This article first appeared on GuruFocus .
Release Date: July 31, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
-
IG Group Holdings PLC ( IGGHY ) delivered a sixth consecutive quarter of sequential growth in active customers, with organic active customers up 13% and organic first trades up 74%.
-
Organic total revenue grew 17%, with broad-based growth across every product line and division, including a 22% organic net trading revenue increase.
-
The acquisition of Underdog is transformational, doubling US revenue, increasing US active customers more than tenfold, and lowering the average customer age from 42 to 34.
-
The company sustained strong margins with a 44% EBITDA margin, despite increased marketing spend and strategic review costs, and reduced organic fixed cost to serve per funded account by 15%.
-
The strategic review is substantially complete, with plans for a redomicile to Jersey, a refreshed organizational model, and a clear path to resume share buybacks in 2027.
Negative Points
-
EBITDA margin declined to 43.9% from 49.6% in the prior year, reflecting consolidation effects, strategic review costs, and deliberate investment in growth.
-
Net interest income fell 10% due to lower rates and greater pass-through to customers, despite higher customer cash balances.
-
Operating costs increased 30% reported and 25% organically, driven by higher marketing, technology investment, and non-recurring strategic review costs.
-
The Underdog acquisition carries significant regulatory uncertainty, with potential Supreme Court involvement and state-level challenges to prediction markets.
-
The company paused its share buyback program, with resumption only expected in 2027, subject to redomicile completion and other capital demands.
Q & A Highlights
Q: What are the key regulatory risks associated with the Underdog acquisition, and how has IG gotten comfortable with them? Additionally, what is the current mix of prediction market versus daily fantasy sports users, and what is the primary short-term growth lever? A: Breon Corcoran (CEO) acknowledged the regulatory uncertainty, specifically the shift from state-by-state licensing of daily fantasy sports towards a federal CFTC licensing structure for prediction markets. He noted that some states are defensive about their licensing heritage, creating risk. However, he emphasized the deal's structure protects shareholders while rewarding the Underdog team for hitting aggressive growth targets. On the user mix, he stated that while the volume on Underdog's own prediction rails is currently tiny, it has just started to move traffic through in the last two weeks and is at a "point of explosion." The primary short-term growth lever is monetizing the existing customer base's opinions on sports through these new prediction rails, with the potential to expand to financial markets in the future.
Q: How does the Underdog acquisition compare to the previous Tastytrade acquisition, and what assumptions underpin the conviction that it will exceed the cost of capital by year three? A: Breon Corcoran (CEO) noted similarities, as both are fast-growing US-based assets, but highlighted that Underdog has a more mass-market appeal, is mobile-first, and targets a younger demographic with high engagement, unlike the more niche Tastytrade. CFO Clifford Abrahams detailed the drivers for the ROIC target: the business's transition to its own prediction exchange will improve monetization and gross margins, the shift from DFS to prediction markets liberates the proposition format to drive handle significantly higher, and the scale business offers operating leverage as EBITDA margins pick up. He confirmed the expectation of strong double-digit revenue growth without giving specific guidance.
Q: What is the expected level of non-recurring costs in the second half of 2026, and what are the key risks and growth levers for the Underdog business? A: CFO Clifford Abrahams declined to guide on specific non-recurring costs for H2 but reconfirmed the company's guidance for mid-40s EBITDA margins and comfort with consensus. On Underdog, CEO Breon Corcoran explained the regulatory risk involves a potential Supreme Court case over whether sports prediction markets should be regulated by states or the CFTC on a federal basis. He stated the backstop is the brand, product, and team, while the upside is federal regulation liberating the market. He also noted the deal structure protects shareholders while rewarding the team for delivering on "heroic" growth expectations.
Q: Can you provide comfort on marketing efficiency in the face of heightened competition, and how should we think about the shift from share buybacks to M&A and the potential for excess capital from the redomicile? A: CEO Breon Corcoran stated that the marketing efficiency metrics (six-month payback, 4:1 LTV/CAC) are aggregate and rounded, and the company uses different levers in different geographies. He pointed to six consecutive quarters of active customer growth as the key metric and indicated there is room to increase marketing spend. On capital allocation, he acknowledged the importance of buybacks to some shareholders but emphasized the long-term need to invest in the business's relevance, noting IG had been losing market share. CFO Clifford Abrahams added that M&A was always part of the capital allocation framework and that the Underdog deal fits the M&A criteria. He confirmed the expectation to resume buybacks in 2027, subject to caveats, and noted the redomicile to Jersey would provide capital flexibility.
Q: What is the expected cost of the 950 million bridging facility, and will it be included in adjusted EPS? Also, when might the share buyback resume, and has the OTC customer revenue retention metric improved? A: CFO Clifford Abrahams declined to guide on specific finance costs, noting the 950 million is a committed facility and the company has options to refinance and optimize it. He confirmed adjusted EPS would be after the cost of funding. On buybacks, he stated no commitment on timing but said the company would update its thinking at the October strategic review and full-year results, with the redomicile and transaction closing expected by the end of the calendar year. On retention, he said the metric is volatile and not reported quarterly, but the company is encouraged by the new Head of IG Securities, Andy Biggs, which underpins long-term confidence.
Q: What proportion of Underdog's customers or handle comes from states where sports betting is not currently allowed, and what is the risk of a negative Supreme Court outcome? A: CEO Breon Corcoran declined to provide specific state-level breakdowns, but acknowledged the inference that prediction markets have grown in states without a history of legalized sports betting. He stated there is a growing expectation the issue will go to the Supreme Court, with a broad variance in timing. The core decision will be whether sports event contracts should be regulated by individual states or by the CFTC on a federal basis. He reiterated that the deal's structure protects shareholders against regulatory uncertainty while rewarding the team for delivering on growth targets.
Q: What investment might be needed to achieve goals with Underdog, particularly in technology and marketing? A: CEO Breon Corcoran stated the Underdog business has been capital efficient to date and expects that to continue. He noted the deal structure motivates the team to hit EBITDA targets in 2028 and 2029 through marketing spend, which he expects to increase, but primarily through product-led growth, which is how they have grown the business so far. He expressed confidence in their product velocity and ambitions, having known the business for over a year.
Q: What are the key drivers for the expected revenue growth and ROIC for Underdog, and how will the transition to prediction markets impact monetization? A: CFO Clifford Abrahams explained that the business has historically delivered revenue as the number two player in daily fantasy sports. The recent transition to its own prediction exchange will assist in monetization and gross margins. The shift from DFS to prediction markets liberates restrictions on the proposition format, which is expected to drive the handle (dollars wagered) significantly higher. This, combined with operating leverage from the scale business, gives confidence in revenue growth and a healthy ROIC by year three.
Q: How should we interpret the pause in the share buyback, and what does it signal about the company's capital allocation priorities? A: CEO Breon Corcoran acknowledged that some shareholders value the buyback, and the company has bought
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
