Thank you for standing by, and welcome to the PointsBet Holdings Limited Q3 FY 2022 Appendix 4C Investor Presentation Conference Call. 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 1 on your telephone keypad. I would now like to hand the conference over to Mr. Sam Swanell, Group CEO. Please go ahead.
Good morning, and thank you all for joining the PointsBet Holdings Limited Q3 FY22 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 our 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 3. The March quarter has been another period of progress for the company, and pleasingly, this momentum has continued into April with both the Australian and US businesses trading above expectations.
As noted at the FY 2022 results announcement, PointsBet had a successful 2022 Super Bowl, becoming the first ever sports betting operator to integrate into Super Bowl programming via our partnership with NBC, including Pre-Game segments and NBC ticket integration with viewership in the tens of millions. Underpinning our operational success was PointsBet's In-House technology, which again continued its impressive record of successfully managing peak days without incident.
Earlier this week, we were thrilled to be honored by the eGaming Review as the top sports betting operator at the EGR North American Awards for the second successive year. The recognition follows PointsBet's notable exhibition of scale and growth, ability to innovate and differentiate, commitment to responsible gambling, quality of marketing, and of course, quality of product.
We're also pleased that our US app was again ranked in the top three out of 34 in the latest Eilers & Krejcik app by app testing, with the testing group commending PointsBet for In-App speed and a diverse feature set. This recognition is a testament to the fact that PointsBet is now hitting its stride and building upon the investment we have made in our technology and product.
This investment, together with our continued refinements to our proprietary trading and quants models, has been bearing fruit, and this can be evidenced by our performance during the NCAA March Madness tournament. We debuted expanded Pre-Game, In-Play, and same game parlay offerings for college basketball as part of our Odds Factory proprietary technology integration. The Odds Factory integration also introduced Lightning Bets to NCAA basketball markets.
Lightning Bets provide clients more options on real-time micro markets such as team to score next, player next minute, next 4 minute markets, as well as our live same game parlay feature. Compared to the 2021 March Madness tournament, In-Play handle increased by 116%, and In-Play represented 49% of total tournament handle, up from 35% last year.
This validates our thesis that In-Play betting will continue to increase in the U.S. market as a percentage of overall bets, and PointsBet's superior optimized client experience in this area will continue to differentiate us from our opposition. During the 1,4, we also delivered continued enhancement of our broader In-Play product, delivering on our stated strategy to lean into improving the bettor experience with more markets, higher uptime, a reduction in bet delays, quicker cash outs and settlements.
In January, we were the first sportsbook to offer live In-Game same game parlay options for NFL and NBA contests. Clients now have the ability to instantly build their customized PointsBet live same game parlay while tracking odds, play performance, and team stats. I'm very proud of what the tech and product teams have delivered over the last 12 months. It's a testament to their skill, commitment, and desire to deliver a market-leading product.
From a market launch perspective, during the 1,4, we had successful launches in both New York and Pennsylvania, and we are now amongst an exclusive group of operators that are live in New Jersey, Pennsylvania, and New York. This is important as there is a significant movement of people between these states on a daily basis, and these customers want a seamless one app betting experience.
Operators in New Jersey, Pennsylvania, and New York are Well-Positioned to gain a greater share of a client's wallet. In New York, we are again leveraging our NBC partnership through SportsNet New York, a part of the NBC Sports Group. SNY is the regional broadcast home of Major League Baseball's New York Mets, in addition to carrying supplemental coverage of the NFL's New York Jets. They offer PointsBet year-round multi-platform media and marketing opportunities.
Similarly, in Philadelphia, we have access to NBC Sports Philadelphia, delivering integrations exclusively for all 76ers, Phillies, and Flyers games, an extremely powerful asset. For our launch in New York, we deliberately took a more disciplined approach than some of our competitors. However, despite this, we are seeing some promising results when compared to our previous state launches.
New York had the highest volume of first-time bettors in the 1,4 compared to our other live states. Deposits from first-time depositors in New York are also, on average, almost 3 times higher than in our other states. Despite being only live for approximately 1/2 of Q3, early indications of first-time bettor customer value is also looking very promising in Pennsylvania. We will now drill down into particular focus areas for the 1,4. Turning to Slide 4.
Compared to the group result for Q3 FY 2021, to be referred to as the PCP, in Q3 FY 2022, sports betting turnover was up 54% to a new quarterly company record of AUD 1.4 billion. Total group net win was up 18% at AUD 76.9 million. We will speak later to positive Short-Term variance experience in the US in the PCP. Now turning to Slide 5.
The Australian trading business continued its strong performance, ending the 1,4 with turnover of AUD 579 million, up 37% compared to the PCP. Gross win of AUD 78.8 million, up 44% from the PCP. Net win also saw strong growth at AUD 52.3 million, up 37% from the PCP.
Gross win margin was 13.6%, and net win margin was 9%, a material improvement on H1 as promotions as a percentage of gross win reduced. PointsBet's app download volume grew by 11% compared to the PCP. A pleasing result considering marketing spend fell considerably and thus is a result of prior investment continuing to support the adoption of the PointsBet app by the market.
The 1,4 saw a 34% increase in Multi-Turnover per active compared to the PCP, and a 25% increase in same game Multi-Turnover per active as a result of improvements in our breadth and depth of product offering across the Multi-Segment.
With a successful Spring Carnival campaign at the tail end of 2021, the focus has turned to profitability for the remainder of the financial year, and we continue to track towards and expect positive EBITDA for the Australian trading business for FY 2022. Now turning to Slide 6. A few results. H2 marketing expense will be significantly lower than H1 as a result of this strategy.
The Australian trading business's Q3 marketing expense was AUD 7.1 million, which assisted in delivering twelve months rolling cash active clients to 31 March 2022 of 232,763, an increase of 47% compared to the PCP. While 1,4-on-1,4 actives were flat from the December 1,4, we note that cost per acquisition was better versus the PCP.
We also note we ran more aggressive sports promos in the PCP and had a greater focus on genuine clients this 1,4. This led to net win per active client in the 1,4 being a significant improvement on last year. To run through highlights for North America. Thank you, Sam. Turning to Slide 7.
The US trading business ended the 1,4 with turnover of AUD 819 million, up 70% compared to the PCP, and gross win of AUD 46.1 million, flat from the PCP. Total net win was AUD 24.6 million, down 8% from the PCP. However, it should be noted that Q3 FY 2021 benefited from above trend trading margins as New Jersey clients lost back their winnings from the prior 1,4.
As a result, Q3 FY 2021 gross win and net win outperformed from what we would have expected in a normalized trading environment. As can be seen on Slide seven, to remove this volatility of prior periods, we have provided a year to date to Q3 comparison. This shows handle up 36%, gross win up 84%, and net win up an impressive 157% compared to the PCP. For Q3 FY 2022, sports betting gross win margin and net win margin were 5.6% and 2.3% respectively. The PCP, which we understand is consistent across the sector. Please refer to appendix one of the presentation of handle, gross win, and net win.
PointsBet's blended US online market share in the states we were operational for the full 1,4 was 3.6% compared to 4.2% in Q2 FY22. A further breakdown of market share per state can be found on the bottom Right-Hand side of this Slide. Our New Jersey sportsbook handle experienced a cannibalization from the successful launch of our New York operation, as well as from our New Jersey casino vertical.
Noting New York generated $6.3 million of net win in the 1,4, and our New Jersey iGaming net win increased 1,4-on-1,4. On March 5, we saw Illinois return to a remote self-registration environment. In Illinois, we've enjoyed steady and healthy market share during the in-person registration. In February, PointsBet achieved online handle share of 8.8% and online GGR share of 9%.
Based on internal modeling, we expect to maintain a similar market share when the March results are released. Our ongoing strategy in Illinois with remote Self-Registration centers around acquisition and retention efforts targeted those High-Value cohorts and ensuring they continue to feel rewarded for betting with PointsBet. Turning to Slides 8 and 9. $2.2 million with working media cost per FTB of well under $500 from Q2 FY22.
As we commented on our last results call, in Q3, we studied client segments, moving away from tactics that bring in volume FTBs with low lifetime value, increasing player days, bet counts, and share of wallet. This investment in rolling cash actives to 249,000, up 96% compared to the PCP and up 18% 1,4-on-1,4.
It should be noted that this metric also reflects our retention efforts, not just acquisition efforts. Further, a reminder that a sizable portion of this 1,4's marketing investment was into audiences outside of our 10 live states. This investment acts to build brand awareness and a database nationally to assist in future state launches. As set out on Slide 11, I will now speak in more detail to In-Play betting, customer economics, our iGaming products and increasing TAM.
Turning to Slide 12. Q3 FY 2022 has seen continued momentum in the rollout of our In-House betting products through OddsFactory. Our In-Play betting strategy leans into providing a superior betting experience for our customers through increased product offerings and more reliability in market uptime and speed of bet placement. During the 1,4, we replicated the success of our NFL with basketball.
This demonstrates progress towards a market-leading In-Play betting experience among the core U.S. sports, which helped In-Play handle increase to 59% of overall handle for the 1,4, up 22% versus the PCP. Having control of the product has allowed us to make many customer-facing improvements. With more markets, higher uptime or less rejected bets, a reduction in bet delays, quicker cash out and quicker bet settlement.
Furthermore, the betting experiences continue to improve following the release of our In-House Odds Factory offering as NBA product uptime is now close to 99%, and college basketball uptime during the March Madness tournament improved to 93%. Clients are now presented with more markets to bet on, including an industry-first live same game parlay offering and Lightning Bets markets.
This speaks to the progress we are making to position PointsBet as the home of In-Play betting and in driving tangible improvements in KPIs. Turning to Slide 13. To ensure timely marketing payback and strong return on investment, we maintain an acute focus on the cost per acquisition to lifetime value ratio. It is imperative in this industry as any other, that the lifetime value of clients acquired is expected to handsomely exceed the cost of acquisition.
We continue to make progress on this front. This 1,4, relative to the PCP, I'm pleased to say that we got more from less. That is, we delivered more STBs from a slightly less marketing spend. On one hand, we were more efficient. As mentioned previously, working media CPA was again well below $500 and trending in the right direction.
At the same time, we have indications that the clients we've acquired in this 1,4 are more valuable on average. The average first sportsbook cash stake of new clients was up 91% versus the PCP, assisted by high quality launches in the states of New York and Pennsylvania. Our internal models predict that clients acquired this 1,4 under our more targeted strategy are on track to deliver a net win payback in around 12 months, an improvement on recent 1,4s.
Creating a sustainable business model that delivers a path to profitability continues to be our primary ongoing focus. Now turning to Slide 14. Our work with NBC continues to deliver results. We have found a strong go-to-market solution for each state via NBC that drives lead generation, brand awareness, conversion, and retargeting to our In-Play product once they have signed up.
PointsBet and NBC Sports Chicago partnered in producing a series of live sports betting broadcasts known as BetCast during 4 Chicago Bulls games in March and April. The live In-Game coverage was enhanced by graphic overlays of real-time betting odds, from core markets to player props to future markets.
Compared to the previous 15 Bulls games without a BetCast, on average, these games saw 41% more unique bettors, 39% more total bets, 17% more handle, 107% more In-Play unique bettors, and 81% more In-Play bets. Throughout Q3, an additional 46,000 leads were generated by NBC's free-to-play Predictor app. This raises our total lead base via Predictor to over 653,000, and currently more than 25% reside within our 10 live states, allowing PointsBet to target them with sign-up messaging.
Looking forward, we will also leverage these leads for future state launches. For example, we have approximately 45,000 leads across Ohio and Maryland, where we expect to go live on the starting line during FY 23. Turning to Slide 15. The iGaming net win result for the 1,4 was AUD 5.5 million. We were particularly excited to have launched in West Virginia in January, Pennsylvania and Ontario in April, while also introducing our branded table live dealer solution in New Jersey and Pennsylvania through our partnership with Evolution.
West Virginia and Pennsylvania marked the 1/3 and fourth U.S. states we are introducing our iGaming platform, following the successful launches in Michigan and New Jersey, while Ontario is the first jurisdiction to go live in Canada.
Online casino products have seen a rapid growth in the US, and we're quickly scaling our online casino business and look forward to expanding and refining our suite of products throughout the year to deliver more options for our users. We have significant increase in game titles scheduled for rollout in the June 1,4.
The main product releases from Light & Wonder, formerly Scientific Games, will see Michigan titles increase by 70%. We also expect to see titles double in Ontario compared to the current 1,4. Finally, before I hand it over to Scott Vanderwel, CEO of PointsBet Canada, I would like to comment on Slide 16. PointsBet's total addressable market continues to grow.
Since the last 1,4ly update, we have launched sportsbook operations in New York, Pennsylvania, and Ontario, together with iGaming launches in West Virginia, Pennsylvania, and Ontario. As of today, we have live online sportsbook operations in 10 US states, plus Ontario, Canada, and live with iGaming in four states, plus Ontario, Canada. We have previously anticipated to be live in 17 states, plus Ontario during this calendar year.
However, we have now proactively decided to focus on a further four priority states only in the remainder of the calendar year. We expect three of these states to be new state launches, where we will be hard launching on the starting line and one priority catch-up state. This would mean we would finish the calendar year 2022 being live in 14 states plus Ontario.
This adjustment in plan will allow PointsBet to focus more strongly on the priority launch dates and to continue the positive momentum we have built over the last 1,4 in particular. Any outstanding catch-up states remain part of our future launch plans beyond calendar year 2022. I will now hand it over to Scott Vanderwel.
Thank you, Johnny. Now turning to Slide 17. We are proud to be one of the first operators regulated by the Alcohol and Gaming Commission of Ontario, as it showed the confidence that the regulators have in our ability to deliver an innovative, safe, and responsible experience to the Canadian consumer. As we have previously communicated, we are focused on delivering an authentically Canadian gaming experience and product to the Ontario sports fan.
Ontario is Canada's most populous province, with over 14.8 million people and a host of professional sports teams in the mainstream markets. Over the last few months, our team has been scaling and focusing on building partnerships with athletes, teams, and organizations that matter to Canadians.
As announced earlier this month, PointsBet was appointed an official sports betting partner of Maple Leaf Sports & Entertainment, which own and operate the Toronto Maple Leafs of the NHL, the Toronto Raptors of the NBA. As you rarely get the opportunity to unite with an organization that spans across all four professional leagues and carries this level of fan engagement. This deal complements previously announced deals in Canada.
Since opening day, April 4, we are seeing positive signs that our client base consists of a high-quality bettor, as both bet count and average bet size are tracking well ahead of our forecasts. While the regulator has not yet released market share data, an early report from Morgan Stanley that was circulated on April 25 suggests that PointsBet is currently making up about 4.3% of total sports betting app downloads in Ontario.
We are happy with the performance month to date, especially because PointsBet is a new brand to Ontario, where we are acquiring net new customers and not simply marketing to an established database or migrating users from one platform to another. In launching PointsBet Canada into Ontario, we have built up a team of 40 full-time staff in Ontario, supporting all aspects of the business.
The Canadian team will leverage not only the proprietary technology and market-leading product that the company has built, but also the global scale we now possess with a one team approach supported by staff in numerous continents. I'd like to now hand it over to Andrew Mellor to run through the 1,4ly cash flow summary. Andrew.
Thank you, Scott. Turning to Slide 18 for the 1,4ly 4C cash flow summary. In the 1,4 ending 31 March 2022, net cash used in operating activities, excluding movement in player cash accounts, was AUD 63.5 million. Net cash used in investing activities was AUD 26.3 million. It should also be noted that there was a negative impact from the movement in exchange rates on the USD cash held of $8.6 million, mainly due to the move in the USD/AUD FX spot price during the 1,4.
Much of the Q3 FX spot price move has reversed in April. I'll now move through each of the main line items. Net cash used in operating activities, excluding the movement in player cash accounts, was AUD 63.5 million in the 1,4, up from AUD 56 million in the prior 1,4.
Noting that in Q2 we received the one-off New York license fee reimbursement from Resorts World Bet, as previously disclosed. Receipts from customers for the 1,4 totaled AUD 78 million. This includes net win from sportsbook and iGaming verticals of AUD 76.9 million, and a balance of AUD 1.1 million includes cash receipts from our European and New York B2B operations, as well as cash receipts from our US Racing ADW business.
Cash outflows during the 1,4 included cost of sales of AUD 51.3 million, which grew on the previous 1,4 in line with increased trading and handle activity in the US. Non-capitalized staff costs of AUD 23.4 million, with global employees growing to 630 at the end of Q3 as we continued to be able to scale.
In addition, we have support staff which are engaged by 1/3-party service companies. As we now approach operating scale, the velocity of hiring in Q4 has been reduced significantly and will continue to reduce into FY 2023.
Marketing cash outflow for the 1,4 was AUD 53.7 million, down from AUD 65.6 million in the prior 1,4. This 1,4-over-1,4 decrease was mainly driven by a fall in the Australian marketing expense. As previously spoken to, the Australian marketing expense was AUD 7.1 million for the 1,4, and the US marketing expense was AUD 33.2 million for the 1,4.
As previously disclosed, the Australian marketing expense will fall significantly in H2 versus H1. The US marketing expense in Q3 was slightly higher than Q2 as we launched new US states, including the recent launches of New York and Pennsylvania, our tenth US state of operation. Administration, corporate costs, and GST paid on Australian net win was AUD 13.6 million for the 1,4. Turning to investing activities.
Net cash used in investing activities during the 1,4 was AUD 26.3 million, down from AUD 43.6 million in the prior 1,4. The main driver of this Q3 investing outflow was the market access payment made to the Pennsylvania Gaming Control Board of $11 million to receive our sports betting and gaming licenses. In Q4, we expect market access payments to be significantly lower than Q3.
Over the 1,4, the company capitalized AUD 8 million of technology and product staff wages as part of the continued development of our sports wagering and iGaming platform. There was minimal cash flows from financing activities for the period. We continue to take a disciplined approach to setting up the company for Long-Term success. At the end of March, we had AUD 424.9 million in corporate cash and no corporate debt. I'll now hand back to Sam.
Thank you, Andrew. Turning to Slide 19. Before I open for questions, I would like to comment on the group's commitment to responsible gambling. Responsible gambling is seen as a core function of sustainability as it emphasizes developing Long-Term relationships with loyal players, and we're committed to delivering a premium experience through products meant to be enjoyed as a form of entertainment. Effective responsible gambling begins with a genuine commitment across departments.
This includes regular collaboration on all projects, such as ensuring RSG safeguards are included as part of strategic partnerships, enhanced staff training, and dedicated RSG teams conducting routine surveillance of the customer database for indications of gambling harm. We also engage with researchers, problem gambling advocacy organizations, and responsible gambling experts to ensure best practices are being met.
In FY23, we will lead a research project in collaboration with the National Council on Problem Gambling and will also be launching a dedicated responsible gambling awareness campaign. There are various touchpoints which are included throughout the customer journey aimed at normalizing healthy play and minimizing gambling-related harms. We provide customers with the tools necessary to manage their gambling, including temporary take a break, permanent self-exclusion options, and deposit pre-commitment functions. Thanks for your time. I'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 request, please press star two. If you are on speakerphone, please pick up the handset to ask your question. Your first question comes from Rohan Sundram from MST Financial. Please go ahead.
Hi, Sam. Thanks for that. Just a couple from me. Firstly, can you please just build on some of your comments in the call around your recent new market entries and some of the early learnings and what maybe has encouraged you or surprised you in markets like New York, Ontario, and Pennsylvania, please?
Yeah. Good day, Rohan. Yeah, I think I'll split the two out. I mean, I think New York, you know, obviously we were not too far behind the starting line. I'd classify New York, you know, we went in with the measured strategy that we've spoken about. I think, you know, our product has resonated in that state.
You know, we gave some KPIs that the quality of clients that we're acquiring there are very strong. In Pennsylvania, obviously, we were very late to the market, but we've now pushed out sports betting and iGaming. So we're able to compete fairly there. In the short time that we've been live there, again, those customer per customer KPIs are strong, I'd say.
In broad terms, I'd say we're seeing stronger customer metrics from those later states, New York and Pennsylvania, than we've necessarily seen from earlier states. From an Ontario perspective, really happy that we hard launched on the starting line, but with both sports betting and iGaming simultaneously.
Obviously, we haven't done that before, simultaneously or been on the starting line. I think, you know, when we talk about a starting line in Ontario, we need to be a little bit measured. I mean, there has been a flourishing gray market, and then on top of that, there has been a sort of operators from the sort of semi-government agencies running books for some time. It's not a new market, but again, strong metrics.
I think now that we've got the product that we've, you know, had the vision of delivering, it's doing what we want it to do, which is attract bettors. You know, we wanna appeal to bettors, and we wanna lean into those better quality clients. Both, you know, all of Ontario, Pennsylvania, and New York, I think are bearing some of that fruit.
Thanks, Sam. Last one from me is on the competitive environment, how would you describe it now versus, say, six months ago?
Well, September, obviously, October, November, you know, we spoke about that period, you know, on previous calls. That was when it was, you know, really off the charts. You know, but then you've gotta talk about it was still pretty strong when New York launched 'cause everyone was still going very hard at that stage.
I mean, obviously, you know, WynnBET have come out and, you know, they were the first sort of one to sort of say they were gonna pull back very strongly. Then, you know, Caesars came out on their last call and said that they were gonna pull back strongly, but I think they noted that would take some time for them to be able to implement that, you know, to pull back on some of the marketing.
You know, it certainly was a little bit eased off, but I think now that March Madness is completed and perhaps most of the media bookings and plans that operators had, you know, sort of pre-booked in late last year probably flushed through and run through. You know, I expect and we are seeing it, you know, that easing off.
Perhaps not as quickly as we would've expected. You know, I think most of the operators have some form of reporting next week, you know, Caesars, BetMGM, DraftKings, et cetera. We'll get some color there. But it's certainly, you know, just to reiterate, it was very, very hot for a long time there.
You know, if our own results are anything to go by, and the fact that we feel we've made progress, then you know, perhaps that's been helped a little bit by some easing off just lately.
Nice, Time .
Thanks, Rohan.
Thank you. Your next question comes from Don Carducci from J.P. Morgan. Please go ahead.
Morning, everyone. I think it might be worthwhile revisiting the NBC obligations. I think in 2020 you committed to almost $400 million, progressively increasing amounts over the five-year media partnership. Now here we are a couple years later, and if we convert that into AUD, it's about AUD 550 million that you owe NBC
. I know that you've got, what, AUD 425 million in cash remaining if we account for clear cash. You know, how far into these increasing payments to NBC are you? Because I think it's important to know, do we have 90% of the 550 to go, 10%? Because it feels like a big delta at this point in time.
Good day, Don. It was obviously a $393 million partnership, you know, in terms of value to be delivered, paid for partially in cash and partially in equity. You know, obviously at the time, we issued some shares and we issued some options. The cash amount was, I think, roughly $273 million US. That's the number to be paid for over 5 years in cash. Back-Ended obviously, it starts off smaller and then it grows over the 5 years as we plan to be in, you know, a greater number of states.
Okay. If we take that $273 million in cash, that's US dollars, that's about AUD 380 million. I mean, have you already paid 9% of that or 90%, or you've only paid 10% because it is increasing? I mean, presumably you would have more than 1/2 that amount left to go, given that it's a 5-year deal, we're 2 years into it. Do we have 70% of that remaining to pay to NBC?
Yeah, I don't think we've disclosed that, but yeah, it's Back-Ended, so we're 2 years into a 5-year deal, so we're not even 1/2way and it's back-ended, so it's, you know, it's definitely more than 50%, that's for sure.
Right. Okay. All right. It's fair to say you probably still owe them almost, you know, AUD 200 million. Is that fair?
I'm not gonna comment on the number because I don't know exactly what the number is, Don, but yeah, you can work out roughly the math pretty simply. Yeah.
Maybe if we chat through the change in strategy for the state rollout and you're losing share in states you've been live in. I'm glad you're finally starting to slow the rollout as Johnny said, but you know, the land grab strategy that was apparent at the onset of legalized US sports betting feels much less sensible than maybe going into preservation mode.
If that's not specific enough of a question, maybe you can explain, you know, what are these other three to four states that you're gonna go live into by the end of this year? What is that gonna add to PointsBet that you don't already get with the recent launches in New York, Pennsylvania, et cetera?
Yeah. I think, you know, obviously we've acknowledged that we've taken a loss in market share over the last 6 or 7 months, you know, under the heat of that marketing. You know, I think I'm focused on the fact that, you know, for the 3 1,4s today, we're up 157% net win. You know, for the 9 months to the end of March, the PCP we're up 157% versus last year.
We're definitely making progress. We've lost market share under that heat, but we're definitely making progress. I suppose to your point about, you know, we're not immune to looking at what's going on in the marketplace, and we understand the focus on, you know, disciplined behavior.
I think, you know, we've made the point that there's going live on the starting line of states is a priority. You know, that's something that we haven't been able to do. We got a taste of that in Ontario. That's our priority. States like Maryland, Ohio, assuming the regulatory process gets through, et cetera, they would certainly be part of the four states that we plan to launch in the remainder of the year.
We're hopeful, there's a process going on in Kansas at the moment, so we're hopeful that Kansas can get over the line, and a state like Kansas would be part of our plans this year because we understand that they'd wanna get that live, ASAP.
In terms of catch-up states, you know, we're still deciding which of the ones that we haven't prioritized yet will take priority.
Yeah. Okay. In talking to that growth that you're talking about, you know, when I think about the active customers and just two more quick questions from me. You know, that 2Q 2021 to 3Q 2021 period, you know, you grew actives 90%, and that was well before you added a handful of very populated states that NBC has a massive footprint in.
New York, Pennsylvania, West Virginia, Connecticut. You know, this period has the Super Bowl, you've got March Madness, and you launched prior to those events. Why haven't you achieved commensurate growth in active customers from 2Q 2022 into 3Q 2022 relative to what you would've done last year? It just seems like a big miss in terms of the US active customer growth.
You know, I can't check all your math there, Don, but I mean, I think that once you're building off a larger client base, obviously the exponential increases gets a little bit harder. I think we've been pretty clear, and we've called out in the marketplace that there's a lot of frothiness in some of the numbers that are out there.
There's a lot of clients that are basically not worth your effort. We've made it pretty clear on this call and the previous one, that we're gonna focus on quality over quantity. I think you're gonna see some other competitors report over the next couple of weeks and perhaps see that they haven't necessarily followed the same path and the low value that is in some of those client segments.
While we may give up some sheer volume of clients, in terms of delivering net win and quality of clients, that's, we think we're making good progress.
Okay. Final one from me. You know, you'd mentioned the competitive environment. As we think about the Australian industry, you know, News Corp's backed Betr is gonna launch a greenfield. You know, what do you expect happens to the profitability for, you know, players at your scale? You know, kind of right now, there's probably only four, you know, Tabcorp, Ladbrokes, yourselves and Sportsbet.
Maybe in other words, if you start burning the candle at both ends 'cause News Corp is entering a greenfield, can you afford to lose money in the US and Australia? You know, what does that do maybe for the outlook of your focus on the Australian business?
Yeah. I mean, look, got great respect for Matt and Andrew and the team there. You know, they'll get off and give it a go. You know, I wouldn't say that we're taking too much focus on that solely at this point in time. I think our approach with the Australian business, as we've spoken about last 1,4, was we've got to this point without really giving the Australian business any focus or love.
The fact that we're on track to deliver a 1/3 positive year of EBITDA. You know, we've lifted marketing from like AUD 20 million to AUD 50 million to AUD 60 million and done that by remaining self-funded. We haven't necessarily had the scale inside the business to service both the U.S. and Australian product needs equally.
The US has been focused on launching states and building out the In-Play product and casino, et cetera. Australia really hasn't had a lot of love from our, you know, our core area, which is product excellence. We've got a good product in Australia, but we see so much room for improvement there. You know, we're in the process of hiring an Australian CEO.
Very confident that we'll have that filled this 1,4. With the scale that we now have at a global level, we can allocate the required level of product and tech resources on an Australian sort of product roadmap as well. You know, we think the Australian business has terrific upside.
Yeah, while that business will add extra pressure to the competitive landscape, I think we can, you know, sit here confident that our upside is more than enough to offset that.
Awesome. Thanks, Sam. Thanks, everyone.
Sure.
Thank you. Your next question comes from Joe Stauff from Susquehanna. Please go ahead.
Thank you. Good morning. I wanted to ask, you know, again, on certainly look, using Illinois as a case study and thinking about, you know, your recent launches in New York, Pennsylvania, Virginia, where you do have NBC RSNs and, you know, just kinda like the potential that you have to maybe replicate or come close to what you've done in Illinois, where you also have an NBC RSN.
Can you talk about that? I mean, certainly those states really account for the bulk of the increase handle just on a sequential basis. If you could talk about that strategy.
Yeah. I mean, I think, you know, we've spoken since the start of the NBC deal now about the value of the Chicago RSN and how, you know, we believe that's played a role in helping us fast-forward, let's call it, our trust and credibility as a brand. It's one of the reasons we, you know, we have circa 9% in the state of Illinois.
As Johnny mentioned, I think even post the opening of remote registration, we think we've based on internal modeling, we're holding our share well. Yeah, we do put, you know, a decent degree of our success in Illinois down to that asset and what it's been able to do for us.
Yes, I mean, we've called it out, you know, whether it's the Washington DC RSN that will service Virginia and Maryland. Remember when we launch Maryland, we'll get the benefit of that. Obviously, the Philly RSN that's servicing Pennsylvania and New Jersey, and then SNY that's servicing New York and New Jersey.
We go from having one RSN to support, you know, our efforts to having four. That's, you know, that was again, part of the increasing back-ended nature of the deal with NBC taking that into account. It, yeah, it certainly, you can't get a more targeted audience, obviously. Johnny spoke about the fact that we've been doing these BetCasts and some of the statistics that we've seen when we've done them.
Yeah, it's a big part of our plans for those states and, yeah, part of the optimism for why we can grow from our current market shares.
Makes sense. Just one Follow-Up, if I could. Whether it be Scott or Sam or Johnny, I just wondering what your first observations are at the Ontario market. You know, it's obviously been open for just under a month.
Anything you could share with us, you know, above and beyond, you know, obviously everyone can access that download activity. But is there any, I guess, early observations with respect to just GGR or, you know, kinda handle trends that you could share with us?
Yeah, I'll start and then Scott can jump in with any further. I mean, look, it is very early on, and as I noted, I mean, it's not a new market. You know, bet365 is converting clients from their gray app to their new app, and others are doing likewise.
You know, our early behavior, but again, this is PointsBet. As I said, we've seen good average bet size, high deposit size, just all the things that you would associate with a good quality client base. But again, that's what we're trying to do. You know, that's what we're leaning into. Scotty, do you wanna make any observations about the market as a whole?
Yeah, no, just that, Sam, to emphasize your point, this is not a gun goes off, and everybody starts, and the market is fresh. There is a ten-year mature market in place, and the Ontario regulatory framework allows for gray market operators to migrate their bases into the legal framework. But having said that, there's, I would say, all the attributes of enthusiasm around the market.
What's been the positive attribute of particularly our experience so far has been the quality of the customer. A part of that may come from just the maturity of the customer in the market. But we believe that there's a product storyline there as it relates to PointsBet as well.
Thank you.
Thank you. Your next question comes from Phillip Chippindale from Ord Minnett. Please go ahead.
Hi, good morning, team. Thanks for your time. Firstly, Sam, can we just talk a little bit about New York? Can you give us a sense of, particularly how much your market share is there? I can't see any of the materials referencing that, but maybe a bit of a range would be useful. Just comparing the New York performance to other states like Pennsylvania, and clearly New York turnover was very strong.
When I look there, the margins were obviously very different from a net margin, so you were clearly giving away a little bit more in Pennsylvania. Perhaps you could just talk a little bit about that dynamic as to, you know, perhaps why New York was so strong relative to Penn.
Clearly Pennsylvania wasn't running for the full 1,4 on that.
Yeah. Yeah, I don't think we reported the market shares because we weren't live for the full 1,4, so I don't think we included New York or PA in there. Yeah, I think, and I'm, you know, I'm sort of speculating a little bit here, but I think, you know, New York, it is, from our experience at least, you know, there was some cannibalization.
So there's a group of clients that's in New York that have been betting in New Jersey, for example, for some time. So New York itself can't be considered, you know, for us anyway, it's not brand new. You know, we've had some clients that have come across and obviously given us a pretty strong start there as well as perhaps some clients that weren't.
Whereas with Pennsylvania, you know, perhaps less of that dynamic than New York, so not as strong a start, you know, from a margin perspective. You know, the bottom line in Pennsylvania, it's only a short time. Remember, we only launched, Johnny, when did we launch in Pennsylvania?
The week before the Super Bowl.
Yeah. You know, obviously the strategy is when you first enter a state, you're, you know, you are being generous with your promotions. Having launched the week before the Super Bowl, obviously there was a degree of acquisition in that volume into March Madness, et cetera. While it's only maybe a month difference between that and New York, I think that's probably that's how best we can explain the differences.
Okay, thanks. Just moving to this balance of the year and the four states that you're looking to target. You know, I guess, are there any that you can sort of lock in at this point? Again, sort of reference a timeframe there for some of those as well would be useful.
I mean, we definitely will launch some states. What I suppose what we're saying is we wanna prioritize first and foremost the new states. You know, like there's a process ongoing with the Maryland regulator and the Ontario regulator. You know, perhaps Ontario will be later in the year, perhaps Maryland or pre NFL.
You know, we would expect to squeeze a state in prior to Maryland going live. One of the catch-up states we'd expect to you know to launch, probably Louisiana is probably the state. We just wanna make sure that those new states, being Maryland, Ohio, and perhaps Kansas, have priority. You know, we will make sure we launch four states. That's, I suppose, that's the new, that's the updated guidance there.
Just finally on iGaming, sort of a flat net win result sequentially. Can you just talk a little bit about the seasonality of that business? Certainly you're Cross-Selling that into your sportsbook customers. I guess I'm just trying to think about, I was probably expecting a little bit more from that business this 1,4. It's obviously delivered more of a flat outcome there.
Yeah. I mean, look, I think we would've hoped for a little bit more ourselves, to be honest. Honestly, it came down to a bit of low margin, just a little bit of variance against us and, you know, a little bit of player behavior. Really, yeah, there's not much in it. I mean, obviously we're still pretty early on in the cycle. We would've hoped for a little bit more, to be fair, but in terms of we don't report iGaming handle, the margin for this 1,4 than the previous 1,4, which didn't help our efforts.
Okay, thanks. I'll let somebody else come.
Thanks, Phillip.
Thank you. Your next question comes from Larry Gandler from Credit Suisse. Please go ahead.
Thanks, guys. Continuing along the questioning around case studies, I was actually interested in some states where you're there for a year, but there really seems to be no significant movement in net win or market share, maybe going backwards.
Michigan, Indiana, Colorado, you know, there was sort of this notion that maybe PointsBet not being first out of the gate in some of those markets impinged on market share momentum, but looks like your Pennsylvania performance may sort of suggest that you guys can establish a good business when you're not first out of the gate. What's the challenge in Michigan, Indiana? Those states are pretty chunky, but there really seems to be no movement.
Yeah, I mean, Indiana, I mean, they're small numbers, but we did increase, I think it was from AUD 300 thousand-AUD 700 thousand net win 1,4 on 1,4. Colorado, I think we went from AUD 1.1-AUD 1.3. Michigan, yep, we definitely went back I think from AUD 3.2-AUD 2.8 slightly, you know. 1,4 on 1,4, there can be some variance.
There's no doubt that, those earlier states in particular, let's call it in Indiana, hasn't been an easy state. I think we've called that out, you know, somewhat previously. We're certainly, you know, it's not a matter of, you know, we're not giving up on any states. You know, it's our intention to keep those states moving forward.
Where we do see greater breakthrough or cut-through, you know, with our efforts, you know, we are prepared to sort of push our marketing dollars and our efforts towards those states where we're getting that. So, you know, at the moment, some states are, you know, we're getting cut-through a bit more easily than others. As per an earlier question, you know, perhaps some of that correlation is around those RSNs and how we use them via NBC.
Yeah, I was seeing that. Does that suggest that, you know, as you look to preserve capital, those states, particularly those three and maybe a couple others will attract less of your marketing budget?
Yeah. No, we wanna be prudent and, you know, we always try to be disciplined. If we can spend the marketing dollars and get the ROI, you know, we're happy to spend them. We sort of, you know, obviously we've just taken a, you know, following the, let's call it the last six months to where the heat in the kitchen just got, you know, too much and it pushed competition for clients into, you know, tough territory.
We wanted to maintain that CPA below AUD 500, and we've done that consistently through that. You know, we spent AUD 33 million this 1,4. You know, with an easing of that heat, we can, you know, we can spread the wings a little bit more and build back up.
We wanna be focused on, you know, a payback period. We'll chase those clients where we can most effectively deploy those marketing dollars.
Okay, great. Thanks. I had a question, might be for you, Sam or Andrew, similar to Don's question, with regards to NBC. I was under the impression that there was some prepaid marketing for NBC, and I was looking for some periods where the cash flow would be less than the marketing expense. Just wondering if, you know, maybe that's the case in the near term, if you can comment there.
Yep. Yeah, I'll throw that to Andrew.
Yeah. No, I think as Sam referenced earlier, we committed to $270 million in cash, and the balance for the $393 million was $123 million. The $123 million is a prepayment on our balance sheet, and that steadily unwinds over the life of the deal as the marketing expense that NBC provides us through the commercial agreement is wound through.
There will never be a position where the marketing because the $270 is greater than the $393 or more than 50% of the $393, there wouldn't be a position, Larry, where the cash payments are less than the marketing expense.
Yeah. Okay. Understood. Thanks, guys, for clearing that up.
Thanks, Larry.
Thank you. Your next question comes from Desmond Tsao from Goldman Sachs. Please go ahead.
Good morning, guys. I was just hoping if you could flesh out your comments a bit more around the improved CPA efficiency and higher FTBs. Just also noting your comment around, I think, internal modeling forecasting net win payback within 12 months. Just wondering if that was for a particular state or for the group. I guess, you know, whether or not that has changed over time. You know, keen to sort of hear what that same measure would've been, say, at this time last year.
Yeah. Good day, Desmond. I mean, I think in broad terms, you know, there were periods where, historically where the CPA to LTV. Sorry, that figure is for a U.S. blended. So, you know, we spent what? $32, whatever it was on marketing and, for the 1,4, and we're talking about the payback for the U.S. There'll be differences across states, but that was a blended rate for the U.S.
So yeah, I think there was periods, you know, let's call it, over a year ago where, you know, we were comfortable with where we were going with some of these figures.
Certainly we lost a bit of shape under the heat, you know, and of the competition and the way, perhaps we were investing the marketing dollars or applying our promotional spends again through that, you know, mainly through that six-month period perhaps to the end of December. We certainly feel, yeah, the March 1,4, a slight adjustment in strategy to sort of lean into our target client, more strongly.
You know, it's coincided obviously with us delivering a product which allows us to firmly do that. Our product's improved a lot in the last six months, nine months. You know, the Banach acquisition, what we call Odds Factory, our internal capability, you know, I think there's numerous signs of that hitting its stride. The fact that 59% of all handle for this 1,4 was in play.
You know, we talk about getting to 75% at some point in the future, and some people scoff at that. We're already at 59% for the March 1,4. That's on the back of us actually having a product that true bettors, people who value that experience can appreciate it. You know, it's definitely passing, you know, some heat in the market sort of consequences.
You know, I think us getting that relationship right size is also on the back of our hard work and getting our product. Probably the next stage of that is leaning more into the product from a marketing perspective. You know, we've probably, like everyone in the market's been dominated by promos and the like.
You know, now that we have this product, we're gonna lean more into that from a marketing messaging perspective. Thus the clients that do join will be more likely joining for the right reasons.
Thanks, Sam.
Thank you. There are no questions in the queue at this time, and that does conclude our conference for today. Thank you for participating. You may now disconnect.