igamingnext photo
Analysts at JMP Securities said FanDuel regrets not spending more money on user acquisition in the past.

JMP had dinner with FanDuel CFO David Jennings and Flutter director of investor relations Ciara O’Mullane, who outlined the company’s current thinking on a range of topics.

This included a feeling of regret the operator did not historically devote more resources towards driving player acquisition, despite reporting a $552m EBITDA loss in 2021-22.

In recent years, operators have scaled back their user acquisition investments in the US as interest rates have risen, with many investors placing more of an emphasis on profitability.

“If we knew what we know now, the company would have spent a considerable more amount of money,” said FanDuel CFO Jennings.

JMP said it believes this attitude reflects the current philosophy driving FanDuel’s 2024 outlook, in which continued investment will be prioritised.

However, it added increased spending will only happen “when it makes sense”, with a customer payback period below two years.

JMP pointed to increased investment making headway in a range of areas, including higher adult penetration rates following recent state launches.

The analysts also highlighted FanDuel’s success in pushing players to higher margin products such as same-game parlays.

FanDuel looks to improve payments margins

According to JMP, FanDuel also is looking at reducing the costs to its US payment processors, which are reportedly several times higher than in other countries.  

This tracks with DraftKings’ thinking, as the company aims to reduce payment costs from 12% to 8% of revenue in the medium term, the analysts said.

“We estimate FanDuel had ~$500M of processing fees in 2023, providing a significant opportunity to increase gross margins through further procurement,” said JMP.

Another area of discussion was FanDuel’s improving iGaming market share, which has increased to 26% in Q4 2023, up from 20% in 2021.

According to the analysts, the brand’s CFO argued that improved technology as a result of leveraging Flutter’s global casino platform was responsible for the share increase.

“We get the sense the company views its current market share position as the baseline moving forward,” said JMP.

The analysts also said it believed FanDuel will consider investing in a “local hero” brand to cement its position in the Brazilian market, something the business previously hinted at.

“In our view, M&A will be on the table with several larger, local brands operating in the country already, including companies like Betnacional and Betano, whereby Flutter can leverage its technology and balance to improve the scale of a business with local ties,” they said.

Similar posts