Earnings Call: Q1 2021

Oct 26, 2020

Good morning, and thank you for all joining the Pointsworth Holdings Limited Q1 FY 'twenty one business update and activities report. This is Sam Swinell, CEO, and I'm joined on the call today by our CFO, Andrew Melwell. This morning, I would like to walk you through the Q1 FY 'twenty one trading performance for the Australian and U. S. Businesses. I'll then hand over to Andrew Melo to talk to the Appendix 4C quarterly cash flow update released to the ASX this morning. Please note all numbers referred to are unaudited and in Australian dollars unless otherwise stated. Turning to Slide four. The Q1 performance of the global trading businesses resulted in strong growth across the key KPIs. Compared to the prior corresponding period of Q1 FY 'twenty to be referred to as the PCP. Turnover was up 193% at 691,900,000 gross win up 282% at $70,400,000 net win up 222% at $38,100,000 active clients up 88% at 165,000 As can be seen on Slide five, in Australia, active clients were up 73%. And in The United States, active clients were up an impressive 159% compared to the PCP. The company recognizes a structural change in the Australian online wagering market, including brand consolidation with the BetEasy brand recently being folded into sports bet and a shift from retail to online wagering. To capitalize on this opportunity, Australian marketing expense was increased to £11,300,000 in the quarter as the company acquired and retained clients during the recommenced NBA, NRL and AFL seasons and leading into the important spring racing period. It can be seen on Slide five that this increased marketing spend has had a direct correlation to the increase in active clients. In The United States, Q1 FY 'twenty one saw the recommencement of the NBA and NHL, together with the commencement of the NFL and MLB. As a result, in July 2020, PointsBet U. S. Resumed its targeted marketing investment in New Jersey and Indiana and launched operations in Illinois in September 2020, assisted by the NBC Sports media assets. Total U. S. Marketing expense for the quarter was USD 11,800,000.0. As evidenced on Slide five, these efforts have seen U. S. Active clients increase from just under 21,000 for the twelve months to thirty June twenty twenty to almost 40,000 for the twelve months to thirty September. Before turning to our U. S. Trading results, I would like to provide an update on our partnership with NBC Sports. Turning to Slide six. As previously announced on twenty eight August twenty twenty, PointsBet and NBCUniversal have entered into a five year media partnership. Under the partnership, PointsBet has become the official sports betting partner of NBC Sports, providing PointsBet access to leading national and regional television and digital assets with the largest sports audience of any U. S. Media company accessing over 184,000,000 viewers. On the September 1, PointsBet began the utilization of these assets with some of the integrations seen on Slides six and seven, including integration of the NBC Sports designation and logo into our website and app, PointsBet odds and branding added prominently throughout nbcsports.com and targeted regional sports television networks PointsBet Sportsbook attribution in key sports broadcast and delivering over 4,400,000 total digital impressions in September. These types of integrations are just the beginning, and we are thrilled with the progress being made, which speaks to the aligned interests as structured within our agreement. Now turning to Slide nine, I will touch on The U. S. Trading results for the quarter. Q1 FY 'twenty one saw the return of the four major U. S. Sports, and as a result, the company saw an unprecedented level of activity from our clients. As a result of the COVID postponements, this was the first time that clients could legally bet on all four sports at the same time. As mentioned in July 2020, PointsBet resumed its targeted marketing investment in New Jersey and Indiana and launched operations in Illinois in September 2020, assisted by the NBC Sportsmenia assets. PointsBet will not make significant marketing investment in Iowa until in person registration is replaced by online registration on the January 1. U. S. Marketing expense was USD 11,800,000.0 in Q1 FY 'twenty one, resulting in active clients during the twelve months to thirty September, increasing by 90% to just under 40,000 compared to the twelve months to thirty June twenty twenty. The U. S. Business achieved a quarterly gross win of $9,800,000 compared to gross win of $1,100,000 in the PCP, with a net win performance of $3,100,000 compared to a loss of $800,000 for the PCP. Strong net win in New Jersey of $5,500,000 at a net win margin of 4.1% was offset by negative net win in the recently launched states of Indiana and Illinois as the company's strategy to acquire and retain clients resulted in promotions exceeding gross win in these states. During the quarter, The U. S. Business achieved 6.5% market share in New Jersey and 3.2% market share in Indiana for online handle. The quarter also saw PointsBet enter into various strategic sports partnership deals with teams within the four major U. S. Sports. In the MLB, PointsBet became a partner of the Detroit Tigers, being the first sports betting partnership for a professional sports team within Michigan and the first for any MLB franchise. In the NBA, PointsBet partnered with the Denver Nuggets and Indiana Pacers. In the NFL, PointsBet partnered with the Indianapolis Colts and the Chicago Bears. And in the NHL, PointsBet partnered with the Colorado Avalanche. In addition, PointsBet became the official sportsbook partner of the Denver Nuggets home arena, the Pepsi Center, recently renamed the Ball Arena. Under these deals, we swing closely to markets where PointsBet is operational or will soon be. We gained usage of the team's trademarks and logos as well as sponsorship opportunities and brand visibility across various assets and databases. At the end of the quarter, PointsBet was operational in four states: New Jersey, Iowa, Indiana and Illinois, with the next launches planned for Colorado in November and Michigan in Q3 FY 'twenty one. Michigan will also see the launch of PointsBit's iGaming product. As per Slide 11, PointsBrad has brought together a highly experienced iGaming team and is well advanced with the development of our in house proprietary iGaming platform, remote gaming server and administrative tools. The iGaming team is led by Kieran Power, a previous CTO at Ainsworth Gaming and former VP, Advanced Products and Intellectual Property at Aristocrat. Mr. Power reports to Manjit Gombrasinghe, President of Product and Technology, who has a deep background in online casino, including in his former position as CTO of Aristocrat. We are focused on ensuring that both our sportsbook and iGaming platforms and products are customized for The U. S. Market. Our proprietary iGaming platform will be complemented by targeted licensed third party iGaming content, including a live dealer solution, together with a focus on innovating and developing our own content. Now turning to Slide 12. As mentioned earlier, there was a clear structural change occurring in the Australian market. As a result, the Board and management have agreed to capitalize on this change. The acceleration of the transference of retail to online and the cessation of the BetEasy brand has made management more bullish on the Australian opportunity than we have been for some time. There is now a growing opportunity for PointsBet to achieve a 10% market share in Australia by 2025. It is currently estimated that the Australian online wagering market generates GBP 3,000,000,000 of net win per annum. We expect the transition of betting activity from off line to online to continue over the next five years and for the online total addressable market to grow above $4,000,000,000 by 2025. PointsBet's strategy involves growing our in house digital and analytical marketing teams, increasing targeted marketing spend and continuing to take full advantage of our strategic media assets, including the Channel seven horseracing coverage. This strategy will result in continued growth in net win across FY 'twenty one and beyond, whilst ensuring that the Australian trading business remains EBITDA positive and does not require any further group funding. Now turning to Slide 13. The Australian trading business continued its strong performance, achieving a net win for the quarter of $35,100,000 up 178% from the PCP. Net win margin of 6.6% was down from 7.7% in the PCP as a result of increased promotional activity. This promotional investment is reflected in active client growth and turnover with 124,715 active clients to thirty September, an increase of 73% on the PCP, and Q1 FY 'twenty one turnover of $527,700,000 more than tripling compared to the PCP, up 221%. The recommencement of AFL during June saw the company benefit from its exclusive partnership with FOX Sports AFL. Towards the end of the quarter, the company continued its national broadcast role as an exclusive Channel seven Victorian Odds integration partner for the spring racing coverage. This will be an important media asset in Q2 FY 'twenty one, especially given the current brand consolidation and reduced attendance at racetracks, pubs and clubs over the spring. The Australian trading business marketing expense for the quarter was $11,300,000 generating a net win of $35,100,000 Before I hand over to Andrew Mello, I would like to make some brief comments on our in house technology platform. As I have regularly spoken to, owning and controlling your technology stack is unquestionably a superior position. To provide some tangible evidence of our recent product deliveries, as can be seen from Slide 14, we recently launched an improved app in New Jersey, Indiana and Illinois, where the user experience is more than 2x faster than the average sportsbook. This will certainly aid the in play experience of our customers in The U. S. The right hand side of the slide highlights our recent focus on The U. S. Parlay, or multi as it referred to in Australia, segment, including the launch of single game parlay, parlay booster and in play parlays, which are traditionally high margin products and drive client engagement. It was encouraging to see PointsBit's focus on user experience recognized by Eilers and Crycheck in their recent review of New Jersey's 17 operator apps. They commented that our app was fast and intuitive and enhances the user experience with its attention to detail. They stated it is the most polished and modernized on the market. The report also spoke to the learnings from The U. K. Market and emphasized that a customized user experience is of the utmost importance. I will now hand over to Andrew Mellor to talk through the Q1 FY 'twenty one Appendix 4C quarterly cash flow update released to the ASEC this morning. Thank you, Sam, and good morning to those in Australia and Asia, and good afternoon and evening to those in The U. S. And The U. K. Now turning to the Q1 FY 'twenty one Appendix 4C cash flow summary released earlier today, and please refer to Slide 15 of the presentation. At the September 30, the company's corporate cash balance was $436,500,000 with the quarterly AUD USD FX movement resulting in an unfavorable FX translation of $4,100,000 during the reporting period as the company held a significant portion of its corporate cash in USD. The company has no corporate borrowings. On the September 25, PointsBet completed a $353,200,000 capital raise. Under the offer, PointsBet raised $200,000,000 at $11 per share under a placement and $153,200,000 at $6.5 per share under a one six point five pro rata accelerated renouncement entitlement offer with retail rights trading. Eligible shareholders in the entitlement offer received one new option for every two shares issued under that offer at no further cost to them. The new options will be exercisable at $13 and expire on the thirtieth September twenty twenty two. The company will receive an additional $153,000,000 in funds should these options be exercised in full. Receipts from customers or net win for the quarter totaled $38,100,000 as previously detailed by Sam. Net cash used in operating activities in the quarter ending thirty September twenty twenty was $10,000,000 Excluding the movement in player cash accounts, net cash used in operating activities was $21,600,000 Major operating cash outflows during the quarter were cost of sales of $19,000,000 non capitalized staff costs of $6,400,000 marketing costs of $28,600,000 and administration and corporate costs of $5,800,000 These cash flows primarily resulted from the resumption of targeted marketing investment in New Jersey and the launch of full operations in Indiana and Illinois, the prepayment of some U. S. Marketing obligations and the increase in cost of sales payments as The U. S. Business grew in this quarter and the Australian business grew through the last two quarters. Net cash used in investing activities in the quarter ending thirty September twenty twenty was $15,300,000 This predominantly related to market access payments of $10,800,000 a significant portion of which related to the Illinois Gaming Board licensing fee and further the capitalization of our technology and product staff costs of $2,700,000 I'll now hand back to Sam to provide some concluding comments. Thanks, Andy. Turning to Slide 16. This slide reflects the sports wagering and iGaming market opportunity over the term of the NBCUniversal partnership to 2025. This opportunity is predicted to be at least $12,100,000,000 of annual revenue. This is the immediate opportunity in front of us as we pursue our target market share. Moving to Slide 17. PointsBet continues to execute on its strategic and operational objectives. Since listing in June, the company's strategic objectives have included gaining additional U. S. Market access, achieving strong market share in New Jersey, launching operations in additional U. S. States, reaching profitability in the Australian trading business and executing a media deal with the market leading U. S. Media company, NBCUniversal. We plan to launch in Colorado in November and Michigan in Q3 FY 'twenty one for both Sportsbook and iGaming, followed by iGaming in New Jersey. One of the important goals of our technology team is to improve the efficiency and speed of the rollout of our state infrastructure with the aim to ensure that we are on the starting line of future state launches, supported by the NBC Sports assets and their ability to help facilitate a fast start in these new states. It's a truly exciting time for the business. Thank you for your time today, and we welcome any questions. Thank you. If you wish to ask a question, please press 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press 2. If you're on a speakerphone, please pick up your handset to ask your question. Your first question comes from Alison Lai from Credit Suisse. Please go ahead. Hi, Sam. Hi, Andrew. My first question is on the margins. So in The U. S, I believe some of your competitors commented that they had low wind low yield this quarter because floating units are held behind those stores and the results are unpredictable. Your margins, at least in New Jersey, growth and that win, are reasonable. So I wonder, you know, there's some luck factor in there or maybe some sort of bookmaking techniques. Yeah. Hi, Alice. Yeah. I think, you know, obviously, our gross trading margins in New Jersey were were good, 6.8%. But I think to balance out that, Indiana was 2.6, and Illinois was 0.3. So, you know, we had some, let's call it, some luckier clients in Illinois and Indiana that capitalized on, yes, there were some favorable results for punters in sports betting in The US in September, and and that's been reflected in those wider results. So I think our results do reflect that, although there is some differences between what's occurred in New Jersey and what's occurred in Indiana and Illinois. The right result is probably the blend between the three. Okay. And in Australia, the margins are still, in my opinion, relatively high despite the competition and the fact that sports have returned, so not just horse racing anymore. So for point spread as well as the broader market, do you see these levels sustainable? Yeah. It's a good question. I mean, look, sports you're right. Sports did resume, and that's undoubtedly led to some yeah. It should lead to some evening off of margins from the previous quarter where, obviously, racing dominated. Look, we we obviously historically guide to those 10% gross margins and sort of 8% net in a normalized environment. But I think that's a low bar. We'd outperform like that. So I think in summary, we're happy with the 11.5%. I think that's a good result, as you said, considering resumptions of Sport and the fact that it would make up a higher portion of turnover compared to the previous quarter. Okay. Sure. I just have one more question on The U. S. Market access. I actually haven't heard too much news market wise in terms of new state legislations as well as Pointsbad obtaining new market access. So just wondering what's happening in the broader market and if Pointsbad is still having conversations with potentially new market access partners. Yeah. Most definitely. It's a it's a constant focus for the company to ensure that as new states are legalized, that we're in a position to to be operating in those states. I think, you know, we talk about Colorado and Michigan being our next two states. You know, a state like Virginia is getting ready to launch. We haven't announced any, partnerships, in terms of Virginia, but we're you know, we back ourselves into secure market access there and and be operating in Virginia when Virginia goes live. I think another state like Massachusetts is a state to watch. You know, there's there's moves afoot there. And again, we're working hard to ensure that we're in Massachusetts and have confidence that we will be. So our position is that we were already we'd already secured those 12 market access arrangements through a number of partners, which talks to, I think, the faith of those partners in the industry that PointsBet is going to be a material player and that we are a good partner to secure. I think on the back of having the NBC assets behind us, being the sports betting partner of NBC and the and the that that signaled, I think our position in the marketplace in securing market access has only been enhanced. And that note that note only ensures that we get into markets, but ensures that we get into markets on the best possible terms. You know? So it strengthens our position in terms of what what our partner fee may may be in terms of what we have to pay those partners. So I think I think well and truly, the momentum is still there in terms of states legalizing sports betting. It's only been, I think, enhanced by, obviously, the state based budgetary problems. And I think even a state like New York, you know, is is looking far more likely on the back of the the budgetary issues that they're having and and the possibility of them passing an overall revenue package bill. So I think I think the momentum is well and truly still there, and I think PointsBet's ability to ensure that we're in states that legalizes has only been improved post the NBC deal. Thanks very much, Sam. Thanks, Ellis. Thank you. Your next question comes from Jed Kelly from Oppenheimer and Co, Inc. Please go ahead. Great. Thanks for taking my question. Just circling back on Illinois, when did you when when were you actually live in that state? And then can you give us, since you've launched, anything you're sort of seeing with the trends in October? Yeah. Good day, Jed. Yeah. So we only launched, I think it was the September 10. So we got three weeks of operating. You know? So three weeks of operating. As you know, we were the fourth to go live. So DraftKings, Fanjul, and Rivers had been live before us, in that you know, in what is currently the mobile registration environment. So we were the we were the fourth to go live around September 10. I think it was the first weekend of NFL, and, you know, we, yeah, we we were ready to go and and activated, you know, assets and and got going from a marketing perspective. I think, you know, I think we're everyone's pretty happy what they'll what they're seeing out of Illinois. I think, you know, Illinois is a I I think it was always a state that we had we thought would have the strong DNA for sports betting and and and, get out of the gate strong, and and we're certainly seeing that, that's the case. And, obviously, you know, the fact that there's only five competitors, I think William Hill launched after Weedy, Five competitors in what is the biggest state for legal so far. Obviously, we have the Chicago RSN assets plus the other assets that we're leveraging up, in Illinois. So, you know, it's it's certainly taking up a a decent portion of our focus and and and our marketing investment, and, and we're seeing the results. So all in all, very good. Alright. That's helpful. And then, you know, so a lot of the sports books, you know, that I guess they do use third party providers. And I think a couple weeks ago, there were some outages in a couple of states. I mean, if you I mean, can you talk about, like, in terms of how your outages compared to some of your competitors? And then just on the Parlay booster or the Parlay product, what percentage of that is coming from, like, in game wagering? Do you have those stats? Yeah. I'll come back to the latter. I mean, in in terms of outages, I think our performance in that space has been outstanding. Again, it's one of the cause. We view your priorities from a technology perspective in terms of being first of all, you've got to master stability and scale. There's no point having bells and whistles and features if your if your app is breaking down regularly and going offline. You know, we've we've in recent weeks, in our spring carnival here in Australia, we've obviously processed some very high volumes with with with success. And once you've got the stability and the scalability, then you want to move to user experience and speed. And then you worry about the bells and whistles, real sort of finite features on the end. So we put a lot of emphasis on reliability, and I think our performance in America and Australia has certainly been, up the top. There was an outage, I think, early this week or late last week, which, where all of the geolocation functionality on on all the apps came down. We basically all use a a single vendor there that that had some problems. So if that's the one you were referencing, that was that was not really a result of anyone's platform. It was it was the the third party, geolocation provider. But even prior to that issue, you know, some of our competitors in America have certainly had some pretty serious outages and touchwood so, you know, so far through our preparations and hard work. We haven't had experienced anywhere near the same issues that they have. In terms of the parlay, Bruce, no, I can't give you the exact stats of how much of that is happening in play. I will say that the American market, from a product perspective, we've spoken regularly and and others have speak to it as well that, you know, we we see two you know, from a UX perspective, two of the focuses need to be in play. You know? So that in play experience being as quick and your bet slip being, as efficient as possible to to facilitate in play. And, you know, we're seeing in play numbers approaching 50% of turnover in America already, and we expect in play to go above, you know, well above that, over the long term. And then the other element is parlays. You know? Parlays use that opportunity to, increase engagement for your clients and to produce some larger margins. And, you know, when you combine the two, you know, if we're facilitating clients being able to have an in play bet on, you know, five basketball matches that are going on at the same time or five sporting events that are going on at the same time and to parlay them up in play, that's a pretty good experience for the client and the the users that can or the the operators that can facilitate that sort of seamless experience are are gonna have success. Alright. And then just one more for me. You know, we do have the Breeders' Cup in The US coming up in a in a couple weeks. It's on NBC Sports Network. I know you're not completely in The US with horse racing, but is there anything you can do or do customer acquisition around that event? No. It's it's the simple answer. I'm pretty sure that that event has a has a preexisting, commitment. And as part of signing the NBC Sports Partnership deal, there were some existing commitments that were flagged and called out, and they have to effectively run their course. So the short answer is no. I'm pretty sure we can't leverage that one, and I'm pretty sure it was a element of of the deal. That's not to say that in the future, there might not be opportunities. Okay. Great. I'll get back in queue. Thanks, Jed. Thank you. Your next question comes from Rowan Sundram from MST Financial. Please go ahead. Good morning, Sam and Andy. Question has been answered on The US yield front, but maybe just a follow-up on The US gross margin, which looks quite solid actually. I just wanted to ask, is it not too early to attribute any of that performance to the tech stack or is it too soon? Look. In this instance, I would say because there is disparity between the states, you know, I pointed out that, from a just a trading gross win margin perspective, that New Jersey was at 6.8, whereas Indiana was at 2.6 and Illinois was point three. And and and it the the industry, sort of commentary that results were tough for sports bookmakers in in particular in September, obviously, when those that was when the NFL resumed. That that was accurate. I mean, it was a sort of a tough quarter. But to your point, most definitely, can tech and product make a difference to improving improving gross yields? I mean, we've just been talking about the role that Parlay's can play in that range, the focus that we have on that part of our product. So if you can the difference between having 10% of your turnover in Parlay versus 20% or 25% will will make a meaningful difference, to your gross yield. And then the other part to that is, you know, the mix of your client base. As your product improves, if you lead the if you lead the product, we we believe product will win. And what that means is when it comes to recreational customers who aren't necessarily price sensitive, they're not just shopping around for the best product, best price, they're more likely to win the best best product, the best product features, the best functionality, the fastest app, and those recreational clients obviously will have a, you know, a higher natural yield than than a sharp client who shops around for price. Okay. No. That's clear. Thank you. So on that note, in in markets like New Jersey, where you've got a net win of 4.1%, which also seems pretty solid early on, are you saying that there's also a a yield aspect to that based on product and mix? Would you expect to grow that net win over time as well rather than just a turnover story? Yeah. Well, there's there's two parts. But there's the let's call it the the trading margin, the gross win margin, which is a a a pure view of how you've traded and how the results have gone from a, you know, sports perspective. And then there's how much you give away in generosities and promotions from that to end up in a net win margin. I think it's really telling, and this is, you know, this is part of our, let's call it, our our model, is that, obviously, New Jersey, we've been live there circa twenty one months. So what happens there is you've got a client base or a business that is more mature. You've got more retained clients. Obviously, when new clients are coming through, you're giving away more in generosities, but that that speaks to closing the gap between gross win and net win margin because you've got a you've got a more mature client base and a more mature business in states like Illinois and Indiana and Iowa come January 1 when we really kick off marketing there. In the early months, our strategy is to give away any gross margin in general season prom promotions for go net win because you wanna scale up. You wanna you wanna add clients. You wanna get them in trying their app, you know, by giving them back generosities. You get them through having their eight, ten, 15 bet milestones. And if you can get clients having going through those milestones, they're starting to appreciate how how fun sports betting is. They're getting used to the app, and the navigation, and, you know, that can start to distinguish between a good app and a bad app. So, you know, that's the modus operandi. As states mature, like in New Jersey, you'll see improved net win margins and the gap between gross win and net win closing. As states launch early on, you'll see us giving away that gross margin in pursuit of client active scale. And, you know, that's that's the that's the strategy. And I'll point out about Indiana. Even though we launched in Indiana in March, we only had one week live. And so effectively, then we, you know, went back into sort of hibernation mode until the sports as a result of COVID, until sports resumed again in late July, and that's where we we picked up marketing again. So we we view Indiana very similar to Illinois in that it's a recently launched state. Okay. Thank you, Sam. Thank you. Your next question comes from John Carducci from JPMorgan. Please go ahead. Good morning, everyone. So it looks like you added about 18,000 actives in The U. S. From the fourth quarter into the first quarter and, spent about, what, dollars 12,000,000 to get there. So the back of the envelope customer acquisition cost math means that you're in the low $600 head. So was this CAC spend focused on defending the New Jersey turnover share, which seems to have dropped from nine to 6%? Or was this all due to early Illinois sign ups? You can go ahead, Don. I think in terms of New Jersey market share, when we spoke last quarter about achieving 8.7%, we were pretty clear not to take credit, you know, to put too much emphasis on that because it was off low activity as a result of there being no main US sports. And we spoke about the fact that until we launch our USI Gaming product in New Jersey, you know, we estimated that we we would stay around the 6% to seven percent market share percentage because that's that's the level of marketing spend that we're doing. So to maintain that 6.5% in a growing market on the back of sports resuming and obviously all everyone in the marketplace starting to spend from a marketing perspective again, we think that's a great outcome. In terms of Illinois, yes, that is a big focus. It's not only the biggest state, and we've spoken before about a rough guide. This differs state by state depending on the makeup of the state. But if you take Illinois, which, let's say, is an $800,000,000 revenue state, we're aiming to be 10%. That's $80,000,000 of revenue. And then we guide to that we'll spend roughly 30% of that, on marketing. Now that's not going to be spent equally, across various months because seasonality will play a big role in that. And this if you're talking about seasonality, this is as strong as it gets with the big four sports all operating. And obviously, us launching into a state, where there was only three existing competitors, and being the biggest state to to go live so far, it's definitely a focus of marketing. But we're we're spending in Illinois and Indiana according to, let's call it, that 30% of 10% model. And in, New Jersey, we're spending less than that. We're spending more towards sort of a six percent to 7% market share position until we launch the iGaming product, next year. Okay. So to refocus that, so that $12,000,000 that was spent in the quarter, was that predominantly or weighted towards focusing on those three weeks in Illinois where you feel like you got the initial you know, cane punters at launch, so we shouldn't see an equivalent tick up in actives into the second quarter? Or, just keen to understand where those 18,000 actives, came from. Yeah. No. You can you can assume a big chunk of them came, from from Illinois be because it's that biggest market. Let's say it's 800,000,000 versus Indiana being 300,000,000. You know, it's two and a half times the size. So, you know, logically, even if all other things were equal, be spending two and a half times more in sort of, in Illinois than we would Indiana. And, you know, we, you know, we probably even overemphasized in Illinois a little bit more because of the, you know, the more favorable setup in terms of number of competitors. So now you're right in saying that, first of all, the amount that we spend in September was more than we spend in July. So July, August, September would have been the the peak month of of the quarter because of, obviously, the sporting calendar and return of the the NFL. And in terms of focus of that spend, we will only live in Illinois for three weeks. But on a if you if you may amortize that over the four weeks, it was it was certainly our biggest spending stake. Great. And then it sounds like the Board is happy to focus on Australia a bit more. And with the growth expectation of $3,000,000,000 online getting to $4,000,000,000 by 2025, can you talk about what underpins this assumption? Because I think it's been well known that those five brands on Slide 12 were going to dissolve, and that's been well known for quite some time. So keen to understand, again, what underpins that assumption of $3,000,000,000 to $4,000,000,000 whether it's based on maybe an over indexed of fixed out sports growing? Or is this really just you guys are taking, or seeing all that retail money just converted to online? Yeah. I mean, I think we'd previously flagged that, you know, we had seen even before the cessation of the BetEasy brand, we had seen, you know, some heat come out of the market a little bit. And, you know, we would you know, obviously, we've been able to secure the the racing deal and the channel seven and the Foxtel Footy deal, which, on terms that we were comfortable with, which was probably reflective of some of the heat coming out of the market. But the BetEasy brand was obviously a big brand, and for that to no longer exist, provides a great opportunity. But I think no doubt, the biggest factor was the transfers from off line to online has been fast. That was always going to occur over the next five years, but it has been fast tracked by the COVID impact. And our expectation is that, that activity, only a portion of it will return offline or is returning offline. So what that's meant is we've had a fast tracking of the online opportunity. As we stated, we think it's above $3,000,000,000 now, which is very encouraging and will continue to grow. And so I think our success in getting to EBITDA positivity and those market factors, what that's meant is we believe that we can grow revenue very strongly while still maintaining EBITDA positivity, and that's a pretty attractive proposition. Great. Thank you very much. Thanks, Tom. Thank you. Your next question comes from Phil Chippendale from Ord Minute. Please go ahead. Hi, Sam and Andy. Thanks for your time. First question, just talking about the Australian market and the marketing expenses that you're incurring here at the moment. So first of all, just for FY 'twenty one, how should we think about that marketing expense over the balance of the year? You called out the $11,000,000 that you spent in the quarter just gone. So should we expect that to sort of ramp up potentially over the balance of the year? And then secondly, sort of a follow on for that is, obviously, the 2025 target is going to require significant investment from a marketing perspective. So again, can you maybe paint us a picture about how we should be thinking about that? And Sam, maybe you could connect it with your earlier comment about that sort of 30% number and how you think about that with The U. S. Is that a similar approach we should be thinking about here? Or again, just be interested in your guidance? Yes. I mean, taking the end, I suppose. We don't I wouldn't take four times our quarterly spend on marketing as a as a hard and fast annualized result. This quarter was you know, it was pretty extraordinary. And, again, we are mad about American sports in Australia. So to have the four American sports going plus the two AFLs, two domestic sports, sports, plus racing, you know, plus, you know, still a portion of lockdown sort of most definitely in Victoria and even restrictions in other states, it it made sense to capitalize on that. And, again, our approach when it comes to marketing is is, let's call it, responsive and iterative. Know, we if we see the early signs that the payback is there, you know, then we have some flexibility where we can upspend a little bit. And if we if we see that the payback is sort of not there from our, let's call it, our plans, then we'll then we'll dial it down. So, you know, we certainly were seeing encouraging results from that increased spend, and, you can see that in the active clients, You can also see it in the turnover for the quarter for the Australian business, which is a pretty remarkable number, to be honest. So that encouraged us that that spend is getting the return on investment as well as the other measures that we use internally to do that. But that takes you through to the September. Obviously, spending continues through to now and couple weeks because that's still peak period. So then it'll really then it really we go into a quieter period through the November, December, January, and then you look at the start of AFL and and then all seasons again and you step it up. But no. I wouldn't I wouldn't go to four times, the quarter to sort of get a view on on what marketing spend will be. I suggest it will be less than that. But again, we have some flexibility in our plans, based on the results that we continue to see. In terms of that pathway forward, I mean, first point to note is all of our growth will be achieved within EBITDA positivity. That's the strategy, is to space self funding. And a little bit will be formed by, again, what we see from a marketing perspective. You know, if you're spending 30 or $40,000,000 on marketing, you know, it's a little bit different, potentially, the efficiency than if you're spending 60 or $70,000,000 on marketing. But if we take if we take that $4,000,000,000 market $4,000,000,000 revenue, say, for the Australian market in 02/2025, and you estimated that, we can be 10% market share, that's 400,000,000 Aussie revenue in 02/2025. Based on what we've been talking about, you know, a rough 30% model, you'd be spending, what, a 130,000,000 on marketing. Now I don't think you'll be spending quite at that level, because you do get some, a dropping off or pulling back of of the marketing investment. I think if you look at most of our competitors who are operating in, let's call it, a more advanced stage of their life cycle, their marketing investment is probably more around 21%, 22%, 2324%, maybe high teens. So I think once you get to that sort of scale, you can see margins pull back from that 30% marketing spend. But within a model of EBITDA positivity, you know, we don't see our marketing spend sort of going beyond the 30%. And, you know, anything less than that, I suppose, contributes to that that EBITDA margin. We delivered a nice little margin, obviously, this year, and the aim will be to deliver a positive margin again in FY 'twenty one. Okay. Can we maybe just shift to Illinois? Yes. I'd be interested in your assessment of your progress so far. And then as a follow on, how should we think about that net margin profile in that state? Clearly, you're going to be investing with promotions, etcetera, for a period of time. And we can look at your, you know, New Jersey, for example, as a case study and how that profile has changed over time. Is it you know, should we be using New Jersey as a guide for how we should maybe expect that net margin to change? And if not, why not? And and how should we be thinking about that? Should it maybe take a little bit longer, just, you know, larger states, etcetera? Or, yeah, just be interested in any differences that you'd like to highlight for us. Yeah. No. I think I think you're pretty much spot on there, Phil. I think New Jersey is a good a good road map from a net margin perspective as to what, you can expect in other new state launches, in particular, Illinois. There's a couple of points I'll highlight, though. Again, gross margins do play a role in net margins. So we just spoke about sporting results sort of going against bookmakers in September. So the higher the gross margin, then the more chance that we would deliver positive net margins earlier. But I think in general terms, go through a period of wanting to ramp up your client numbers, get some scale, capitalize while there's less competitors, and that's certainly the plan. I think the other point that's worth pointing out is we've never been first or equal first to a market. I think in New Jersey, were like eighth, in Indiana or Illinois, we're sort of fourth or fifth. And even Colorado, which will launch in November. Obviously, there's existing operators that are live in Colorado. In Michigan, depending on how quickly everything moves, we should be pretty close to the starting line. But I made a comment at the end of my introduction that we see a great opportunity now with the NDC assets as well for Pointsberg and our, let's call it, our greater operational tech capacity. We want to be on the starting line, let's call it, from April onwards next year. Any new markets that open up, we definitively want to be on the starting line for those states. And not only do we want to be on the starting line, we want to be warming up those states with the NPC assets, whether it's the free to play Predictor app, whether it's their email databases, other spend to warm up that state. What that should mean is it will be a slightly different experience to what we've experienced in New Jersey, Indiana, Illinois, where you're coming in, your competitors have already had months, two months, three months of operations. Now that gives you that opportunity, let's call it, to grab the keenest sports fans from day If I was in one of those states of being a person who loves to have a bet on sport, I'm signing up to the first operator that's live, even if the app might be terrible or whatever else, because I want to have a bet on sports. So the closer we can be, the more that we can exploit the the the advantage of having a great app in those NBC assets. And so that will be a indicator and a you know, will influence how quickly we can move through our gears in gaining scale from the clients and perhaps move to more net positive net win numbers as well. Thanks. Final question for me. Just on the Colorado and Michigan launches and their timing. What are the hurdles that need to be overcome in order for those launches to occur, you know, within, you know, what the time frame you've indicated? Yeah. Colorado, is very close. It's just us getting through, you know, let's call it the final stages of system sign offs. So that's that's that's within touching distance. Michigan, the regulator there is just sort of finalizing, let's call it, their, their rules and regulations, and they will publish them. And, you know, then the expectation is is that, you know, shortly after operators will be available to go live. Now that's probably going to be around January. And, if it's around January, that will be sort of in line when operationally, we're ready to go. And that's why I say we, know, we'd be hope to be on the close to the starting line in in Michigan, if if it's around that sort of current time line that's being talked about. If it gets pushed back to sort of February or March, then we'll, you know, then we'll definitely be on the starting line, all other things being equal. If it came forward to sort of November, December, well, then we may miss the first the first month or so. But I think the current expectation would be around January, and that's going be pretty close to when we can launch. Thanks, Sam. That's all for me. Thanks, Phil. Thank you. Your next question comes from Damian Williamson from Bell Potter. Please go ahead. Yes. Hi, Sam and Andy. Just in terms of Illinois, can you give us an update of what's going on with the in person registration process? Because it appears it's going online at the moment. And also, in terms of your customer acquisition strategy, what have you seen any traction from your NBC SportsChicago network partnership to this stage for your your customer acquisitions in Illinois? Yes. Hi, Daniel. Yes. In terms of in person, look, I think given the current COVID environment, in Illinois, our expectation would be, that it gets extended again, in November, unless there's a, you know, just a quick some quick dropping of of sort of, COVID infection rates, etcetera. So we're continuing at the moment as if remote registration will continue for the foreseeable future. Obviously, we would have a strong competitive advantage if in person resumed. But look, the the impact of being the remote registration is is the market will grow more quickly. The five operators that are there will will, invest from a marketing perspective, and and, you know, we'll get, let's call it, the the sports betting potential sports betting customer thinking and and converting to becoming a customer. You know, again, in the long term, we think our product wins out. So the quicker the market grows, we'll we'll accept that. We'll accept the the registration. We'll compete. We're happy to compete. We think, again, our product will will serve us well for the long term. I mean, in terms of the NBC assets, yep, you know, as we highlighted, we've certainly been putting into use. I would say that, you know, we're only gonna get stronger. Yeah. The lowest hanging fruit is the easiest stuff, you know, logos and banners on their telecasts and and the like and, you know, hitting up some of their digital assets and but it's gonna be, you know, the the deeper integrations, you know, into programming and, you know, that that we wanna move towards and we are moving towards with. You know, we have someone from our team member team will speak to their team nearly every day. There's there's there's multiple meetings going on on multiple different streams, and the partnership is well and truly, heading down the path that we we hoped it would, which is great. One one point I think is worth pointing out about marketing is is that I've been pretty clear about the fact that in New Jersey, historically, you know, we hadn't implemented a full brand strategy. You know, one of the things we would like to have done was, you know, announce to the market that there is an alternative to DraftKings and Fanjul. But because of the media DNA taking, content from New York and Pennsylvania, we would have wasted spend into those states. So our marketing mix in New Jersey had been very digital focused, and I think that talks that that is a different approach to what we're now implementing with the MVC assets behind us and in Indiana and Illinois in particular. We want to build a brand for the long term. We want to announce to the marketplace and the sports betting consumer that there are alternatives there to Fanjul and DraftKings. That's why it's so important to have the NBC logo on our app to build that trust and credibility so people feel comfortable depositing their money. They know they're gonna get paid out if they win half a million dollars on a big multi. That's a very big part of this industry, and that's something that we haven't been able to do in New Jersey, but we are doing now going forward on the back of the NBC asset. So that will build a brand. That takes time. But over time, we expect that to have an efficiency impact on our other marketing channels, And that is a different approach to, obviously, what we had previously been doing in New Jersey. Okay. And just a second follow-up question. In terms of your NVC deal, looking at all the other big media companies in America, your deal seems to be the most comprehensive. You're raising your same turn to do a deal with FanDuel and DraftKings, and DraftKings do a deal with ESPN. Who who other other than your deal, like, which other deals do you do you rate as being, you know, as being, you know, you know, decent deals that that other bidding companies have done with the, with the media companies? Yeah. I think the only one that compares is obviously the Fox, Stars Group deal now now owned by Flutter. Mean, the the fact that they use the Fox brand and there's some equity changing hands, you know, that that's obviously a pretty a pretty deep relationship. But I I think you're right. I think the others are nowhere, as deep as ours. You know, it was interesting to hear Caesars talk about their takeover of William Hill and their plans post that takeover, which is to go back to their various media partners and to seek deeper relationships and integrations. And I think that's a flag to say, you know, that's a nod to what we've already done. That's they they would like, I suppose, or they're gonna attempt to move down the path of the type of deeper relationship that that we've secured with with NBC. But I think NBC, through their equity and options, based on current share capital, that represents 28% of our company, obviously subject to shareholder approval at our upcoming AGM. So that gives them very real skin in the game. And I listened to a podcast recently where one of the key execs that we we worked with over this process, you know, talked about getting the deal done and then putting the agreement, in the drawer because they didn't need to look at the detail of the fine print or the clauses because our interests were so well aligned. You know, they, they have that 28% potentially 28% position that produces great alignment. That's why they gave us the favorable terms that they've given us because they want to give us a competitive advantage to ensure that we achieve our market share aims and to ensure that they receive a return on investment on that 28%. There's no point taking 28% if they're going to set us up to fail by putting in place punitive commercial terms. That's why they put in place favorable commercial terms, and that speaks to the the structure that we wanted in the relationship. So unless unless other media partnerships, try and structure up their deals in a similar way, I I don't think they're gonna be as effective as ours. Okay. No. Thanks. Well done. Thanks, Daniel. Thank you. Your next question comes from Larry Gandler from Credit Suisse. Please go ahead. Hi, Sam. Hi, Larry. Hi, Andrew. Yep. Thanks for taking the call. Look. I was quite impressed by the number of active customers in Australia, a 125 plus thousand. It's almost about quarter the size of, TADcorp's active customers. So I was just doing comparison, and, you know, the turnover per customer is quite similar, believe it or not, but the obviously, the the net win you guys collect is significantly lower. I was wondering if usually with sort of a lower yield, you'd get some sort of elasticity on the turnover. Why do you think your customers maybe aren't turning over more than, you know, your typical punter out there given your yields are are lower? Is there something you guys can do to stimulate turnover a bit more? Yes. Probably look. I I think I'm following the the math that you're doing there. You you're definitely riding that a lower yield, a lower net yield should stimulate higher turnover, other things being equal over a over a long time. Obviously, over a short period, people can redeposit or or withdraw and all those sorts of things. I would see that I suppose what I would talk to, Larry, I would expect that the people that are betting with TADCOG are still, let's call it, the dyed in the wool TADcorp customer that's been with TADcorp through through the absolute long term. I hazard a guess that TADcorp's customers probably have less accounts on average than the average corporate bookmaker account. But I think that does talk to if we are I obviously don't believe that Tabcorp have an overall superior product than ours, But I, you know, I think there's definitely something to be said for the fact that their brand's been in the market for eighty, sixty years or something and had had billions of dollars invested in They have every every shop in Australia by WA branded. So all of those things bring advantages, for a TAB Corp, that may mean that they have just that that that more loyal customer that is is giving them, you know, a 100% of their share. Okay. So so it sounds like it's something that is, you know, an obvious thing where your turn your your your revenue per customer is lower than, say, Tagcorp's. You would expect some elasticity. But, know, but in terms of getting that, is that something that you can is it, you know, digital marketing, specific marketing techniques that sort of Yeah. I I think I think there's there's two there's there's two or three things. First of all, as our client base gets more mature, you will see net yields improve. You know, they've got a very mature client base. I mean, we as you can see be seen by our actives numbers, you know, we've acquired a large number of clients in the last quarter. This was the most we've ever spent on marketing in the last quarter. We were very aggressive with generosity. So the more the larger the portion of your client base that is made up of first time bidders or new clients, that has a negative impact on your on your net yields. But over time, as we get a more mature client base and as we further improve our product, you know, I think we're gonna get a more, stickier recreational client base. There's no doubt that TADcorp and then Sportsbet have the the strongest brands. They've been around the longest, and so they have Mhmm. You know, the the greater recreational mix of clients. But, also importantly, they have a very, established, retained client base, whereas ours is still growing rapidly as can be can be seen in those numbers. You know, having said that, you know, we we'd expect, your net yields in Australia to improve, from what we what we reported this quarter, on the back of generosities easing off. So yes, we went particularly hard this quarter. We went particularly hard, from a marketing spend perspective, and we went particularly hard from a generosities perspective. But at the gross level, delivering 11.5% gross, if you look at TABCORP's and Sports Bet's grosses, they're to be higher than that. So there's those two elements to it. Okay. And just following continuing on that train of thought, so as your customer base matures, is that a changing profile of an existing customer? Or is that a churn of customers and bringing you know, more punches that are perhaps less sophisticated? I think it's both. I mean, the clients, let's call your retained clients, they're they're your, you know, that's your they're they're your stable clients. You know, they they they bet with you each month. You know, a portion of the churn and a portion of of your clients are are first time bidders. So, you know, as you move through and, you know, 10% of your clients are you know, if if 80% of your clients are retained or 60% or 90%, that's gonna make a difference to your yields. The higher your percentage of retained clients in your overall client mix, the better your yields, your net yields are going to be because you're giving away less, I suppose, to acquire them or to reactivate them. So that talks about net yield. In terms of gross yield, as much as your brand grows and trust and credibility grows, and as your product improves, that will improve gross yields. And the reason I say that brand will help you attract and retain a longer, a bigger portion of recreational customers. It's a bit a bit like what I said before about America is that the first clients to find a new bookmaker are price sensitive clients because they are they they're shopping around for for the best prices. So your client base starts off by being the more sophisticated client, and then as you improve your brand and your products, you you add to those, let's call it, more sophisticated clients with less price sensitive clients, more recreational clients, and that helps improve your your gross margin. But you can also help improve your gross margin, obviously, through what we've just been talking about, a better multi product. You know? Yeah. You know, driving products proactively from a marketing perspective to higher yielding products. You know? Not all products are equal as we know. Not only do, you know, some products yield lower sports versus racing, for example, but some products have higher cost of goods sold attached to them. So once you even get below the net win number and you start thinking about your product mix from a gross profit perspective because there's certain products that we don't pay any product fees on, and there's some that we do. So all that comes into play. Okay. Great. Thanks, Sam. Thanks, Larry. Thank you. Your next question is a follow-up question from Alice Lai from Credit Suisse. Please go ahead. Sorry. My question has been asked. I withdraw. Thank you. Thanks, Alice.