Thank you for standing by, and welcome to the PointsBet Holdings Limited FY 2022 Q4 Investor Presentation. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Sam Swanell, Group CEO. Please go ahead.
Good morning, and thank you for joining the PointsBet Holdings Limited Q4 FY 2022 Business Update and Activities Report. This is Group CEO Sam Swanell, and I'm joined on the call today by our Group CFO Andrew Mellor, US CEO Johnny Aitken, and Canadian CEO Scott Vanderwel. Before we begin, please note all numbers referred to are unaudited and in Australian dollars unless otherwise stated. Turning to slide three. The June quarter has been another period of progress for the company. From a market launch perspective, during the quarter, we had a successful launch in Ontario for online sportsbook and iGaming, and the launch of iGaming in Pennsylvania. As of today, we have live online sportsbook operations in Australia, 10 U.S. states, plus Ontario, Canada, and are live with iGaming in four U.S. states, plus Ontario, Canada.
As previously communicated, we've proactively shifted to focus on four priority state rollouts, being Louisiana, Kansas, Maryland, and Ohio, with the last three referenced, we expect to be hard launching on the starting line. This rollout strategy allows PointsBet to focus on the priority launch dates and to continue the positive momentum we have built over the last two quarters in particular. From a leadership perspective, in early June, we announced Dr. Jerry Bowskill will join us as Group Chief Technology Officer, taking over from Manjit Gombra Singh, who has transitioned to a non-executive director role. Jerry is an experienced technology executive with a successful track record as a C-suite leader within a range of international regulated gaming groups.
Most recently, Jerry was the outgoing CTO at Capital International Group and is the former CTO at both The Stars Group and Scientific Games Interactive, having also held other senior technology roles at Playtech, Gaming Technology Solutions, and PartyGaming. In Australia, the company also announced that Mr. Andrew Catterall had joined as Australian CEO. Andrew is the former CEO of Racing.com, where he led the business business through a major transformation in broadcasting, digital media, rights acquisition, audience development, and commercial growth. Prior to Racing.com, he held senior leadership positions at Racing Victoria and the AFL. Both executives have now started with PointsBet. I'm delighted to have added such high-quality appointments to an already outstanding executive team. In April, we were thrilled to be honored by eGaming Review, EGR, as the top sports betting operator at the EGR North America Awards for the second consecutive year.
Also in April, our U.S. sports betting app was again ranked in the top three out of 41 in the latest Eilers & Krejcik app-by-app testing, with the testing group commending PointsBet for its in-app speed and diverse feature set. This recognition is a testament to the continued investment we make in our technology and product. During the quarter, we continued to deliver enhancements of our broader in-play product, delivering on our stated strategy to lean into improving the better experience with more markets, higher uptime, faster bet placement, and quicker cash out and settlements. Turning to slide four. Last month, we welcomed a AUD 94.2 million strategic investment from SIG Sports Investments Corp., a member of the Susquehanna International Group of Companies.
Privately owned Susquehanna, which was co-founded by Jeffrey Yass in 1987, is headquartered in Pennsylvania, U.S.A., and is one of the largest proprietary financial trading firms in the world, with additional business verticals encompassing derivatives market making, institutional brokerage, private equity, sports analytics, and structured capital. PointsBet issued 38,750,000 shares to SIG Sports at a price of AUD 2.43 per share, representing a 15% premium compared to the five-day VWAP to 17 June 2022. This strategic investment represented 12.76% of the company's issued capital, with SIG Sports becoming the company's largest shareholder. From the very beginning of our engagement with Jeff and his Susquehanna leadership team, it was clear that the cultural alignment between both organizations is very strong.
In SIG Sports, we have found a strategic long-term partner who believes in PointsBet's ability to continue to grow and compete in the North American sports betting market. We also announced that PointsBet's European technology subsidiary has entered into an agreement with Nellie Analytics Limited, a member of the SIG Sports Group based in Dublin. Nellie has built cutting-edge quantitative models and technology to trade and make markets for sports betting using trading acumen, advanced statistical forecasting models, and quantitative research. These models and technology currently allow Nellie to trade successfully on sports betting exchanges around the world. Nellie applies to sport the same quantitative approach that drives Susquehanna's success in the financial markets. Turning to slide five. The work Nellie Analytics have been doing over the last four years as a proprietary sports betting house is very impressive.
Based on our engagement today, these skills will enhance our strategy to deliver the best in-play betting experience in North America. Our primary focus has been to continuously strive to deliver a quality betting experience to our customers by developing an offer that delivers increased betting options and enhanced fundamentals such as faster bet placement, fewer suspensions, and more cash out options. Nellie can accelerate our focus on sharper in-play pricing, which will ultimately translate into a better customer experience. With more confidence in our pricing, we can give customers differentiation and value on price, take bigger bets via increased wagering limits while maintaining an efficient and profitable business model. Excellence in technology, user experience and trading is at the forefront of everything we do at PointsBet.
In Nellie Analytics, we have found another like-minded team of technologists, mathematicians, and traders whose services we believe can accelerate our product led strategy and thus our right to win in the U.S.A., Canada, and Australia. Good progress has already been made between Nellie and the PointsBet teams on the pathway forward. Turning to slide six. Compared to the group results for Q4 FY 2021, to be referred to as the PCP. In Q4 FY 2022, sports betting turnover was up 32% to AUD 1.3 billion, and group net win was up 41% at AUD 86 million. Turning to slide seven.
Compared to the group results for FY 2021 for the 12 months to 30 June 2022, sports betting turnover was up 32% to AUD 5.01 billion, and group net win was up 48% at AUD 309.4 million. Turning to slide eight. The Australian trading business continued its strong performance, ending the quarter with turnover of AUD 599 million, up 21% compared to the PCP, and net win of AUD 55.2 million, up 28% from the PCP. Gross win margin was 13.3% and net win margin was 9.2%, up 0.5 percentage points from the PCP.
The quarter saw a 17% increase in multi turnover compared to the PCP and a 35% increase in Same Game Multi turnover as a result of the improvements in our breadth and depth of product offering across the multi segment. As previously communicated at our Q3 and half year results, H2 marketing expense was significantly lower than H1 as the focus turned to profitability for the remainder of the financial year. As a result of this strategy, the Australian trading business Q4 marketing expense was AUD 9.6 million, which assisted in delivering 12-month rolling cash active clients to 30 June 2022 of 239,121, an increase of 22% compared to the PCP. We note that CPAs and net win per active for the quarter were materially stronger versus the PCP.
We are pleased to announce that following the hugely successful Shaquille O'Neal marketing campaign in FY 2022, we've signed Shaq for a further two years. We are very excited to launch a new campaign shortly ahead of the 2022 football finals here in Australia. Finally, I'm happy to confirm that we will report a positive EBITDA result for the Australian trading business for FY 2022 when full results are released next month. I'd like to now hand it over to Johnny Aitken to run through highlights for the United States.
Thank you, Sam. Now turning to slide nine. The U.S. trading business ended the quarter with sports betting turnover of AUD 688 million, up 40% compared to the PCP, and total net win of AUD 30.4 million, up 72% from the PCP. This is positive momentum on our journey to grow net win through a targeted customer strategy built on excellence around our proprietary sportsbook proposition. The Q4 FY 2022 sports betting gross win margin and net win margin was 6.1% and 3.5%, respectively. Turning to slide ten. PointsBet's blended U.S. online handle market share was largely steady at 3.5% quarter-on-quarter. It should be noted that the Q4 calculation includes a full quarter for newly launched PointsBet states, New York and Pennsylvania, and represents a greatly expanded TAM.
Our New Jersey sportsbook handle market share for April to June has remained in line with our Q3 market share, while neighboring state, New York, generated AUD 6.2 million of net win in the quarter. In Illinois, we have continued to enjoy steady and healthy online market share for April and May of 8.9%. In line with our performance before the market reverted to remote registration. Illinois is a state where our NBC partnership has a lot of depth. This includes prominent integration across the local RSN for the Bulls, the Blackhawks, and the White Sox, as well as other local NBC-owned stations. The combination of this high impact local media with our strong in-play product creates our foundation to compete in Illinois, regardless of the competitive landscape.
For Michigan, combined online sportsbook and iGaming for the quarter saw 25% quarter-on-quarter growth in net win, while for Pennsylvania, the addition of iGaming saw an improvement in net win quarter-on-quarter. Q4 marketing expenses were $27.4 million, with working media cost per FTB continuing to be under $500. As I noted during our last results call, in Q4, we continued to focus our marketing efforts on our target customer segments, moving away from tactics that bring in volume, FTBs, but with low lifetime value. Our focus remains on our genuine clients and on increasing play days, bet count, and share of wallet through our internally powered product experience.
This investment and strategy helped drive 12 months rolling cash actives to 267,000, up 67% compared to the PCP. It should be noted that this metric also reflects our retention efforts, not just acquisition volumes. iGaming. The iGaming product continues to show quarter-on-quarter growth, with net win results of AUD 6.7 million, up 21% quarter-on-quarter on the back of the successful launch in Pennsylvania. Pennsylvania marks the fourth U.S. state where our iGaming platform has been introduced. The increase in our addressable online casino market powered quarter-on-quarter growth, but was also supported by a strengthening casino product. We had another busy quarter introducing new games, with New Jersey content increasing significantly via IGT additions and 205% increase in content this coming quarter in Pennsylvania as we look to cement and continue growth there since launch.
In addition, we look forward to the continued improvement in our proprietary iGaming platform, including the expansion of the depth and breadth of our library of games and a more customized, engaging in-app game lobby and customer experience. Now turning to slide 11. Our mission to create the best in-play betting experience for our customers continues to progress in a positive direction. The guiding principles to our strategy are to lead on core U.S. sports and deliver a competitive offering on other sports to ensure a comprehensive in-play betting experience 24/7. We have made significant progress on this pillar by soft launching our fourth core U.S. sport in MLB in West Virginia during the quarter. We expect a full launch into other states of MLB in the coming weeks.
Another notable mention is the launch of ITF Tennis, adding 1,500 hours of in-play content per week, with 50% of these games also included with streaming, delivering more opportunities throughout the day and night for customers to bet in-play. Our second principle is to ensure we deliver a quality core betting experience to our customers. As an example, throughout the quarter, we saw consistent market-leading uptime on the NBA postseason of above 97%. We believe the core tenets of winning in-play is maximizing uptime and being the fastest to accept bets. Finally, we also focus on giving our customers more ways to bet. We continue to make progress on this front with NBA player props launched in April and our new MLB in-play solution, increasing the number of in-play markets that we are offering to customers.
As a result of our continued progress in-play and the sporting calendar in Q4, which lends itself to higher in-play activity, in-play for the quarter made up 63% of overall handle versus 46% in the PCP. NFL in-play activity is typically lower than other sports, and thus this percentage may decrease in the September quarter. Turning to slide 12. New NBC initiatives and announcements were prevalent across Q4, with a focus on engaging content and customer acquisition. Over the course of the NBC partnership, PointsBet has helped to power pre-game, halftime, and post-game shows with data and odds. Once MLB lifted limitations of sportsbook promotion during in-game broadcasts, where the largest audiences lie, we worked with NBC and SNY to include odds integrations during every White Sox, Phillies, and Mets games on their networks.
The integrations have featured various game and player markets and help cement our focus on being the go-to sportsbook for in-play betting. We have further tapped into the Illinois market with our David Kaplan unfiltered sponsorship that airs on NBC Sports Chicago. Kaplan is one of the voices of Chicago Sports, and his nightly program generally airs right before the Bulls, Blackhawks, and White Sox pregame shows. The timing is preferable as our branding and odds are appearing at peak times where we know bettors are researching and placing their bets. Each show includes a PointsBet-focused odds segment and PointsBet talent integration. Finally, as of June 30, 2022, the NBC free-to-play Predictor app has generated 663,000 leads across the U.S. for PointsBet. I'd like now to hand it across to Scott Vanderwel, Canadian CEO, to run through the highlights for Canada.
Thank you, Johnny. On slide 13. We have now completed our first full quarter of operations in Ontario and are pleased with the overall performance to date. Total sportsbook handle was AUD 16 million in the quarter, and total net win came in at AUD 200,000, with iGaming net win of AUD 700,000 more than offsetting sportsbook net win loss of AUD 500,000. Our overall financial performance was helped by having our casino offering live from day one, which served to stabilize some of the expected volatility in the sportsbook. On the sportsbook side, total handle, gross win, and net win all improved month-over-month throughout the quarter.
As we discussed on the last call, PointsBet is a new brand in Ontario, so we continue to focus on building awareness of who we are, given the levels of competitive intensity with 19 licensed operators and existing gray market providers still in operation. Our approach has been to stand out from the sea of sameness that customers are seeing through mass media and to engage with our target customers more directly through our strategic partnerships with key sports teams and organizations.
Building on top of the deals previously announced in Canada, most notably Maple Leaf Sports & Entertainment and the Ottawa Sports & Entertainment Group, we recently signed a partnership deal with ClubLink, Canada's largest operator of premium golf clubs, golf clubs with 40 courses across Ontario, and announced the creation of a new premium curling event in partnership with Curling Canada. The first ever annual single elimination March Madness style curling event that will host the top men's teams and women's teams from around the world. This focus on commercial deals drives marketing spend higher in the short term. However, it reflects the investment required to establish our brand in Ontario and help drive CACs of AUD 7,200. We expect to be able to leverage these valuable commercial partnerships to drive stronger player acquisition economics in future quarters as the sporting calendar becomes more robust.
As we look ahead to fiscal 2023, we are excited about the potential and our plan to deliver growth. We will be entering the first full season of the MLSE deal and expect to be able to drive significant top of funnel activity through those activations. We continue to invest in our product and app experience, and we'll be bringing new and exciting markets to our customers throughout the year. Lastly, it should be noted that Ontario market structure is well set up commercially for operators. Not being tethered to a casino, racetrack, or retail footprint that is no partner revenue share agreements, a nominal licensing fee and an effective tax rate of 18% of GGR make the overall future economics favorable as our platform attains further scale. I'll now hand over to Andrew Mellor, who will discuss our quarterly cash flow summary.
Thank you, Scott. Turning to slide 14 for the quarterly 4C cash flow summary. In the quarter ending 30 June 2022, net cash used in operating activities, excluding movement in player cash accounts, was AUD 54.8 million. Net cash used in investing activities was AUD 11.7 million, and net cash received from financing activities was AUD 92.9 million. It should be noted that there was a positive impact from the movement in exchange rates on the USD cash held of $24 million due to the move in the USD, AUD spot price during the quarter. I will now move through each of the main line items. Net cash used in operating activities, excluding movement in player cash accounts for the quarter ending 30 June, was AUD 54.8 million, an improvement from 64 million of operating outflows in the prior quarter.
Receipts from customers for the quarter totaled AUD 87.4 million. This includes net win from sportsbook and iGaming verticals of AUD 85.8 million, and the balance of AUD 1.6 million includes cash receipts from our European and New York B2B operations and cash receipts from our U.S. racing ADW business. Cash outflows during the quarter included cost of sales of AUD 46.1 million, which fell from the previous quarter, mainly as a result of movement in prepayments and accruals from the prior quarter. Non-capitalized staff costs of AUD 22.7 million were slightly lower than Q3. As we are reaching operating scale, the velocity of hiring in FY 2023 will continue to be reduced. Marketing cash outflow for the quarter was AUD 53 million in line with the prior quarter.
As previously detailed, the Australian marketing expense was AUD 9.6 million for the quarter. The U.S. marketing expense was $27.4 million, and the Canadian marketing expense was CAD 7 million. Administration, corporate costs, and GST paid on Australian net win was AUD 20.5 million for the quarter. This quarter-on-quarter increase was mainly due to increased prepayments, increased GST payments, and additional administrative and corporate payments in our Canadian business. Turning to the investing activities. Net cash used in investing activities during the quarter ended 30 June was AUD 11.7 million, down from AUD 26.3 million in the prior quarter. Over the quarter, the company capitalized AUD 10.4 million of technology and product staff wages as part of continued development of our sports wagering and iGaming platform, up from AUD 8 million in the previous quarter.
Turning to financing activities. Net cash received from financing activities during the quarter ending 30 June was AUD 92.9 million. As previously spoken to, in June, we welcomed a AUD 94.2 million strategic investment from SIG Sports Investments Corp, resulting from PointsBet issuing 38.75 million shares at a price of AUD 2.43 per share. The company has no corporate borrowings. Given our existing cash balance at 30 June 2022 of AUD 472.7 million, we are adequately funded to execute our strategy in the near term, and we'll continue to take a disciplined approach to setting up the company for long-term success.
Finally, along with announcing the strategic long-term investment from SIG Sports, we executed a pro rata deferred bonus equity option issuance to eligible shareholders, providing the ability for PointsBet to raise up to AUD 150 million at any time up until the 7th of April 2024, three months prior to the expiry of the DBEOs on the 8th of July 2024. PointsBet may elect at its discretion to allow holders the right, but not the obligation, to exercise the DBEOs. The pro rata entitlement to take up shares allows holders to acquire shares at a 20% discount should we choose to call the DBEO. Please refer to the announcements on the 20th of June for further details on the DBEO. Sam.
Thanks very much, Andy. Thanks for your time, and we'll now take questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your question, please press star then two. If you are using a speakerphone, please pick up the handset to ask your question. The first question today comes from Rohan Sundram from MST Financial. Please go ahead.
Hi, guys. Thanks for that. Just the one from me and maybe for Sam or Johnny. A question on the net win rates in the U.S. I noticed that it was up about 120 bits quarter-on-quarter, and it seemed to outpace the improvement in the gross win rate. Can you maybe just talk us through what you were talking about in the call around attraction you might be getting from managing for yield or focusing on a better quality customer. Maybe while you're there, if we can just talk about the market dynamics and if there's any improvement in this quarter on the competitive landscape and whether that had any impact on the net win in that quarter. Thanks.
Yeah, sure. Good day, Rohan. It's Sam. Yeah, I think the improvement in yield, obviously you gotta be a little bit careful that there's just not some short-term results variation there. But you know, our aim clearly is not about increasing turnover. Our aim is about increasing net win. You know, that's what we're pleased about that both the quarterly and the yearly results in the U.S., obviously we've dramatically improved net win 122% for the year in the U.S. It is our intention that what was historically levels of promotions that obviously drive turnover and drive gross win, those historical levels, you know, we are looking to bring them down as we focus more on having more net win fall to the bottom line.
It's great to see that. I think the other element is that the June quarter is a quieter quarter, in terms of the sporting calendar. From an acquisition perspective, you're not doing quite as much acquiring, and that's where a lot of your promotional spend goes on new clients. Yeah, we would like to see obviously, net win, the gap between net win and gross win margins closing over time. This is a reflection of the fact that we are more focused on net win, and less so on turnover. In terms of competitive dynamics, I might throw to Johnny after this, but yeah, it's always gonna be a very competitive market, Rohan, as we always said.
I mean, I think, you know, we can't forget the opportunity. I think I was reading some research that said the combined iGaming and online sports betting market was AUD 950 million or nearly AUD 1 billion of GGR for the month of May. You know, we're talking about, if you annualize that, a market that's already approaching AUD 12 billion in GGR. You know, the market remains as attractive as ever. Obviously the macro environment has asked operators to be more rational with their capital and perhaps more prudent, and we're certainly applying that framework. The competition is always going to be there, but I think it is fair to say that there has been some more rational behavior. Johnny, do you wanna add some comments?
Yeah, I'd probably add two comments. I think the first one, just to be very clear on, is that as a business here in the U.S.A., you know, we're in no way sort of chasing handle or turnover. You know, we are serving the needs of a sort of revenue-sort of generating customer and sort of really focusing on those higher value customer segments, as opposed to booking any handle that, you know, that wouldn't sort of generate sort of revenue, i.e., be loss-making. The second point would be from the improving margins both to the gross and net win perspective, is that we are continuing to see customer behavior improve on placing bets on non-core markets, particularly for in-play.
We're really enthused by the increased activity on in-play player props and in-play Lightning Bets, which again, are proprietary markets that we power through our internal technology on the NBA postseason, and again from next month in every state for MLB as well. You know, those non-core markets offer opportunities where there is more than sort of three-way options where we can book a higher book percentage and/or we don't have to compete as hard on price. That again, can allow us not only to grow activity and grow engagement with the platform, but also continue over time to incrementally increase our expectations and returns around gross win and net win margin.
All right. Thanks, guys. Appreciate it.
Thank you. The next question comes from Larry Gandler from Credit Suisse. Please go ahead.
Hi, guys. Thanks for taking the call. Couple questions. Building on Rohan's question, last year, in Q4 2021, net win margin was 3.3%, this quarter 3.5%. I heard what you said about, what's gonna lift that, you know, more in-play focus on, higher value customers. I would've thought there would've been more improvement in the net win margin. Is there something working the other way that we should be aware of? Was it, maybe as you pointed out, Sam, sporting outcomes?
Yeah, I mean, again, I think we've got to recognize. Larry, by the way, that quarter-to-quarter there will be, you know, sporting variation. I can clearly affirm that our aim will be to grow net win, you know, from what it was two years ago, from what it was a year ago, from what it is today at a consistent, you know, consistently. To improve that net win. Ultimately, you've gotta look at net win. That's what's most important.
Yeah.
The number at the bottom has gone up, what did I say? 122% year-on-year.
Yeah.
Ultimately that's what we're worried about. You know, as we improve our pricing and our models, you know, there is a scenario whereby we actually do attract a lower margin client. You know, because there's turnover out there that perhaps will be attracted to PointsBet, you know, on our service and our product. It's not necessarily all about margins. The bottom line is how much net win are you delivering?
Yep. Okay, understood. Thanks. My other question was pertaining to Australia. This might be for Andrew. Can you guys help us understand what the increase in the POCT in Queensland and New South Wales might mean? I don't know what portion of your revenue comes from those states there, or maybe you can give us a feel for how that's gonna change the margin of that business.
Yeah, I'll take that, Larry. I mean, I think there's a bit to play out, you know, as it relates to Queensland. I'm very happy that we've got Andrew Catterall, Australian CEO in place because obviously there's a bit happening in Australia at the moment, and he's all over this, and obviously, we're part of Responsible Wagering Australia, which is the industry group here. You know, I think there's a bit to play out there. There's no doubt that any increase in point of consumption tax is a negative. Yeah, we'll talk a little bit more about forward-looking considerations at the full-year results, Larry.
You know, I think our belief is that as a business, as I've spoken about for the Australian business, you know, we've got to this point without a lot of you know, utmost attention from the group on the Australian business. While there are potentially some headwinds there, I'm really confident that there's more upside to come for us as we focus on our product and deliver product initiatives for the Australian business, which is not something that we've necessarily done. A lot of those initiatives are around you know, more efficient allocation of promotions and making sure that we're maximizing margins. Yeah, while any increase in fees and costs are disappointing, and I think yeah, again, we'll have more to say about forward-looking expectations about that.
I've got a lot of confidence in the improvement that can come from the Australian business.
Okay. I might see if I can just paraphrase something because just tell me if this is not what you're saying. I'm thinking the increase in cost may not necessarily be a bad thing. Do you have confidence, perhaps, that you can refine your customer base so that you end up improving your, you know, call it your margin such that you can absorb those extra costs? Is that sort of what you're thinking?
Yeah. I don't wanna be too specific, but that's the general theme of what I'm saying, is that there is a lot of improvement to come for us from, let's call it initiatives that we have in the pipeline that ensure that we're allocating value more accurately. And yeah, we're getting efficiency from doing that. Yeah, in general terms, you're on the money.
Okay, thanks.
Thank you. The next question comes from Don Carducci from JP Morgan. Please go ahead.
Morning, everyone. Just a quickie from me. I noticed your average account balance per customer is down double digits. To be clear, that's the total client cash you hold divided by your total active cash customers, and that's dropped from well over AUD 100 per customer to about AUD 90 now. I know this isn't a seasonal adjustment. Are you seeing smaller bet sizes or maybe your customers with higher retained balances are churning out?
Yeah. You've got me a little bit there, Don. It's not one I've looked into closely. What I would say is a couple of things. You know, I think if I look at the Australian business, if you look at the revenue we've generated for the year, relative to the actives that we've got this year, the value of our clients has gone up year-over-year, so the average revenue per active has gone up year-over-year. We definitely are focusing on a better quality of client. I suppose if I'm off the top of my head thinking about any movement in client-player cash balances, I would point to seasonality and the fact that some people are, you know, absent.
You know, obviously, we give a 12-month active figure that takes into account peak periods when most clients are betting. At this time of the year, in both Australia and the U.S., it really, in particular in the U.S., it really is the quiet time.
Yeah. Right. You know, it's definitely not a seasonal adjustment, but if you're managing for a better quality customer, better yield, does it make sense that your customers would be carrying a lower cash balance with you?
No, it wouldn't. No, no. We would expect that average, if you call it cash balances, if we're focusing on a better quality of client, would increase. So as I said, I can only put it down to probably we're at the bottom of the seasonality and a lot of people basically empty their accounts, come back at the start of football season in the U.S. or footy finals and racing here and start punting. Yeah.
Great. Thank you very much.
Thanks, Don.
Thank you. The next question comes from John Campbell from Jefferies. Please go ahead.
Hi, guys. Thanks for the call. Just sort of further on the sort of customer active client base that you've achieved in the U.S. The growth in quarter-on-quarter in active clients slowed in the fourth quarter to 7% as your presentation shows, which is down, you know, from the double-digit growth rates we've seen in the last, you know, probably last 10 quarters potentially. Can you just maybe talk around that 7% growth rate, whether there are any factors within the quarter that led to that slower growth rate? Secondly, just on the NBC free-to-play app, you know, it's generated a lot of leads for you. Can you just give us an indication on how those leads are being converted into cash active clients? Thanks.
Yeah. Hi, John. Yeah, I think in terms of client growth rates, couple of things. You know, as you get bigger, and I'll use the Australian business as an example again. As you get bigger, in terms of your base, client base, it's harder obviously to keep producing the bigger percentages. You know, a portion of your marketing spend—a growing portion of your marketing spend is more about retention to your existing clients. It's not just all about attracting new clients. You know, you can take the example of Sportsbet here in Australia, the huge marketing spend that they're putting out there isn't just about acquiring new clients, it's about hitting their existing huge database and keeping them betting.
I know the calculation that is available to say, "Okay, actives have gone up this much. We've spent this much on marketing." You've got to take into account that a lot of the marketing spend is an acquisition marketing spend. There is churn, obviously, as well, which we don't shy away from. Yeah, just to give some clarity there. It is also the quietest quarter from an acquisition perspective from the U.S. market in particular. You know, we're looking forward to college football coming back shortly and then professional football in the U.S., and off we go again. There is this overarching message that we're putting out there that we are focusing on genuine clients over volume clients.
Again, we put client numbers out there because it's a metric, and we know that, you know, it's relevant. But the main point for us is, you know, we're not gonna keep clients on the books with promotions and generosities if they're not genuine clients, and they're not gonna generate net win for us. There will be a result of where that approach has changed from 12 months ago. That will cycle. That will have to cycle through at some point and will be a negative drag on our active numbers. The second one was NBC free-to-play, I think you asked about. Yeah, I mean, I think-
Yeah.
I've spoken about this previously before. You know, we've never been on the starting line of a state, sort of going live. Michigan was the closest we got, but even then, it was sort of a soft launch starting line for us. You the scenario that I've spoken about previously is, you know, leads that we've got into states like New Jersey or, Iowa, et cetera, you know, we can go to those clients and a portion of them will sign up and be of some value. Pretty much all of those clients already have a FanDuel or a
Yeah.
DraftKings or a BetMGM account. You know, we're pretty keen to see the impact of having a database of x thousand clients when we go live in some of these newer states, and to see the impact there. But I think it's fair to say that the clients through a predictor app, a free-to-play type mechanism, are always gonna be sort of a lower value client sort of tier. You know, they're not gonna be-
Yeah.
It's very unusual for that to spring out of VIP, for example.
Yeah.
Just to give some guidance on value there. Yeah.
Yeah. Overall, what you're saying is that the NBC client leads haven't really. Until you get onto, you know, the states where you're on the starting line, it's not gonna be as valuable until you get onto those particular states opening up.
Yeah. I think if you're talking.
Yeah.
about it in terms of how significant have those leads been in the live active states? It's not a huge,
Yeah.
contributor. Obviously, it's a big branding experience. It's national, it's growing our brand, et cetera. Yeah, that's a fair point.
Got it. Okay. Thanks very much for that.
Thanks, John.
Thank you. At this time, we're showing no further questions. That does conclude our conference for today. Thank you for participating. You may now disconnect.