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Fanduel CEO: Our customers are ‘average gamers’

Fanduel CEO Amy Howe joins Yahoo Finance Live to discuss earnings, sports betting, marketing promotions, and more.

Video transcript

[MUSIC PLAYING]

BRIAN CHEUNG: Shares of Flutter Entertainment on the move this morning after the FanDuel parent company reported financial results for the first half of 2022. You can see shares up 14% on that stock. That included a positive profit for FanDuel in the second quarter. Joining us now for more on this, FanDuel CEO, Amy Howe, as well as Yahoo Finance's Josh Schafer. Great to have you on the program. Amy, sports betting market share in the United States accelerating to 51% in the second quarter. Tell us about what drove that.

AMY HOWE: Yeah, first of all, we're incredibly pleased with our second quarter performance. We did extend our leadership position to a 51% online share. And in 13 of the 15 markets, we had a number one position. It's really a couple of things driving it. One is we have always been very efficient at how we bring customers onto the platform. We've always had a strong brand, but we've engaged phenomenal talent like Pat McAfee. We've got great integrations with TNT and Turner. And BA was a big part of Q2 this year.

So that acquisition engine just keeps getting stronger and stronger for us every day. But our product is just-- it's just phenomenal. We've been the number one downloaded sportsbook app for quite some time. And you see it in the way customers are engaging with our product. And if you look at our NBA customers, 80% of those are using one of our parlay or same game parlay products. And it's just, it's creating a great experience. So it really comes down to more efficient acquiring customers and a really fantastic product.

JOSH SCHAFER: Amy, I wanted to zone in a little bit on the profitability aspect there in the second quarter. That's obviously something we talk about a lot when it comes to all the different sports gambling companies. What do you think drove that? And is that something we can expect quarter over quarter, moving forward? Or with the addition of new markets and football season coming back up and those promotions, is that going to be something that kind of fluctuates quarter to quarter?

AMY HOWE: Yeah, I mean, listen, Q2 profitability was a function of the player values were incredibly strong. And what we were seeing candidly coming out of Super Bowl is, if you look at the relationship between our player values and our customer acquisition costs, that formula was great. So we actually decided to lean in. So that $22 million in EBITDA profitability is despite the fact that we leaned in even harder than we would have.

It's just a function of how many new customers you're acquiring relative to existing customers. And every year, as your existing customer base gets bigger, that flips to profitability. So we feel very good about as we head into '23. You know, obviously, this is going to come down to whether California gets legalized or not.

But the fundamentals of our business and the fact that our cohorts of customers are just getting stronger year over year, and the fact that we have phenomenal operating efficiency, right? If you look at over the last couple of years, our revenues have grown 2 times faster than our cost base. So for all those reasons, we feel quite confident about our ongoing path to profitability.

JOSH SCHAFER: And I did want to ask you a little bit about those customers. We've heard from various different sectors across other businesses. There's concern when we talk about pricing pressures and where consumers are going to be spending their money over the latter half of the year. How are you sort of evaluating your consumers right now? And what are you expecting from them in the fall?

AMY HOWE: Yeah, it's a great question. As you can imagine, it's something that we're keeping our eye on. So far, as you can tell by the performance of the business, the fundamentals are very strong. And one thing you have to remember is an overwhelming percentage of our customers are what we would consider to be casual gamers, right? So their average bet size is not very significant. And customers are viewing this as a form of entertainment, right?

So if we keep giving a great proposition, we feel confident that we'll maintain those fundamentals. But it's certainly something we're keeping our eye on.

BRIAN CHEUNG: And then Amy, I want to ask just kind of about other ways that you're expanding the business, the news this week that you've advanced kind of your plans to actually build a sportsbook in Las Vegas, a physical one. Why is that part of the strategy here? Isn't the whole point to go to digital?

AMY HOWE: Well, retail has actually always been an important part of our strategy. We operate 26 different retail locations across the US right now. And what you see is that omnichannel customer, right, who's both engaged in retail and online sports betting tends to be a more valuable customer. It's an important part of our relationship with our market access partners. And in Nevada, specifically, we think that's the first right step. We have a phenomenal relationship with Boyd, who's our market access partner. So we think it's going to be a great opportunity to start to build a presence in a really important market.

JOSH SCHAFER: Amy, when we talk about marketing spend and promotions and the promotions that users see on the platform, is that something that you guys are planning on? You mentioned leaning into it more. Are you going to continue to lean on to that in the football season in states like New York, where the promotions have been big? Did you see success with that, and fans can expect that to come back come September?

AMY HOWE: Well, football is always the most competitive season, right? It is the number one acquisition moment for-- candidly, for all sports betting operators. Separate New York for a minute. New York, obviously, has a much higher tax structure. And almost all competitors have started to pull back, but candidly, even though we've pulled back, we've still seen some strong fundamentals.

I can't comment to what others are going to do. What I can tell you is that we're always looking at that equation between the value of that customer and what it takes for us to get them on the platform. And as long as we see solid paybacks within that 12 to 18-month range, we're going to keep spending in.

But we're excited about our football product. It's our second year with our relationship with the NFL, which has gone extremely well. And our product is just fantastic. We have, by far, the best offering around parlay and same game parlay product. So we're excited with NFL upon us.

BRIAN CHEUNG: All right. This is, by the way, a lot more calm of a backdrop than I think we had you on in the Super Bowl when Pat McAfee was screaming behind you. You remember that?

AMY HOWE: Yes, it's much more calm than Pat in the background, but we love Pat.

BRIAN CHEUNG: Yeah, well, next time, for the next earnings round, you could just have him sit behind you and just scream. That way, we can get the energy up over here.

AMY HOWE: That would be a lot of fun.

BRIAN CHEUNG: FanDuel CEO Amy Howe, as well as Yahoo Finance's Josh Schafer, thanks so much, and have a great weekend to both of you. Appreciate it.