

I've been really pleased with the positive momentum we have seen in the first half as we further expanded our recreational customer base, driving good revenue growth. Our U.S. performance in the quarter is outstanding and continues to exceed all expectations, delivering a profit in Q2. This was achieved despite the fact that we've been leaning into customer acquisition in Q2, acquiring over 0.5 million new customers in the quarter on the back of the good customer economics we're seeing.

This isn't just new state launches either. 1/3 of all FanDuel Sportsbook and iGaming acquisition in the half was in our pre-2021 states. This U.S. performance was driven by phenomenal execution, with the sports betting market share of 51% in Q2, where we are #1 in 13 out of 15 states.

The increased proportion of our revenues, now coming from existing customers, gives us confidence that we'll deliver a profit for the full year 2023, as you'll see later in the presentation. Obviously, that expectation doesn't include California going live, but it does include share-based compensation costs and is for the full year. If California were to launch in 2023, it will be a fantastic opportunity for us to replicate the success we're seeing elsewhere in the U.S. in the world's fifth largest economy.

In the ex-US group, revenue and EBITDA in H1 were in line with expectations, and we'll come on to talk about this in more detail in the presentation. We completed our acquisition of Sisal on the 4th of August, and I'm pleased to say that Sisal delivered a strong performance in H1, and we're excited to welcome the team into the Flutter Group and begin integrating our businesses in due course. Francesco, Roberto and teams, welcome to the family.

Looking forward, while there are lots of moving parts to consider, both across our business and in the wider consumer outlook, we still expect our full year performance to be in line with current expectations. And Jonathan will talk to you more about this later.

As you recall at our preliminary results in March, we laid out our refreshed 4-pillar strategy for the group and the key enablers of this strategy. I won't take you through each of the pillars again today, but I did want to remind you that these 4 pillars are the heart of all decision-making within the group. Underpinned by our key enablers and our newly launched sustainability program, the positive impact plan, these pillars keep us focused on our objectives to embed and deliver long-term value. We'll spend a little more time discussing progress against the strategy at our full year results next year.

Turning to Slide 6. It is clear how our growth and, in particular, our U.S. expansion has transformed the group. Since H1 2019, the US has transformed from our smallest division on a revenue basis to our largest. In Q2, it represented over 1/3 of the entire Flutter Group's revenues. The continued growth of our U.S. business will further transform the earnings and cash flow of the group once the business becomes profitable in 2023.

Our regulated mix has continued to grow, with 93% of our revenue is coming from regulated markets and regulating markets bringing that up to 96%. This proportion will increase further with the addition of Sisal and as our U.S. business continues to grow. Our ever-increasing scale drives top line growth through our operating leverage, which drives the flywheels in our local markets. Our diversification ensures resilience in the face of external pressures enable us to withstand market-specific issues and continue to grow.

Slide 7 sets out how Flutter scale drives value across the group. We are a truly global business with over 20,000 employees across more than 20 countries. With this scale comes significant advantages. Our global resources complement a personalized and tailored approach that our local hero brands take to serving their local markets. We can share people, talent and expertise across our group. In the U.S., we have over 400 employees who have either transferred to the U.S. or are working for the U.S. in our dedicated technology and trading hubs around the world.

Flutter has the world's leading pricing and risk management platform, powered by over 650 experts across the globe. All our brands have access to this platform, leading to innovations such as same-game multis and same-game parlays, and ensuring that we're 1 step ahead of the competition.

Our businesses have access to scalable and reliable platforms. For example, our global betting platform, which now powers Paddy Power, Betfair, FanDuel and PokerStars. And our group gaming network, which enables the sharing of content produced by our 3 in-house gaming studios among our brands around the group and to be prided to FanDuel in the U.S. later this year.

Using our vast pool of data and customer insights also enables us to collaborate and share best-in-class ideas. These combined resources are unique to Flutter and very hard for others to replicate. Our ability to optimize these resources across our group means we can continue to drive efficiency and top line growth.

We launched our Positive Impact Plan in March, a strategy that places 3 key sets of stakeholders at the heart of everything we do: our customers, colleagues and communities. We set clear targets in each of these areas that we can hold ourselves to account. And I'm pleased to say we made good progress against those in the first half of the year.

Almost 35% of customers use a safer gambling tool in the 12 months to June 2022, which is an increase of over 2% compared to the end of last year, and this now includes the Adjarabet, Junglee and Tombola. We've also made good progress within our work better and Do more pillar, as you can see on the slide.

Whilst our Do more pillar is built on specific programs to help our communities, we also contribute to society in other ways. For example, through the tax contributions we make. In H1, our total tax contribution was over GBP 1.1 billion, of which over GBP 330 million was in the U.K.

Finally, as I previously shared, we've signed up to the UN Race To Zero campaign and are currently developing our road map to achieve this goal, and we'll share more with you on this in due course.

I'm very pleased with the progress we've made on the positive impact plan in the half, and the plan remains core to our strategy as we move forward. And with that, I'll hand you over to Jonathan, who will take you through the financials.

[Jonathan Hill, executive]

Thanks, Peter, and good morning, everyone. Before we get into the detail, I thought that it was worth taking a minute to go through where we are as a group. As Peter laid out earlier, we have massively reshaped the group over the last 3 years. We are delivering huge growth in the U.S. with a clear route to profitability. The group outside the U.S. is highly focused on regulated and regulating markets with good exposure to market growth opportunities. We also have efficiency opportunities across the group to support profitability going forward.

A few thoughts on the macroeconomic backdrop. Given the pace with which states are regulating for online sports betting in the U.S. and the high levels of demand amongst U.S. consumers for our products, we don't expect to see any discernible impact there. This would be consistent with the last economic slowdown when we didn't see a consumer impact in our fast-growing online markets.

In our more mature markets, we haven't seen any sign to the consumer spend slowdown yet, but we are maintaining a real focus on the data. Overall, the scale and diversified nature of our business, along with our ability to grow through regulatory change, which Peter will bring you through later, will continue to provide us with significant profit growth potential. This profit growth, combined with high cash generation, will enable rapid deleveraging with associated optionality around capital allocation.

Now let's get into the positive performance of the group in H1. Starting on Slide 10 with our financial highlights. Our recreational customer base continued to expand with average monthly players or AMPs up 14%. This player growth delivered constant currency revenue growth of 9% to GBP 3.4 billion. The U.S. was 50% ahead, with revenue into exceeding $750 million for the first time. Revenue from the group ex U.S. was 3% lower, in line with expectations. I'll come on to talk about the moving parts impacting revenue growth shortly.

In the U.S., our launch in New York contributed to a GBP 46 million increase in the investment-led loss to GBP 132 million. In the group excluding the U.S., the known impacts of safer gambling initiatives and regulatory changes were the drivers of the 10% EBITDA decline. The group continues to turn profit into cash at a high rate, even with our increased U.S. CapEx investment. And we ended the period with net debt of GBP 3 billion and leverage of 3.4x or 2.6x, excluding the U.S. investment losses.

Turning to Slide 11 and the statutory income statement. The statutory EBITDA of GBP 434 million includes GBP 42 million of separately disclosed items, which relate to integration and restructuring costs, primarily associated with the TSG merger. A further GBP 286 million of separately disclosed items are included within the loss before tax relating to the amortization of acquired intangibles. Interest expense was lower due to reduced cost of debt. And the tax charge of GBP 61 million is lower than the prior year due to a one-off deferred tax charge of GBP 105 million in H1 2021 relating to the announced U.K. corporation tax increase in 2023. This resulted in a statutory loss after tax of GBP 112 million.

On Slide 12, we show AMP and revenue performance compared with the prior year. In the U.S., strong customer acquisition in new and existing states drove revenue growth of 50%. In the group outside the U.S., AMPs were 6% higher and revenue 3% lower, as expected. In the UK&I, the numbers include the benefit of Tombola. On a pro forma basis, AMPs were flat and online revenue 19% lower, driven by 3 main factors: firstly, a GBP 48 million incremental impact of safer gambling initiatives, consistent with our disclosures at prelims. Secondly, H1 2021 included the European championships, which was a GBP 43 million prior year benefit. Thirdly, the unwind of peak COVID player activity levels with an estimated 10% benefit last year.

Looking at H2, the impact of the new product launched the football World Cup. And the condensed domestic football calendars will all help drive year-on-year growth, with Q4 2021 also suffering some very adverse sports results.

Performance in Australia remained strong. Good customer retention and acquisition helped drive revenue growth of 5% and despite the year-on-year impact of more favorable sports results in the prior year. In international, AMPs declined 6%, leading to revenue being 8% lower, reflecting the guided headwinds of switch-offs in Russia and the Netherlands and German tax changes as well as tough COVID comparatives. Pleasingly, within these numbers, we saw a revenue growth of 14% in our consolidated and invest international markets, which Peter will discuss in more detail later.

At the group level in the first half, we grew AMPs by 14% to GBP 8.7 million, which drove revenue growth of 9%. On Slide 13, we have laid out the year-on-year EBITDA bridge for group, excluding the U.S.

Moving from left to right, we make a number of adjustments to rebase EBITDA to give a clearer view on underlying performance. Firstly, we adjust for FX and the previously guided impact of safer gambling measures in the UK&I and regulatory changes in international. We have not included an adjustment for the COVID benefits we saw in 2021. This leads to a rebased 2021 comparative of GBP 584 million.

In UK&I, underlying EBITDA was GBP 6 million down year-on-year. Online performance was impacted by those factors highlighted on the previous slide, but were mostly offset by the benefit of a fully open retail estate during the half. Australia was GBP 20 million ahead, with a combination of continued top line growth and good operating leverage. In International, we delivered some EBITDA upside while investing for growth. Across the group, we are facing into the same inflationary headwinds as others. But it's worth reminding people that as a digital-led business, we don't have a major supply chain, making us less exposed than some.

We are seeing inflation in salary costs and some other areas, including data feeds. Our synergy program and other operational efficiencies helped offset these costs in the half. Ex U.S. EBITDA of GBP 608 million represented underlying growth of 4% for the first half.

Slide 14 sets out our U.S. income statement. Revenue was 50% higher, with sports up 58% and gaming growth of 31%. After adjusting for the adverse impact of sports results in the current year and favorable results in the prior year, which led to a GBP 104 million revenue swing, normalized revenue was 71% ahead.

Cost of sales as a percentage of revenue increased by 7 percentage points, driven by the higher tax rates in New York, where gaming tax rates are 51%, significantly higher than other states. Sales and marketing costs increased year-on-year by 29%, but declined as a percentage of revenue, both as a result of our business maturing in existing states and also our disciplined approach to customer acquisition, which Peter will talk more about later.

Operating costs grew by 46%, less than normalized revenue growth of 71%, demonstrating operating leverage as the business grows and despite our new state investments. The EBITDA loss was GBP 132 million for H1. But within that, we delivered an EBITDA profit of GBP 16 million for Q2. During Q2, we are aggressively leaning into investment given the excellent customer economics we saw as others pulled back. Peter will speak to you more about how this builds our confidence in delivering a full year EBITDA profit, excluding California for our U.S. business in 2023.

On Slide 15, you will see we generated adjusted free cash flow of GBP 127 million. This was lower than the prior year due to reduced EBITDA, higher CapEx spend, our working capital unwind and an increase in corporation tax payments. Cash flow generation is still very good. Comparing operating profit to pretax adjusted free cash flow, we converted profits into cash at 77%.

Key points to highlight. We paid higher corporation tax given the changing geographic mix of our earnings, as well as the timing of payments and refunds during the year. Interest paid and other borrowing costs were GBP 27 million lower year-on-year, thanks to lower borrowing costs.

Our acquisition of Tombola, which we completed in January, led to an outflow of GBP 410 million with cash acquired of GBP 15 million. As a result, we finished H1 with net debt of GBP 3 billion prior to the acquisition of Sisal, which brings us on to Slide 16.

We have modeled the 30th of June 2022 debt position pro forma, including Sisal. On this basis, our leverage ratio would have been 4.1x or 3.3x excluding U.S. losses. The acquisition was completed using facilities underwritten at the point of announcement, and we estimate a 3.4% weighted average cost of debt for H2.

Given the highly cash-generative nature of our business, and our expectation that we will be EBITDA positive in the U.S. in 2023, we expect to delever rapidly from this temporarily elevated leverage ratio. We remain committed to our medium-term leverage target of 1 to 2x, and the Board will review the group's dividend policy once leverage is within the targeted range.

On to guidance for this year on Slide 17. Current trading in the first 5 weeks of H2 to the 7th of August was in line with our expectations. To date, we haven't seen a reduction in consumer demand due to broader macroeconomic pressures. However, we will continue to monitor this very closely as we move through H2.

We anticipate that the group, excluding the U.S., will generate EBITDA of between $1.29 billion and GBP 1.39 billion in 2022, in line with current expectations. This guidance includes Sisal within Flutter's results from the 1st of August and also incorporates the impact of the Australian point-of-consumption tax increases of GBP 22 million.

In the U.S., we expect to generate net revenue ahead of expectations, at between $2.85 billion and $3.1 billion and to incur an investment phase loss of between GBP 225 million and GBP 275 million. This loss reflects our continued investment behind the strong customer economics that we are seeing and the assumption that the only state launch in the second half will be Kansas in Q4. And as always, all our guidance assumes normalized net revenue margins for the remainder of the year and no material disruption to retail or sporting calendars.

Our effective tax rate for the group ex U.S. is expected to be between 22% and 24%, reflecting our changing geographic profit profile. CapEx, including Sisal, is anticipated to be between GBP 360 million and GBP 390 million. And as covered in the previous slide, our expected weighted average cost of debt for H2 is 3.4%.

And I will now hand you back to Peter to talk you through our business update.

[Jeremy Jackson, executive]

Thanks, Jonathan. And now into the U.S., where our performance continues to exceed expectations. Slide 19 demonstrates the sheer extent of FanDuel's leadership position in the U.S. sports betting market.

On the left-hand side of the slide, you can see FanDuel has consistently maintained the #1 position, with more than half the total GGR for sports betting in Q2. As highlighted in our Q1 trading update, we've been leaning into customer acquisition, post Super Bowl, and through Q2 as we continue to see good returns helping drive an even higher market share.

The FanDuel NBA proposition is well ahead of the competition, which delivers a key benefit during the playoffs and finals. Our leading position has been achieved through outstanding operational execution, including efficient customer acquisition at scale through our leading brand and having the best product in the market, which keeps our customers returning to our platforms and helps us generate the best returns.

Three states published bonus data for all operators. And the right-hand side of this slide presents our market share in these states after deducting bonus costs. Again, we are consistently way ahead of the competition, with a higher share of NGR in these states showing we are also monetizing our customers more efficiently.

Since launch to date, our post-promotional market share has been higher than our GGR share by over 10 percentage points in these 3 states. And in Q2, our post-promotional share of 60% in these states is over 3x our nearest competitor. When you combine our Sportsbook and our iGaming share, our business represented more than 1/3 of the entire U.S. online market in Q2 with a 36% market share. This is a truly exceptional performance.

Now let me share more on how we're achieving this. Turning to Slide 20. We are acquiring customers efficiently, and we are doing this at scale. There are 3 key points I'd like to make here on this slide.

Number one, we're getting better. When we first launched our online sports book back in 2018, we were very good at converting our existing DFS players to our sports betting platform. This means, on average today, penetration of the database is high in those early states, with 60% of DFS customers having placed a bet in the last 12 months.

In our newer states, we've become even better at optimizing this journey. The migration to our proprietary FanDuel account and wallet as well as delivering an increasingly personalized offering to customers means we are reaching higher cross-sell penetration levels more quickly.

Number two, we're driving faster adoption curves with each state launch, as can be seen in the middle chart. Having the broadest and deepest portfolio of strategic partners, including Pat McAfee and Turner Sports, ensures FanDuel's leadership in the category. And despite these improvements, we still have a long runway of growth in these states, which on average are well under the penetration levels we see in more established markets.

And finally, the third point, we're doing all of this more efficiently. In the first half, we drove 53% more downloads for more or less the same amount of marketing spend when compared to [ Novarki ] competitors, which, of course, is contributing to our cumulative CPAs still remaining under $300.

This brings us on to Slide 21. Our product ensures that we are monetizing our customers more effectively than anyone else and delivering the maximum return on investment. The left-hand side shows that we're delivering 80% more gross gaming revenue for every dollar of handle when compared with the rest of the market in Q2. This market-leading win margin is driven by the high levels of parlay or same-game plays within our bet mix, with over 80% of customers placing 1 of these higher-margin bets with us during Q2.

This would not be possible without the best-in-class pricing and risk management capabilities within the group, which underpin our product superiority. The right-hand side demonstrates how this premium is playing through into our customer value. At our interim results last year, we explained that customers who played with us for more than 2 years, grew their revenue by 11% in year 2 when compared with year 1.

For those same customers, this trend accelerated into year 3, with a 2-year compound annual growth of 22%. While these cohorts still represent a relatively small portion of our overall customer base, we continue to be encouraged by these trends and the paybacks we are seeing, which cumulatively remain within 12 to 18 months.

This next slide shows the evolution of contribution profit within our Sportsbook and our iGaming business in the last 12 months to the 30th of June 2022, compared to the previous 12 months to the 30th of June 2021.

For simplicity here, I'll just refer to this year and last year for each of these periods, respectively. Moving left to right on the slide. Last year, our existing customer base was smaller than the new customer volumes. This meant that while our existing customers generated a contribution profit of $195 million, this was not large enough to cover the $311 million incurred in new customer acquisition costs. This led to an overall loss last year of $116 million. Fast forward to this year, firstly, last year's existing customers continue to grow in value. And secondly, last year's newly acquired customers are now profitable.

This resulted in the loss of $116 million, swinging by considerable $750 million to a contribution profit as can be seen in the middle chart. This contribution profit in turn then funded new customer acquisition costs of $572 million, which ultimately led to contribution profit of $63 million.

As we move forward, the ratio of existing to new customers will continue to grow, with the annual revenue growth impact compounding, helping to deliver profitability for the full year 2023. On Slide 23, we show that our cost base is already demonstrating significant operating leverage. We have grown revenue more than twice as fast as operating costs since 2019, despite the considerable levels of investment we've made in scaling up our business. We expect to see further efficiency in future periods with a large portion of our cost base capable of scaling as the business expands.

While we don't consider EBITDA at a state-by-state level due to the shared nature of our cost base, we have allocated our operating costs by state on a population basis, to give a sense of what the P&L looks like for the state we've been operating the longest, New Jersey. While this is not an exact science, it should hopefully be a helpful insight into how the P&L is evolving, with an estimated EBITDA margin of 17% at this stage. And this is even though we continue to invest in marketing and acquisition costs given the early life cycle of the state. As the market matures, we expect this spend to reduce further. Over 1/3 of the states in which we are live were profitable in Q2 on this basis, demonstrating this is not just unique to New Jersey.

Slide 24 concludes our U.S. section. Our pathway to profitability is clearly evident. You have seen how we are winning across the 2 key battlegrounds of efficient customer acquisition and product, coupled with the disciplined scaling of our cost base and significant operating leverage. This has enabled us to deliver a U.S. EBITDA profit in Q2. And as we have shown, as our ratio of existing customers to new customers continues to increase, we expect to deliver an EBITDA profit for the full year 2023.

Now on to our ex U.S. business on Slide 25. As I set out in my introduction section, the scale and shape of our business has been transformed in recent years. We are a global business, operating in a large number of geographies and across 3 non-U.S. segments. Combined with external headwinds and tailwinds, which are an inherent part of our sector, we appreciate that at times, it can be a complex picture.

There are, however, some very clear trends across our ex U.S. Group. We think can help frame our growth trajectory. The left-hand side shows that we've outgrown regulation in the last 3 years, both at revenue and EBITDA. Over time, the ex U.S. group has grown at between 5% and 10% after regulation and delivered high EBITDA margins. This has helped deliver strong cash conversion, which funds organic investment, bolt-on M&A and returns to our shareholders. We think this framework is a good way to think about our ex U.S. group.

Slide 26 shows the extent to which our 2 mature businesses, the UK&I and Australia, have outgrown regulations over time. During the period shown, point-to-consumption taxes were introduced in both markets, in the U.K. in December 2014 and in Australia across 2018 and '19, alongside other regulatory developments and safer gambling initiatives.

Our scale and operating leverage means that we're able to mitigate these impacts through both improved operational efficiency and also through market share gains as small operators were forced to exit the market. In the periods following the introduction, we saw EBITDA margins decline in both businesses, but then recover in subsequent years as the impacts are mitigated with pro forma compound growth in our UK&I business of 12% and a very significant 38% in Australia.

In the UK&I, we've delivered a range of new products, helping address the issues we referenced at the full year, as you can see on Slide 27. In SkyBet, we launched BuildABet in Q2, which leverages the success of the RequestABet product. Despite only being launched in the final weeks of the football season, already over 1/3 of football customers have used the product, with further enhancements planned as we look forward to rich football content in H2 with the condensed domestic programs and the World Cup.

On the gaming side, Paddy Power has performed strongly with continued innovation of its daily free-to-play game, Wonder Wheel, with over 80% of monthly players have engaged with the product.

This helped drive UK&I gaming AMPs 9% higher year-on-year, with growth across all 4 of our UK&I brands and a return to gaming revenue growth in June.

Moving to Slide 28. We've taken proactive steps to help reshape our business over the last 3 years and drive growth in our recreational player base. Player volumes have increased at a compound rate of 13% per annum. Our proactive safer gambling measures, including our affordability triple step, have resulted in a reduction in revenue from higher spending customers. The incremental impact of this in H1, as Jonathan mentioned, is in line with previous guidance.

As you can see from the chart, this has contributed to a 14 percentage point decline in the proportion of revenue coming from our higher spending customers over the last 3 years. As part of the integration of our UK&I online business, we have identified a number of efficiency initiatives. We have a significant opportunity to optimize the efficiency of our promotional and generosity spend by ensuring we deliver value to the running customers. We plan to migrate Sky Betting & Gaming onto our proprietary technology stacks in 2024. And we are already simplifying operations in our UK&I business.

We expect the benefits of these programs to both offset the current high inflationary cost headwinds we see in pay and data feeds and to position us well given the pending gambling at review, while the generosity efficiencies will also help drive continued top line growth.

In Australia, the team have continued to deliver innovation in the first half of the year with the launch of 2 new product features for AFL. Same game multi-cash out and same game multi-bet tracker have proven very popular with our punters. And over 22% of AFL customers have engaged with the product since they were launched.

We also continued to increase our focus on personalized generosity. This is the most efficient way to deliver promotional spend to customers and ensure that the right customer is getting the right value at the right time. Since 2019, 80% of the structural margin benefits we've delivered through Sports book innovation, such as those I just mentioned, has been reinvested into generosity. These factors are combined to drive good levels of customer retention from H2 last year and the strong overall revenue growth we see on this slide.

Turning now to international. We completed the acquisition of Sisal on the 4th August, and I'm delighted to welcome the team to the Flutter Group. The acquisition of Sisal gives us the #1 position in the fast-growing Italian online market, combined with the competitive advantages of an extensive omnichannel offering. Sisal's performance in H1 was very strong, somewhat flattered by COVID-related retail restrictions in the prior year but with revenue and EBITDA over 50% ahead. We look forward to providing you with more details on Sisal at our full year results.

The Sisal acquisition further transforms our international business as we show on the following slide. Since our merger with TSG, the business has been rebased through regulatory changes in our markets, improvements to compliance practices and corrective investment to stabilize its operational and technology capabilities, and now the acquisition of Sisal.

The business is on a more sustainable footing, with 86% of revenue from regulated or regulating markets. And with Poker now representing less than 20% of our international revenues or 6% of group revenues. We've grouped the business into 4 main categories.

Firstly, we'll increase our market share and drive profitable growth by consolidating our existing #1 position in Italy, Spain, Georgia and Armenia. Including Sisal, these markets were 56% of revenue in H1 or with a significant TAM opportunity.

Secondly, we have strong positions in high-growth markets, including Brazil, Canada and India, where we'll make significant investments for leadership. And in these markets, we believe the regulatory upside could result in a materially higher addressable TAM in the longer term. These 2 categories will be the drivers of future growth for the international business and had combined revenue growth of 14% in H1.

Thirdly, we'll optimize the returns in existing regulated markets by making targeted investments where we see good returns.

And finally, we'll maintain our existing position in the long tail of unregulated or nonregulated markets, the largest of which was only 0.3% of group revenue in the half.

And to talk in more detail in one of these markets, on Slide 32, you'll see the significant investment we are making in India. In January 2021, we acquired a 50.1% stake in what was at the time, India's #3 online Rummy operator Junglee. The Indian market has many attractive characteristics as one of the fastest-growing gaming markets globally through significant increases in disposable income and a doubling of Internet and smartphone penetration. This has driven compound growth of 54% in the real money gaming market over the last 3 years with Rummy, the fastest-growing vertical and 57% of the market in 2021. Rummy has Supreme Court protection in India as a game of skill and has successfully defended this ruling in a number of states over the last 18 months, providing with positive regulatory momentum.

Junglee is the fastest-growing Rummy brand in the market, driven by a superior product and increased marketing investment following our acquisition. Flutter has been able to accelerate Junglee's growth by adding product expertise, such as bringing the concept of PokerStar's Spin and Go product to Rummy. We've also been able to add more sophistication to Junglee's digital marketing capabilities. This, allied with a very strong local team, mean that Junglee has grown rapidly to become the #2 Rummy operator, leaving us very excited about our future prospects in India.

So to summarize, our group ex U.S. business is very well positioned. We have gold medal positions in our key markets with podium positions in a multitude of other geographies. Bringing Sisal into the portfolio strengthens our position even further. The ex U.S. group has delivered good growth at a high margin, and our increasing scale and diversification provides a resilient and robust model for further growth and cash generation.

To conclude, I've been very pleased with the positive momentum we've seen in the first half. Our U.S. performance in the quarter was outstanding and continues to exceed all expectations, delivering a profit in Q2 and with operational execution that gives us confidence that we'll deliver a profit for the full year 2023, excluding any impact of a California go live.

In the ex U.S. group, revenue and EBITDA in H1 were in line with expectations. And we're excited to welcome the Sisal team into the Flutter Group and begin integrating our businesses in due course. And looking forward, our performance in the first half and opportunities in the second half mean we anticipate our full year performance to be in line with expectations.

We look forward to taking your questions on our call at 9:30, the details of which are available on our website.