Earnings Call: Q1 2020

Oct 29, 2019

Good morning, and thank you for joining this call for the PointsBet Holdings Limited investor update and capital raising. This is Sam Swanell, CEO, and I'm joined today by our CFO, Andrew Melo and General Counsel, Andrew Henscher. I'll start by commenting on our September appendix 4C release before working through our capital raising presentation, which includes a year to date trading update. Both the September and capital raising presentation were lodged with the ASX yesterday evening. Please note all numbers referred to are unaudited and in Australian dollars. PointsBet reported a Q1 FY 'twenty net win of $11,800,000 a 138% increase on the prior corresponding period, which was $5,000,000 in Q1 FY 'nineteen. The company's wagering turnover for Q1 FY 'twenty increased to $235,800,000 an increase of 138% on PCP. For the twelve months ending thirty September twenty nineteen, PointsBet accepted more than 10,000,000 individual bets. Net cash used in operating activities excluding the positive movement in player cash accounts in the quarter ending thirty September twenty nineteen was 10,685,000 as Pointsbeck continued marketing and promotional initiatives aimed at attracting and retaining clients in Australia and The U. S. And hired staff to execute the company's strategy. Net cash used in investing activities in the quarter ending thirty September twenty nineteen was $10,200,000 as Pointsbeck continued to invest in developing its sports wagering platform as well as making payments for market access and retail sports book fit out costs. The cash outflows for the period were circa $5,000,000 less than the previous Appendix 4C estimate due to a slightly delayed opening of our new head office in Denver, Colorado, resulting in lower staff hiring and office lease costs as well as the timing of marketing payments. The company's cash and cash equivalents at the thirty September twenty nineteen was $47,000,000 which excludes the $10,700,000 of player cash accounts. I would now like to move to the trading update and capital raising presentation. Please turn to Slide five. Since our IPO in June, PointsBet, subject to enabling legislation, has increased its market access in The U. S. By five states via our partnership with Penn National Gaming, which the company announced on 08/01/2019. As a result, PointsBet subject to enabling legislation now has access to 10 U. S. States with a total population of 81,000,000 people And according to the Eilers and Crytek Gaming report of April, a retail and online revenue opportunity in 2023 of US4.6 billion dollars per annum should all states or should all 10 states legalize sports wagering. Our market access agreements highlight our ability to win multiple competitive tenders. This provides great confidence that we will gain future additional market access opportunities in other states. As a result of the growing U. S. Opportunity, I believe we must continue investing in our scalable cloud based technology platform and product, our people, executing on our marketing strategy to efficiently acquire clients and additional market access opportunities. Turning to Slide six. Last night via Bell Potter, the company launched a fully underwritten capital raising to raise $122,100,000 comprising an institutional placement at $3.6 per share to raise 60,000,000 and a one for six pro rata accelerated renounceable entitlement offer with retail rights trading at $3.2 per share to raise $62,100,000 The company expects to have pro form a cash at thirty September twenty nineteen of 165,400,000.0 The board of PointsBet believes this is an appropriate time for the company to raise additional equity capital to provide funding for The US opportunity. Access to The US sports betting opportunity is only going to happen once. With the addition of the Penn deal and two states in Indiana and West Virginia that are live for sports betting now, these funds will ensure PointsBet is in a position to capitalize on the existing legal states and the legalization of further states in 2020. The company will continue to take a disciplined and merit based approach to all market access, media and marketing opportunities to ensure it maximizes its return on invested capital. The One Global team approach operating on our in house front to back technology platform will deliver increasing economies of scale as we launch into multiple new states in the coming months and years. Turning to Slide seven. The company continues to focus on growing our registered clients and active clients both in Australia and The U. S. As at thirty September twenty nineteen, our registered clients grew by 223% over the prior corresponding period to 148,902 and our active clients grew by 166% to eighty seven thousand three and ninety one. Acquiring clients efficiently is a key success metric. We understand and closely monitor the relationship between cost per acquisition and client lifetime value. This is demonstrated by the performance of PointsBet's Australian business, which operates in a highly advanced market. While New Jersey is undoubtedly a competitive market, PointsBet's marketing expertise and disciplined approach has produced encouraging results with cost per acquisition in line with expectations. Similarly, the behavior of clients acquired is promising and provides management with confidence regarding the trajectory of the New Jersey business. Turning to Slide eight. I'll now take this opportunity to provide a trading update for the first sixteen weeks of trading in FY '20 to the October 20. I'm pleased to report that FY 2020 has got off to a very encouraging start. At the close of business on the October 20, the year to date Australian business net win is 15,700,000.0 at a net win margin of 7.8%. In this presentation and ASX announcement, we've provided additional information of the different and emerging parts of our U. S. Business, New Jersey Digital, New Jersey High Staking Clients and Iowa Retail. Year to date to October 20, our New Jersey Digital business achieved a net win of $3,900,000 at a net win margin of 5.2%. PointsBet U. S. Commenced actively targeting high staking clients in late August twenty nineteen. We define high staking clients as clients who are consistently wagering large amounts of money. This initiative has been developed following an increasing number of high staking clients being attracted to PointsBet's leading product suite and client service. As at October 20, this segment had year to date net win loss of $1,800,000 The company's proven track trading risk management systems allows PointsBet to accommodate these clients with confidence that this segment will be profitable over the medium to long term. PointsBet online sports wagering turnover market share in New Jersey for Q1 FY twenty twenty was 6.71% in part due to the high staking clients. On August 20, we launched our retail sports book at Catfish Bend Casino in Burlington, Iowa. Up to October 20, it achieved a net win of circa 200,000 at a net win margin of 16.1%. This is the company's first retail operation and it is expected to deliver higher operating margins due to lower promotional costs and a more recreational client demographic compared to online only markets. This experience will be invaluable as PointsBit rolls out additional retail operations in U. S. States, including Illinois and Colorado. In summary, I'm very pleased with the trading performance of the global business up to the October 20, achieving a year to date net win of $18,000,000 and a net win margin of 6.1%. Turning to Slide 11. The company continues to appropriately plan for the requirements and demands presented by The U. S. Sports wagering opportunity and has been building the global capabilities of the team in preparation for the next phase of The U. S. Strategy. The market access that PointsBet has achieved is significant, and we expect there to be more to come. Owning our own technology from front to back will be a competitive a key competitive advantage as we look to the structure of the state by state rollout opportunity in front of us. As I've spoken to regularly, the rollout of our technology initiatives will be a key factor in the success of our U. S. Strategy. The company continues to invest in our in house tech stack providing operational leverage across the Australian and U. S. Businesses. Moving to Slide 12. We focus on delivering a best practice user experience across all front end channels including web, mobile, apps and retail. For instance, we are one of only two operators in New Jersey to offer a Spanish language version of our product with 15% of New Jersey residents being native Spanish speakers. Slide 13. As a global business whose market access opportunity has grown significantly and quickly, PointsBet is focused on several product initiatives that deliver parity with its main competitors. In parallel with these parity projects, the company continues to focus on executing our innovative product road map. Slide 14. As mentioned earlier, I was thrilled to announce in August the opening of our first retail sports book at the Catfish Bend Casino in Iowa. And as seen on Slide 14, working with our wonderful partners in Burlington, you can see that we've produced a world class sports book and are pleased with its performance so far. The retail sports book at Catch Fish Bend Casino is an example of the operations points that we roll out across other U. S. States subject to enabling legislation. Slide 15. In H1 FY 2019, we were thrilled to sign former NFL pro, Dorel Revis and former NBA superstate, Alan Iverson, as our brand ambassadors. The ability to use these ambassadors across the Australian and U. S. Marketing initiatives has created not only a global brand for the business, but significant economies of scale and cost savings. In September, for the start of the NFL and college football in The U. S. And the AFL finals and spring racing carnival in Australia, we launched a refreshed global marketing campaign. This included a TV commercial filmed in North Carolina that features our NBA ambassador, Allen Iverson. This campaign is an example of the economies of scale and cost savings that PointsBet are already starting to obtain as we are able to utilize the same advertisement in both Australia and The U. S. Slide 17. The following slide provides the key details of the entitlement offer and placement. With market access subject to enabling legislation to 10 states, raising $122,100,000 will provide points, but the capital required to support marketing client acquisition in U. S. States in which it plans to launch, continuing to build our scalable cloud based technology and product platform, focus on merit based marketing market access opportunities and sports book fit out and maintain balance sheet flexibility. Since our early days as a private company, we have always taken a disciplined approach to the investment of our capital we will continue to take this laser focused approach with the burgeoning U. S. Sports betting opportunity. Thank you for your time today and we welcome any questions. Thank Your first question comes from the line of Stephen Main with Cricky. It's just a treatment of retail shareholders' question. So the $60,000,000 placement is obviously diluting all shareholders. And then it's good to see you've gone for the renounceable in terms of the entitlement offer. But net net, there will still be dilution of retail shareholders in particular because the placement will be primarily institutional. So will you consider doing a share purchase plan for all retail shareholders at the conclusion of this offer as a makeup offer so there's a to minimize the dilution that your retail shareholders will be suffering from the structure you've chosen to go with? Hi, Stephen. No, we haven't considered any plans around the share purchase plan. We think, look, the fact that the cornerstone institutional investors were willing to pay $3.6 sends a strong message to our, loyal retail investors. We've got a lot of long standing, investors that have been with the company for a long time. And we're pleased that we're able to deliver a 12.5% discount from the placement price, to the renounceable price, for those investors. Thank you. Your next question comes from the line of Matt Ryan with UBS. Please proceed with your question. Hi, Sam. How is it going? Good day, Matt. Good. Thank you. I just had a question on the trading results. So net win margin was up quite a bit year on year. Just wondering whether you could talk through what you were doing with above the line or below the line promotions during the period. Was that something that impacted that net win margin? Was that increased just due to the lock? Yes. I think as your product set improves, Matt, and obviously, we've done a lot in a short time from a technology and product perspective. But as we've made the improvements and delivered some of the features that we wanted to deliver over the journey, you know, we need to do less in terms of those gratuities. So I think the market generally is being a little bit smarter with their gratuities. Obviously, the National Consumer Protection Framework, bonus bets on sign up and the like, are now are now out. So that that helps as well. But, yeah, I think it's more about our improving product and our ability to rely on the quality of our product, rather than having to rely so much on gratuities with our client base. Okay. Thanks. And then, I guess, the Australian wind margin at at almost 8%, is is that a number that you you think, you know, is reasonable for us to think about moving forward rather than the 5% you're doing last year? I think I think it's reasonable to assume that we'll be closer to 8% than than 5%. Whether whether we can maintain the 8%, I'm not can't commit to that. Because I think, you know, I think there has been some favorable results through the spring racing carnival so far for bookmakers that has contributed a little bit. But, yeah, I think, you know, the 8% is more reflective than the 5%. Okay. That's great. Thank you. Your next question comes from the line of Liam Stevenson with BFAM Partners. Please proceed with your question. Me, Liam Stephenson, your line is live. Please ask your question. Hi there, Andy and Sam. Thanks for the call this morning. I guess it would be good to hear more on whether or not you are also seeing maybe the legislation in some states moving faster than expected as to whether or not that's part of the drive for the capital raise at this point and whether or not you're also seeing any improved partnership opportunities given your success in rolling out in so many states thus far? Yeah. Hi, Liam. Look, I think with the addition of the Penn deal, assuming Illinois gets its regulations through reasonably soon, you know, we now have access to five states that are legal for sports betting, New Jersey, Iowa, Indiana, West Virginia, Illinois. And we have, obviously, another five states that aren't yet legal. There are also, you know, other states that, obviously, in the next six months, twelve months are likely to legalize. You know, some states that we're keeping an eye on. Michigan is a is a good one. So I think it's safe to assume that over the next fifteen months or so, it won't be just the five that are currently legal that we're looking to enter. But whether it's those additional five that we have now or additional deals that we win in the interim that go first. We'll we'll wait and see. Yes. So I do think in terms of partnerships, think it is telling that to get out 10 access points, we have we've had to impress multiple partners, five partners to be exact. So we haven't we haven't achieved that those 10 states from one big deal. We've we've had to convince five partners of our of our worth. And I think, that does bode well for our ability to to win future deals. And I also think that the parties that are establishing themselves as leaders in sports betting in The U. S, that brings an advantage because you're capable of implementing a national marketing strategy. And that's certainly PointsBets plan. You know, we wanna be a national player and your ability to execute those national strategies and and really get leverage from your marketing is dependent on being in in most states and and that's certainly our plan. Thank you. Your next question comes from the line of Brian Gustafson with ten sixty Capital. Please proceed with your question. I had a similar question as far as the rollout of states and any states that you look to avoid or any states that you will find market access more difficult? Yes, Brian. We have publicly commented on the fact that, for example, Pennsylvania, for now we're happy to sit out from. If we can't see the ability to quickly turn a state, I want to say quickly, we've sort of publicly said within three years EBITDA positive, then that's a state that we'll avoid for the short term. So yes, we are not just chasing every opportunity. We're being particular about the opportunities that we go after and ultimately agree on. So yes, there are some states that we will avoid, but we do expect to be in the states that are attractive and we believe we should be pursuing. We expect to be in the vast majority of them. And on the Penn deal, what are the economics again? Do you have any cash outflows if the state that you get access through Penn legalizes? Yes. As part of the part of Ohio. If Ohio legalizes, there's a two and a half million dollar payment when Ohio goes live. That's the that's the only outstanding component. Okay. Gotcha. And then just because you're, you know, on the ground in Colorado, any color on that referendum that's upcoming? Yeah. Quite a bit of color. We're we're increasingly confident that that it will pass the referendum. I think it's November 7. Look, it's not the end of the world if it doesn't because as I said, I expect there to be plenty of states going live over the next twelve months, but we would love it to to go live given that we've set up there. And, yeah, the indications we're getting in the feedback from the pollsters is that it's looking positive. Great. Thank you, guys. Your next question comes from the line of Damian Lilliamson with Bell Potter. Please proceed with your question. Good morning, Sam. Just a question on your New Jersey market share, which is a very impressive effort. Do you know where you'd rank in that market? Because from the New Jersey data, looks like there's 17 operators. And from the New Meadowlands data, looks like Fanjul would have about 40%, you've got 6.7%, and DraftKings is probably around 25%. So would you be approaching the top five operators of market share in New Jersey at the moment? Is that what you'd expect? I think that's the case. If we talk about online, which obviously, that's where we compete, I think we oscillate for third with William Hill. So Fanjul and DraftKings from an online perspective are one and two, and I believe that us and William Hill would be neck and neck for online in third place. Okay. And just also in your announcement, disclosed some information about the high net worth or the high stakes clients, which is a new initiative. Can you explain your strategy on getting those clients on board? Is it an incentive scheme? Or is it what's the strategy behind you've captured that part of the market? Yes. Look, think it's exciting in America because there are individuals that perhaps have the staking ability in excess of what we commonly see here in Australia, which is great. Obviously, points that we do pride ourselves on being bookmakers. We manage our own risk. We've got our own risk management trading system unlike a lot of our competitors. Our track record, where we've never had a losing month from a trading perspective demonstrates that we are very good at risk management and trading. So look, there's a group of clients out there that are attracted to the points betting product, are attracted by the fact that we let them on for a fair bet. And so, yeah, it's a it's a attractive segment of the market that we think we're well set up to capitalize on both from a risk management perspective, but also knowing how to manage these clients and meet their needs. And, yes, from a client service perspective, make sure that they're looked after. Yes. And just as another observation, had an NBA kickoff last week. And I think you've mentioned the strategy of providing the most market sort of being the most comprehensive bookmaker in all those sports markets. Just looking inside the NBA season, you've over 1,200 regular season matches. Ice hockey's got over 1,200. In terms of providing markets to all those, like what level of of resources, you know, you you know, providing that many markets to you know, when you got, you know, multiple matches going every day, is that, you know, you know, is, you know, the capability you've got to to continually Yeah. Yeah. I mean, we we use a combination, Damien, of of feed providers. So we do have some inputs coming into our platform, plus our own pricing and and and quants team that goes into that mix. Yep. Yes. It does it does take some effort to ensure that we're maximizing the depth and breadth of products. But for those mainstream sports, you know, we believe it's important that we're leading the way, and we don't ever want to have a situation where a client has to go elsewhere for a particular bet type that they that they want. Yep. And and and just finally, just looking at you know, you had it you know, NFL is, I think, the most expensive media rights of any sports code. You get a sense that there could be the potential to a media deal with some of these broadcasters next in couple of years, how much their sports rights cost and sports betting could be another way to monetize some of the big price that they're paying for broadcasting rights? Yes. I certainly think the Australian experience points to that. Obviously, the wagering segment in Australia are heavy advertisers with sports telecasts. We certainly think that the sports recognize that in The States and certainly the broadcasters do where, you know, we continue to have discussions with all the major media companies that you'd expect and hope that we'd be talking to. And it's still our intention. Yeah. It's still a big priority for the business to ensure from a media perspective that we that we can execute our marketing strategy. Okay. Thanks for that. Your next question comes from the line of Lloyd Danzig with Sharp Alpha Good morning, and thank you for joining this call for the PointsBet Holdings Limited investor update and capital raising. This is Sam Swanell, CEO, and I'm joined today by our CFO, Andrew Melo and General Counsel, Andrew Henscher. I'll start by commenting on our September appendix 4C release before working through our capital raising presentation, which includes a year to date trading update. Both the September 4C and capital raising presentation were lodged with the ASX yesterday evening. Please note all numbers referred to are unaudited and in Australian dollars. Pointsport reported a Q1 FY 'twenty net win of $11,800,000 a 138% increase on the prior corresponding period, which was 5,000,000 in Q1 FY19. The company's wagering turnover for Q1 FY20 increased to 235,800,000.0, an increase of 138% on PCP. For the twelve months ending thirty September twenty nineteen, PointsBet accepted more than 10,000,000 individual bets. Net cash used in operating activities, excluding the positive movement in player cash accounts in the quarter ending thirty September twenty nineteen was $10,685,000 as PointsBet continued marketing and promotional initiatives aimed at attracting and retaining clients in Australia and The US and hired staff to execute the company's strategy. Net cash used in investing activities in the quarter ending thirty September twenty nineteen was 10,200,000.0 as Pointsbeck continued to invest in developing its sports wagering platform as well as making payments for market access and retail sports book fit out costs. The cash outflows for the period were circa $5,000,000 less than the previous appendix 4C estimate due to a slightly delayed opening of our new head office in Denver, Colorado, resulting in lower staff hiring and office lease costs as well as the timing of marketing payments. The company's cash and cash equivalents at the thirty September twenty nineteen was $47,000,000 which excludes the 10,700,000 of player cash accounts. I would now like to move to the trading update and capital raising presentation. Please turn to Slide five. Since our IPO in June, PointsBet subject to enabling legislation has increased its market access in The U. S. By five states via our partnership with Penn National Gaming, which the company announced on 08/01/2019. As a result, PointsBet subject to enabling legislation now has access to 10 U. States with a total population of 81,000,000 people and according to the Eilers and Crytek Gaming report of April, a retail and online revenue opportunity in 2023 of US4.6 billion dollars per annum should all states or should all 10 states legalize sports wagering. Our market access agreements highlight our ability to win multiple competitive tenders. This provides great confidence that we will gain future additional market access opportunities in other states. As a result of the growing U. S. Opportunity, I believe we must continue investing in our scalable cloud based technology platform and product, our people, executing on our marketing strategy to efficiently acquire clients and additional market access opportunities. Turning to Slide six. Last night via Bell Potter, the company launched a fully underwritten capital raising to raise $122,100,000 comprising an institutional placement at $3.6 per share to raise $60,000,000 and a one for six pro rata accelerated renounceable entitlement offer with retail rights trading at $3.2 per share to raise $62,100,000 The company expects to have pro form a cash at thirty September twenty nineteen of $165,400,000 The Board of PointsBet believes this is an appropriate time for the company to raise additional equity capital to provide funding for The U. S. Opportunity. Access to The U. S. Sports betting opportunity is only going to happen once. With the addition of the Penn deal and two states in Indiana and West Virginia that are live for sports betting now, these funds will ensure PointsBet is in a position to capitalize on the existing legal states and the legalization of further states in 2020. The company will continue to take a disciplined and merit based approach to all market access, media and marketing opportunities to ensure it maximizes its return on invested capital. The one global team approach operating on our in house front to back technology platform will deliver increasing economies of scale as we launch into multiple new states in the coming months and years. Turning to Slide seven, the company continues to focus on growing our registered clients and active clients both in Australia and The U. S. As at thirty September twenty nineteen, our registered clients grew by 223% over the prior corresponding period to 148,902 and our active clients grew by 166% to eighty seven thousand three and ninety one. Acquiring clients efficiently is a key success metric. We understand and closely monitor the relationship between cost per acquisition and client lifetime value. This is demonstrated by the performance of PointsBet's Australian business, which operates in a highly advanced market. While New Jersey is undoubtedly a competitive market, PointsBet's marketing expertise and disciplined approach has produced encouraging results with cost per acquisition in line with expectations. Similarly, the behavior of clients acquired is promising and provides management with confidence regarding the trajectory of the New Jersey business. Turning to Slide eight. I'll now take this opportunity to provide a trading update for the first sixteen weeks of trading in FY 'twenty to the October 20. I'm pleased to report that FY 'twenty has got off to a very encouraging start. At the close of business on the October 20, the year to date Australian business net win is $15,700,000 at a net win margin of 7.8%. In this presentation and ASX announcement, we've provided additional information of the different and emerging parts of our U. S. Business, New Jersey Digital, New Jersey High Staking Clients and Iowa Retail. Year to date to October 20, our New Jersey Digital business achieved a net win of $3,900,000 at a net win margin of 5.2%. PointsBet U. S. Commenced actively targeting high staking clients in late August twenty nineteen. We define high staking clients as clients who are consistently wagering large amounts of money. This initiative has been developed following an increasing number of high staking clients being attracted to PointsBet's leading product suite and client service. As at October 20, this segment had year to date net win loss of 1,800,000.0 The company's proven track trading risk management systems allows PointsBet to accommodate these clients with confidence that this segment will be profitable over the medium to long term. PointsBet online sports wagering turnover market share in New Jersey for Q1 FY twenty twenty was 6.71% in part due to the high staking clients. On August 20, we launched our retail sports book at Catfish Bend Casino in Burlington, Iowa. Up to October 20, it achieved a net win of circa 200,000 at a net win margin of 16.1%. This is the company's first retail operation and it expected to deliver higher operating margins due to lower promotional costs and a more recreational client demographic compared to online only markets. This experience will be invaluable as PointsBit rolls out additional retail operations in U. S. States, including Illinois and Colorado. In summary, I'm very pleased with the trading performance of the global business up to the October 20, achieving a year to date net win of $18,000,000 and a net win margin of 6.1%. Turning to Slide 11. The company continues to appropriately plan for the requirements and demands presented by The U. S. Sports wagering opportunity and has been building the global capabilities of the team in preparation for the next phase of The U. S. Strategy. The market access that PointsBet has achieved is significant and we expect there to be more to come. Owning our own technology from front to back will be competitive a key competitive advantage as we look to the structure of the state by state rollout opportunity in front of us. As I've spoken to regularly, the rollout of our technology initiatives will be a key factor in the success of our U. S. Strategy. The company continues to invest in our in house tech stack, providing operational leverage across the Australian and U. S. Businesses. Moving to Slide 12. We focus on delivering a best practice user experience across all front end channels, including web, mobile, apps and retail. For instance, we are one of only two operators in New Jersey to offer a Spanish language version of our product with 15% of New Jersey residents being native Spanish speakers. Slide 13. As a global business whose market access opportunity has grown significantly and quickly, PointsBet is focused on several product initiatives that deliver parity with its main competitors. In parallel with these parity projects, the company continues to focus on executing our innovative product roadmap. Slide 14. As mentioned earlier, I was thrilled to announce in August the opening of our first retail sports book at the Catfish Bend Casino in Iowa. And as seen on Slide 14, working with our wonderful partners in Burlington, you can see that we've produced a world class sports book and are pleased with its performance so far. The retail sports book at Catch Fish Bend Casino is an example of the operations points that we roll out across other U. S. States subject to enabling legislation. Slide 15. In H1 FY twenty nineteen, we were thrilled to sign former NFL pro Dorel Revis and former NBA superstar, Alan Iverson as our brand ambassadors. The ability to use these ambassadors across the Australian and U. S. Marketing initiatives has created not only a global brand for the business, but significant economies of scale and cost savings. In September, for the start of the NFL and college football in The U. S. And the AFL finals and spring racing carnival in Australia, we launched a refreshed global marketing campaign. This included a TV commercial filmed in North Carolina that features our NBA ambassador, Allen Iverson. This campaign is an example of the economies of scale and cost savings that PointsBet are already starting to obtain as we are able to utilize the same advertisement in both Australia and The U. S. Slide 17. The following slide provides the key details of the entitlement offer and placement. With market access subject to enabling legislation to 10 states, raising $121 $22,100,000 will provide points about the capital required to support marketing client acquisition in U. S. States in which it plans to launch continuing to build our scalable cloud based technology and product platform focus on merit based marketing market access opportunities and sports book fit out and maintain balance sheet flexibility. Since our early days as a private company, we have always taken a disciplined approach to the investment of our capital and we will continue to take this laser focused approach with the burgeoning U. S. Sports betting opportunity. Thank you for your time today and we welcome any questions. Thank Your first question comes from the line of Stephen Main with Cricky. It's just a treatment of retail shareholders' question. So the $60,000,000 placement is obviously diluting all shareholders. And then it's good to see you've gone for the renounceable in terms of the entitlement offer. But net net, there will still be dilution of retail shareholders in particular because the placement will be primarily institutional. Will you consider doing a share purchase plan for all retail shareholders at the conclusion of this offer as a makeup offer so there's a to minimize the dilution that your retail shareholders will be suffering from the structure you've chosen to go with? Hi, Stephen. No. We haven't considered any plans around the share purchase plan. We think, look, the fact that the cornerstone institutional investors were willing to pay $3.6 sends a strong message to our, loyal retail investors. We've got a lot of long standing, investors that have been with the company for a long time, and we're pleased that we're able to deliver a 12.5% discount from the placement price, to the renounceable price, for those investors. Thank you. Your next question comes from the line of Matt Ryan with UBS. Please proceed with your question. Hi Sam, how is it going? Good day, Matt. Good. Thank you. I just had a question on the trading results. So net win margin was up quite a bit year on year. Just wondering whether you could talk through what you were doing with above the line or below the line promotions during the period. Was that something that impacted that net win margin? Was that increased just due to the lock? Yes. I think as your product set improves, Matt, and obviously, we've done a lot in a short time from a technology and product perspective. But as we've made the improvements and delivered some of the features that we wanted to deliver over the journey, you you know, we need to do less in terms of those gratuities. So I think I think the market generally is being a little bit smarter with their gratuities. Obviously, with the national consumer protection framework, bonus bets on sign up and the like, are now are now out, so that that helps as well. But, yeah, I think it's more about our improving product and our ability to rely on the quality of our product, rather than having to rely so much on gratuities with our client base. Okay. Thanks. And I guess the Australian win margin at at almost 8%, is is that a number that you you think, you know, is reasonable for us to think about moving forward rather than the 5% you're doing year? I think I think it's reasonable to assume that we'll be closer to 8% than than 5%. Whether whether we can maintain the 8%, I'm not can't commit to that. Because I think, you know, I think there has been some favorable results through the spring racing carnival so far for bookmakers that has contributed a little bit. But, yeah, I think, you know, the 8% is more reflective than the 5%. Okay. That's great. Thank you. Your next question comes from the line of Liam Stevenson with BFAM Partners. Please proceed with your question. Me, Liam Stevenson, your line is live. Please ask your question. Hi there, Andy and Sam. Thanks for call this morning. I guess it would be good to hear more on whether or not you are also seeing maybe the legislation in some states moving faster than expected as to whether or not that's part of the, the drive for the capital raise at this point, and whether or not, you're also seeing any, you know, improved partnership opportunities, given your success in, enrolling out in so many states, thus far. Yeah. Hi, Liam. Look. I think with the addition of the Penn deal, assuming Illinois gets its regulations through reasonably soon, you know, we now have access to five states that are legal for sports betting, New Jersey, Iowa, Indiana, West Virginia, Illinois. And we have, obviously, another five states that aren't yet legal. There are also, you know, other states that, obviously, in the next six months, twelve months are likely to legalize, you know, some states that we're keeping an eye on. Michigan is a good one. So I think it's safe to assume that over the next fifteen months or so, it won't be just the five that are currently legal that we're we're looking to enter. But whether it's those additional five that we have now or additional deals that we win in the interim that go first. We'll we'll wait and see. Yes. So I do think in terms of partnerships, I think it is telling that to get out 10 access points, we have we've had to impress multiple partners, five partners to be exact. So we haven't we haven't achieved that those 10 states from one big deal. We've we've had to convince five partners of our of our worth. And I think, that does bode well for our ability to to win future deals. And I also think that the parties that are establishing themselves as leaders in sports betting in The US, that brings an advantage because you're capable of implementing a national marketing strategy. And that's certainly PointsBet's plan. You know, we wanna be a national player, and your ability to execute those national strategies and and really get leverage from your marketing is dependent on being in in most states, and and that's certainly our plan. Thank you. Your next question comes from the line of Brian Gustafson with ten sixty Capital. Please proceed with your question. I had a similar question as to far as, the rollout of states and, in any states that you look to avoid or any states that you will find market access more difficult? Yeah, Brian. We've we have publicly commented on the fact that, for example, Pennsylvania, for now we're happy to sit out from. If we can't see the ability to quickly turn a state, I want to say quickly, we've sort of publicly said within three years EBITDA positive, then that's a state that we'll avoid for the short term. So yes, we are not just chasing every opportunity. We're being particular about the opportunities that we go after and ultimately agree on. So, yes, there are some states that that we will avoid, but we do expect to be in the states that are attractive and we believe we should be pursuing. We expect to be in the vast majority of them. And on the Penn deal, what are the economics again? Do you have any cash outflows, you know, if the state that you get access through Penn legalizes? Yes. As part of the part of Ohio. If Ohio legalizes, there's a 2 and a half million dollar payment, when Ohio goes live. That's the that's the only outstanding component. Okay. Gotcha. And then just because you're, you know, on the ground in Colorado, any color on that, referendum that's upcoming? Yeah. Quite a bit of color. We're we're increasingly confident that, that it will pass the referendum. I think it's November 7. Look, it's not the end of the world if it doesn't, because as I said, I expect there to be plenty of states going live over the next twelve months, but we would love it to to go live given that we've set up there. And, yeah, the indications we're getting in the feedback from the pollsters is that, it's looking positive. Great. Thank you, guys. Your next question comes from the line of Damian Lilliamson with Bell Potter. Please proceed with your question. Good morning, Sam. Just a question on your New Jersey market share, which is a very impressive effort. Do you know where you'd rank in that market? Because from the New Jersey data, it looks like there's 17 operators. And from the New Meadowlands data, looks like Fanjul would have about 40%. You've got 6.7 And DraftKings is probably around 25%. So would you be approaching the top five operators of market share in New Jersey at the moment? That what you'd expect? Yeah. Good day, Damien. Yes. I think that's the case. If if we talk about online, which obviously, that's where we compete, I think we also like for third with William Hill. So Fanjul and DraftKings from an online perspective are one and two, and I believe that us and William Hill would be neck and neck for online in third place. Okay. And just also in in your your announcement, you you disclosed some information about the the high high net worth or the high stakes clients, which is a new initiative. You explain your strategy on getting those clients on board? Is it an incentive scheme? Or is it what's the strategy behind have captured that part of the market? Yeah. Look, I think it's exciting in America because there are individuals that perhaps have the staking ability in excess of what we commonly see here in Australia, which is great. Obviously, points that we do pride ourselves on being bookmakers. We manage our own risk. We've got our own risk management trading system unlike a lot of our competitors. Yeah. Our track record where we've never had a losing month from a trading perspective demonstrates that we are very good at risk management and trading. So look, there these are there's a there's a group of clients out there that are attracted to the points betting product, are attracted by the fact that we let them on for a fair bet. And so, yeah, it's a it's a attractive segment of the market that we think we're well set up to capitalize on both from a risk management perspective, but also knowing how to manage these clients and meet their needs. And, yeah, from a client service perspective, make sure that they're looked after. Yep. And and and just as as another observation, you know, you've had an NBA kickoff last week. Yeah. And I think think you you mentioned the strategy of providing the most markets sort of being the most comprehensive bookmaker in in all all those sports markets. Yeah. Just just looking inside the NBA season, you got over 1,200 regular season matches. Know, ice hockey's got over 1,200. You know, it it yeah. In terms of providing markets to to all those, does yeah. Like, what what level of of resources, you know, you know, providing that many markets to, you know, when you have, you know, multiple matches going every day? Is that, you know, you know, is you know, the the capability you've got to to continually? Yeah. Yeah. I mean, we we use a combination, Damien, of of feed providers. So we do have some inputs coming into our platform, plus our own pricing and and and quant team that goes into that mix. Yep. Yes. It does it does take some effort to to ensure that we're maximizing the depth and breadth of products. But for those mainstream sports, you know, we believe it's important that we're leading the way, and we don't ever wanna have a situation where a client, you know, has to go elsewhere for a particular bet type that they that they want. Yep. And and and just finally, just looking at know, you had a you know, NFL is, I think, the most expensive media rights of any sports code. Do do do you get a sense that there there could be the potential to to a media deal with some of these, you know, broadcasters in, you know, the next next couple of years given given how much they they sports rights cost and and and sports betting could be another way to to monetize some of the the big the big price that they're paying for for broadcasting rights? Yeah. I certainly think the Australian experience points to that. Obviously, the wagering segment in Australia are heavy advertisers with sports telecasts. We certainly think that the sports recognize that in The States and certainly the broadcasters do where, you know, we continue to have discussions with all the major media companies that you'd expect and hope that we'd be talking to. And it's still our intention. Yeah. It's still a big priority for the business to ensure from a media perspective that we that we can execute our marketing strategy. Okay. Thanks for that. Your next question comes from the line of Lloyd Dantzig with Sharp Alpha Advisors. Please proceed with your question. Thanks a lot for your time. My quick question is particularly keeping in mind the high cost of customer acquisition that operators like yourself are facing here in The U. S. I'm just wondering how you view the ongoing and seemingly constantly evolving, discussions around official league data, especially with two states, Tennessee and Illinois, I believe, actually going as far as to mandate the use of official league data on behalf of operators, which I would, assume, is is not only expensive, but but also requires, technological and and human capital resources. And just curious how you guys think about that and how that's incorporated into your road map going forward. Yeah. Well, we're we're well versed on the potential for, you know, league fees because we we pay them here in here in Australia. Look, I don't think in terms of trading systems and modeling and and the data feeds and whatnot, I it's not gonna create I don't foresee it creating any extra complication there. You know, if those fees come with benefits for the wagering companies, the allow us to execute our product better for our clients, then maybe there's an opportunity to be paying those fees in return for for those benefits. You know, we don't, you know, we obviously don't agree with with the mandated fees. If our our position is is that we would prefer states like Illinois and Tennessee didn't mandate that because we believe that they should be negotiated on a on a commercial basis. But, you know, we'll we'll continue to monitor that situation. We'll continue to have those discussions, and we'll see how it plays out. In terms of sorry. One other one thing, Lloyd. In terms of in terms of you mentioned cost per acquisition that's being paid. You know, we're very comfortable with the cost per acquisition that we're that we're paying. New Jersey is competitive and we've seen some of the numbers that are bandied around. And, you know, we're not we're not paying the levels that are being published by some of our competitors, and we won't we'll continue to take a disciplined approach, we've been able to get our market share in New Jersey while maintaining that disciplined approach. Great. That's great to know. Thank you so much. Your next question comes from Stephen Main with Cricky. Please proceed with your question. Hi, guys. One more. First up, a very interesting discussion. Just hoping that you can make the transcript available either on your website or preferably on the ASX announcements platform. And secondly, could you comment on the Stars Flutter merger, whether that's good or bad for us? And you might want to address that both in Australia and in The U. S. And I guess a related question, now that we've got 165,000,000 cash in the bank, are we potentially equipped to compete for the AFL official wagering position? Because obviously, BetEasy has got that at the moment. They're paying $10,000,000 a year. It's up at the moment, and they're in a merger situation with Sports Bet in Australia, which is creating some uncertainty Good morning, and thank you for joining this call for the PointsBet Holdings Limited investor update and capital raising. This is Sam Swanell, CEO, and I'm joined today by our CFO, Andrew Mellor and General Counsel, Andrew Henscher. I'll start by commenting on our September appendix 4C release before working through our capital raising presentation, which includes a year to date trading update. Both the September 4C and capital raising presentation were lodged with the ASX yesterday evening. Please note all numbers referred to are unaudited and in Australian dollars. Pointsport reported a Q1 FY 'twenty net win of 11,800,000.0, a 138% increase on the prior corresponding period, which was 5,000,000 in q one FY nineteen. The company's wagering turnover for q one FY twenty increased to 235,800,000.0, an increase of 138% on PCP. For the twelve months ending thirty September twenty nineteen, PointsBet accepted more than 10,000,000 individual bets. Net cash used in operating activities, excluding the positive movement in player cash accounts in the quarter ending thirty September twenty nineteen was $10,685,000 as PointsBet continued marketing and promotional initiatives aimed at attracting and retaining clients in Australia and The U. S. And hired staff to execute the company's strategy.