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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, and thank you for joining Jonathan and I for this call. Hopefully, you've all had a chance to watch our presentation this morning, which provides an overview of why the business is well positioned for future growth and details of our 2022 performance.
Before we go to questions, I'd just like to touch on a couple of items. As announced in mid-February, we've commenced a consultation with our shareholders in relation to an additional US listing. We outlined in the announcement the numerous long-term strategic as well as capital markets benefits this could yield.
One point to emphasize is should we proceed with additional listing, it would not change where we're headquartered domiciled or the taxes we paid. Early feedback from shareholders has been supportive and we'll be meeting many more of our shareholders over the coming weeks. At the end of our process, we'll announce results for shareholder consultation. And until that point there is very little extra we can say.
Turning to our 2022 performance. We delivered another strong year. Our US business is going from strength to strength and our advantages are compounding with each new state opening. The recent launches of Maryland and Ohio have been our best yet, providing ever greater – even greater conviction and positive EBITDA for the full year 2023.
Outside of the US, the business carries good momentum into 2023. UK and Ireland [ph], the product improvements and efficiency initiatives delivered throughout the year resulted in a strong Q4. Our Australian player volumes remain high as H2 COVID frequency benefit unwind and we saw increased competitive intensity in Q4. The International, our consolidate and invest markets is delivering strong growth and now make up 76% of the division. The division is at a growth inflection point. And when combined with the US profitability in 2023, we'll transform the earnings profile of the business.
And with that I'd like to hand it over to Judith for questions.
The first question is coming from Ed Young of Morgan Stanley. Please go ahead.
Good morning. Both questions on the US, if it's okay. The first is you gave some detail in the presentation around the cadence of US EBITDA. I wondered if you could do the same for revenue if that's okay. A, if I look at previous years Q4 sort of sets a baseline for the following year and then there's a step up in Q4 with the seasonality of the business. Is it reasonable to expect the seasonality and the cadence of this year's revenue will look similar to previous years, or are there any other extra considerations we should be thinking about?
And then the second one is on paybacks. On Slide 26 you're talking to below 12-month paybacks, given what appears to be more improvement in the way you're doing your state launches and state openings. So I guess that's deeper additional investment quicker, payback as you spoke back historically. You're flat below 18 months back at the CMD. So is that a change that we can think about for this year or ongoing? And how does the iGaming share increases play into your thought process around paybacks? Thanks.
Okay. Thanks, Ed. Jonathan will pick up the first question.
Yes sure. I mean it pretty much follows the same seasonality as EBITDA, which is obviously driven by the sporting calendar. The only other thing to say is obviously, the EBITDA shape in Q3 is there is a bigger spend there obviously in sales marketing and promo around that reactivation as we come into the NFL season. And it's obviously, the big acquisition point in the year from new people coming into sports betting. So very much the revenue should follow because effectively the cost base certainly OpEx is relatively flat. But it is seasonal based on that calendar.
I think the only thing, I'd build to add -- to add is, of course when there's specific state launches in different parts of the year, will have an impact. The start of the football season is always a great way of us, and it's the reason we spend a lot of money in acquiring customers. And clearly, if the state has launched, at a period of time where they haven't been able to participate in football, we'd see in the next football seasons of an inevitable step up.
In terms -- look in terms of the payback, I think we were talking specifically on that slide about some of the sort of new state launches and stuff. But look in general, we're very pleased with the trajectory of our acquisition costs. In fact, I think in 2022, there were an improvement on 2021. If you look at it on a sort of cost base, the way we actually look and run the business is looking at the capital LTV dynamics and in terms of those paybacks. We're very pleased with the way in which the business is performing. We're continuing to improve our structural margins, and if we can continue to drive up structural margins and reduce our acquisition costs, it means that the paybacks go well within our target time frames.
Thank you. Just one technical follow-up. You mentioned in the release material NOLs. Have you given the number for US NOLs in the statement somewhere, have I missed it, or could you give any color on that? Thank.
No, Ed. We've obviously had operating losses over the last few years. You can look at the EBITDA and add something to that around the sort of estimates on depreciation. So there are significant brought-forward losses, which will obviously, impact the amount of tax, we have to pay over the next two, three years.
Okay. Thank you.
The next one is from Paul Ruddy of Davy. Please go ahead.
Hi, good morning, Peter and Jonathan. Just two questions, if I close. First one is, maybe just on the diverging performances, you're seeing or we are seeing between UK, Ireland, Australia. So kind of looks like the UK and Ireland performance is strong and you appear to be taking share there. Australia, may be a little bit more challenging in Q4. Could you just maybe talk to the competitive backdrop in both and how you think about growth rate through 2023, and potentially market share expectations?
And the second one, is just appears to be some regulatory developments in India, placing even in Brazil, popping up on the screen this morning. Just in particular your competitive position in India and how that benefits you in the context of positive regulatory developments, and then also maybe just on the negative side just maybe the rate question on UK White Paper. Any kind of on the recent speculation performance may take trend for the consumer [ph] for revenues, et cetera.
Paul, it's a very good way to try and get two questions in. I think you got seven in there. But well, we'll try and deal with them as best we can. So look Paul in terms of your question around the performance of the UK and Australia. Let me give you some high-level thoughts on it, and then Jonathan, might follow up with a few more specifics. I think, if I look at our Q4 performance in the UK and Ireland [ph] up 14% when the market was down.
I'm very pleased, with how the business is performing. We've delivered a lot of product enhancements and improvements over the course of the year. And I think with the World Cup and the energy, we put into that I think we were really pleased, with the way that the business has performed. And I feel, like we've got our mojo back. So we've got lots of momentum, we're carrying into this year.
In Australia, I think it's important to remember the dynamics that we're seeing in that market. And of course, the Australian market is somewhat behind the UK in terms of the time it's taken for them to come out of COVID. And so in Q4 which is the summer was the first summer period they've had without COVID for a number of years. And we undoubtedly we're benefiting – we're the main beneficiary of COVID as the biggest brand in Australia. And so therefore, we saw -- did see a disproportionate impact on our engagement with our customers in terms of average player days.
But look the main thing that happened in Q4, there was a big step-up in competitive intensity as a in fact launch and was spending a lot of money on very attractive odds and the most players in the market we're trying to bulk up in advance of the changes in the consumption tax, which we've seen happen before.
So we very deliberately leaned really hard into generosity and spend a lot of money. And you can see the growth we saw in AMPs in the quarter, which I think we were very pleased with it. In terms of the – and I'll let Jonathan provide you a bit more follow-up on those, and then I'll turn to turn to the regulatory developments.
I think there's a couple of points, I'd make on each of these. I think there's a great slide in the deck which is slide 30 for those who haven't looked at it, which looks at both the gaming performance and then talks about our sporting performance. I think for me overarching the fact that, our pro forma AMPs are up 14% in Q4. Gaming revenue was up 12%. Sports revenue up 16%, really strong results in the fourth quarter. I think when you look at the progression of what's happened during the year and that's where slide 30 gives I think a really good picture on gaming, dime in the early part of the year as we lapped some of the safer gambling measures.
Then we go into the second half. We launched product improvements as we said, we would. And you can see that performance in Q4 and the growth and that's continued on into 2023. And on the Sports side, again, really strong performance very happy with where we were. Sadly, we had about 300 bps of negative luck in, in quarter four, which we hope is going to unwind from the prior year, but actually didn't. We had roughly the same negative luck in Q4 as we did last year. So we're not getting a benefit in that number from sort of an uplift in the luck component or sports results component. So really happy with where we are there.
And on Australia, we decided to invest some of the margin we had in order to make sure that we were properly positioned to keep our customer base and to fight back against the increased competitive intensity we saw. And both Peter and I are very happy with where we ended the year and looking back on that we would not have done anything different.
Look in terms of the regulatory developments, what I would say about India is probably for us actually our fastest-growing market up sort of 80%. And we're really pleased with the performance we're seeing there. I think, it's nearly our second biggest market in international actually. So look it's a great story for us. And I think the investment we made there and the trajectory that our business on is very, very exciting. There are a number of regulatory views going on, on a state-by-state basis, and indeed some federal changes which we believe will position us while as Rummy becomes accepted in more states in India.
I'm afraid, I haven't had a chance today to see what the – what's coming on the what’s widen in Brazil, so I can't comment on that.
With respect to the white paper, I've sort of slightly lost count on how many of these meetings we've been talking about, because we unfortunately did not talk about it for a long time. We're really keen it gets published. We've made a number of changes. We've taken $150 million of revenues at the UK business. We've made massive strides forward really focused on doing the right thing. And I think the extent to which the white paper can be published and can encourage other operators to pick up the slack and join us, it would be very helpful for the sector.
Great. Thank you.
The next one is from Ryan Sigdahl of Craig-Hallum. Please go ahead.
Good morning guys. Appreciate taking the time for questions. Just one on the US, I want to talk at a higher level and then one follow-up. So with many operators hoping to get positive EBITDA at some point this year, our thesis is some of those have structural challenges scaling to meaningful profits beyond that. We agree that you guys can do and will. But how do you think about the need to achieve positive EBITDA now versus making investments in the near term to build the business that can earn potentially billions in profits longer term?
And did you have a follow-up Ryan, or do you want me to pick up on your first?
Just on the follow-up, just curious how Ohio, Maryland, very strong starts. Just curious how your marketing strategies as they launch playbook have changed or if they're similar?
Yes. Look, I think the point you make about the US is a very important one. And whilst we're very confident that the business will be EBITDA profitable this year, I think people need to be careful that they're not to just focus on getting across the line on that. If you look at slide 18 on the presentation and that cohort analysis, it doesn't require a lot of imagination to see how, when you add in the business that we've acquired this year to that chart, and then you think about what the business starts to look like into '24, the reason we're talking about this being a transformational year, as you'll see a very significant sort of change in the profile of our US business.
And look, we're very excited about it. And we've always taken an approach of focusing on acquiring as much business as we possibly can, whilst we ever have the rights of CAP [ph] LTV dynamics, and that's something we're doing. You've seen us lean very heavily into customer acquisition this year, acquiring more business year-to-date than we did in the first quarter last year.
And I think the important thing is that we're compounding the advantages we have in the market. So we're continuing to see higher levels of hold against or handle that our competitors do. The parlay penetration was fantastic in things like the Super Bowl and the product offering that we have there is the best in the market, and we're continuing to develop and improve it. So we have a structural advantage in revenues, and we know that we are more efficient than anybody else from a customer acquisition perspective.
And when you start rolling for those cohorts, I think, yes, we are going to be EBITDA-positive in 2023. But it's actually when you start looking at the trajectory that, that business delivers, which I think is very exciting. Jon, I don't know if you want to add anything.
Yes. I'd add a slight nuance to the point made, which is some of our competitors are targeting getting to profitability in Q4 of this year. We've never targeted getting to profitability this year. We said it was a resultant outcome of slide 18. So this is not a deal an end-all target. We expect it to happen because of the cohorts. But I think Peter's point is absolutely right.
People need to focus on 2024 and the 2025 potential of where this business gets to, because that's the -- for us the big story here on the transformation of the earnings profile, the cash flow profile, the deleveraging benefits of 2024 and 2025. And what that actually means for the group is fundamental.
Look, with regard to the launch in Ohio, Maryland, look, you will know as well as anyone, Ryan, how complex these states can be from a rules and regulatory perspective. We were really pleased with the way that -- which the team performed to get to a point where we've got, sort of, 6% of the adult population as customers of FanDuel in such a short order in Ohio and to have 50% of the market was pretty remarkable.
We were clearly leveraging our, sort of, DFS base hard in the state. I think, we probably got nearly some 67% penetration of our DFS base in Ohio already, which is a, sort of, new record for us. But, look, I think the team refine and enhance and improve the state launch playbook with each one that we see and I'm really pleased with the results that they delivered.
Congrats on the performance. Thanks Peter, Jonathan. Good luck, guys.
Thanks, Ryan.
The next one is from David Brohan of Goodbody. Please, go ahead.
Good morning, guys. Just two questions for me, both on the US. And, firstly on the iGaming side, I think, very encouraging to see the share gains there. Just wondering where do you think your product sits now versus peers? I know in the past you had mentioned that the product needed some improvements. And then, also, just wondering is there any update you can give on the potential termination in FOX -- FOX Bet in August of this year. Thank you.
Hi, David. Look, on the iGaming side, we are the world's biggest online casino operator. If you look at our -- the strength of our business in the UK which is a fiercely competitive market and those figures that Jonathan just quoted are clear in the presentation. We now had to run these businesses and we're very successful.
And look we are hardest critic. And I think, when we look at the quality of our products in the States, we knew it was not good enough. We have made some improvements to it, but there's a lot more that we're going to bring to the market. So we're very pleased with the share gains that we've seen so far. But we're not standing still from a product perspective. So we're going to continue to make improvements, which we expect to enhance the offering we have in the market.
With respect to FOX Bet, look, I mean, the FOX is a bit important partner for us. I mean, one of the things that's worth acknowledging is that, they were transmitting the Super Bowl this year. And actually, rather than promoting FOX Bet, we -- FanDuel was promoted.
So I think these subscale operators, very difficult to make money in and the long tail of operators, I think, are probably struggling as FOX Bet is. So we'll review what we do with the business at the appropriate time.
Okay. Thanks, guys.
The next one is from Clark Lampen of BTIG. Please, go ahead.
Hey. Thanks. Good morning, guys. I've got two follow-ups. The first is on the US. Peter you talked about Parlay penetration in the product offering I think two-thirds of UK customers use build a bet during the World Cup. Is there a stat you could share around usage rates for comparable products whether it's with the World Cup or maybe NFL activity just curious what peak usage sort of looks like to level set.
And then for Australia the trading comments were pretty clear around early year performance, but I'm curious if you could share thoughts around how -- what looks like really strong player acquisition could begin to either accrue or I guess offset some of the competitive headwinds that you talked about throughout the year as those cohort season? Thanks a lot.
Okay. Thanks, Clark and I appreciate you getting up early. Look in terms of your question around the Parlay product, I mean, I think couple of things I'll share with you.
I mean I think first of all if I take the Super Bowl it's around three-fourth of our actives based on the sort of same game Parlay in the Super Bowl. So it's pretty high levels of penetration not that dissimilar to what we have shared around the bet builder for the UK. And look as Conor shared on Capital Markets Day, the in-house pricing is really important there. So around, sort of, 90% of the handle of the parlays is a priced in-house. And that means we get to keep all of the economic benefits associated with it.
And so we believe we've got one of the best products in the market. We're continuing to evolve it and improve it and price more of it. And that means that we capture all of the economics associated with it. But most importantly our customers obviously love it. So we're seeing really good sort of engagement with them on that.
In terms of Australia look I think the important thing for us to focus on in our business. And it's one of the reasons we use it as one of our important KPIs is at AMP figure. And so we were very pleased that we're continuing to grow sort of engagement in Australia particularly as people are able to live a normal life in -- for the first time in the summer period. So if you think about the way that COVID restrictions are working in Australia back end of 2021 many states were only just coming out of lockdown.
So in Q4 in Australia this year we were really pleased that as people were for the first time look – business planned overseas holidays and all those sort of things AMPs were up 13%. We have definitely seen a, sort of, a moderation of engagement. So the average player days are down trending back down towards the levels we saw pre-COVID. And that's a phenomenon we're seeing in the UK and other markets.
And I think look we have got these point of consumption tax changes coming into the market. If you're a smaller operator it will probably -- and you're making a small profit I think it probably push you into being unprofitable. Last time around we saw a bunch of people reacting and changing margins and overruns and generosity to try and deal with that. We have the scale to cope with those tax changes and the important metric for us is to keep driving engagement with our customers.
I think that's probably the critical point is that we didn't just behave in an aggressive fashion in Q4 because of the competitive intensity. It's also in the run-up to the incremental point of consumption tax changes because we felt that the strategy that was employed in the business as Peter said and they run into the last point of consumption tax for the introduction of this significant point of consumption tax changes a few years ago was a successful one and we've we followed that. And I think the team have actually executed really well in Australia in terms of the approach they've taken and the way they've executed.
Thank you very much.
Thanks Clark.
The next one is from Joseph McNamara of Citi. Please go ahead.
Hi, there. Thanks for taking my question. First one is on the US. I just wanted to ask about the Super Bowl. In prior years you offered extremely generous odds for new customers, and this obviously had an outsized impact on Q1 win margins. Am I correct in thinking you didn't pursue the same 71, sorry, 50/71 odds, and if so can you explain the rationale? And any color on I guess the impact for Q1 profitability this year and going forward?
And the second one is on Sisal, very strong numbers there. What should we expect for 2023 as retail comps normalize? And any ambition to bring product launches such as Geo and Tipster to other brands within the Flutter portfolio? Thank you.
Thanks Joseph. Maybe I can take the first one. You're correct in that we didn't employ the 56 moving to 57 to one offer this year. We actually ran a fantastic campaign around the ground kick at half time and that really caught the imagination of punters. But it also did it through the playoff period as well. So we really think we benefit a lot on FanDuel over that whole period. And actually in the playoff stages we saw activity up two-thirds year-on-year. So we are really pleased with the way that that campaign actually went on for quite a long time rather than just being a one and done.
I think the second thing is that the offer that we put in the market last year, we saw just short of half of those punters being effectively one and done. And, therefore, we reevaluated the overall economics. And actually what we've seen this year is really good value coming into the business. We think the offers that we have in the markets were the right ones for driving medium and long-term value. So we're very happy with where we ended up in terms of our offer on the Super Bowl and our engagement. And certainly you can see the market share stats are pretty strong through the start of this year in the US.
Yeah. I think, I'll just build on that. So Joseph we think that the -- as Jonathan said the benefit of acquiring customers in the period of time leading up to the Super Bowl rather than on the day of the average value of customers are requiring as much higher and we think we've got a much better of engaged base. Actually when we look at the volumes as I said we've already acquired more customers this year than we did in Q1 last year. So undoubtedly we're -- we think that the change in strategy has been the right one.
With regard to the work we're doing with Sisal. Look, we talk a lot about the Flutter Edge, which is the symbiotic relationship we have with all of the different parts of the group benefiting and contributing as well.
I think if we look at things like from a product perspective the Geo and Tipster are definitely things that we are interrogating and making sure that we use those in other parts of the group and sooner or rather that makes sense. But likewise we're also taking things into Sisal as well.
So they're already now using our risk and trading capability and when cash out was made available from a regulatory perspective in Italy we're able to do in very accelerated fashion because of the capabilities we have elsewhere in the group.
With regards to the retail and online performance, we very pleased with how Sisal exited 2022. Fantastic momentum in their core Italian business, the online business, reaching some more sensible levels of penetration but we believe there's still a very long way to go. We were definitely helped in terms of customer acquisition numbers by the enormous SuperEnalotto jackpot of €370 million.
And we need to see what happens this year as we operate in a more normal lottery jackpots. But I think the team have got an excellent capability there in terms of having a million customers a week, checking their lottery tickets on the Sisal app and using that as a vehicle for cross-selling people into gaming, and I think we're also benefiting in Sisal from some of the international elements.
So we're really excited about the opportunities that we see in Morocco, Tunisia and of course, the business we have in Turkey as well. So look, it's been a great acquisition for us. We're really pleased with the performance and we think that they're on a very positive trajectory. And it's part of what we know gives us real conviction in the turnaround in the International division.
And just adding to that, I think the thing that in terms of the Italian part of their performance that was most pleasing was when retail came back, we actually -- the team were very looking carefully at the performance of the online. But actually, we saw the online continue to grow through this period, which I think shows the strength of the underlying product but also the strength of the omnichannel offerings in that market versus those who are online only. So we are really pleased with the way the business performed online with retail returning.
The other thing I'd just say is, we obviously highlighted in the presentation. The Sisal made £247 million of EBITDA this year. We obviously paid around £1.6 billion for it. So it's sort of 6.6 times. We're really happy with this acquisition and we look forward to going to strengthen strength to strength both in Italy and in some of the international markets where we've got these fantastic positions. And hopefully you'll have seen the presentation and seen a little bit of a deep dive that Peter did on the Italian and international business for Sisal.
Thanks and really appreciated color. Thanks a lot.
Thank you.
The next one is from Louise Wiseur of UBS. Please go ahead.
Hi. It’s Louise from UBS. Thanks for taking my questions. I was wondering if there is any indication you could give on where you are on EBITDA profitability and margin in the kind of like more mature state, New Jersey, Pennsylvania. Have any of these states got closer to the long-term margin you expect from the US?
And then the second question is on the consumer backdrop. Has there been any change in the consumer behavior in Q4? I think in the past you said that you were not seeing any impact from the consumer. I just wonder whether that's still the case or if you've seen any change, and is there any differences between the different regions? Thanks.
In terms of the EBITDA margins, we're not going to comment on a state-by-state basis. We did give a break down I think it was the interims around the sort of EBITDA trajectory in New Jersey. Look, I think the most important thing is aligning the Chart 18 in the deck with the Chart 7 the numbers on 17. You can see the improvement in EBITDA percentage from the overall business as we get the top line driving operating leverage and that flywheel effect.
And then secondly, Slide 18, as these contributions from these cohorts come through, the trajectory is very, very clear, but we're not going to comment on state-by-state basis and then you get into all sorts of questions of allocation of national marketing and this sort of stuff. I don't think it's massively helpful.
But I can tell you from looking at the trajectory on Slide 18, you can see that the contribution is increasing in each of the states and that gives us high levels of confidence of getting to sensible levels of EBITDA in this business going forward, as we talked about in the Equity Capital Markets Day.
And with regards to your question about consumer behavior, we're seeing no discernible impact across our business. The [indiscernible] Sisal, Tombola or any of the brands in the UK or any other markets we're seeing no impact.
Thank you.
The next one is from Joe Stauff with Susquehanna. Please go ahead.
Good morning, Peter. Good morning, Jon. I wanted to ask about Australian user growth. You had AMP growth of nearly 13%. What's the right way to think about that? Is that in the context of where say the penetration is in Australia of the adult populations for the online gaming? Is that -- do you read that as customers kind of trying out your product, or is that say new customers in terms of increased penetration in that market?
Yes. Look, Joe, there anything else you wanted to ask was that.
Yes. And then I wanted to ask about Sisal. And with the reopening trade and retail kind of more normalized in Italy and elsewhere in the world is most of the growth from here say more online within Italy?
Okay. Look in terms of the two points, first of all, on Australia, look, we have a very, very recreationally focused business in Australia with Sportsbet. It's a great of mass market products. And if you want to have a better understanding of the brand code you to look at the Capital Markets Day we did, which focused on some of the aspects of that during the sort of the COVID lockdown or we even have a look at the YouTube channel at some of the creative that they do they do a brilliant job of activating and bringing fitment to life as they say in Australia.
I think if you look at what's been driving the AMP growth certainly is a degree of reactivation from historical business. But every year new cohort of customers comes available to us because they come on late in Australia. And you know how important sport is to Australians and actually having a pump for those is something which a lot of people do for fun and recreation.
We're the mainstream brand in that market and that's why we continue to grow our AMPs. And I think that's supported by our innovative poker niche product which has been fantastic for recreational betters, bringing in new recreational betters. And we've got more products and features coming on that in the near future. So what's the space on that.
In terms of Sisal, if you look at the Chart 36 in the presentation, you can see the very strong growth that is occurring in the online space. And as the brand that has significant retail presence, we're able to really participate and drive that off the back of things, like the customers who are checking the launch of ticket – the million that I referenced. With advertising restrictions, it's very difficult for pure-play digital brands to compete against us in the market, and say look online penetration is growing. It's growing strongly and we're capturing a significant share from it. So we're really pleased with the trajectory that we're seeing in Sisal.
And the application of the Flutter Edge in terms of getting our knowledge expertise both into the business, but out of the business we were asked the question on Geo and Tipster earlier, there's fantastic opportunities for us to really help and drive growth in that market. We've got ramped live in Sisal now. We've obviously got cash out which came live very quickly with a lot of expertise across the group earlier in late 2022. So, very excited about the opportunities there to help drive that online growth even faster than Sisal.
Make sense. Thank you.
Thanks, Joe
The next one is from Jordan Bender of JMP Securities. Please go ahead.
Great. Thanks. Can you talk about your penetration rates in your more mature sports betting markets in the US and kind of what those growth curves look like? And then for my follow-up kind of to touch on the FOX Bet comments you made breaking out the FanDuel business from the other investments in the US, the loss outside of FanDuel was to the tune of about $75 million during the year which is a decent size loss. Maybe can you talk about how that non-FanDuel loss might look in 2023? Thank you.
Yeah, look, in terms of penetration rates, I mean, you'll have seen that all of the states publish market share data. So, on a state-by-state basis we're continuing to perform very well even in the states which launched very early days. And of course, we're performing very well in the states which we've only just launched. If we look at our performance in states that, we've been in some time. We're continuing to see good performance there. So we're still growing up 24% in staking in states that we launched in pre-2021, and revenues at 42%.
So the strong performance we're seeing in the US is not just being driven by recently launched states. So I think the product is – the benefits we have are compounding, right? We're continuing to see improvements in our revenue performance. We're seeing more efficient marketing acquisition and we're able to reinvest that in having better products better generosity driving wallet share driving further customer volumes and really getting that flywheel powering.
In terms of the loss – in terms of FOX Bet, obviously, as you said, FOX Bet plus PokerStars we need to remember that is the – that we're talking about is 3% of revenues and 30% loss, yeah, that $75 million would expect between half and two-third of that to go away, if FOX Bet was no longer operational. The question is how much we want to invest in PokerStars and the fact that we've got shared liquidity across multiple states. Now how much do we want to try and drive that growth and try and build that liquidity. So again, we'll have an equation of how much do we invest to grow and build that liquidity pool versus how much do we decide it will depend on CAC-to-LTVs in those markets at that time, how aggressively or not reinvest behind the PokerStars liquidity pool.
Great. appreciate the questions.
Thanks, Jordan.
The next one is from Kiranjot Grewalof Bank of America. Please go ahead.
Hey, morning. Firstly just on the US, could you give a bit more color on the cost breakdowns, clearly marketing is being leveraged and we'll probably see more of that next year as you go towards positive EBITDA, but I wanted to get a better sense of other OpEx, it looks like it was up over 60% year-on-year. What's driving this increase? And should we see a significant leveraging of that as you move forward?
And then the second question is around -- is sort of building around the AMP question that came up earlier. You've also spoken a lot about focusing on the recreational customer. I think some of your peers are also targeting a similar cohort given there's a lot of focus on this I mean where are you winning your customers from? Is it from competition? Is it increase in proportion of population betting overall? And I suppose this relates a bit more to the mature markets. Thank you.
Thanks. I'll take the cost question. Clearly, the business is scaling up in the US as we build out a lot of the functions to get to that sort of sustainable level. There are some -- we've got a range of different cost drivers in the business. We've got some cost base which are relatively variable. And as we expand states well, for instance, we'll take on compliance and legal teams to ensure that we're able to comply with all of those new rules and regulations around each of the individual state. So, will get variable costs in those. We've got areas where we've got fixed costs and that includes areas that sort of like finance and other areas like that.
So, the big increase that we've had year-on-year in terms of the cost base is about two-thirds in terms of staff costs as we scale up. There's actually within that we have the California lobbying costs, so there's some extra costs in the year. Those will obviously drop out as we go forward.
But we feel as if we were getting the business more towards where we need it to be and then we'll have scaling costs associated with certain functions. We're also clearly looking at where we can take part of my new role as COO will be looking at where we can take learnings and ways of doing things across the group and drive some effectiveness and efficiency into operations across the group and the US are clearly focused on making sure they build their cost bases in a very effective way to be able to service the customers at the right cost base. So, yes.
Look Kiranjot in terms of your question around AMPs, I think it's pretty straightforward for us really. We have been very focused on the recreational space for a long time. We've got products which we think are very well-suited to and invest very heavily in them.
If I look at the UK, for example, I'm really pleased with the way in which we've been able to use our new products for that in gaming in terms of things like this if the Wonder Wheel for Paddy Power, some of the changes we've made around BetBuilder for SkyBet bringing fantastic product innovation to the market. It's helped us grow AMPs because people have sort of really engaged with those exciting products we're in.
And when I think about 2023, look we definitely took share in Q4. You can see that with a very strong performance we had relative to the market. I expect us to continue to take share in 2023 by growing the topline. And the great products we have are translating into growth in AMPs and other people in particular sort of catching up with some of the stuff we've done a long time ago on safer gambling, I think we're really seeing the benefits of our strategy come to that.
Perfect. Thank you.
The next one is from Daniel Politzer of Wells Fargo. Please go ahead.
Hey. Good morning everyone. So a couple of ones on the U.S, first, Maryland and Ohio you guys are quickly up to 60% plus share there. One, I wanted to see what you kind of contribute to that early success to? Are there changes in the market, changes in your long strategy or just changes in the kind of competitive and promotional environment?
And then also, the second one, your whole benefit in the second half of the year, I think it was 8.5% net revenue margin which compares to call it, significant change in prior years. I know that there is a little bit of favorable hold but also, your structural margins have improved.
So I guess, on a go-forward basis kind of what's a good range to think about? And how should we think about kind of the breakdown between what was favorable sport outcomes and what was the structural improvement in the second half? Thanks.
Daniel, I mean, when I look at the Maryland at the high. And I'm very proud of what the team has done. I mean, terrific job. We get better and better with each state launch that comes along. Think about the Capital Markets Day and the stuff that Mike and the team talked to you about, we are shifting spend towards sort of national advertising that helps.
We're getting more efficient around our advertising and effectiveness. But really we're able to capitalize on our DFS base, so very high-levels of penetration in Ohio which has naturally helped now our offers our referral friend all the different components of the strategy and as well as having the best product. So we're really pleased with the performance that we saw in those two states. Jonathan, do you want to talk about the margin?
Yeah. Sure. I mean, year-on-year when you look at the mixture of luck and promotional spend those two things are the net out. So, most of the uplift year-on-year was actually improvements in structural margin.
We feel good about the 12% number that we talked about for gross win at the Equity Capital Markets Day. And we're on a trajectory to move towards that. So we do expect further improvements in our gross win margins going forward as we get improved pricing accuracy and improved levels of parlays. So we're confident in the sort of medium-term target that we put out there.
Got it. Thanks.
Thanks, Daniel.
The next one is from Richard Stuber from Numis. Please go ahead.
Hi. Good morning. Two questions for me please. One on Safer Gambling and one on Australia, in terms of Safer Gambling I think in the presentation you said that, 40% of customers use that tool.
Could you split out, in terms of what percentage of customers use this tool in the U.K. and what use it in the U.S.? And the follow-up on the U.S. side, are you starting to see opposition to marketing and advertising in the U.S. the comments coming out of New York sort of more of an outlier as opposed to a general sort of nationwide consensus.
And the second question is on, Australia. I think you saw EBITDA margin fall by nearly 300 basis points because of the competition in the COVID reversal. Would you expect margins to return this year back towards previous levels, or do you think that this is the new norm? Thank you.
Hi. Look, I think it's -- if I look at the two markets you referenced, I'm really pleased with what we've done in the U.K. We've directed -- directly invested £65 million across the U.K. to support promote and educate safer play. And there's, lots of proactive measures that we've implemented as part of our Play Well strategy maybe taken at least £150 million revenues out of the business.
The stuff that we've done the deposit limits of £500 for U.K. customers under £25, the £10 limit of the slots. These things are not always included in some of the Play Well tools, right? So I think that the team are doing an excellent job and we've got Safer Gambling targets in the annual bonus schemes for all colleagues, which I think is really important. So I think that the UK team are doing a terrific job and we're definitely sort of leading the race to the top.
When you think about the fact that we set those Play Well targets for the group, as America, which is now our biggest division is going to be – is going to have to play its part. And clearly to get to our 75% target, we're going to need the Americans to be at least at that level.
There's loads we're doing there as well. We have been working very carefully with the leagues, the teams and media partners to develop code to conduct. We've actually done some terrific work with them around advertising which we think will try and take some of the heat out of potential problems with advertising but we're obviously, watching very carefully with the developments we see. Because it's America, we've got our Safer Gambling ambassadors, which are very important voices to get out there.
They're not just – our customers are not just hearing from us, we've actually managed to help lead the industry in the development of 12 common principles around Safer Gambling, leveraging some of our experiences in the UK and other markets. So there's a lot going on. But ultimately the states are going to play a very significant role. Jonathan do you want to talk about Australia.
Yes, sure, Richard. In terms of H2, we obviously as you said sort of 26% EBITDA margin. We'd expect that to improve probably around 3 percentage points year-on-year. We've got some non-recurring marketing of around 7 million in H2. We are obviously very aggressive in terms of generosity and that obviously has an impact on cost of goods sold as well. We've got other areas, we think we can make some efficiencies. So we'd expect that to help offset some of that PLC impact. So we'd expect to be in the sort of high 20s as a sort of rough guide for this year.
That’s great. Thanks very much.
Thanks, Richard.
The next one is from Andrew Tam of Redburn.
Hi, Andrew.
Hi, there. Sorry. So just wanted to follow up on Sisal and what's happening in terms of the online space. Are you able to share anything in terms of say the margin differential between the retail business and the online segment? And just in terms of that growth dynamic there?
Yes. Look we know Andrew that when we have customers in online, particularly if they migrated from retail, we see much higher levels of margin for them. And if you look at Slide 37, you can see some of the benefits we see from online because it operates at a higher online EBITDA margin at 40% as opposed to the retail EBITDA margin.
Our retail business is slightly unusual because these are not also owned and operated stores and sometimes sort commission. So we see it slightly different to fall through. But look the online business that we're acquiring is much more sort of EBITDA positive for us and we're not actually sort of migrating customers from retail to online so we're actually growing our penetration significantly in online.
Yes. And obviously with the marketing restrictions in Italy, we don't spend very much marketing, which obviously helps the level of profitability in the online business.
Got it. Got it. And just a second one just in terms of the guide towards the higher depreciation in 2023. I think there's some comments around some offset to that in terms of US tax losses. Can you just clarify just the size of what some of those offsets could be?
Sure. You'll need to look at your model and work out what you think the profitability is and then therefore, work out what you think the offset is because the offset obviously carrying forward the earlier question on NOLs, you need to work out what your taxable profit is and therefore, what the tax benefit is from the carryforward losses, which are – as you'll recognize from our losses over the last few years quite significant. So I'll leave you to have a look at that maybe chat to the IR team is probably the best way to get through that.
But obviously, the – some of the depreciation increase is about making sure we've got pro forma, making sure we get a lot Sisal in. And remember some of Sisal is around the concession. So you do get an uplift there from depreciation and amortization around that. So I'll leave you to work through that with the team but we feel pretty confident about the offsets.
Got it. Okay, appreciate it. Thank you.
Thanks, Andrew. Look I think that's the end of the questions this morning. Thank you very much to everybody who's dialed in, particularly thanks to Jonathan, this is the last time he is sitting next to me. Happy with the results – looks so happy for those of you who have dialed in and can't see. But Jonathan, thank you. I really appreciate everything you've done over all the years to help us. And look forward to continuing to work with you to help deliver the Flutter edge [ph].
Indeed, thanks.
Thank you, all.