Earnings Call: H2 2021

Aug 31, 2021

would now like to hand the conference over to Sam Swinell, Managing Director and Group CEO. Please go ahead. Good morning. I would like to thank you for joining this call for the PointsBet Holdings Limited full year 2021 results. This is Sam Swinell, Group CEO, and I'm joined today by our CFO, Andrew Melo, together with U. S. CEO, Jonny Aitken and U. S. Chief Commercial Officer, Eric Foote, who are joining from our Denver headquarters. Today, we will talk to our investor presentation, which was lodged with the ASX this morning together with our full year financial report. All figures in this presentation are in Australian dollars unless otherwise stated. Turning to Slide four. Since inception, PointsBet's Board and management have been working towards establishing the key building blocks that have put us in a strong position we are in today to pursue the expansion of the North American sports betting and iGaming opportunity. The pieces are now in place as we look towards FY 'twenty two and beyond. Turning to Slide five. FY 'twenty one has been full of achievements, a few of which I will now detail. We entered into a transformational five year media partnership with NBCUniversal, providing PointsBet with deep access and integration into NBCUniversal's world leading broadcast and digital assets. We achieved strong strategic and operating momentum in FY 'twenty one in both our Australian and U. S. Businesses, with the Australian trading business achieving successive financial years of EBITDA positivity and The U. S. Business achieving strong market share as well as growth in gross win, net win and customer acquisition. The successful completion of two strategic acquisitions, being Bannock Technology and Premier Turf Club, both accelerating the development of our unique in house technology platform and product offering established a strong pipeline of growth into FY 'twenty two and beyond with the expectation of launching in 11 new U. S. States as well as Ontario, Canada by the end of calendar year 2022, successfully raising capital to take advantage of this growth pipeline. Additionally, we have attracted outstanding brand ambassadors, including Paige Spiranik, Drew Brees, Shaquille O'Neal and Devin Hester. We were appointed as one of only seven official sports betting partners of the NFL, making PointsBet an authorized partner for the four major US pro sports leagues. We've also entered into strategic partnerships with a host of NBA, MLB, NFL, and NHL teams across The US US. And we've assembled a highly experienced iGaming team and built an in house proprietary iGaming platform and administrative tools, which have now been successfully launched in two U. S. States, Michigan and New Jersey. Turning to Slide six. The FY 'twenty one performance of the global trading businesses as compared to the prior corresponding period of FY 'twenty, to be referred to as the PCP, was as follows: sports betting turnover was up 228% at $3,780,000,000 sports betting gross win was up 201% at $353,100,000 and total net win was up 154% at $208,500,000 As can be seen on Slide seven, we continue to rapidly grow our client base. In Australia, cash active clients were up 117% compared to the twelve months to thirty June twenty twenty. In The U. S, cash active clients were up 661% compared to the twelve months to thirty June twenty twenty. I will now hand over to Andrew Melo to walk through our financial results. Thank you, Sam. Good evening to all in The U. S, and good morning to those in Australia. Now turning to Slide nine. I'll be talking to our normalized results. However, there is a summary of our statutory results on Slide 36 and a reconciliation of the normalized results to the statutory results included in the review of operations and on Slide 37 of this presentation. For the reporting period, PointsBet reported net revenue of $194,700,000 a growth of 159% versus the PCP. Gross profit of $87,600,000 represented growth of 129% over the PCP. The group sales and marketing expense of $170,700,000 for the year with Australia accounted for $51,400,000 and The U. S. Accounting for $119,200,000 This increased marketing investment assisted with the delivery of 196,000 cash active clients in Australia and 159,000 cash active clients in The U. S. As at the June 30. The U. S. Expansion strategy requires upfront marketing investment to establish and grow market share and drive revenue growth. And The U. S. Marketing expense is expected to continue to increase as our state footprint continues to expand. Employee benefits expense increased over the reporting period in both Australia and The U. S. Headcount as at the 06/30/2021 grew to four thirty one, up 101% from the June 30. Product and technology expenses increased over the reporting period. During FY 2021, the company was operational in Australia and six U. S. States, being New Jersey, Iowa, Indiana, Illinois, Colorado and Michigan. And as a result, our betting volumes have increased as have our costs associated with developing, hosting, operating and securing our technology and data platforms. The normalized EBITDA loss for the group was 156,100,000 as the company continued to invest in the business to scale in The U. S. And within the technology department as well as growing our U. S. Client base across the six operational states. Turning to Slide 10. I'll now speak to our business segments. Further details can be seen in Note five of our consolidated financial statements. On a statutory basis, the Australian Trading business segment recorded net revenue of $150,700,000 and an EBITDA of $9,200,000 in the reporting period compared to the EBITDA of $6,900,000 in the PCP. This result was extremely pleasing given we increased the Australian marketing investment by 156% compared to FY 'twenty. On a statutory basis, The U. S. Segment recorded net revenue of $42,300,000 and an EBITDA loss of $149,600,000 in the reporting period. The loss was driven firstly by The U. S. Marketing expense of $119,200,000 as we expanded operations across six U. S. States and secondly, by more than doubling headcount of our U. S. Operational team. The Technology segment derives its revenue from licensing fees charged to the Australian trading business and the group's subsidiaries in The U. S. The Technology segment recorded intersegment revenue of $19.419500000.0 dollars Please note this revenue is eliminated in the company's consolidated results. In addition, the Technology segment recorded B2B revenues of $1,600,000 post the acquisition of Bannock Technology in April 2021. On a statutory basis, EBITDA for the Technology segment for the year ended June 30 was a loss of $9,600,000 compared to the PCP loss of $2,900,000 Corporate administrative costs are costs that cannot be readily allocated to individual operating segments. Statutory EBITDA for the Corporate segment for the year ended thirty June twenty twenty one was a loss of $12,400,000 compared to a PCP loss of $5,500,000 The increase was largely driven by increased listed company costs, an increase in professional services costs associated with the MVC transaction, the September 2020 capital raise, the acquisition of Banik Technology and Premier Turf Club as well as increased employment benefits due to the increased headcount of corporate staff. The statutory EBITDA loss for the group was $162,300,000 for the reporting period. After accounting for the impairment loss of $1,300,000 income tax expense of positive $600,000 net finance cost of $3,200,000 net foreign exchange losses of $8,700,000 and depreciation and amortization of $12,200,000 the statutory loss for the year was $187,100,000 Turning to Slide 11. The balance sheet was strengthened over the reporting period with the group having net assets of $448,000,000 as at the June 30. Net asset movements are driven primarily by cash received upon completion of the $353,200,000 capital raise in September 2023 payments, including prepayments for future committed marketing spend noncurrent financial liability relating to the fair value of the debt component of the share options issued as part of the NBCUniversal transaction. The $76,100,000 includes the notional interest charged on the financial liability for the period. Investment in U. S. Licenses and market access, identifiable intangible assets and goodwill recognized from the acquisitions completed during the year being Bannock Technology Limited and Premier Turf Club LLC and the continued investment in the betting platform through the capitalization of relevant technology and product employee costs. Turning to Slide 12. I'll briefly touch on the cash flows as these have previously been disclosed and detailed as part of our quarterly ForeSee reporting obligations in July. Net cash outflows from operating activities, excluding the movements in player cash accounts for the year ending thirty June 'twenty one was $138,800,000 Net cash outflows from investing activities was $77,800,000 Net cash inflow from financing activities was $339,400,000 I will now provide an overview of the Australian trading business. Turning to Slide 14. The Australian trading business recorded net win of $166,100,000 up January from the PCP with a net mean margin of 8.4%. The Australian trading business has seen improvement across a number of key KPIs, particularly with respect to customers continuing to trend towards higher margin multiproducts. Also improvements in marketing tech tools and the refreshed brand campaign assisted with acquisition and retention compared to the PCP. FY 'twenty one turnover was just shy of $2,000,000,000 up 140% compared to the PCP. We were very pleased that the Australian trading business recorded a statutory EBITDA of $9,200,000 for the reporting period, an increase from the $6,900,000 on FY 'twenty. As can be seen on Slide 15, in just three years since launch in Australia, we have achieved meaningful share in a competitive and growing market. We are extremely pleased with the performance of the Australian trading business across the full financial year, and this strong momentum sets us up very well for FY 'twenty two, and in particular, the coming football finals and spring carnival beginning in September. Our ability to operate a growing profitable business in the advanced and competitive Australian market, backed by continually improving product and growing brand recognition, provides confidence in the continued execution of our U. S. Strategy. I'll now hand over to Johnny Aitken, our U. S. CEO, to speak to The U. S. Results. Thank you, Andy. Now turning to Slide 17. Our execution strategy is clear. We will continue to invest to become a top five player, targeting 10% sports betting market share in key U. S. Jurisdictions. As can be seen on this slide, our strategy is built around three key pillars. Firstly, a market leading team. We have put together a world class, highly experienced team across all key areas, who are recognized for excellence in strategy and execution. We continue to invest in critical technology, product and strategic functions in addition to strengthening core operational departments such as sports book trading, iGaming and customer retention management. Secondly, a market leading product. As we've previously said, products will win as the market matures. Over the reporting period, we've built up additional strength in this area, including the acquisition of Bannock Technology, now called PointsBet Europe. The PointsBet Europe team will deliver market leading in play, pregame and player prop products across all key U. S. And global sports, driving client engagement through breadth of product, superior uptime of markets and improved gross win margins. Thirdly, growing brand awareness. We continue to execute strategic and disciplined marketing campaigns to accelerate client growth and brand awareness and trust. Being the official sports betting partner of NBC Sports, together with our recent appointment as one of only seven approved sports betting operators of the National Football League and signing Hall of Fame down quarterback Drew Brees as a national brand ambassador, provides outstanding opportunities for us to create innovative integrations and customer engagement to be a leading brand throughout the NFL season. Turning to Slide 19. I'm very proud of what our team has achieved in terms of market share to date. We have delivered just shy of 8% online handle market share in Q4 in both Illinois and New Jersey, states with a combined adult population of circa 17,000,000 people as well as delivering Q4 net win margins of 3.94.5%, respectively, is extremely pleasing and indicative of the experience the PointsBet team possesses in the online sports betting space. I'm also pleased with the market share trends now at the state, and we remain focused on achieving 10% market share over time. Now turning to the full year performance on Slide 20. The U. S. Business achieved a sports betting gross win of $95,800,000 at a gross win margin of 5.3% compared to gross win of $16,500,000 in the PCP, with a sports betting net win of $40,900,000 at a net win margin of 2.3% compared to net win of $7,000,000 for the PCP. In addition, The U. S. Business achieved iGaming net win of $1,500,000 This delivered an overall U. S. Net win of $42,300,000 for the year. The trading results of the individual states can be seen in the appendix on Slide 38 and is detailed in our quarterly results in July. As I look back over the last twelve months, the progress our team has made to further PointsBet growth in The U. S. Has been outstanding, highlighted by launching sports betting in four new U. S. States, Illinois, Colorado, Michigan and West Virginia launching our gaming in two states, Michigan and New Jersey gaining new market access in three states being appointed as official sports betting partner of both the NHL and NFL making points with an authorized partner of the four major U. S. Pro sports leagues, signing key partnership arrangements with the NBA, NHL, MLB and NFL teams, appointing significant brand ambassadors with the global presidents that presence, I should say, in Page Spurnak and Drew Brees and doubling our U. S. Operational staff, most of whom are headquartered with me in our Denver, Colorado headquarters. As announced yesterday, our partner in Arizona, Cliff Castle Casino Hotel, was not awarded a license by the Arizona Department of Gaming. Whilst we were surprised and disappointed, we continue to assess the market access opportunities in Arizona. Before I touch on iGaming, I'd also like to make some comments on the twenty twenty one Super Bowl performance, which was strong across all areas and gives us extreme confidence in launching the upcoming NFL season as one of only seven official sports betting partners of the NFL and backed by world class NBC Sports assets. We were delighted with how the proprietary platform performed, noting that some of our key competitors experienced technical issues and customer delays on the biggest sporting day on The U. S. Calendar. PointsBet, by comparison, saw no major outages or system issues in the lead up or during the game. PointsBet also offered the most markets on the Super Bowl. As an example, fifteen minutes before kickoff, PointsVet was offering seven sixty five markets, over 200 more than our closest competitor. Our depth and breadth of markets is a testament to our platform capabilities and expert internal trading teams. This will only increase this year with the benefits of our acquisition of Bannock Technology. Turning to Slide 21. PointsBet has assembled a highly experienced iGaming team, which has built an in house proprietary iGaming platform and administrative tools. With Vice President of Online Casino Revenue, Aaron O'Sullivan, formerly Bet365 and President of Technology and Product, Damajit Gombrasinghe, formerly of Aristocrat and IGT, leading the strategy and execution of iGaming. Owning and controlling an in house iGaming technology stack will become an increasingly important strategic advantage, with PointsBet's mandate always being to provide a fast and immersive experience across all our customer touch points. The company has licensed third party our gaming content from premium content suppliers, including live dealer solutions to match the speed and ease of use customers receive. On the May 5, PointsFit launched our gaming operations in Michigan. PointsFit is currently offering 30 slot video poker and table games. The company will bolster this offering in H1 FY 'twenty two with the offering of additional strategically selected slot games, live dealer table games and other innovative initiatives. Since the launch, PointsFed has had no technical issues related to our gaming. PointsBet launched our gaming in New Jersey on the July 23. We plan to launch in West Virginia in H1 FY 'twenty two and Pennsylvania, Ontario in H2 FY 'twenty two. PointsBet has also secured our gaming access in Ohio, Indiana, Missouri, Louisiana and Iowa pending the passing of a neighborhood legislation. We are pleased with our performance to date and are starting to see some informative trends in player behavior. Notably, 40% of Michigan cash active clients have placed in our gaming bet since launch, with 71% of all our gaming players having placed an in place sports wager, further validating our view that having a superior in place sports betting product will enhance the cross sell to iGaming. I will now hand to Eric Foote, our U. S. Chief Commercial Officer, with me here in Denver for some comments on our NBC partnership. Thank you, Johnny. Turning to Slide 24. I would now like to provide an update on the first year of our NBC partnership and how we are planning to unlock further opportunities in year two. As previously noted, year one of our partnership was focused on utilizing the NBC assets to build the PointsBet brand with the new and expanding audience. As set out on this slide, this has been primarily achieved through four key areas. Firstly, we maximize our in state presence through premium local placements. This included premium commercial inventory in addition to storylines and live lines integrations across MLB, NBA and NHL regional sports network coverage in Philadelphia, Chicago, New York and Washington DC, leveraging PointsBet odds and data while also featuring targeted sign up offers. Secondly, PointsBet leveraged key national NBC platforms to reach previously unattainable audiences. As an example, PointsBet was fully integrated into the English Premier League and NHL studio shows on NBC Sports Network with odds features informing the audience of betting markets and odds relevant to the upcoming programming. Thirdly, we leveraged NBC data for direct leads into our acquisition funnel. As of August 26, PointsBet has received over 353,000 qualified leads obtained upon users signing up for NBC's free to play sports game Predictor. To put this into perspective, the potential of the acquisition funnel stems from over 1,700,000 app downloads resulting in over 29,300,000 contest entries. And fourthly, the NBC Sports digital platforms, including but not limited to Predictor, nbcsports.com, Golf Now and NBC Sports Edge accounted for a combined estimated 114,500,000 advertising impressions across PointsBet operational states, facilitating an ever present and targeted reminder of the PointsBet brand. In addition, PointsBet was able to leverage the NBC Sports overall database to deliver dedicated emails to various consumer segments. Turning to Slide 25. While leveraging the NBC assets, we have also been able to deliver cutting edge experiences for our consumers while creating numerous first for both our brands and the sports betting industry. In February 2021, PointsBet launched the Waste Management Phoenix Open BetCast airing on Peacock, a first ever betting theme simulcast for a PGA Tour event that focused PointsBet odds, sign up offers and a seamless integration of the points that trading and editorial teams across four days of golf coverage. Given the success of the program, it was fast followed with a localized version of a bet cast for a Chicago Bulls Charlotte Hornets game aired in April on NBC Sports in the Chicago market. We also launched voice enabled brand focused commercial advertisements on Effective, Comcast advanced targeting solution for television. The advertisements featured brand ambassadors, Paige Spirianak and Allen Iverson, in addition to utilizing Chicago White Sox legends and NBC sports talent, Ozzy Guillen. Lastly, we ran product focused advertisements featuring Sarah Perlman during MLB games, while PointsBet's Head of Trading, Jay Croucher, and Teddy Greenstein, PointsBet's senior editor made regular appearances across Golf Channel studio shows, marking the first ever inclusion of betting experts on Golf Channel coverage. Turning to Slide 26. We are excited to enter into year two of the partnership. While we are extremely happy with the progress made in year one, we are poised to deliver future growth and unlock new opportunities by enhancing our in state presence through premium local placements, increasing national integration and the opportunity to engage with new and existing audiences at scale as we launch a new state and leverage our recent appointment as an authorized sports betting partner of the NFL. Turning to Slide 27. As can be seen on this slide, PointsBet is ready for the NFL season. And as an authorized NFL partner, we are afforded the opportunity to advertise in and around NFL games. A multi touch approach utilizing the most premium properties across NBC, our strategy will ensure we are reaching NFL fans throughout the week and on Sundays. Commercial units featuring Drew Brees are planned across our key markets. Together with video and display advertising inventory across the entirety of the NBC Sports Digital properties, this allows us to reach our target audience at scale. NBC Sports Edge continues to be a key NBC Sports digital property that attracts betters looking for news and information. With the Bet the Edge podcast hosted by Sarah Perelman and other PointsBet talent, we will continue to educate the audience on our available NFL markets while promoting the PointsBet brand. Finally, dedicated email campaigns will reach prospective users with relevant sign up offers and relative promotions. We will reach betters in multiple ways throughout the NFL season. It begins with predictor as customers select their picks across NFL Sunday night seven as our real time odds and promotions will be displayed. Whether they are watching their home team's pregame or postgame show in Philadelphia, Washington DC, or Chicago, points that will reach our audience via odds integration and advertising units. This will be followed by our weekly national integration into Football Night in America during Sunday Night Football, which boasts an average audience of 17,000,000 viewers. In addition, we will launch in game Sunday Night Football advertising commercials in key and select markets. The above elements will be critical in allowing us to reach audiences at scale. In closing, our enhanced odds integration into the Sunday Night Football postgame show on Peacock will conclude the day's games and provide a look ahead to the following week's slate of games. I will now hand back to Sam. Thank you, Eric. Turning to Slide 31. From day one, we have said that product will win. Ultimately, the entire product experience will be the differentiator between those operators who succeed and those who do not. We have built a global product and technology team of over 200 people who have developed and continue to refine our proprietary in house platform, both in the areas of sports betting and iGaming. Owning our own tech facilitates complete control of our product road map. Importantly, it increases the speed of innovation and execution across product development, testing, regulatory approvals and deployment. Ultimately, this allows better and more reliable products to reach our customers faster. It further provides confidence in the speed of use and reliability across the important peak load periods, such as the spring racing carnival in Australia, culminating in the Melbourne Cup, and the NFL season in The United States, culminating with the Super Bowl. With one team with a one team global approach across North America, Europe and Australasia, we can leverage the learnings and key product developments into The U. S. And Canadian markets. Importantly, owning our own tech also allows us to customize and localize these products to suit the local jurisdictions. Included in our FY 'twenty one enhancements have been the developments we have made over the past year in pricing and risk management as well as targeted investment in our marketing tech capabilities, allowing us to reach the customer across numerous touch points with a personalized service and appealing offers. Turning to Slide 32. In March, PointsBet announced the acquisition of Bannock Technology, now known as PointsBet Europe. Through highly sophisticated risk management algorithms and deep trading experience, this technology will allow PointsBet to optimize achieved margins and offer superior value to our customers. PointsBet Europe's proprietary models for the major U. S. Sports and others such as EPL will provide PointsBet with a clear differentiation from operators which engage third party off the shelf pricing models, leading to more customer engagement through increased and better priced markets. This acquisition will position PointsBet as a leader of in play sports wagering in The United States, just as in play wagering is expected to grow exponentially. Within the next three years, in play wagering is expected to represent circa 75% of all sports wagering in The United States. This acquisition accelerates Pointsbeck's technology road map and places the company in a prime position to take advantage of this growth in sports betting activity in The United States. Turning to Slide 34. I would now like to make a few comments on our global commitment to responsible gambling. PointsBet endorses the principle of informed choice, which is aimed at empowering customers to make informed decisions and exercise choice regarding their gambling expenditure. PointsBet's commitment to responsible gambling is demonstrated through its wide range of responsible gambling initiatives and tools, some of which go beyond those obligations imposed by regulators in the jurisdictions in which we operate. Both Australia and The United States have dedicated responsible gambling officers and supporting teams. We have also invested in improvements in our systems and automations to detect red flag behaviors, which have allowed a more fact based and individualized approach to responsible gambling with our global customers. These system investments have also led to improvements in fraud and anti money laundering risk detection, which facilitate compliance with our regulatory obligations and also reduces revenue leakage. PointsBit has a policy that all customer facing employees receive annual responsible gambling training. Ultimately, we believe this is an important area for long term sustainability of the industry, and we take our obligations in the area very seriously. In conclusion, the pieces are now in place as we look towards FY 'twenty two and beyond. In Australia, the investment made in marketing in H2 FY 'twenty one off the back of the refreshed brand campaign featuring Shaquille O'Neal has continued into FY 'twenty two and has PointsBet positioned for its biggest and most successful spring ever. In The U. S, we're excited by the position we have put ourselves in as we approach the twenty twenty one NFL season launch as an official sports betting partner of the NFL supported by the strategic NBC assets. And finally, we are looking forward to preparing for the Canadian opportunity under the leadership of CEO Scott Vandewell as we target a launch in Ontario. I'm happy to take questions. Thank you. Thank you. Your first question is from Joe Saff with Susquehanna. Please go ahead. Mr. Saff, your line is open. Mr. Joe Staff, your line is open. We will move on to the next question. We have Rowan Sundram with MSG Financial. Go ahead. Hi, team. Thanks. Just one for me actually on the New York licensing opportunity. I appreciate you're in a process, but what are you comfortable to say in terms of the consortium you're in and and what you think that brings to the table, if you're able to say at all? Yeah. Good day, Rowan. Yeah. I think look. We can comment on what's been made public, obviously, and I think what's been made public is that we are in a very strong group, obviously, with Rush Street, Caesars, Wynn, Genting, the Oneida tribe, the Mohawk tribe, as well as the media companies attached to to us. You know? So ESPN with Caesars, NBC with PointsBed, and SNY, the local RSN in the New York area that PointsBed has. So, you know, I think that group is public, and I think anyone would agree that that's a very strong group to be associated with. So we're confident and hopeful of our progress through the process. Thanks, Sam. And maybe just one more. On the NFL partnership, I take onboard the comments in Slide 27. But what are the parts of that partnership that have got you most excited and most confident that you can get the desired returns on that? Yeah. It's really that it opens up the advertising around the most popular betting store, the biggest sport in The US, Rowan. So we believe that to acquire clients, to get the brand out there, We need to be in front of that audience. And if you're not a approved partner of the NFL, you're not advertising around those assets and getting access to those clients. So it's a really big step. Obviously, only seven books have approved have received that approval. We approach everything in a disciplined manner. So we don't, you know, we don't just go for something because it looks good on a badge. You know, this will be a very effective marketing outcome for us. And and those that are not advertising around the NFL, we believe, you know, will be will suffer for it. Your next question is from Joe Stoss with Susquehanna. Okay. Can you hear me? We're good, John. All right. All right. Thanks very much for taking the call or taking the question here. I wanted to ask you, Arizona, there are 20 licenses. We can argue maybe there are seven kind of, say, real operators, at least those that can achieve some level of scale. I guess the question is how quickly you might be able to pivot given, say, the decision with your current market access partner? Yeah. I think first thing you know, obviously, when it comes to market access, we approach it very strategically. I think our record in getting into states at the right time and most importantly, under the right terms. And so, you know, when we we understood, obviously, the landscape in Arizona very, very well. You know, when it came to partnering with Cliffcastle, you know, they're seen as a a very strong tribe. We're seen as a very strong operator. You know, we we fully expected that, you know, as part of the the 10 licenses that that we would be holding one of those licenses. So, you know, it's not an indication that we didn't approach the state of Arizona with the same strategic oversight that we approach all states or opportunities. We certainly did. So fair to say it was a bit of a surprise. But we then look for other opportunities. So look, I'm not going to sit here and say if the market goes forward and is operating and bets are being taken in early to mid September as is being sort of planned, well, that might not be possible for PointsBet anymore. But we'll consider we'll keep looking for opportunities. But again, it has to be under the right terms. We're not going to commit to something that financially is irresponsible. We had the right deal with Cliff Castle, and we believe we have the right partner. We'll now have a look around and see how that all plays out. Understood. And then secondly, wondering, Sam or Johnny, if you can comment maybe on how quickly one would expect, say, the number of in play bets would how quickly you can start increasing the number of bets, say, that you offer in the new U. S. Sports calendar, whether it be the NFL or college football or so forth? Like how quickly you can move that dial? You just did the acquisition. So just kind of wondering how quickly you can increase the number of products in given game. Yes, understood. Yes. Look, we'll start to get the benefits from the NFL, start of the NFL season. But to be honest, Joe, this is a never ending cycle. You're trying to make the better the the bet type, you know, more fun, you know, greater bet types, greater accuracy. You know, we we hope to lean in more and more with NBC and in the in play space and and innovate with them as well. But, you we'll start to get the benefits from the points that you're obtained for for NFL NFL season and NBA and college and, you know, and obviously, EPL and others as well, as I mentioned. So it's it's not a big bang where overnight you click your fingers and you have the full impact that you where you wanna end up. We this will be our area of focus. This this is where we wanna play. You know, sports betting led operators will lead market share in The US market. So if you believe that sports betting operators will lead market share and then you believe that 75% of sports bets will be placed in play, it's pretty clear that if you're a product led company like we are, that that's the space where you wanna have you wanna have a top notch product. And so that's why we made the Bannock acquisition. It was already a focus for our business, obviously, in play from the time we entered The US market. But we'll have benefits, and it'll be an ever improving product from this NFL season. But it'll be gradual. You're not gonna sit there and go, oh, wow, overnight. It'll change across all sports. Each sport is different. They have different nuances to each sport. But as we've spoken about, the key things are depth and breadth of markets, So and, you know, and including micro markets and player props which help with cash out of pregame bets. But then if you're gonna offer those depth and breadth of markets, you need to be able to ensure that you can do it for high uptime. There's no point having a deep number of markets, but you're suspending them all the time. And so we value up or balance up between all the things that are important, but even down to the resulting of bets and the speed of bet acceptance. It's not all just about the risk management trading technology. It's the other elements around the betting experience as well. So we we understand what the better wants from an in play experience. And, you know, the Banner guys, you know, they started this at Flutter. You know, they they were there at Flutter. They built the early models. They're now on board with PointsBed and fully motivated to lead us to being the market leader and in play in The US market. We plan on delivering that. And if we do do that, it goes a long way to ensuring our success in The US market. Understood. Thanks very much. Your next question comes from Jesmyn Tsao with Goldman Sachs. Please go ahead. Thank you. Good morning, Sam, Andy and Johnny. Just a quick question on Slide 21. Thanks for the disclosure on some of those iGaming metrics. Just keen to get a sense for how, I suppose, July was tracking for Michigan and then how the progress has been so far since you've launched in New Jersey? And if you could perhaps make any comments around retention or customer acquisition costs potentially coming down as a result of having those dual product offerings in these two states? Yep. Yep. Hi, Des. Look, I think one thing probably worth pointing out is, you know, what we launched in Michigan was a single app experience. So you're on the one app, and you have iGaming and sports betting. What we launched in New Jersey was actually a separate app experience, you know, deep links. So it feels like you're pretty much on a single experience. And that's a path that some of our competitors have already gone down themselves in terms of a separate app, and it's a path that, you know, we're exploring as well because you do like to separate out the content somewhat between sports and iGaming. So, yeah, the great thing is in launching our first two states, we've we've produced both models, a single app experience and a separate app experience and all the deep deep linking that needs to occur between that. And as Johnny said, we haven't had any issues. It is very early stage. We recognize that 30 games is a long way off the market. But again, we've taken the time to build the platform ourselves. We've taken the time to get to this point. We want to develop a strategy that is the right one for long term that will maximize margins, give us the greatest ownership over our roadmap. But yeah, the statistics so far are pretty encouraging. I mean, I think everyone can appreciate that adding an iGaming product enhances your lifetime value of a client. Yes, there's a degree of cannibalization. You don't just add it completely on top of whatever your sports betting revenue was on, but the net net is a positive one. So we're still we're encouraged by the cross sell. We're encouraged by the inquisitiveness of our clients to try the iGaming product. It's producing what you'd expect it to produce from a revenue perspective and increasing monthly revenues per active players and the like. So but apart from that, it's still very early on. And we've when we release something, we want what we release to be top notch and for it to work, and then we'll keep adding to it. There's no point rushing things out that are substandard or not reliable or not fast and easy to use, etcetera. So we will move more quickly. We're going to launch live dealers. We'll launch more licensed products. And by the end of the year, we'll have iterated a lot. So a lot of the data, obviously, that comes back from the clients that are using it, we analyze that data. That's the part of optimizing your iGaming offering. But the other thing about iGaming, even though it's not a core part of our strategy, our strategy is to acquire clients through the mass appeal of sports betting. That's where you get the greatest scale, as I spoke about before, and then to cross sell them across to iGaming. We want to have an iGaming a very, very credible and strong iGaming product. And even without really trying to, we are acquiring clients directly to the iGaming product. So we haven't put anything really out there to do that, but you do naturally get some clients come and play directly to the iGaming. They may then go across and play sport, or they may not. They may just stick to iGaming. So it does open up another acquisition channel and another segment of the market for us to consider and dip our toe into. Fantastic. Thanks, Sam. That's all from me. Thanks, Tez. Your next question comes from Sasha Crime with Evans and Partners. Good morning and good afternoon. Just a couple of questions around the financials, maybe Andy, first of all. Your second half twenty twenty one gross profit margin looks to have been around 50%. Is that around the level we should expect going forward? Sascha. How are you? Thanks for the question. Yes, I think gross profit margins for the year fell slightly from FY 'twenty. I mean FY 'twenty, we had 51% for the group FY 'twenty one, 45%. And I think what we can say is that the Australian gross profit margins were fairly consistent year on year. But as The U. S. Is moving through that growth phase, then The U. S. Gross profit margins were lower than Australia, significantly lower than Australia. And and therefore, that sort of brought down that that that gross profit margin from a group basis as as The US, I think, now represents about 20% of our revenue. But I think the focus for FY 'twenty two is obviously to keep the consistency in the Australian gross profit margins and to grow US gross profit margins from their current levels. Okay. Great. And how should we think about the marketing spend going forward? So you spent $77,000,000 in the second half and you're alive in, I think, six states for most of the half. You're adding, I think, 11 jurisdictions over the next fifteen to eighteen months. Can you maybe just talk through a little bit about your strategy of spending in new markets? And if you were to just stay in those six months for the full so if you were to just stay in those six markets for the full twelve month period, would we simply double the 77,000,000? I'll I'll grab that one, Andy. Yeah. So if part of part of our spend, Sasha, is, let's call it, here and now into the six states that we're operating in. But some of the state spending is is forward looking. You know? And and and for example, you know, the Sunday night football pregame show that we're gonna do with NBC, this football season, which is always most of what show on TV, you that's a national commitment. And in some ways, when you're live in seven states and then eight, nine, ten, eleven, 12, you're not you're not just doing that for the here and now maximizing of short term acquisition. You're also doing it with some forward looking intent to build the brand. And similarly, when it comes to states that we expect to be launching in, we are prepared to put some forward looking spend to help close that brand gap on some of our competitors. So, you know, what I would say is that, yes, generally speaking, the amount of marketing that we spent in the six live states in FY twenty one will be very similar to FY twenty two. But there is an element that's sort of away from that, and then you sort of understand how we think about new states that are coming online. Our aim is to spend an amount that we think can have us working up to 10% over time. So those new states, from perspective, an will be additional spend. Yep. Got it. That makes sense. Maybe just one last question, either yourself or Eric. You sort of spoke about a few channels through which you're receiving leads and driving impressions from the Embassy partnership. Can you provide any color about which of those channels you think are delivering the most new active customers for The U. S. Business? Eric, I'll throw that to you. Yeah. No problem. A variety of leads, I think, when you think of the acquisition funnel, we're starting with the linear platforms to do the brand building, which has been quite successful. As we drop down to their digital platforms, The ones that stick out, obviously the Predictor platform, the free to play which we mentioned a significant number of leads not only in active states but in states we're heading to in the near future. I would say the close second would be their golf products, specifically Golf Now. It's the largest online TK marketplace in the world. And so we're heavily dialed into that database and working on loyalty rewards programs. And then lastly would be, you know, their their gaming platform or their, you know, their, information and new service which is now called NBC Sports Edge. So we're heavily integrated into that not only from a talent perspective on the editorial but also from a data odds analysis and information. So I'd probably say those are one, two, three as we look at the digital assets that we're utilizing with NBC. Okay. That's great. Very helpful. Thank you. Your next question comes from Larry Ganler with Credit Suisse. Please go ahead. Yes, thanks. Hi, guys. A couple of questions from me. Sam, can I revisit Arizona? Just want to maybe see if I can get some more specifics there. Does your arrangement with Cliff Castle, now that the license hasn't been granted, are you now free to, you know, go and find other partners, or are you still bound to an arrangement with Cliff Castle? Yeah. Good day, Larry. If if Cliff Castle is unsuccessful in obtaining a license, yes, we are free to to pursue other opportunities. I would note that Cliffcastle have put out a a press release sort of in broad terms indicating that they're considering their options. But, yes, in broad terms, to answer your question, we we have the right, if they are unsuccessful, to to pursue other avenues. Is it been concluded that they haven't been successful, or is that still up in the air? No. As per the official process, when the Arizona Department of Gaming put out a release, I think it was on the weekend, they were not included in that. Yeah. Yeah. But I'd I'd direct you probably to their release, Larry, to give it a status there, wouldn't matter. Yep. Okay. Great. And the other question I had is, I think there were three tribes or so that didn't seem to have partners. Is that the avenue of market accesses maybe beginning conversations with those tribes? I think there's a few things to keep in mind. I mean, I think whether it's the sports team licenses or the tribal licenses, there were some gaps in terms of at least the Arizona release, and, you know, we're we're sort of running those down. I mean, obviously, you know, in leading up to choosing to go with Cliffcastle, you know, we engage with a number of parties. So we do have various relationships in the state and various parties that we've spoken to along on the journey. So, yeah, so logically, they are the ones. I'd also note that there's a maximum of 20 licenses allowed under the legislation, and only 18 have been handed out. So there is some room for future licenses. Yep. Okay. I was just going to ask. All right. And I guess one of the things I'm starting to realize is, yes, I agree with your comment about that product will ultimately win, but it appears like brand is gonna give some of those companies that don't have superior product to kind of catch up. You know, let's take a Caesars, for example. So I'm just wondering, I saw your unaided brand awareness there. My question, I guess, would be when I think about PointsBet in Australia and its brand presence relative to its market share, Can you sort of describe, let's say, PointsBet's brand presence in Illinois and New Jersey relative to its market share? I don't know if you have sort of awareness stats on that. Is it commensurate with the market share? It's a good question. I mean, I would say that, obviously, brand awareness plays a role when it comes to marketing efficiency. All other things being equal, if you have stronger brand awareness and you're executing exactly the same, you're gonna get a better result. That's why as part of a logical brand mix, we do make that investment in brand to make our performance channels more efficient over time. And we believe, and it's reflected in our brand awareness strategies that, for example, in Illinois, where we do have, let's call it, the strongest brand building assets because we have that Chicago RSN as we've spoken about, and we're we're integrated in. And, you know, we've really you know, we're ahead of not just of awareness, but trust that we're being associated with that RSN. That leads to greater marketing efficiencies and has been helpful in us winning market share. So I think Illinois, definitely. And obviously, an Illinois perspective, we got there reasonably quickly. New Jersey, yes. But we are spending some money, for example, in SNY, which is the new New York RSN that has the Mets exclusivity and the Philadelphia RSN in advance of Pennsylvania coming online and in advance of hopefully being accepted into the the New York market. And that has some some extra benefits for for New Jersey as well. So, you know, to to your point about the correlation between brand awareness and and, you know, market share, you know, I'm not gonna draw a direct correlation there because if you've got a poor product, it doesn't matter how good your brand is. People will come through, you know, the first time they might accept, you know, the the app breaking down or a taking thirty seconds to be accepted or a bet taking ten minutes to be resulted or whatever it may be. But they're not gonna once they find out that there's products out there that are better, and, you know, that's what will happen with the American consumer over time, they will they will, you know, try other accounts. They'll have the average punch will have more than one account, and they will congregate to to the best product. And, yes, a Caesars or whatever, you know, that that brand, I suppose, gives them a start, but they're still gonna have to they're gonna have to nail that piece. And we've already seen it in the market shares in The US. You know, I think in general terms, Fanjul have been able to hold market share more strongly in DraftKings because, you know, they they have a they have a stronger product in our view. And even even an MGM who has done well, I'm not sure they would have done so well without the the experience and expertise of Entain. You know? So there's a common theme here that, you know, Fanjul backed by the Flutter Group and the skills and experience from there, and MGM backed by Entyme with the skills and experience, we sort of see them as the stronger operators, and we would put ourselves in that category in terms of ability to execute. Okay. Thanks, Sam. It's a good description. Your next question comes from Rodney Forrest with Argyle Fund. Please go ahead. Thank you for the very good presentation. Just going on Larry's point there around, let's say, the FanDuel, I use sort of 55%, I believe, data from external providers. DraftKings is 50. Can you just talk to how much you're using at the moment of platforms such as Canby or other competitors of your data? And then obviously where that goes to in future state. You obviously made those two acquisitions related to that, please. Obviously, we'll drive you all the time. Yep. Saw that in the Flutter presentation. Haven't gone and fringely sort of done that on our side. What I will say is this, in terms of the core betting platform, we're not using a Cambium SP Tech or an OpenBet. You know, even a flatter group is very reliant on OpenBet, is owned by Scientific Games. At the moment, it's up for sale, actually. You know, we our core betting platform is ours. In terms of data feeds, we do have data feeds relationships with there's providers out there. There's multiple providers. Like anything, it comes down to commercial negotiation about value for money and what they're charging and what they give you, etcetera. And for some sports, it makes a lot of sense to be able to rely on some of those data feeds. For example, there might be some sports out there that it's not worth because of the volume of turnover that we get on them, us as a starting point investing our quants and our model as get that done in a proprietary fashion. Because we a can feed and a service and even an in play service from a third party provider that can do the job. But when it comes to the popular sports, so the big four American professional sports, the college sports, which is massive, and then things like EPL and tennis, if draw a line there, they're very much a focus that we wanna we still have it as inputs, some of these fee providers, so they can be inputs into our ecosystem and our model. And make no mistake that the flooders of the world have have lots of inputs and data flows, But then what they're saying is they take that information, and they put it through their proprietary models to produce their pricing and their product. And that's what we'll do. But I can't tell you what percentage it sits at the moment, but I can say that we have the same sort of inputs that they have. And, you know, then we take those inputs along with others, our proprietary models, etcetera, to to produce the prices and the offer that goes out to the clients. That's very helpful. Thank you. And then the second one is just relates to your sort of view on TAM of The U. S. By 2025 when it fully opens up if it was at stake. Where do you see that as a proposition? And then your net margin take at 2.3% at the moment, some competitors are running in in the teens and industry's four, right? Where where does that rate settle by 2025 in your view as an industry? Because, obviously, those two values are pretty related. So any insight on that would be very helpful, please. Yeah. So from a margin perspective, we talk in terms of trading or gross margin. So a lot of the margins that are reported by regulators, etcetera, are are are gross margins, gross GGR. So from a trading margin perspective, we see things trending up over time. Originally, a gross margin trading margin we spoke to of 5%. So we said, look, Nevada has been operating at 5% for a long time. Let's go in there and just, at least as a starting point, aim for 5%. Now we finished the year after some turbulence, some really big betting punters that dragged down our yields at 5.3%. We definitely see trading yields having the ability to grow from there. If you think about a 5% book, the main markets where there's two outcomes, head to head, lines, totals, they're a less than 5% margin product. So if most of your turnover is happening on the simplest markets, head to head, lines, totals, which is what people gravitate to first when they're just learning about betting, then your margins are gonna be below 5%. The more then you can educate clients about taking prop bets and multis and parlays, then those products contain a higher margin, and you can start taking your bookmaking or trading margin higher. So we certainly see an opportunity to take it into the sixes and the sevens. You've got to be a little bit careful about how high you take it because this is an entertainment product, and you want your clients enjoying the experience. So there's an upper limit as to where you want to take that. We're still determining where we want to go. We do see price as something that we do want to occasionally lever. So we do wanna be reasonably competitive from a pricing perspective, and we are very good at risk management trading. So we wanna play into that strength. Then it really just comes down to how much do you give away in generosities. So if you're making a gross margin of 6% and you're giving away 05% in generosities, free bets and the like, well, your net margin is going to be 3%. Now our Australian business, which has been live for a few years now, it gives away about 35% in generosities. We'd like to see that come down a little bit, but we're still growing pretty aggressively in the Australian market too. So over time, you can expect the difference between U. S. Gross margins and net margins. The difference there will be about 35%. And then as states get more mature, probably even a little bit lower, 30%, 25%. In terms of market TAMs, we're comfortable going with we've got our own internal models, obviously, of what states we expect to legalize and and how big they'll be. But generally speaking, we would say that the market and the analysts in in the market are pretty much on track with with those expectations. I think the thing, And I think the thing that's interesting is just how they have changed. Even from obviously, we've lived and breathed this now since our entry into The US market, but how grown on the back of expectations that there's probably more upside to the state. So while they might reach what would be expected in, say, two or three years, they've actually got huge growth above and beyond from years three to ten. And I think when we look at the Australian experience, we can clearly see that. Sort of thirteen years into the opening up of the Australian market, still experiencing really strong growth, great opportunity, and The US will be no different. So the excitement for us is not necessarily what the market is in FY 'twenty four, FY 'twenty five, but what can it be in FY 'thirty and FY 'thirty five? Because this is what we've always spoken to. The US population is 13x the size of Australia. We're doing 4,000,000 online of net win. If you extrapolate that, that would be 52,000,000 of net win for The US. But we don't have in place sports betting, we don't have online casino. So we're pretty bullish on the long term TAM, and we're happy to sort of go with the market on the shorter term TAMs. Thank you so much. That excellent. There are no further questions at this time. I'll now hand back to Mr. Swinell for closing remarks. No, that's it. Thanks, everyone, for your time, and we look forward to talking more. Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.