CEO of Flutter expresses positivity towards Brazil, notwithstanding KYC complications impinging on Q1 performance.
Flutter Takes a Hit in Brazil,但 Later looks to NSX Groupfor a Competitive Boost
Flutter's Brazilian revenue took a significant nose dive by 44% in the first quarter of the year, attributed to KYC bottlenecks with its Betfair business. However, Flutter's CEO, Jackson, remains optimistic, expecting their upcoming NSX Group acquisition to bolster their competitive position in the fast-growing, newly-regulated Brazilian market.
Jackson shared his optimism during the group's Q1 earnings call, stating, "Combining a strong local management team, localized proprietary technology, a local hero brand in Betnacional, alongside our existing Betfair Brazil business and Flutter Edge capabilities, will position us for success in this very exciting market."
The acquisition, scheduled to complete later this month, will result in the creation of a new "Flutter Brazil" business, incorporating the company's existing Betfair brand and NSX Group's Pagbet, MrJack.bet, and Betpix brands. Interestingly, the NSX business reported a 20% year-on-year increase in Q1 revenue, suggesting it had weathered the regulatory challenges better than others.
Flutter initially announced its intention to acquire an initial 56% stake in NSX Group, owner of the Brazil-facing Betnacional brand, last September. The $356 million deal is set to close in Q2 2025.
Flutter anticipates the acquisition will give it an 11% market share in Brazil in the long term, positioning the company as one of the top three players in the nascent legal betting market, which launched on 1 January.
Betfair Brazil Faces KYC Challenges
Like other operators, Flutter faced hurdles adapting to the new regulatory environment in Brazil, particularly KYC-related issues. New regulations have mandated facial recognition technology for ID verification, and bettors must register with a bank account attached to a financial institution authorized by the Central Bank of Brazil.
"We have seen a few challenges with Betfair in Brazil due to the changes in the regulatory environment," Jackson admitted. "That's mainly around some friction in the sign-up process for customers. We've seen that impacting on activation."
However, Jackson expressed satisfaction with what Flutter is observing so far in Brazil. In a letter to Flutter shareholders alongside the Q1 results, he said, "M&A in Brazil remains on track as we augment an impressive portfolio of local hero brands."
Competitors' Performance in Brazil Remains Undisclosed
While Flutter's competitors' financial performance in Brazil during Q1 2022 remains undisclosed in the search results, Entain reported a 31% NGR Q1 growth in the country, well ahead of expectations. Betsson recorded a 70.3% revenue growth across Latin America, although it only received its full license for Brazil in March, limiting its impact in the market.
CEO Pontus Lindwall of Betsson remains cautious about Brazil but expects the launch to draw on the business' success elsewhere in the region to power its growth. "Brazil, it's a huge market, and we want to start off in a soft way and make sure that the product is calibrated for that market," Lindwall said. "And then we're going to start marketing and see what kind of traction we get."
- The NSX Group, with its localized technology and brand, Betnacional, will join Flutter's existing Betfair Brazil business and Flutter Edge capabilities, aiming to mitigate the KYC bottlenecks that Flutter's Betfair business faced in Brazil.
- The acquisition of an initial 56% stake in NSX Group, scheduled to close in Q2 2025, is expected to boost Flutter's earnings, leading to a long-term 11% market share in Brazil and positioning the company among the top three players in the nascent legal betting market.
- Although the financial performance of Flutter's competitors in Brazil during Q1 2022 remains undisclosed, Entain reported a 31% NGR Q1 growth in Brazil, indicating potential success in the market, while Betsson recorded a 70.3% revenue growth across Latin America, signaling its readiness to capitalize on the growth opportunities in Brazil.
