Flutter Entertainment plc

1. DESCRIPTION OF BUSINESS

Flutter Entertainment plc (the “Company” or “Flutter”) and its subsidiaries (together referred to as the “Group”) is a global online sports betting and iGaming entity, operating some of the world’s most innovative, diverse and distinctive online sports betting and gaming brands such as FanDuel, Sky Betting & Gaming, Sportsbet, PokerStars, Paddy Power, Sisal, tombola, Betfair, TVG, Junglee Games, Adjarabet and MaxBet. As of September 30, 2024, the Group offers its products in over 100 countries.

The Group is a public limited company incorporated in the Republic of Ireland.

Public Listing on the New York Stock Exchange (“NYSE”)

On January 29, 2024, the Group completed its registration process with the United States Securities and Exchange Commission (“SEC”), and listed on the New York Stock Exchange (“NYSE”) for public trading. On May 31, 2024, the Group moved its primary listing to the NYSE following the approval of shareholders at the Company’s Annual General Meeting held on May 1, 2024. In addition, the Group maintains a listing on the main market of the London Stock Exchange.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation — These unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim reporting and the rules and regulations of the SEC. As such, certain notes or other information that are normally required by U.S. GAAP have been omitted if they substantially duplicate the disclosures contained in the Group’s audited consolidated financial statements as of and for the year ended December 31, 2023. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Group’s consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on March 26, 2024 (the “2023 Annual Report”). These condensed consolidated financial statements are unaudited; however, in the opinion of management, they include all normal and recurring adjustments necessary for a fair presentation of the Group’s unaudited condensed consolidated financial statements for the periods presented. Results of operations reported for interim periods are not necessarily indicative of results for the entire year, due to seasonal fluctuations in the Group’s revenue as a result of the timing of various sports seasons, sporting events and other factors.

Recent Accounting Pronouncements Adopted

In January 2024, the Group adopted Accounting Standards Update (“ASU”) 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies the guidance in Accounting Standards Codification Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions and (ASU 2023-01), Leases (Topic 842): Common Control Arrangements, which requires leasehold improvements associated with common control leases to be amortized over the useful life to the common control group. The new standards did not have material impact on the Group’s unaudited condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. This ASU is effective for annual periods beginning after December 15, 2023, and for interim periods beginning after December 15, 2024, with early adoption permitted. While the Group is continuing to assess the timing of adoption and the potential impacts of ASU 2023-07, it does not expect ASU 2023-07 to have a material effect, on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires, among other things, additional disclosures primarily related to the income tax rate reconciliation and income taxes paid. The expanded annual disclosures are effective for the year ending December 31, 2025. The Group is currently evaluating the impact that ASU 2023-09 will have on our consolidated financial statements and whether we will apply the standard prospectively or retrospectively.

In March 2024, the FASB issued ASU 2024-01, Compensation – Stock Compensation (Topic 718): which clarifies how an entity determines whether a profit interest or similar award is (1) within the scope of ASC 718 or (2) not a share-based payment arrangement and therefore within the scope of other guidance. The ASU’s amendments are effective for fiscal years beginning after December 15, 2024, including interim periods within those years with early adoption permitted. While the Group is continuing to assess the timing of adoption and the potential impacts of ASU 2024-01, it does not expect ASU 2024-01 to have a material effect on the Group’s consolidated financial position, results of operations or cash flows.

In November 2024, the FASB issued ASU 2024-03 "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which requires disclosure, in the notes to consolidated financial statements, of specified information about certain costs and expenses. The ASU’s amendments are effective for fiscal years beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027 with early adoption permitted. The Group is currently assessing the timing of adoption and the potential impacts of ASU 2024-03. The impact of the adoption will be limited to disclosure in the notes to the consolidated financial statements.

3. SEGMENTS AND DISAGGREGATION OF REVENUE

The Group reports its consolidated financial statements based onfour reportable segments:

•U.S.;

•UK & Ireland (“UKI”);

•International; and

•Australia

The segment information aligns with how the chief operating decision maker (“CODM”) reviews and manages the business. The Group determined that it is the Chief Executive Officer and Chief Financial Officer jointly who are performing the function of CODM.

Beginning January 1, 2024, the Group revised its definition of Adjusted EBITDA, which is the segment measurement used to evaluate performance and allocate resources. The definition of Adjusted EBITDA now excludes share-based compensation as management believes inclusion of share-based compensation can obscure underlying business trends as share-based compensation could vary widely among companies due to different plans in place resulting in companies using share-based compensation awards differently, both in type and quantity of awards granted.

Effective January 1, 2024, subsequent to the Group’s decision to close the sports betting platform “FOX Bet”, the Group reorganized how the PokerStars (U.S.) business is managed which resulted in a change in operating segment composition. From January 1, 2024, PokerStars (U.S.) is included in the International segment as opposed to the U.S. segment.

Segment results for the three and nine months ended September 30, 2023, have been revised to reflect the change in operating segment measurement and change in operating segment composition.

The Group manages its assets on a total company basis, not by operating segment. Therefore, the CODM does not regularly review any asset information by operating segment and accordingly, the Group does not report asset information by operating segment.

The following tables present the Group’s segment information:

iGaming revenue includes Poker and Lottery.

The information below summarizes revenue by geographical market for the three and nine months ended September 30, 2024 and 2023:

The information below shows the reconci liation of reportable segment Adjusted EBITDA to income (loss) before income taxes for the three and nine months ended September 30, 2024 and 2023:

1. Unallocated corporate overhead includes shared technology, research and development, sales and marketing, and general and administrative expenses that are not allocated to specific segments.

2. Comprises advisory fees related to implementation of internal controls, information system changes and other strategic advisory related to the change in the primary listing of the Group for the three and nine months ended September 30, 2024, respectively. For the three and nine months ended September 30, 2023 transaction fees and associated costs comprised advisory fees related to the listing of Flutter’s ordinary shares in the U.S.

3. During the three and nine months ended September 30, 2024, costs of $42 million and $87 million (three and nine months ended September 30, 2023: $28 million and $75 million) primarily relate to various restructuring and other strategic initiatives to drive synergies. The programs are expected to run until 2027. These actions include efforts to consolidate and integrate our technology infrastructure, back-office functions and relocate certain operations to lower cost locations. It also includes business process re-engineering cost, planning and design of target operating models for the Group's enabling functions and discovery and planning related to the Group's anticipated migration to a new enterprise resource planning system. The costs primarily include severance expenses, advisory fees and temporary staffing costs.

4. OTHER EXPENSE, NET

The following table shows the detail of other expense, net for the three and nine months ended September 30, 2024 and 2023:

5. INTEREST EXPENSE, NET

The following table shows the detail of interest expense, net for the three and nine months ended September 30, 2024 and 2023:

6. INCOME TAXES

For interim income tax reporting the Group estimates its annual effective tax rate and applies it to its year-to-date ordinary income. The tax effects of unusual or infrequently occurring items, including changes in judgment about beginning of year valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur. The Group’s effective income tax rate was a benefit of 12.3% on loss before income taxes for the three months ended September 30, 2024 (benefit of 4.0% on loss before income taxes for the three months ended September 30, 2023) and was an expense of 89.7% on profit before income taxes for the nine months ended September 30, 2024 (expense of 12.4% on loss before income taxes for the nine months ended September 30, 2023). The difference in the effective income tax rate compared to the Irish corporation trading tax rate of 12.5% primarily reflects the tax impact of the impact of amortization of acquired intangibles and profit mix across jurisdictions, as well as the tax impact of discrete adjustments which includes our loss making jurisdictions and the fair value loss on Fox Option Liability.

The Group doesnot expect there to be any material changes to its existing unrecognized tax benefits over the next 12 months, due to the current position with taxing authorities. The Group regularly reviews its tax position on the basis of current law.

The Organization for Economic Co-operation and Development (OECD) is co-ordinating negotiations to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar 2). Certain aspects of Pillar 2 effective from January 1, 2024 and other aspects are effective from January 1, 2025. The Group does not expect Pillar 2 to have a material impact on its effective tax rate, however as this legislation is enacted in jurisdictions in which the Group operates, transitional rules lapse, and other provisions of Pillar 2 become effective, we expect our effective tax rate and cash tax payments may increase in future years. Under U.S. GAAP, the OECD Pillar 2 rules are considered an alternative minimum tax and therefore deferred taxes would not be recognized or adjusted for the estimated effects of the future minimum tax.

7. EARNINGS (LOSS) PER SHARE

The following table sets forth the computation of the Group’s basic and diluted net earnings (loss) per ordinary share attributable to the Group:

The number of options excluded from the diluted weighted average number of ordinary share calculation due to their effect being anti-dilutive as the assumed proceeds were greater than the average market price was 2,023,140 and 1,846,515 for the three and nine months ended September 30, 2024 respectively (2023:1,844,942 and 2,167,967 for the three and nine months ended September 30, 2023 respectively).

8. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables presents the changes in accumulated other comprehensive income / (loss) by component for the three and nine months ended September 30, 2024 and 2023:

9. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following as of September 30, 2024, and December 31, 2023:

10. OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following as of September 30, 2024, and December 31, 2023:

Loss contingencies include accruals related to regulatory investigations and proceedings including those relating to gaming taxes to the extent to which they may apply to our business and industry.

The Group includes the contract liability in relation to sports betting open positions in the Condensed Consolidated Balance Sheet. The contract liability balance was as follows:

1 Includes $2 million included in Other non-current liabilities.

Due to the short term nature of our contract liabilities, a substantial portion of the contract liability at the beginning of the period is recognized in revenue in the immediate subsequent reporting period.

11. BUSINESS COMBINATIONS

MaxBet

On January 10, 2024, the Group completed the acquisition of 51% of MaxBet, a leading omni-channel sports betting and iGaming operator in Serbia. The purchase comprised of a cash consideration of $143 million (€131 million).

The share purchase agreement also includes call and put options to acquire the remaining 49% stake. The call and put options are exercisable in 2029, commencing on the date on which the option price is determined in accordance with the terms set out in the shareholders agreement and ending on a date that is 30 days thereafter. The options expire if neither the Group nor the non-controlling interest shareholder groups exercise the options within the option exercise period. The option price is calculated using a multiple of MaxBet’s EBITDA less net debt or plus net cash, as defined in the shareholders agreement, subject to a cap calculated as $7 billion (€6 billion) less the purchase consideration. The options can be settled, at the Group’s election, in cash or freely tradable shares of Flutter.

The provisional fair value of assets and liabilities acquired was $118 million which comprised of identifiable intangible assets of $135 million consisting primarily of $100 million of trademark and $22 million of customer relations. The provisional measurements of fair value for certain assets and liabilities may be subject to change as additional information is received. The Group expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.

The acquisition resulted in the recognition of $114 million goodwill on the acquisition date which has been allocated to the International segment and reporting unit. The main factors leading to the recognition of goodwill (none of which is deductible for tax purposes) is the opportunity for the Group to enter the market in the Balkans region where MaxBet is one of the market leaders with an established retail and online presence. There are also tangible opportunities to deliver synergies from the acquisition of MaxBet through (i) leveraging MaxBet’s retail channel to grow online deposits for existing Flutter brands and (ii) enhancing MaxBet’s online capabilities by utilizing the Group’s technology and marketing resources.

The fair value of redeemable non-controlling interest was $89 million, which was provisionally estimated by applying a discount for lack of marketability of 20% considering the output of the Finnerty method and a discount for lack of control of 20% using implied discounts from observable transactions and data based on Mergerstat studies.

Acquisition-related costs during the three months ended and nine months ended September 30, 2024 and September 30, 2023 were not material and are included in the general and administrative expenses in the Group’s condensed consolidated statement of comprehensive income (loss).

Since the date of acquisition to September 30, 2024, MaxBet has contributed revenue of $149 million and $10 million of profit after tax to the results of the Group. For the three months ended September 30, 2024, MaxBet contributed revenue of $50 million and $2 million of profit after tax to the results of the Group.

BeyondPlay

On May 31, 2024, the Group completed the acquisition of 100% of BeyondPlay for a consideration of $26 million. The provisional fair value of the assets and liabilities acquired was $17 million which comprised of technology intangibles of $18 million and deferred tax liability of $1 million. The acquisition resulted in the recognition of $9 million of goodwill which has been allocated to the U.S. segment. The contribution of BeyondPlay to the revenue and profit after tax of the Group was not material.

Considering that the size of the acquisitions are not material, no additional pro-forma information is provided.

12. LONG-TERM DEBT

The Group’s debt comprised of the following:

As of September 30, 2024, the contractual principal repayments of the Group’s outstanding borrowings, excluding accrued interest, amount to the following:

During the nine months ended September 30, 2024, the Group has drawn $126 million (September 30, 2023:$609 million) and repaid $851 million (September 30, 2023: $687 million) under the GBP revolving credit facility. The Group had an undrawn revolving credit commitment of $1.3 billion (£1 billion) as of September 30, 2024 (December 31, 2023: $537 million (£422 million)), of which $13 million (December 31, 2023: $13 million) was reserved for issuing guarantees.

On March 14, 2024, the Group entered into the First Incremental Assumption Agreement (the “Assumption Agreement”) to the TLA/TLB/RCF Agreement dated as of November 24, 2023 (as amended, the “Credit Agreement”). After giving effect to the Assumption Agreement, the aggregate principal amount of Term B loans outstanding under the Credit Agreement increased by $514 million (the “First Incremental Term B Loans”), which is fungible with the existing Term B loans outstanding under the Credit Agreement. The proceeds of the First Incremental Term B Loans were used to refinance the USD First Term Loan B due 2028. As the terms of First Incremental Term B Loans were not substantially different from those of the original USD First Lien Term Loan B due 2028, the refinance was treated as continuation of the original debt instrument for accounting purposes.

On April 29, 2024, the Group issued $525 million aggregate principal amount of USD-denominated senior secured notes due 2029 (the “USD Notes”) and €500 million aggregate principal amount of EUR-denominated senior secured notes due 2029 (the “EUR Notes” and, together with the USD Notes, the “Notes”), each issued at 100% of their nominal par value, by its subsidiary Flutter Treasury DAC. The Group used the proceeds of the Notes to repay the EUR First Lien Term Loan B due 2026 under the existing syndicated facility agreement dated July 10, 2018, and to repay borrowings under the GBP Revolving Credit Facility due 2028, and pay certain costs, fees and expenses in connection with the offering of the Notes. The Group incurred issuance costs amounting $13 million in connection with the Notes which has been reduced from the debt’s initial net carrying amount and amortized as additional interest expense over the life of the debt. The Group recognized an extinguishment loss of $5 million on repayment of the EUR First Lien Term Loan B due 2026 during the three and nine months ended September 30, 2024.

The USD Notes have interest at a rate of 6.375% per annum and the EUR Notes bear interest at a rate of 5.000% per annum, both payable semi-annually in arrears. The Notes are senior secured obligations and rank pari passu in right of payment with all existing and future senior debt. The Notes are secured on a first-ranking basis by security interests granted over the collateral that also secure, as applicable, the obligations of the Group under the Credit Agreement.

Prior to April 15, 2026, the Group is entitled, at its option, to redeem all or a portion of the Notes at a redemption price equal to 100% of the principal amount of such Notes being redeemed, plus accrued and unpaid interest and additional amounts, if any, to, but excluding the date of the redemption, plus a make-whole premium. In addition, prior to April 15, 2026, the Group is entitled to redeem up to 40% of the aggregate principal amount of each series of Notes using the net cash proceeds from certain equity offerings at a price equal to 106.375% of the principal amount of the USD Notes and 105% of the principal amount of the EUR Notes being redeemed, plus accrued and unpaid interest and additional amounts, if any, to, but excluding the date of the redemption, subject to certain conditions set forth in the Indenture that governs the Notes. Furthermore, at any time prior to April 15, 2026, the Group is entitled, during each twelve month period commencing April 29, 2024, redeem up to 10% of the aggregate principal amount of each series of Notes at a redemption price equal to 103% of the principal amount redeemed, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the date of redemption. On or after April 15, 2026, the Group may redeem some or all of the Notes at redemption prices as set forth in the Indenture that governs the Notes.

Following repayment of the EUR First Lien Term Loan B due 2026 and the USD First Lien Term Loan B due 2028, the facilities under the Credit Agreement and the Notes are secured by a first priority security interest (subject to permitted liens) (x) in respect of obligors organized or incorporated outside of the United States, over the shares held by an obligor in another obligor and (y) in respect of obligors organized or incorporated in the United States, substantially all of our assets (subject to certain exceptions), in each case, in accordance with the Agreed Guarantee and Security Principles (as defined in the Credit Agreement).

As of September 30, 2024, the Group was in compliance with all debt covenants.

13. DERIVATIVES

In the normal course of the Group’s business operations, it is exposed to certain risks, including changes in interest rates and foreign currency risk. In order to manage these risks, the Group uses derivative instruments such as futures, forward contracts, swaps, options and other instruments with similar characteristics. All of the Group’s derivatives are used for non-trading activities.

Cash flow hedges of interest rate and foreign currency risk

Interest rate and foreign currency risk arising from a portion of the Group’s floating interest rate USD First Lien Term Loan B maturing in 2030 and foreign currency risk arising from the Group’s fixed rate USD Senior Secured Notes maturing in 2029 are managed using interest rate swaps and cross-currency interest rate swaps, which are designated as cash flow hedges with the objective of reducing the volatility of interest expense and foreign currency gains and losses in the case of the USD First Lien Term Loan B maturing in 2030 and foreign currency risk in case of fixed rate USD Senior Secured Notes maturing in 2029.

Under the terms of the cross-currency interest rate swaps designated as a hedge of the interest rate and foreign currency risk arising from USD First Lien Term Loan B maturing in 2030, the Group makes fixed rate interest payments and principal repayments in pounds sterling (GBP) and receives variable interest amounts in U.S. dollars (USD) from counterparties over the life of the agreements effectively converting the variable rate term loan into fixed interest rate debt with the exchange of the underlying notional amounts over the term of the loan whereby the Group will receive USD from and pay GBP to the counterparties at exchange rates which are determined at contract inception. Under the terms of the interest rate swaps designated as a hedge of the interest risk arising from the USD First Lien Term Loan B maturing in 2030, the Group makes fixed rate interest payments and receives variable interest amounts in USD from counterparties over the life of the agreements, effectively converting the variable rate term loan into fixed interest rate debt. Under the terms of the cross-currency interest rate swaps designated as a hedge of the foreign currency risk arising from the USD Senior Secured Notes maturing in 2029, the Group makes fixed interest rate payment in GBP and receives fixed interest rate payments in USD with the exchange of the underlying notional amounts at maturity whereby the Group will receive USD from and pay GBP to the counterparties at exchange rates which are determined at contract inception, thereby effectively converting the USD Senior Secured Notes to GBP Senior Secured Notes.

The notional amount of cross-currency interest rate swaps accounted for as cash-flow hedges of foreign currency and interest rate risk on the USD First Lien Term Loan B was $691 million as of September 30, 2024, and $1,603 million as of December 31, 2023, with the cross-currency interest rate swaps maturing on June 30, 2025. The notional amount of interest-rate swaps accounted for as cash-flow hedges was $1,954 million as of September 30, 2024 and $1,094 million as of December 31, 2023 with maturities ranging from June 30, 2025 to September 30, 2026. The notional amount of cross-currency interest rate swaps accounted for as cash-flow hedges of foreign currency risk on the fixed rate USD Senior Secured Notes was $525 million as of September 30, 2024 andnil as of December 31, 2023 with the cross-currency interest rate swaps maturing on April 15, 2026. Changes in the fair value on the portion of the derivative included in the assessment of hedge effectiveness of cash-flow hedges are recorded in other comprehensive income (loss), until earnings are affected by the variability of cash flows. Amounts recorded in accumulated other comprehensive income (loss)were recognized in earnings within interest expense, net when the hedged interest payment was accrued. In addition, since the cross-currency interest rate swaps was a hedge of variability of the functional-currency-equivalent cash flows of the recognized term loan liability remeasured at spot exchange rates under ASC 830, “Foreign Currency Matters,” an amount that offset the gain or loss arising from the remeasurement of the hedged term loan liability was reclassified each period from accumulated other comprehensive income (loss)to earnings inforeign exchange (loss) gain, net, which is a component of other expense, net.

The amount reclassified from accumulated other comprehensive income (loss) into earnings was a net loss of $119 million for the three months ended September 30, 2024 (net gain of $60 million for the three months ended September 30, 2023) and a net loss of $117 million for the nine months ended September 30, 2024 (net loss of $24 million for the nine months ended September 30, 2023).

The Group expects to reclassify a gain of $1 million from accumulated other comprehensive income (loss) into earnings within the next 12 months.

Fair value hedge

In September 2024, the Group entered into cross-currency interest rate swaps to manage the foreign currency risk arising from a portion of USD First Lien Term Loan B maturing in 2030. Under the terms of the cross-currency interest rate swaps, the Group either pays fixed interest in GBP and receives fixed interest in USD or pays a floating interest in GBP and receives a floating interest in USD with the exchange of the underlying notional amounts over the term of the loan whereby the Group will receive USD from and pay GBP to the counterparties at exchange rates which are determined at contract inception.

The notional amount of cross-currency interest rate swaps accounted for as fair value hedges of foreign currency risk on the USD First Lien Term Loan B was $1,428 million as of September 30, 2024 (nil as of December 31, 2023). The Group excludes the cross-currency basis spread in the swap from the hedge effectiveness assessment and recognizes the excluded component into earnings through the periodic interest settlements on the swap. Changes in the fair value on the portion of the derivative included in the assessment of hedge effectiveness of fair value hedges resulting from the changes in the spot rate are recognized in earnings within foreign exchange (loss) gain, net, which is a component of other expense, net which offset the gain or loss arising from the remeasurement of the hedged term loan liability with the difference recorded in other comprehensive income (loss). The Group recorded a foreign currency loss of$8 million in earnings for thethree and nine months ended September 30, 2024 which offset the foreign currency gain from the USD First Lien Term Loan B. Changes in the fair value of the excluded components recognized in other comprehensive income during the three and nine months ended September 30, 2024 was a loss of $1 million.

Net investment hedge

The Group has investments in various subsidiaries which form part of the Group’s International segment with Euro functional currencies. As a result, the Group is exposed to the risk of fluctuations between the Euro and GBP exchange rates. The Group designated its EUR First Lien Term Loan A maturing in 2028, EUR First Term Loan B maturing in 2026 (repaid in full on April 29, 2024) (the EUR First Lien Term Loan A maturing in 2028 together with the EUR First Term Loan B maturing in 2026, the EUR Term Loans), the EUR Senior Notes due 2029 and receive fixed rate, pay fixed rate cross-currency interest swaps whereby the Group will receive GBP from and pay Euro to the counterparties at exchange rates which are determined at contract inception, as a net investment hedge which are intended to mitigate foreign currency exposure related to non-GBP net investments in certain Euro functional subsidiaries.

As of September 30, 2024, the nominal exposure of EUR First Lien Term Loan A and EUR Senior Notes designated as net investment hedges was $424 million and $570 million respectively. The nominal exposures of the EUR Term Loans was $980 million as of December 31, 2023. The designated hedge amounts were considered highly effective. The Group has also designated certain EUR cross currency interest rate swap contracts in net investment hedging relationships. The notional amount of cross-currency swaps accounted for as net investment hedges was $894 million as of September 30, 2024 and $359 million as of December 31, 2023. The designated hedge amounts were considered highly effective.

The foreign currency transaction gains and losses on the euro-denominated portion of the term loan and the cross-currency interest swaps, which are designated and effective as a hedge of the Group’s net investment in its euro-denominated functional currency subsidiaries, are included as a component of the foreign currency translation adjustment. A gain, net of tax, of $27 million was included in the foreign currency translation adjustment for the three months ended September 30, 2024 (loss, net of tax amounting to $2 million for the three months ended September 30, 2023), and a gain, net of tax amounting to $56 million for the nine months ended September 30, 2024 (gain, net of tax amounting to $10 million for the nine months ended September 30, 2023). There wereno amounts reclassified out of accumulated other comprehensive income (“AOCI”) pertaining to the net investment hedge during the three and nine months ended September 30, 2024, and 2023 as the Group has not sold or liquidated (or substantially liquidated) its hedged subsidiaries.

Economic hedges

The Group uses cross-currency interest rate swaps to economically hedge the Group’s net foreign currency exposure arising from 1) the risk of fluctuations between the EUR and GBP exchange rates from the Group’s investment in various subsidiaries which form part of the Group’s International segment and 2) the risk of fluctuations between the USD and GBP exchange rates arising from the portion of the Group’s USD Term Loan that is not designated in a cash flow hedge. The cross-currency interest rate swaps are also used to manage the interest rate risk arising from the portion of the Group’s USD Term Loan that is not designated in a cash flow hedge. Under the terms of the cross-currency interest rate swaps, the Group makes fixed-rate interest payments in EUR and receives variable interest amounts in USD from counterparties over the life of the agreements effectively converting the variable rate debt into fixed interest rate debt with the exchange of the underlying notional amounts at maturity whereby the Group will receive USD from and pay EUR to the counterparties at exchange rates which are determined at contract inception. Changes in the fair value of these instruments are recorded in earnings throughout the term of the cross-currency interest rate swaps and are reported in other income, net in the Condensed Consolidated Statements of Comprehensive Income (Loss). As of September 30, 2024, the cross-currency interest rate swaps are matured.

The following table summarizes the fair value of derivatives as of September 30, 2024 and December 31, 2023:

14. SHARE-BASED COMPENSATION

On June 26, 2024, the Board adopted the Flutter Entertainment plc 2024 Omnibus Equity Incentive Plan (the “2024 Incentive Plan”) as a vehicle to continue granting equity to the Group, and the Group’s affiliates’, current and prospective employees, together with officers, non-employee directors and consultants. The 2024 Incentive Plan provides for an initial share pool of 1,770,000 shares, with such reserve amount to be reduced by the number of shares (if any) covered by awards granted under the Group’s legacy equity-based incentive plans (including the Sharesave Scheme).

During the three and nine months ended September 30, 2024, the Group granted 149,540 restricted awards and options under the 2024 Incentive Plan. Of the options awarded under this plan,70,146 options have a market condition based on the Total Shareholder Return (TSR) relative to the TSR performance of the S&P 500 equity index. The market condition was directly factored into the fair value-based measure of the award at the grant date. The Group engaged a third-party valuation specialist to provide a fair value for the awards using a Monte Carlo simulation model. The key inputs in the model were the expected weighted average volatility of 39.10%, the weighted average correlation of 43.00% and, the weighted average share price of the Group at the date of grant of the award of $207.54. The weighted average fair value of the awards at the grant date was $278.40. The remaining 79,394 options and restricted awards had a weighted average grant date fair value of $210.90 based on the quoted trading price of the Group’s share price on the date of the grant.

During the nine months ended September 30, 2024, the group granted:

•52,902 options under the Flutter Entertainment plc 2015 Deferred Share Incentive Plan at the weighted average grant date fair value of $207.70. The fair value of the options granted was based on the quoted trading price of the Group’s share on the date of the grant.

•7,466 options under the Flutter Entertainment plc 2022 Supplementary Restricted Share Plan at the weighted average grant date fair value of $200.14. The fair value of the options granted was based on the quoted trading price of the Group’s share on the date of the grant.

•792,246 options under the Flutter Entertainment plc 2016 Restricted Share Plan. Of the options awarded under the Flutter Entertainment plc 2016 Restricted Share Plan,197,519 options have a market condition based on the Total Shareholder Return (TSR) relative to the TSR performance of the S&P 500 equity index. This market condition was directly factored into the fair value-based measure of the award at the grant date. The Group engaged a third-party valuation specialist to provide a fair value for the awards using a Monte Carlo simulation model. The key inputs in the model were the expected weighted-average volatility of 35.58% and the weighted-average share price of the Group at the date of grant of the award of $196.70. The weighted-average fair value of the awards at the grant date was $73.98. The remaining 594,727 options had a weighted average grant date fair value of $194.08 based on the quoted trading price of the Group’s share on the date of the grant.

•45,733 share options with a nominal exercise price were granted under the 2023 Long Term Incentive Plan (“2023 LTIP”). The Group engaged a third-party valuation specialist to provide a fair value for the awards using a Monte Carlo simulation model. The key inputs in the model were the expected weighted-average volatility of 39.94% and the share price of the Group at the date of grant of the award of $180.70. The weighted-average fair value of the awards at grant date was $62.14. Another 30,697 share options granted under the 2023 LTIP. The Group engaged a third-party valuation specialist to provide a fair value for the awards using a Monte Carlo simulation model. The key inputs in the model were the expected weighted-average volatility of 37.37% and the weighted-average share price of the Group at the date of grant of the award of $214.76. The weighted-average fair value of the awards at the grant date was $102.62. The performance targets associated with a further 61,395 share options were not determined as of September 30, 2024 and as a result no grant date has been established under ASC 718 and no compensation cost has been recognized in the period ended September 30, 2024.

In April 2023, the Group adopted the 2023 LTIP which enables the Group to grant share awards and nil cost options with a single award vesting in tranches (if the relevant performance conditions are met) after the end of the performance period applicable to the tranche. Awards granted under the 2023 LTIP have a performance period of not less than three years. The awards granted under the 2023 LTIP have a market condition based on the Total Shareholder Return (“TSR”) relative to the FTSE 100 (excluding house builders, real estate investment trusts and natural resources companies). This market condition was directly factored into the fair-value-based measure of the award.

For the three and nine months ended September 30, 2023, the Group granted:

• 524,954 restricted awards and 469,084 share options with a nominal exercise price under the Flutter Entertainment plc 2016 Restricted Share Plan. The weighted-average grant date fair value of awards granted in the period was $160.49 based on the quoted trading price of the Group’s share on the date of the grant.

•Other employee share schemes, the Group granted 34,419 restricted awards and share options with a nominal exercise price. The weighted-average grant date fair value of awards granted in the period under other plans was $163.75 based on the quoted trading price of the Group’s share on the date of the grant.

•44,820 share options with a nominal exercise price under the 2023 LTIP. The Group engaged a third party valuation specialist to provide a fair value for the awards using a Monte Carlo simulation model. The key inputs in the model were the expected weighted-average volatility of 35.91% and the share price of the Group at the date of grant of the award of $199.22. The weighted-average fair value of the awards at the grant date was $111.60. The performance targets associated with a further 134,460 share options were not determined as of September 30, 2023 and as a result no grant date has been established under ASC 718 andno compensation cost recognized in the period ended September 30, 2023.

As of September 30, 2024,3,901,066 restricted awards and options were outstanding across all employee share schemes.

Total compensation cost arising from employee share schemes for the three and nine months ended September 30, 2024, and September 30, 2023, was $53 million and $153 million, and $25 million and $135 million respectively in the Condensed Consolidated Statements of Comprehensive Income (Loss).

15. FAIR VALUE MEASUREMENTS

The following tables set forth the fair value of the Group’s financial assets, financial liabilities and redeemable non-controlling interests measured at fair value based on the three-tier fair value hierarchy:

1. In accordance with subtopic 360-10, Pokerstars’ trademark held and used with a carrying amount of $1,093 million was written down to its fair value of $368 million, in the fourth quarter of 2023 resulting in an impairment of $725 million, which was included in sales and marketing expenses. The Group utilized the relief from royalty method under the income approach to estimate the fair value. Assumptions inherent in estimating the fair value included revenue forecast, royalty rate of 5.0%, income tax rate of 12.5%, and discount rate of 12.5%. The Group selected the assumptions used in the financial forecasts of cash flows specific to the remaining useful life of the trademark using historical data, supplemented by current and anticipated market conditions and estimated growth rates. Financial forecasts beyond the period covered by the plans were estimated by extrapolating the forecasts based on the plans using a steady growth in line with the long-term average growth for the countries in which the trademark is used. As the fair value measurements were based on significant inputs not observable in the market, they represented Level 3 measurements within the fair value hierarchy. There wereno transfers between levels of the fair value hierarchy during the three and nine months ended September 30, 2024, and September 30, 2023.

Valuation of Level 2 financial instruments

Available for sale – Player deposits – investments

The Group has determined that the fair value of available for sale – player deposits – investments is determined by using observable quoted prices or observable input parameters derived from comparable bonds/markets. Although the Group has determined that a number of the bonds fall within Level 1 of the fair value hierarchy, there are a class of bonds which have been classified as Level 2 due to the existence of relatively inactive trading markets for those bonds.

Derivative financial assets and liabilities – Swap agreements

The Group uses derivative financial instruments to manage its interest rate and foreign currency risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis of the expected cash flows of each derivative and incorporates credit valuation adjustments. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, such as yield curves, spot and forward FX rates.

As of September 30, 2024, the Group assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions, determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Group determined that its valuations of its derivatives in their entirety are classified in Level 2 of the fair value hierarchy.

Valuation of Level 3 financial instruments

Equity securities

The Group determined the fair value of investments in equity securities that do not have a readily available market value amounting to $7 million at September 30, 2024 (December 31, 2023: $9 million) using the Market Comparable Companies Approach based on EBITDA multiple. The movement in the fair value of equity securities for the three and nine months ended September 30, 2024 and 2023 was immaterial.

Non-derivative financial instruments

Fox Option

The fair value of the Fox Option amounts to $640 million at September 30, 2024 and $400 million as of December 31, 2023 which was determined using an option pricing model. As of September 30, 2024, and December 31, 2023, the option exercise price was $4.5 billion and $4.3 billion, respectively. The significant unobservable inputs were the enterprise value of FanDuel, the discount for lack of marketability (“DLOM”), the discount for lack of control (“DLOC”), implied volatility and probability of Fox getting licensed.

The enterprise value of FanDuel was determined using an equal weight to the value indications of the discounted cash flow analysis and the guideline public company analysis. The discount rate used in the discounted cash flow analysis was 21.0% and 19% as of September 30, 2024 and as of December 31, 2023, respectively.

Additionally, management applied a combined 35.0% discount for lack of marketability and lack of control as of September 30, 2024, and as of December 31, 2023. A range of DLOMs obtained using various securities-based approaches was 14.2% to 22.3% . DLOC was estimated at 18.4% using implied discounts in previous observable transactions involving FanDuel’s equity ownership and data based on Mergerstat studies as of September 30, 2024, and as of December 31, 2023 respectively.

Management selected a discount rate of 36.5%, which is on the higher end of the third quartile based on the ranges considered by management.

The volatility was 36.5% and 36.0% as of September 30, 2024 and year ended December 31, 2023, which was within the range of selected comparable companies. In developing the fair value measurement, the probability of a market participant submitting to and obtaining a license was estimated at 75.0% as of September 30, 2024, and as of December 31, 2023.

Changes in discount rates, revenue multiples, DLOM, DLOC, implied volatility and probability of Fox getting licensed, each in isolation, may change the fair value of the Fox Option. Generally, an increase in discount rates and DLOM, DLOC or decrease in revenue multiples, implied volatility and probability of Fox getting licensed may result in a decrease in the fair value of the Fox Option. Due to the inherent uncertainty of determining the fair value of the Fox Option, the fair value of the Fox Option may fluctuate from period to period. Additionally, the fair value of the Fox Option may differ significantly from the value that would have been used had a readily available market existed for FanDuel Group LLC. In addition, changes in the market environment and other events that may occur over the life of the Fox Option may cause the losses ultimately realized on the Fox Option to be different than the unrealized losses reflected in the valuations currently assigned.

Redeemable non-controlling interests at fair value

The terms of symmetrical call and put options agreed between the Group and Boyd require exercise price to be calculated at fair market value without giving effect to DLOM and DLOC. FanDuel’s pre-discount enterprise value determined in the same manner as discussed earlier for September 30, 2024 and December 31, 2023 is considered in measuring the fair value of redeemable non-controlling interests owned by Boyd.

Contingent consideration

The contingent consideration payable is primarily determined with reference to forecast performance of the acquired businesses during the relevant time periods and the amounts to be paid in such scenarios. The fair value was estimated by assigning probabilities to the potential payout scenarios. The significant unobservable inputs are forecast performance of the acquired businesses.

The fair value of contingent consideration is primarily dependent on forecast performance for the acquired businesses in excess of a predetermined base target. An increase or decrease in the predetermined base target will not have a material impact on the fair value of contingent consideration as of September 30, 2024 as the expected settlement date is in early 2025. An increase and decrease of 10% in the excess over the predetermined base target would increase and decrease the value of contingent consideration as of December 31, 2023 by $2 million and $2 million, respectively.

Movements in the three months period in respect of Level 3 financial instruments carried at fair value

The movements in respect of the financial assets and liabilities carried at fair value are as follows:

16. COMMITMENTS AND CONTINGENCIES

Guarantees

The Group has uncommitted working capital overdraft facilities as of September 30, 2024 of $26 million (December 31, 2023: $21 million) with Allied Irish Banks p.l.c. These facilities are secured by a Letter of Guarantee from Flutter Entertainment plc.

The Group has bank guarantees: (i) in favor of certain gaming regulatory authorities to guarantee the payment of player funds, player prizes, and certain taxes and fees due by a number of Group companies; and (ii) in respect of certain third-party rental and other property commitments, merchant facilities and third-party letter of credit facilities. The maximum amount of the guarantees as of September 30, 2024 was $300 million (December 31, 2023: $322 million). No claims had been made against the guarantees as of September 30, 2024 (December 31, 2023: nil). The guarantees are secured by counter indemnities from Flutter Entertainment plc and certain of its subsidiary companies. The value of cash deposits over which the guaranteeing banks hold security was $62 million as of September 30, 2024 (December 31, 2023: $29 million).

Other purchase obligations

The Group is a party to several non-cancelable contracts with vendors where the Group is obligated to make future minimum payments under the terms of these contracts as follows:

Legal Contingencies

The Group is involved, from time to time, in various litigation, administrative and other legal proceedings, including regulatory actions, incidental or related to its business. The Group establishes an accrued liability for legal claims and indemnification claims when the Group determines that a loss is both probable and the amount of the loss can be reasonably estimated. The estimates are based on all known facts at the time and our assessment of the ultimate outcome. As additional information becomes available, the Group reassesses the potential liability related to our pending claims and litigation, which may also revise our estimates. The amount of any loss ultimately incurred in relation to these matters may be higher or lower than the amounts accrued. Due to the unpredictable nature of litigation, there can be no assurance that our accruals will be sufficient to cover the extent of our potential exposure to losses. Any fees, expenses, fines, penalties, judgments, or settlements which might be incurred by us in connection with the various proceedings could affect our results of operations and financial condition.

Austrian and German player claims

As previously reported, the Group has seen a number of player claims in Austria and Germany for reimbursement of historic gaming losses. The basis of these claims is rooted in the Group having provided remote services in Austria and Germany (outside of Schleswig-Holstein) from Maltese entities on the basis of multi-jurisdictional Maltese licenses, which the Group continues to believe is compliant in accordance with EU law. However, the Austrian Courts and certain German Courts consider the Group’s services non-compliant with their respective local laws. The Group strongly disputes the basis of these claims and judgements made by Austrian and German courts in awarding the player’s claims.

As of September 30, 2024, the Group expects to settle claims amounting to €15 million ($17 million) and has recognized an accrued liability within loss contingencies forming part of other current liabilities. It is reasonably possible that the actual losses could be in excess of the Group’s accrual. The Group is unable to estimate a reasonably possible loss or range of loss in excess of its accrual due to the complexities and uncertainty around the judicial process. In addition, there are further claims made against the Group amounting to €44 million ($49 million) as of September 30, 2024, the settlement of which is predicated on the merits of the case and whether the enforcement proceedings are successful in laying claim over the Group’s Maltese assets for settlement of these claims. The Group, based on advice from its legal counsel, believes such cross-border enforcement of judgements is in contravention to Maltese public policy and Regulation (EU) 1215/2012 and has not accrued any liability for these claims. The Group has filed countersuits before the Maltese Civil Court for setting aside these claims. The defendants have also filed garnishee orders with the Maltese Civil Court to attach the Group’s Maltese assets, some of which have already been declined by the Maltese Civil Court. Should the Maltese Courts decide in favor of the Group, there would be grounds for dismissal of all pending player claims instituted against the Group.

While the Group believes that it has strong arguments, at this time, the Group is unable to reasonably estimate the likelihood of the outcome due to the complexities and uncertainty around the judicial process.

Tax dispute in relation to operations in Italy

As previously reported, the Italian Tax Police initiated an investigation of the operations conducted by PokerStars business in Italy (hereinafter referred to as ‘PS Italy’), alleging that PS Italy’s server infrastructure located in Italy amounts to an Italian permanent establishment for corporate tax purposes. As of September 30, 2024, the Group has fully settled this tax dispute with the Italian Tax Authorities for an amount of €8 million ($9 million).

Goods and Services Tax (“GST”) rate applicable to operations in India

As previously reported, India’s Directorate General of Goods & Services Tax (the “DGGI”) is currently investigating the historical characterization of products such as rummy, fantasy games and poker as ‘games of skill’ (subjects to tax of 18% on player commission) rather than ‘games of chance’ (subject to 28% tax on player stakes). In making GST returns, Junglee and PokerStars India have consistently followed the Supreme Court of India’s rulings in relation to the distinction between games of skill and games of chance.

The DGGI has issued notices to multiple online gaming businesses alleging historical underpayment of GST, including to the Group’s operations in India (Junglee) of ₹179.1 billion ($2.1 billion). Junglee disputes that any additional tax is payable and has been advised that the notice received is not in accordance with the GST provisions applicable to past periods.

As of the date of issue of these unaudited condensed consolidated financial statements, Junglee has filed a petition with the Supreme Court of India, and has joined its case to the cases of other online gaming operators pending at the Supreme Court of India. The lead case (The Directorate General of GST Intelligence vs. Gameskraft Technologies Private Limited) was ruled in favor of Gameskraft, the taxpayer, at the Karnataka High Court in May 2023, and found that taxes had been paid in accordance with the law, but the case remains unresolved at the Supreme Court of India.

On June 22, 2024, a meeting of India’s Goods and Services Tax Council (the “GST Council”) (a constitutional body responsible for the formation and recommendation of GST law changes, held by the Supreme Court of India to be the ultimate authority on the GST issues), recommended amending the GST law to empower the Indian Central Government, on the recommendation of the GST Council, to waive any historical taxes not paid, where the common trade practice was either:

1. not to subject the goods or services to tax, or

2. to subject the goods or services to a lower tax rate than what is now being suggested by the DGGI.

The recommendation of the GST Council was incorporated into the Finance Act, 2024.

Whilst this law is not industry specific, if applied by the GST Council to be applied to the online real money gaming industry, we would expect the 18% GST already paid on platform commissions for past periods to be accepted as the applicable tax rate and the litigation will cease.

As of the date of issue of the unaudited condensed consolidated financial statements, no liability has been accrued as the Group has determined that it is not probable that a liability has been incurred considering the progress of the cases pending at the Supreme Court of India, decisions of the State High Courts in favor of the industry, the arguments of legal counsel representing the industry and the opinion of the Group’s own legal counsel.

The Group is unable to make an estimate of any reasonably possible loss or range of losses, if any, were there to be an adverse final decision in the cases pending before the Supreme Court of India associated with the notice received.

Trademark and copyright claim regarding the use of the Aviator brand by Adjarabet in Georgia

Aviator LLC, a company owned by parties connected with the former owner of Adjarabet sued Atlas Holdings LLC, the Group's legal entity operating the Adjarabet brand in Georgia and Armenia, for damages alleging infringement of intellectual property rights in the brand name “AVIATOR” used within four third-party online casino games which were available on Adjarabet’s website, and distributed by Spribe, which offers the game globally, and another international game provider. While management believes the claims asserted against the Group to be baseless and without merit, in August 2024, the Georgian Court of First Instance issued a judgment against Atlas Holdings LLC amounting to GEL 896 million ($330 million), which, further, bears no resemblance or basis to the economics of the alleged infringement.

As of the date of issue of the unaudited condensed consolidated financial statements, no liability has been accrued as the Group has determined that it is not probable a liability has been incurred having regard to the legal facts of the case, the status of the on-going appeal process and related ICC London arbitration proceedings and the opinion of legal counsel. The potential effects of the judgement will continue to be evaluated on an ongoing basis.

Others

During the three months ended September 30, 2024, no additional information has become available that would cause the Group to reassess the potential liability related to the Group’s pending claims and litigation in relation to the Group’s cybersecurity incident as disclosed in our 2023 Annual Report.

17. SUBSEQUENT EVENTS

On October 23, 2024, the Group entered into an amended and restated commitment letter originally dated September 12, 2024 with certain banks to obtain binding commitments in respect of a senior secured first lien term loan comprising an aggregate Euro principal of €2.5 billion (the “Facility”) to fund, among others, the strategic acquisition of Snaitech S.p.A which was announced by the Group in September 2024. If implemented, the Facility will (i) mature 12 months from first utilization of the Facility, subject to an extension option ofsix months which can be exercised twice and (ii) bear interest at a per annum rate equal to EURIBOR (provided that in no event shall EURIBOR be less than 0.00%) plus an applicable margin equal to 1.25% per annum, subject to an increase of 0.20% per annum on the last day of each fiscal quarter, commencing with the second complete quarter following first utilization of the Facility. The increase shall be 0.40% per annum instead of 0.20% per annum from the date being twelve calendar months after first utilization of the Facility. The other terms of Facility will be on substantially similar terms to that of the Credit Agreement dated as of November 24, 2023 between, among others, certain members of the Group and the lenders named therein.