Good afternoon, everyone, and thank you for your patience. My name is Kelvin, and I will be your conference operator. I would like to welcome you to the Flutter Entertainment Second Quarter 2025 Update Call. I will now hand the call over to Paul Tymms, Group Director of Investor Relations. Please proceed.

Hi, everyone, and welcome to Flutter's Q2 update call. With me today are Flutter's CEO, Peter Jackson; and CFO, Rob Coldrake. After this short intro, Peter will open with a summary of our operational progress and then Rob will go through the Q2 financials and updated guidance for 2025. We will then open the lines for Q&A. Some of the information we are providing today, including our 2025 guidance, constitutes forward-looking statements that involve risks, uncertainties and other factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors are detailed in our earnings press release and our SEC filings. In addition, all forward-looking statements are based on current expectations, and we undertake no obligation to update any forward-looking statements, except as required by law. Also, in our remarks or responses to questions, we will discuss non-GAAP financial measures. Reconciliations are included in the results materials we have released today available in the Investors section of our website. And I will now hand you over to Peter.

Thank you, Paul. I'm delighted to report a strong set of results for the quarter. Across the group, our operational performance was excellent, and we're making meaningful progress against our strategic priorities. This in turn is driving our strong financial performance. During Q2, we saw around 16 million average monthly players engaging with our products, driving revenue 16% ahead year-over-year and adjusted EBITDA 25% ahead. While increased noncash charges resulted in net income reducing by 88% year-over-year, cash from operating activities was $36 million higher. Before I provide an update on our U.S. and International businesses, I would like to update you on the excellent progress we're making against our strategic priorities. Starting with our transition to the U.S. Following our move to U.S. primary listing in May last year, Flutter has become a well-established business within U.S. capital markets. This was demonstrated by our inclusion in both the CRSP and Russell indices during Q2 and the increased levels of liquidity we now see for Flutter stock. We also believe we remain very well placed with admission to other major U.S. indices in time. Secondly, we continue to demonstrate our credentials as an innovative business, deploying capital at high returns organically through M&A and returning cash to shareholders. This was again evidenced in July with the extension of our U.S. market access partnership with Boyd. This deal increased our ownership of FanDuel to 100% at an attractive valuation and also secured U.S. state market access at much more favorable terms. This is also a great example of the longer-term cost levers we have available, which help underpin our confidence in the delivery of our long-term adjusted EBITDA margin targets. Thirdly, on the U.S. regulatory front, I believe our sector is making meaningful progress in encouraging lawmakers to adopt a balanced tax strategy, which promotes market growth and investment. We believe our substantial U.S. scale positions us well to mitigate tax changes. This is both from a direct mitigation perspective as well as benefiting from the market share gains we typically observe market leaders experience over time when regulatory changes are introduced. We were, of course, disappointed to see the state of Illinois introduce a wager fee on July 1, which unfairly impacts our recreational lower handle customers and significantly increases operating costs in the state. As previously announced, starting September 1, we'll introduce a $0.50 fee on each bet placed in Illinois to help mitigate this impact. We are confident, as evidenced by the majority approach to date, that Illinois is an outlier and that lawmakers generally will recognize the importance of adopting a balanced approach. Fourthly, the events contract landscape continues to develop at pace. We have two decades of experience operating the world's largest betting exchange, the Betfair Exchange, which shares similar characteristics with events contracts, and this will help inform our views. We are closely monitoring regulatory developments and are assessing opportunities and potential participation strategies this may present for FanDuel. In our international markets, we were able to complete the Snai and NSX transactions during the quarter, creating a leadership position in Italy and establishing a scale position in Brazil. In Italy, Snai integration plans are well underway, and our good progress means we have increasing confidence in our synergy targets. We finished the quarter with over 30% share of the online market, and our attention is now on bringing Snai customers onto the SEA's market-leading online platform in the first half of 2026. And finally, in the newly regulated Brazilian market, we retain a strong conviction that the market opportunity will be very significant, and that those operators with scale and the best product will win the largest share of the market. Leveraging the Flutter Edge and local management expertise, our strategy is to elevate our Brazilian proposition. We've targeted quick wins in product and marketing, which we expect will deliver significant improvements to the customer proposition on both sportsbook and iGaming over the next 12 months, which we believe will place us well for future success. I'll now take you through progress in our U.S. and International businesses during the quarter. In the U.S., we maintained our clear position as the #1 online operator in both sportsbook and iGaming. We had a great quarter with revenue growth of 17%, benefiting from the highest gross revenue margin month on record in June for sportsbook and excellent iGaming momentum. Our phenomenal iGaming performance with revenue 42% ahead and average monthly players up 32% is clear evidence of the benefits of our very strong product roadmap. We launched our FanDuel Rewards Club to all iGaming customers in April and added the second installment of our very successful exclusive Huff and Puff series. Leveraging the Flutter Edge via the proprietary platform we migrated to last year, we also added a record volume of new titles to the platform. In sportsbook, continued product improvements drove growth in player frequency and handle 7% higher year-over-year. Average monthly players were 4% lower as we lapped our very successful North Carolina launch in the prior year when we delivered significant population penetration during the opening months. Activity on the NBA playoffs was encouraging with four separate seven-game series, including the finals, helping to drive better engagement than expected. On sportsbook product, we continue to deliver innovative and engaging features to our customers. Harnessing our next-generation pricing capability, we added Same Game Parlay+ and profit boost functionality to our Your Way feature during the NBA playoffs. We've been really pleased with engagement and are looking forward to offering a broader product proposition in the upcoming NFL season. FanDuel's Same Game Parlay experience continues to be by far the standout proposition in the market and underpinned a further expansion in our structural gross revenue margin to 13.6% during the quarter. Building on the success of our Parlay Your Bracket offering for March Madness, we added similar features for NHL and WNBA during Q2, and we also expanded Same Game Parlay Live to Tennis for the first time to deliver a record Wimbledon for FanDuel. On MLB, our Batter Up feature, which allows customers to parlay outcomes for the next three batters up was rolled out for all live games and has been resonating well. These product enhancements supported strong live betting volumes in the period, with live betting making up over half our handle in Q2 and Same Game Parlay Live, our fastest-growing component. A seamless live proposition was key to this growth as we leverage our global live betting expertise through the Flutter Edge. This includes winning on the core fundamentals such as optimized in-game settlement and ultimately delivering an overall player experience that minimizes friction and maximizes ease of use. Our International performance continues to be positive, benefiting from both our scale and diversification. We delivered year-over-year revenue growth of 15% in the quarter with the benefits of the Snai and NSX acquisitions. We saw good product delivery in the quarter, driven by our focus on the Flutter Edge and have recently launched MyCombo to Sisal sportsbook in Italy ahead of the new soccer season. This Same Game Parlay proposition is a market first and represents a step change in product differentiation made possible by our global scale and deep industry expertise. In July, we also launched Flutter's first bingo network following the successful partnership between Sisal and Tombola, which brings the latter's innovative product and deep liquidity pool to Sisal's Italian online bingo customers. We are also executing our cost efficiency program as we successfully migrated 9 million Sky Betting & Gaming customers onto our shared UKI platform. This will give customers access to new exciting features, which will include a version of our SuperSub product in time for the upcoming European football season. Reactions to the new Sky Bet customer proposition have been positive, and early performance on iGaming has been very strong. The PokerStars transformation is another significant pillar of the program, and we delivered our largest milestone to date in Italy in July with the migration of PokerStars' Italian customers onto the shared SEA platform. In conclusion, looking ahead to the remainder of the year, our strong performance in the first half of 2025 underlines the strength of Flutter's fundamentals. I feel confident as we head into the second half of 2025, our performance in Q2 positions us well to deliver on our strategic objectives and execute strongly throughout the content-rich calendars for NFL, NBA and European soccer during the remainder of the year. I will now hand you over to Rob to take you through the financials.

Thanks, Peter. I'm really pleased to be presenting you with a strong set of results for the second quarter. Group revenue increased by 16% and adjusted EBITDA grew 25%, driven by the sustained earnings transformation of our U.S. business as it rapidly scales, the benefit of the NSX and Snai acquisitions and continued growth in International. Group net income was impacted by an increase in noncash charges. This primarily related to the Fox Option valuation, which was a charge of $81 million versus a credit of $91 million in the prior year. Other movements included the amortization of acquired intangibles related to the new acquisitions and the PokerStars and Sky Bet transformations and an increased income tax expense as historic losses were utilized in 2024. Together, this drove an 88% year-over-year reduction in net income. Adjusted earnings per share grew 45%, while earnings per share decreased to $0.59 from $1.45 in Q2 2024 due to the impact of the noncash items I've just outlined. Turning to the U.S., revenue was 17% higher, including sportsbook growth of 11% and exceptional iGaming growth of 42%. Adjusted EBITDA of $400 million was up 54% and EBITDA margin was 530 basis points higher, driven by strong operating leverage. This came primarily from sales and marketing, which decreased by 440 basis points as a percentage of revenue against heightened investment in North Carolina's launch last year as well as our decision to reallocate some marketing spend from the quarter into the second half of the year. In International, revenue of $2.4 billion and adjusted EBITDA of $591 million for the quarter reflected growth of 15% and 13%, respectively, as the inclusion of the Snai and NSX acquisitions contributed 11 percentage points to the year-over-year revenue growth. This result was driven by strong underlying performance in SEA despite lapping the European Football Championships and more favorable sports results in 2024. This contributed to excellent iGaming growth of 27% for the division with notably strong performances in UKI, APAC and CEE. Adjusted EBITDA increased by 13% year-over-year, with the acquisitions of Snai and NSX contributing 7 percentage points of growth. And EBITDA margin reduced by 40 basis points to 24.7%, reflecting our ongoing investment in Brazil. As Peter previously outlined, I've been really pleased with the progress on our cost transformation program with delivery of the PokerStars and Sky Bet migrations in Q2, important milestones on this journey. Progress to date gives me even more conviction in achieving the $300 million savings that I shared with you at our Investor Day last September. We continue to expect the majority of the $300 million savings to arise in 2027 following the final planned migration from the PokerStars technology stack in the second half of 2026. From a cash flow perspective, net cash from operating activities increased by 11%, driven by the earnings growth I previously referenced. Free cash flow reduced by 9%, driven by the acquisition of Snai and higher investment in our technology platforms in Q2 than in the prior year. This technology investment continues to pay dividends as we harness the Flutter Edge and continue to innovate at pace. Available cash increased quarter-on-quarter to $1.7 billion, while net debt for the quarter was $8.5 billion, with leverage 3x our last 12 months adjusted EBITDA, including Snai. As Peter already highlighted, we extended our market access agreement with Boyd in July, which we expect will deliver approximately $65 million in annual cost savings. We purchased Boyd's 5% holding in FanDuel at an attractive price, which has been financed through additional debt on competitive terms. We, therefore, expect our leverage to increase in the near term, but then reduce rapidly given the highly visible and profitable growth opportunities that exist across the group. We remain committed to our medium-term leverage ratio target of 2 to 2.5x. We continue to return capital to shareholders through our share repurchase program with total repurchases of $300 million in the quarter, and we still expect to return up to $1 billion to shareholders via this program during 2025. As an innovative business, we are highly disciplined allocators of capital. We expect to return up to $5 billion of cash to shareholders over a 3- to 4-year period, whilst also maintaining the flexibility to invest significant amounts of capital, both organically and inorganically. The Boyd deal is a great example of both this flexible approach and the value we believe we can create. Moving now to the outlook for 2025. Performance since our Q1 earnings when previous guidance was set has been positive, and we are upgrading our full year adjusted EBITDA guidance to include the $100 million positive impact of U.S. sports results; a $40 million adverse impact from U.S. tax changes in Illinois, Louisiana and New Jersey, which we expect to be almost entirely mitigated by the Boyd market access savings; and finally, a $20 million benefit due to the timing of our anticipated launch in Missouri moving later to the beginning of December. We, therefore, now expect group revenue and adjusted EBITDA of $17.26 billion and $3.295 billion, respectively, at the midpoint, representing 23% and 40% year-over-year growth. Our improved U.S. outlook includes expected 2025 revenue and adjusted EBITDA of $7.58 billion and $1.245 billion, respectively, representing year-over-year growth of 31% and 146%. Foreign currency changes since our previous guidance are not material, and therefore, International revenue and adjusted EBITDA guidance of $9.68 billion and $2.3 billion is reaffirmed, representing year-over-year growth of 17% and 11%, respectively. Additional information on guidance is available in today's release, including additional income statement and cash flow items. With that, Peter and I are happy to take your questions, and I'll hand you back to the operator to manage the call.

Your first question comes from the line of Ed Young of Morgan Stanley.

My first question is on U.S. marketing. Your gross profit was a little bit better than we had, but your contribution was a lot better and your marketing is already in your Investor Day range a couple of years early. And in absolute terms, you mentioned the year-on-year North Carolina timing, but it's actually almost exactly flat with what it was in '22 and '23. So I wonder if you could talk a little bit about the drivers of efficiencies and leverage in that line. And can you quantify how much the benefit was from the reallocation into Q4? The second question is on prediction markets. One of your peers says they're actively exploring and is now explicitly guiding ex prediction market investment. And your other main peer is saying it has no desire to be a first mover and no presumption has a right to win in that space. So where on the scale has your thinking got on the opportunity at this point? And how should we think about potential investment either this year or into later years?

Let me pick up the prediction markets one first, and then Rob will come in and talk to you about the U.S. marketing. Look, with prediction markets, it's clearly a fast-moving space. And for those of you on the call who are a bit less familiar with our International business, it's worth remembering that we've got sort of two decades experience of operating the world's largest betting exchange, the Betfair Exchange. We offer this product in lots of markets around the world, and it shares some similar characteristics of the event contracts, which will obviously be helpful to us as we consider the landscape and any developments. But as you say, we're evaluating the various regulatory developments and assessing the potential opportunities this may present for FanDuel. Naturally, we've got a lot of important stakeholders that we need to consider, and so we're watching this space very closely.

Ed, just picking up on the sales and marketing question. Obviously, when you look at it year-on-year, we're about 4 percentage points lower quarter versus quarter. Part of that is due to the maturing state profile. We also have the North Carolina launch, if you remember, in Q2 last year. And as we said proactively in our statement, we have phased some marketing into H2, which will help us in front of a very busy new NFL and NBA season, which we're looking forward to.

Are you able to quantify that phasing or are you not?

It's broadly $20 million to $25 million.

Your next question comes from the line of Jordan Bender of Citizens.

I want to continue on the conversation with prediction markets for a second, but not the will you or won't you, but rather kind of how you underwrite the risk. So I guess the question is the total capital outlay could be quite significant. So how do you get comfortable investing that type of money given the backdrop that potentially 3 years from now, there could be a different U.S. administration or even change of political party here in the U.S.? And then the second one, I want to touch on the Illinois surcharge. Was that done on a state basis? Or should we view that more as a company policy moving forward that you could look to utilize if states do increase taxes in the future?

Jordan, look, I'll follow on the prediction market stuff. Look, we're not going to sort of speculate on the different ways in which we're assessing this opportunity and what the potential of costs and pros and cons of the different opportunities are. It's just not worth speculating at this time. As it pertains to your sort of second question, the Illinois surcharge, I mean we're obviously very disappointed that they brought this tax into play in Illinois. We think it really will hurt the sort of recreational customers and ultimately risk fueling the black market, which is not good for integrity of sports, it's not good for player protection, it's certainly not good for collection of revenue for the state. So we don't think it's a good idea, but look, we've introduced this fee, which we think is the fairest way to deal with it. We think Illinois is an outlier. We don't expect this to happen anywhere else. We'll introduce the fee, and we'll see what happens.

Your next question comes from the line of Barry Jonas with Truist Securities.

Just a follow-up on Illinois. Does the mitigation and guidance regarding transaction fees assume that the fee is taxable? If it isn't taxable, would that affect your strategy in any way, such as moving to a minimum, adjusting pricing, or anything else?

Yes. Barry, it doesn't assume that it's taxable. Obviously, we are monitoring the situation quite closely at the moment. We landed on the transaction fee. It's quite simple for our customers to understand, and it also ties directly to the legislation that was issued. It's also more straightforward to implement from a tech perspective. So we're monitoring. And if there are some changes around the way the fee is perceived by the state, then we'll address that accordingly.

Got it. Could you talk about California for a moment? I'd like to hear any updates on how sports betting might look there and how that relates to the recent opinion from the Attorney General on daily fantasy sports. I'm curious about how everything fits together with the latest developments in California.

I mean we've talked about California before. And you're right about the AG issuing this nonbinding view around on DFS, clearly something which we're following carefully. I think from our perspective, we have a lot of respect for the tribes and we will be very thoughtful about making sure that we are working with them and listening to them. They're clearly important stakeholders in the state of California, and we have a lot of respect.

Your next question comes from the line of Jed Kelly of Oppenheimer.

This is Josh on for Jed. I just wanted to see if you could speak to any of the early July handle trends or hold trends that you guys are seeing?

No, I'm afraid we're not going to comment on just current trading.

Okay. And then maybe you could touch on, I guess, how your Your Way parlay is kind of progressing into football, and just talk about some of the highlights that you've seen in the NBA playoffs using the Your Way parlay.

Yes. As a reminder for those of you on the call, Your Way is just one feature in the sort of underlying technology we're building for our sports betting business. And we think it's going to be very exciting for customers in the future. It's going to be a revolutionary approach to sportsbooks and will allow us to deliver a meaningful superior experience to customers. In terms of the way in which we were able to utilize it in the NBA playoffs, we weren't pushing it, but we saw a big skew towards Same Game Parlay within the Your Way capability. And there's some exciting plans we've got for the product as we get into the football season. I mean clearly, we're not going to put all the details of it into the competitors' minds right now. But rest assured, this is a foundational change that we're making. And I think when you think about how important it is to ensure you've got a broad range of markets, whether that's in live or pre-market, the Your Way product allows that sort of huge choice. And we think that will also allow us to sort of improve the presentation of betting to consumers as well.

Your next question comes from the line of Bernie McTernan with Needham & Company.

Great. Maybe just continuing on the product conversation. If you could just talk to how you're merchandising and pushing players to try Same Game Parlay Live? How the retention of those products have been and what it means for the upcoming NFL season?

Live betting for us is something that we've been doing for years in Europe. It's a mainstay of our product offering in soccer, cricket, tennis, whatever sports you would think about. And in fact, it's worth remembering that we invented cash-out. So this is something that we've been really thoughtful about for a long time. When I look at live betting in the U.S., there are three things which we think are really important here. One is to make sure you have a really good Same Game Parlay proposition. People want to be able to take the appropriate Same Game Parlay depending on what's happening in the game because let's remember, sports is inherently unpredictable, and that's what makes it so much fun to watch and so much fun to bet on. And so making sure that we can reduce the friction for consumers so they're watching the game, they can select that Same Game Parlay very quickly is important. And that's an immersive front-end experience to ensure that they can discover that Same Game Parlay, they can track it, and then they get the scoreboards and other visualizations important. And look, when we combine all those things, we think it positions us very well with the leading live product in the U.S. market.

Understood. Then maybe just a more broad one on iGaming. Just given the impressive results accelerating in the quarter on difficult comparisons, just where can it go from here? And do you think you're expanding the market or you're taking share?

If we look at iGaming at the moment, the penetration rates still have a long way to go. So I think that we are still early in where penetration can get to in iGaming. We're clearly with the FanDuel business, very focused on acquiring direct to casino customers. In the early days, we were focused on cross-sell, but the biggest opportunity is the direct to casino customers. And when I look at what we've been doing with the rewards club, the exclusive content, the jackpots, there's a lot of great product work we've been doing, which has been really helping push FanDuel to be #1. And there's a long way to go, and a lot more opportunities for us; big opportunities to increase penetration in the states that we're operating.

Your next question comes from the line of Brandt Montour with Barclays.

So guys, when I look at the guidance for '25 and the changes that you made here, it's all sort of noncore things, and you laid it out very cleanly. And I go back last quarter, again, it was sort of the same thing where there was no changes to sort of your underlying thinking. And I just want to level set for the first 6 months of this year, do you feel better or the same across those core KPIs like handle, hold, promo, iGaming? I know that's sort of a convoluted question, but I just want to understand the evolution of your confidence on those core KPIs sort of halfway through here.

Yes. Brandt, yes, I think in summary, we feel really good about the momentum that we've got at the moment. Particularly moving from Q1 into Q2, definitely seeing some strength in the underlying KPIs. With regards to the guidance for the full year, as you mentioned, it's largely mechanical, the moves. We did slightly beat our expectations for Q2 on an underlying basis, and that was a combination of the marketing phasing that I talked about earlier and some slightly better underlying sportsbook and iGaming performance. But listen, it's early in the year. You can't extrapolate the summer performance. We're going to take a reasonably prudent approach given the seasonality of the business, and we're really pleased with the underlying fundamentals.

Okay. And actually another one for you, Rob, if I may. The deal with Boyd and the access agreement renegotiation, that sort of really did set a new low mark on what the value of those access fees could be worth. What is that going through that negotiation and that deal, what does that sort of make you feel about your other access agreements? Is that a one-off? Or do you think there's opportunity there for you?

Yes. Listen, there's definitely opportunity, but it's longer term. These are very long-term agreements that were signed a few years ago when there was a different landscape and a different backdrop to market access. So there are definitely opportunities, but we consider them as longer-term opportunities. I think they will be material when they come around, but it's largely from 2030 onwards. In the meantime, as we've previously said and laid out at the Investor Day, we are confident that we've got other levers within our cost of sales that can act as mitigation for other cost increases.

Your next question comes from the line of Joe Stauff of Susquehanna.

Peter, Rob, I wanted to ask about FanDuel. Considering your guidance and the outlook for the new sports calendar, how should we view your sports AMP growth? Is this a season where you will focus more on monetization efforts compared to the volume strategies you've historically used? Additionally, regarding the previous question about marketing spend, which has decreased, Rob, you've mentioned this. Is FanDuel leaning towards using the promotional budget for engagement and user growth instead of advertising and marketing, similar to your approach in other areas? Or is it still too early to determine?

Joe, nice to hear from you. I think if you go back to some of the conversations we've had historically around sort of acquisition, it's worth remembering that we've always been very focused on acquiring as many customers as we can, whilst ever they meet our customer acquisition cost/lifetime value criteria. That has always been a sort of mainstay of the business, and it will remain so. We also think in the same way, though, around the application of generosity that as well. And I think when we think about how we've been applying generosity over the course of this year and how you get it to the right customer segments, that's also really important. And so I think your characterization of the shift from volume to monetization may not be right, but I think we've always been very focused on that sort of customer acquisition cost/lifetime value dynamic. And that's what we use to drive both where and how we're applying this generosity and also how hard to push from a customer acquisition perspective.

Yes. From an AMP perspective, Joe, clearly, there are a couple of dynamics to this for the quarter and how we're looking at it for the rest of the year. But we're obviously seeing phenomenal growth in our iGaming average monthly players, which were up 32% in the quarter. We've seen a slight retracement in the sportsbook average monthly players within the quarter. But as we explained, that's largely due to the North Carolina launch last year, where we effectively picked up 1 in 20 of the adult population at that launch. So we're feeling reasonably sanguine about the volume and the handle that we're seeing. But as we previously articulated at Q1 and Q4, handle is just one metric that we look at. And we're seeing great frequency. We're seeing increased frequency from our customers. We're seeing excellent retention from those customers that we want to retain. And we continue to see the extension of our parlay penetration. So lots of strong attributes to the program.

Your next question comes from the line of Paul Ruddy of Davy.

Just a quick one on this side of the Atlantic, if that's okay, on Snai. I think you alluded to there, just the platform migration happening in H1 '26. And you also kind of talked maybe I don't know if I'm using the right language, but some conservatism around the synergy targets or maybe increased conviction on synergies. Could you flesh out that piece on the increased conviction on synergies a little bit? And then secondly, just on the platform migration, will it require that to happen for kind of the new product that maybe you're bringing into Sisal to be brought into Snai? Or can you start introducing that product, the kind of Flutter Edge product into Snai fairly quickly? And then just a very quick follow-up on U.S. tax, if that's okay. Just would it be a sensible assumption for next year that the known tax increases can be offset by the Boyd's renegotiation?

Paul, look, let me just deal quickly with Snai, and then Rob can talk to you about the U.S. tax piece. I mean, I think as you pointed out, we're planning to do a migration of the Snai business onto the effectively Sisal platform in H1 2026. That will allow us to offer the Snai customers the full suite of products that Sisal has access to. So things like MyCombo and the full range of products we have available on the platform. So we're excited about that. There are things we're doing in the meantime to provide a sort of step-up for the Snai customers. But it's not long to wait until that migration will happen. And I think the speed at which we can get that done, we've got our hands on the business now, and that's why we reaffirmed our confidence in our ability to hit the synergies which we referenced.

Yes. Regarding U.S. taxes, we will experience a greater benefit from Boyd next year as it annualizes, approximately $65 million. As mentioned, this will largely cover this year's impacts. For the next year, it will offset a significant portion of the tax increases we expect. It’s important to keep in mind a couple of other factors. We often discuss first-order mitigation, where we anticipate about 20% mitigation in the first six months, depending on market competition. After that, we expect to see a second-order mitigation as scale benefits come into play. Therefore, we anticipate that mitigation will improve over time. As we've stated before, while we have Boyd, we also have several other strategies we can employ if we encounter additional tax increases.

And your next question comes from Monique Pollard with Citi.

Just one question. Can I just ask on the U.S. gross margin? That's come in very strong for the second quarter. You do mention in the statement that there was 90 basis points of benefit from payment processing fees, and those were changes you made back in the second half of '24. So obviously, that then annualizes second half of '25. But do you think there are other things that you're working on, whether it's further negotiations on payments or other things that could lead to further scaling of the nontax part of the cost of goods sold?

Monique, as you correctly pointed out, I mean, we have been having some successes in this area. So a lot of the payment cost initiatives that we've put into play, we made roughly around Q3 last year. And a number of these relate to our improving our deposit-to-handle ratio and also renegotiation of payment costs more broadly. I think alongside that, we've also been making some efficiencies in terms of the fraud cost line, which continues to come down. And as we've also said in the past, there's a number of other cost items that we're looking at in the larger buckets within the cost of sales, including the geolocation costs and the other large buckets. So continue to make good progress. We're very pleased with where the cost of sales is, and it's very much on track to be within the parameters that we set out at the Investor Day in September.

Your next question comes from the line of Clark Lampen of BTIG.

Peter, you've mentioned iGaming and its low penetration earlier. You provided a useful overview in July regarding the product and platform developments you’ve achieved over the past few years. I would like to understand the implications of that further. What do you see as the biggest differences compared to your competitors from a product perspective? Additionally, if we were to assess it quantitatively, do you think the advantages that are currently translating into market share are sustainable, and could you potentially become a market leader in iGaming over time?

We are the market leader in iGaming because we have consistently executed our strategy from our Investor Day in 2022, focusing on casino direct customers as a key segment of the total addressable market. This has been validated by our results. We have established a clear three-step plan to achieve product leadership, which we have successfully implemented. The initiatives I've mentioned earlier, such as our advancements with jackpots, exclusive content, and the Rewards Club, as well as leveraging the Flutter Edge to introduce new titles, demonstrate the team's exceptional performance. We have seen significant growth in both average monthly players and revenue, but we believe this is just the beginning. There is still considerable potential for growth in market penetration. We are optimally positioned with the best products and have exciting plans for continual innovation.

Your next question comes from the line of Robert Fishman of MoffettNathanson.

If I could do one more on iGaming. I think in the prepared remarks, you talked about adding a record volume of new titles. Just curious if you can talk how much of FanDuel's iGaming handle on our business, however you want to talk about it, is driven by in-house or exclusive content versus third-party games? Or maybe just big picture, what the mix of that in-house games has evolved over the past couple of years and where you expect that to end up?

All of our content for FanDuel currently comes from third parties. Some of it is exclusive to us, with exclusivity provisions for certain periods. Titles like Huff and Puff have been exclusive on our platform. We have access to our own in-house studios and content within the organization. Over time, we can incorporate that into the FanDuel business to help reduce content procurement costs. Right now, we are focused on offering the broadest and best range for our customers and delivering features like jackpots, with over 200,000 jackpots won since launch, and the Rewards Club, which is an exciting capability. Ensuring these aspects are right has been a priority before introducing our in-house content. We have seen good penetration levels in other iGaming markets for in-house content, but it has not been a priority for FanDuel yet.

Your next question comes from the line of Chad Beynon with Macquarie.

I wanted to ask about kind of a postmortem question after the lottery tender. So now that the results are final and you won't have a major cash outlay in the next couple of years. I guess two-parter on this. One, does it maybe free up some capital to do some things that you would not have been able to do if you had invested in that market? And then second, related to this tender, did it also kind of open up your mind to maybe other things within the lottery space in other geographies?

Chad, yes, I can pick this one up. So I'll take the second part of the question first. I mean we always said with the Italian lottery opportunity that we thought this was a unique opportunity in Italy. So we don't have a broader interest per se in other lottery products around the world. With regards to whether or not it frees up capital, listen, as we said on a number of occasions, we are very disciplined when it comes to our capital allocation. We are very committed to bringing our leverage ratio back to the 2 to 2.5x that we've talked about in the medium term. And we believe that we've got a number of opportunities in front of us. And as we've said before, we think we can continue to be an innovative business. So we'll continue to invest behind the business organically. We'll continue to look at accretive M&A opportunities as they come along. And we'll continue to operate our share buyback, which is operating as we set out previously, and we'll buy back up to $5 billion of our stock over the next 3 to 4 years. So we feel we're in a really good place here. We're deleveraging very quickly, very cash generative, and that opens up a lot of opportunities for us.

Your next question comes from the line of John DeCree with CBRE.

This is Max Marsh on for John DeCree. Seeing some good growth out of Brazil. Correct me if I'm wrong, but I believe that's your only Latin American market. Is your strong performance there impacting your thinking on expanding to other regulated markets in Latin America and maybe if you're developing a bit more of a Flutter Edge in that market that might be able to be replicated?

Max, look, we are the world's biggest and most global sports betting and gaming business. And when we sit here and evaluate what the opportunities are around the world, you're right, we think about Latin America, we think about many markets where we're not operating in. But we have to evaluate where do we think is the best place to deploy our capital. I mean, there's a lot of soccer going on in Latin America. There's some interesting opportunities there. So look, they're all in the mix as we think about where we're going to be deploying our capital. And as Rob said, we're an innovative business. We invest organically in the business. We're doing share repurchases, and we're also doing M&A. So we've only disclosed the Snai acquisition and the Brazil acquisition. But clearly, the team is thinking about other opportunities around the world in Latin America, Europe.

Your next question comes from the line of Ben Shelley of UBS.

Just on the International business, can you walk us through the biggest countries of outperformance and underperformance versus your original expectations at the start of the year?

Yes, there's been significant overperformance, so I will discuss that for a while, and I can quickly cover the underperformance. Specifically, the SEA business, which includes Southern Europe and Africa, is really excelling. This segment has strengthened since we acquired the Sisal business a couple of years ago. At that time, Sisal had about 400,000 average monthly online players; it has now exceeded 1 million. The profitability of this business is also improving progressively. We've now acquired the Snaitech business, which complements our brand and reinforces our leading position in the Italian market, and we are very enthusiastic about Italy. Additionally, Turkey is performing exceptionally well. We have recently signed a new contract with our partners there, along with other promising opportunities that make this region exciting for us. In more mature markets, growth has slightly slowed in Australia due to challenges related to horse racing. However, this quarter we have seen an increase in revenue year-over-year, which we are pleased with regarding Australia's performance. Overall, our international portfolio is doing very well. We are satisfied with the operational changes we made this year to streamline it into one segment, as it provides us excellent visibility for capital allocation opportunities across the portfolio, and this approach is working efficiently for us.

Your next question is from the line of Ryan Sigdahl of Craig-Hallum Capital Group.

When I look at the new state within the guidance, the costs, $70 million EBITDA loss, I assume that's all for Missouri online sports betting launch. That's double what your closest peer in the U.S. is guiding for. So I guess curious if you have any change in your plans from a state playbook launch. I know it's a similar number from last quarter, but just vis-a-vis what they're planning to spend and how you compare that to previous launches.

Yes. Ryan, we've not changed our approach. So we've always been very consistent in terms of what we think new state launches cost. We set this out at our Investor Day last year, where we said a contribution loss of circa $35 million per 1% of the population. Missouri is about 1.8% of the population. I think we've consistently held a number for Missouri. We can't talk for others and their economics, but we're very confident in our own workings.

Okay. Thank you, Rob. And I think that's the end of the questions now. There's no further questions on the call, I can see. So I'd just like to thank everybody very much indeed for joining. And look, as we move into the second half of the year, we're pleased with how we started Q3, and we're excited to see what we can do when we bring our great products to our customers, whether that's for the NFL, NBA or European soccer teams. So thank you very much.

Ladies and gentlemen, this concludes today's conference call. We thank you for participating. You may now disconnect.