Paddy Power Betfair has published its trading update for the three months ended 30 September 2018. The report, which cited Q3 2018 revenue ahead by 12 per cent to $629m year-on-year, focused extensively on the firm’s US activities and its growing customer base there.

Chief executive Peter Jackson commented: “In the US, the exciting potential of the sports betting opportunity and the strength of our strategic positioning has been evidenced by our experience to date in New Jersey. FanDuel recorded a 30% share of the sports betting market in September, driven by a market-leading customer proposition, our strong brand presence and the ability to cross-sell from our fantasy sports player base.”

Highlighting the company’s strong US presence and performance, the report stated: “Following the merger of Betfair US with FanDuel and subsequent sport betting launch, our US business now comprises revenues from the following: FanDuel fantasy sports (across 41 states); TVG horseracing (across 33 states); the FanDuel sportsbook (currently operating in New Jersey and West Virginia); and the Betfair Casino and Exchange in New Jersey.

“Revenue was up 22%, with good underlying growth in each of our existing businesses supplemented by $5m of sports betting net revenue. Excluding sports betting, revenue was up 14%, comprising of 18% growth in fantasy sports, 7% growth in TVG and 40% growth in the Betfair Casino.”

Paddy Power Betfair also reported that fantasy sports performance, notwithstanding the benefit from a soft comparative period, had been good in recent months driven by product enhancements and good execution in promotions and marketing for the new NFL season. “New game formats, coupled with retention promotions, are driving growth with core fantasy players,” it advised.

The firm added that while US sports betting is still in its infancy, it remains encouraged by both the indicative demand for regulated sports betting products and by the initial market share that FanDuel has obtained. “In retail, our FanDuel sportsbook at the Meadowlands in New Jersey generated over $1.5m of stakes per day in October, making it one of the biggest sports betting outlets in the world,” it said.

“This performance reflects the property’s prominent location (we estimate that approximately 30% of bets are coming from New York residents), customer proposition and the strength of the FanDuel brand. That said, we continue to believe that the key US market opportunity lies online. This is evident in New Jersey where, in October, our online stakes were 40% higher than our retail operation.”

Detailing its approach to the American business, the company said: “Our objective for sports betting in the USA is to launch within key regulated states and quickly achieve online scale. Our strategy is to achieve this by offering a leading customer proposition, leveraging our significant existing customer database and supporting this with disciplined marketing and promotional spend.”

On the outlook, the report predicted circa $32.5m EBITDA losses for US sports betting in 2018, reflecting marketing and promotional investment in New Jersey.

SBC Americas analysis:

Breaking into the US market was never going to be a cheap affair for Paddy Power Betfair, but those high initial costs arising from the acquisition/merger of the FanDuel brand look to have been justified. Acquiring the DFS operator has given the company access to an ‘off the peg’ customer base with the potential to take those players beyond the realms of fantasy wagering into traditional sports betting products. And with more states preparing to go legal in the months ahead, these are exciting times for the company.