Good morning. Thank you for joining this call for the PointsBet Holdings Limited investor update and capital raising. This is Sam Swanell, CEO. I'm joined today by our CFO, Andrew Mellor, and General Counsel, Andrew Hentscher. I'll start by commenting on our September quarter Appendix 4C release before working through our capital raising presentation, which includes a year-to-date trading update. Both the September quarter 4C 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 2020 net win of AUD 11.8 million, a 138% increase on the prior corresponding period, which was AUD 5 million in Q1 FY 2019. The company's wagering turnover for Q1 FY 2020 increased to AUD 235.8 million, an increase of 138% on PCP. For the 12 months ending 30 September 2019, PointsBet accepted more than 10 million individual bets.
Net cash used in operating activities, excluding the positive movement in player cash accounts in the quarter ending 30 September 2019, was AUD 10.685 million, 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 strategy. Net cash used in investing activities in the quarter ending 30 September 2019 was AUD 10.2 million, as PointsBet continued to invest in developing its sports wagering platform, as well as making payments for market access and retail sportsbook fit-out costs. The cash outflows for the period were circa AUD 5 million 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 30 September 2019 was AUD 47 million, which excludes the AUD 10.7 million 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 of this year, 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 August 1, 2019. As a result, PointsBet, subject to enabling legislation, now has access to 10 U.S. states with a total population of 81 million people, and according to the Eilers & Krejcik Gaming report of April this year, a retail and online revenue opportunity in 2023 of $4.6 billion per annum, 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 AUD 122.1 million, comprising an institutional placement at AUD 3.60 per share to raise AUD 60 million, and a one-for-six pro rata accelerated renounceable entitlement offer with retail rights trading at AUD 3.20 per share to raise AUD 62.1 million. The company expects to have pro forma cash at 30 September 2019 of AUD 165.4 million. 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 30 September 2019, our registered clients grew by 223% over the prior corresponding period to 148,902, and our active clients grew by 166% to 87,391. 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 16 weeks of trading in FY20 to the 20th of October 2019.
I'm pleased to report that FY20 has got off to a very encouraging start. At the close of business on the 20th of October, the year-to-date Australian business net win is AUD 15.7 million 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 2019, our New Jersey digital business achieved a net win of AUD 3.9 million at a net win margin of 5.2%. PointsBet U.S. commenced actively targeting high-staking clients in late August 2019. 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 2019, this segment had year-to-date net win loss of AUD 1.8 million. 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 2020 was 6.71%, in part due to the high-staking clients. On August 20th, we launched our retail sportsbook at Catfish Bend Casino in Burlington, Iowa. Up to October 20th, it achieved a net win of circa AUD 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 PointsBet 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 20th of October, achieving a year-to-date net win of AUD 18 million 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 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 has 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 sportsbook at the Catfish Bend Casino in Iowa.
As seen on slide 14, working with our wonderful partners in Burlington, you can see that we've produced a world-class sportsbook and are pleased with its performance so far. The retail sportsbook at Catfish Bend Casino is an example of the operations PointsBet will roll out across other U.S. states, subject to enabling legislation. Slide 15. In H1 FY19, we were thrilled to sign former NFL pro Darrelle Revis and former NBA superstar Allen 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 AUD 122.1 million will provide PointsBet 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 market access opportunities and sportsbook fit-out, 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 you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. One moment, please.
Stephen Mayne.
Your first question comes from the line of Stephen Mayne with Crikey. Please proceed with your question.
Oh, hi, guys. It's just a treatment of retail shareholders question. The AUD 60 million placement is obviously diluting all shareholders. It's good to see you've gone for the renouncable, in terms of the entitlement offer. Net-net, there will still be a 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 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 a share purchase plan. We think, look, the fact that the cornerstone institutional investors were willing to pay AUD 3.60 sends a strong message to our loyal retail investors. We've got a lot of longstanding 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.
Once again, if you wish to ask a question, please press *1 on your telephone and wait for your name to be announced. One moment, please. Your next question comes from the line of Matt Ryan with UBS. Please proceed with your question.
Hi, Sam. How's it going?
Good day, Matt. Good, thank you.
I just had a question on the trading results. 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, or was that increase just due to luck?
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. As we've made the improvements and delivered some of the features that we wanted to deliver over the journey, we need to do less in terms of those gratuities. 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 out, so that helps as well. 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. I guess the Australian win margin at almost 8%, is that a number that you think is reasonable for us to think about moving forward rather than the 5% you were doing last year?
I think it's reasonable to assume that we'll be closer to the 8% than 5%. Whether we can maintain the 8%, I can't commit to that. I think there has been some favorable results through the spring racing carnival so far for bookmakers that has contributed a little bit. Yeah, I think 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. Excuse me, Liam Stevenson, 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, 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, we now have access to five states that are legal for sports betting: New Jersey, Iowa, Indiana, West Virginia, Illinois. We have obviously another five states that aren't yet legal. There are also other states that obviously in the next six months, 12 months, are likely to legalize. Some states that we're keeping an eye on, Michigan is a good one. I think it's safe to assume that over the next 15 months or so, it won't be just the five that are currently legal that we're looking to enter. Whether it's those additional five that we have now or additional deals that we win in the interim that go first, we'll wait and see.
Yes, I do think in terms of partnerships, I think it is telling that to get our 10 access points, we've had to impress multiple partners, five partners to be exact. We haven't achieved those 10 states from one big deal. We've had to convince five partners of our worth, and I think that does bode well for our ability to win future deals. 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 PointsBet's plan. We want to be a national player, and your ability to execute those national strategies and really get leverage from your marketing is dependent on being in most states, and that's certainly our plan.
Thank you.
Your next question comes from the line of Brian Gustafson with Ten60 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?
Yeah, 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. Yes, we are not just chasing every opportunity. We're being particular about the opportunities that we go after and ultimately agree on. 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.
Okay. 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 Ohio. If Ohio legalizes, there's a $2.5 million payment when Ohio goes live. That's the only outstanding component.
Okay. Got you. Then just because you're on the ground in Colorado, any color on that referendum that's upcoming?
Yeah, quite a bit of color. We're increasingly confident that it will pass. The referendum, I think it's November seven. 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 12 months. We would love it to go live given that we've set up there. Yeah, the indications we're getting and the feedback from the pollsters is that it's looking positive.
Great. Thank you, guys.
Your next question comes from the line of Damian Williamson with Bell Potter. Please proceed with your question.
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? From the New Jersey data, it looks like there's 17 operators, and from the Meadowlands Racetrack data, it looks like FanDuel would have about 40%. You've got 6.7%. DraftKings is probably around 25%. Would you be approaching the top five operators of market share in New Jersey at the moment? Is that what you'd expect?
Yeah. Good day, Damian. Yes, I think that's the case. If we talk about online, which obviously that's where we compete.
Yeah
I think we oscillate for third with William Hill. FanDuel 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. Just also in your announcement, you disclosed some information about the high net worth or the high stakes clients.
Right
which is a new initiative. Can you explain your strategy on getting those clients on board? Is it an incentive scheme or what's the strategy behind how you've captured that part of the market?
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, PointsBet, 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. Look, there's a group of clients out there that are attracted to the PointsBetting product, are attracted by the fact that we let them on for a fair bet.
Yeah, it's an 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. Just as another observation, you had NBA kickoff last week. I think you mentioned the strategy of providing the most markets, sort of being the most comprehensive bookmaker in all those sports markets. Just looking inside the NBA season, you've got over 1,200 regular season matches. Ice hockey's got over 1,200. In terms of providing markets to all those, what level of resources, providing that many markets when you've got multiple matches going every day, is that the capability you've got to continually?
Yeah. We use a combination, Damian, of feed providers. We do have some inputs coming into our platform, plus our own pricing and quants team that goes into that mix.
Yeah.
Yes, it does take some effort to ensure that we're maximizing the depth and breadth of products. For those mainstream sports, 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 want.
Yep. Just finally, just looking at, you had NFL is I think the most expensive media rights of any sports code. Do you get a sense that there could be the potential to do a media deal with some of these broadcasters in the next couple of years, given how much these sports rights cost, and sports betting could be another way to monetize some of the big price that they're paying 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 U.S., and certainly the broadcasters do, where we continue to have discussions with all the major media companies that you'd expect and hope that we'd be talking to. It's still our intention. It's still a big priority for the business to ensure from a media perspective that we can execute our marketing strategy.
Okay. Thanks, Matt.
Your next question comes from the line of Lloyd Danzig with Sharp Alpha Advisors.
Good morning. Thank you for joining this call for the PointsBet Holdings Limited investor update and capital raising. This is Sam Swanell, CEO. I'm joined today by our CFO, Andrew Mellor, and General Counsel, Andrew Hentscher. I'll start by commenting on our September quarter Appendix 4C release before working through our capital raising presentation, which includes a year-to-date trading update. Both the September quarter 4C 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 FY20 net win of AUD 11.8 million, a 138% increase on the prior corresponding period, which was AUD 5 million in Q1 FY19. The company's wagering turnover for Q1 FY20 increased to AUD 235.8 million, an increase of 138% on PCP. For the 12 months ending 30 September 2019, PointsBet accepted more than 10 million individual bets.
Net cash used in operating activities, excluding the positive movement in player cash accounts in the quarter ending 30 September 2019, was AUD 10.685 million 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. Net cash used in investing activities in the quarter ending 30 September 2019 was AUD 10.2 million, as PointsBet continued to invest in developing its sports wagering platform, as well as making payments for market access and retail sportsbook fit-out costs. The cash outflows for the period were circa AUD 5 million 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 September 30, 2019, was AUD 47 million, which excludes the AUD 10.7 million 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 of this year, 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 August 1, 2019. As a result, PointsBet, subject to enabling legislation, now has access to 10 U.S. states with a total population of 81 million people. According to the Eilers & Krejcik Gaming report of April this year, a retail and online revenue opportunity in 2023 of $4.6 billion per annum 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 AUD 122.1 million, comprising an institutional placement at AUD 3.60 per share to raise AUD 60 million, and a 1 for 6 pro rata accelerated renounceable entitlement offer with retail rights trading at AUD 3.20 per share to raise AUD 62.1 million. The company expects to have pro forma cash at 30 September 2019 of AUD 165.4 million. 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 30 September 2019, our registered clients grew by 223% over the prior corresponding period to 148,902, and our active clients grew by 166% to 87,391. 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 16 weeks of trading in FY20 to the 20th of October 2019. I'm pleased to report that FY20 has got off to a very encouraging start. At the close of business on the 20th of October, the year-to-date Australian business net win is AUD 15.7 million 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 AUD 3.9 million at a net win margin of 5.2%. PointsBet U.S. commenced actively targeting high-staking clients in late August 2019. 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 AUD 1.8 million. 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 FY20 was 6.71%, in part due to the high-staking clients. On August 20th, we launched our retail sports book at Catfish Bend Casino in Burlington, Iowa. Up to October 20th, it achieved a net win of circa AUD 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 PointsBet 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 20th of October, achieving a year-to-date net win of AUD 18 million 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 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 has 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. 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 Catfish Bend Casino is an example of the operations PointsBet will roll out across other U.S. states, subject to enabling legislation. Slide 15.
In H1 FY19, we were thrilled to sign former NFL pro Darrelle Revis and former NBA superstar Allen 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 AUD 122.1 million will provide PointsBet 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 market access opportunities and sportsbook 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. We welcome any questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. One moment, please.
Stephen Mayne.
Your first question comes from the line of Stephen Mayne with Crikey. Please proceed with your question.
Oh, hi, guys. It's just a treatment of retail shareholders question. The AUD 60 million placement is obviously diluting all shareholders. It's good to see you've gone for the renouncable, in terms of the entitlement offer. 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 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 a share purchase plan. We think, look, the fact that the cornerstone institutional investors were willing to pay AUD 3.60 sends a strong message to our loyal retail investors. We've got a lot of longstanding 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 renouncable price for those investors.
Thank you.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. One moment, please. Your next question comes from the line of Matt Ryan with UBS. Please proceed with your question.
Hi, Sam. How's it going?
Good day, Matt. Good, thank you.
I just had a question on the trading results. Net win margin was up quite a bit year-on-year. I was 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, or was that increase just due to luck?
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. As we've made the improvements and delivered some of the features that we wanted to deliver over the journey, we need to do less in terms of those gratuities. 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 out, so that helps as well. 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. I guess the Australian win margin at almost 8%, is that a number that you think is reasonable for us to think about moving forward rather than the 5% you were doing last year?
I think it's reasonable to assume that we'll be closer to the 8% than 5%. Whether we can maintain the 8%, I can't commit to that. I think there has been some favorable results through the spring racing carnival so far for bookmakers that has contributed a little bit. Yeah, I think 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. Excuse me, Liam Stevenson, 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, whether or not you're also seeing any improved partnership opportunities, given your success in rolling out in so many states thus far?
Hi, Liam. I think with the addition of the Penn deal, assuming Illinois gets its regulations through reasonably soon, we now have access to 5 states that are legal for sports betting. New Jersey, Iowa, Indiana, West Virginia, Illinois. We have obviously another 5 states that aren't yet legal. There are also other states that obviously in the next 6 months, 12 months, are likely to legalize. Some states that we're keeping an eye on. Michigan is a good one. I think it's safe to assume that over the next 15 months or so, it won't be just the 5 that are currently legal that we're looking to enter. Whether it's those additional 5 that we have now or additional deals that we win in the interim, that go first. We'll wait and see.
I do think in terms of partnerships, I think it is telling that to get our 10 access points, we've had to impress multiple partners, 5 partners to be exact. We haven't achieved those 10 states from one big deal. We've had to convince 5 partners of our worth, and I think that does bode well for our ability to win future deals. 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 PointsBet's plan. We want to be a national player and your ability to execute those national strategies and really get leverage from your marketing is dependent on being in most states, and that's certainly our plan.
Thank you.
Your next question comes from the line of Brian Gustafson with Ten60 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?
Yeah, 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 3 years, EBITDA positive, then that's a state that we'll avoid for the short term. Yes, we are not just chasing every opportunity. We're being particular about the opportunities that we go after and ultimately agree on. 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.
Okay. 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 Ohio. If Ohio legalizes, there is a AUD 2.5 million payment when Ohio goes live. That is the only outstanding component.
Okay. Got you. Then just because you're on the ground in Colorado, any color on that referendum that's upcoming?
Yeah, quite a bit of color. We're increasingly confident that it will pass the referendum. I think it's November seven. 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 12 months. We would love it to go live given that we've set up there. Yeah, the indications we're getting and the feedback from the pollsters is that it's looking positive.
Great. Thank you, guys.
Your next question comes from the line of Damian Williamson with Bell Potter. Please proceed with your question.
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? From the New Jersey data, it looks like there's 17 operators, and from the Meadowlands Racetrack data, it looks like FanDuel would have about 40%. You've got 6.7. DraftKings is probably around 25%. Would you be approaching the top five operators on market share in New Jersey at the moment? Is that what you'd expect or?
Yeah. Good day, Damian. Yes, I think that's the case. If we talk about online, which obviously that's where we compete.
Yeah
I think we oscillate for third with William Hill. FanDuel 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. Just also in your announcement, you disclosed some information about the high net worth or the high stakes clients.
Okay
which is a new initiative. Can you explain your strategy on getting those clients on board? Is it an incentive scheme or what's the strategy behind how you've captured that part of the market?
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, PointsBet, 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. Look, there's a group of clients out there that are attracted to the PointsBetting product, are attracted by the fact that we let them on for a fair bet.
Yeah, it's an 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. Just as another observation, you had NBA kickoff last week, and I think you mentioned the strategy of providing the most markets, sort of being the most comprehensive bookmaker in all those sports markets. Just looking inside the NBA season, you've got over 1,200 regular season matches. Ice hockey's got over 1,200. In terms of providing markets to all those, what level of resources, providing that many markets when you've got multiple matches going every day. Is the capability you've got to continually-
Yeah. We use a combination, Damian, of feed providers. We do have some inputs coming into our platform, plus our own pricing and quants team that goes into that mix.
Yeah.
Yes, it does take some effort to ensure that we're maximizing the depth and breadth of products. For those mainstream sports, 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 want.
Yep. Just finally, just looking at, you had NFL is, I think, the most expensive media rights of any sports code. Do you get a sense that there could be the potential to do a media deal with some of these broadcasters in the next couple of years, given 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?
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 we continue to have discussions with all the major media companies that you'd expect and hope that we'd be talking to. It's still our intention, it's still a big priority for the business to ensure from a media perspective that we can execute our marketing strategy.
Okay. No, thanks for that.
Your next question comes from the line of Lloyd Danzig with Sharp Alpha Advisors. Please proceed with your question.
Hey, 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 not only expensive but also requires technological and human capital resources. Just curious how you guys think about that and how that's incorporated into your roadmap going forward.
Well, we're well-versed on the potential for league fees because we pay them here in Australia. Look, I don't think in terms of trading systems and modeling and the data feeds and whatnot, I don't foresee it creating any extra complication there. If those fees come with benefits for the wagering companies, that allow us to execute our product better for our clients, then maybe there's an opportunity to be paying those fees in return for those benefits. We obviously don't agree with the mandated fees. Our position is that we would prefer states like Illinois and Tennessee didn't mandate that because we believe that they should be negotiated on a commercial basis. We'll continue to monitor that situation. We'll continue to have those discussions, and we'll see how it plays out. Sorry, one other thing, Lloyd.
Thanks a lot.
You mentioned cost per acquisition that's being paid. We're very comfortable with the cost per acquisition that we're paying. New Jersey is competitive, and we've seen some of the numbers that are bandied around. We're not paying the levels that are being published by some of our competitors. We'll continue to take a disciplined approach, and 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 Mayne with Crikey. Please proceed with your question.
Hi, guys. One more. First up, a very interesting discussion. Just hoping you can make the transcript available either on your website or preferably on the ASX announcements platform. Secondly.
Yep
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. I guess a related question, now that we've got AUD 165 million cash in the bank, are we potentially equipped to compete for the AFL official wagering position? Obviously BetEasy's got that at the moment. They're paying AUD 10 million a year. It's up at the moment, they're in a merger situation with Sportsbet in Australia, which is creating some uncertainty around.
Good morning, 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 Hentscher. I'll start by commenting on our September quarter Appendix 4C release before working through our capital raising presentation, which includes a year-to-date trading update. Both the September quarter 4C 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 FY20 net win of AUD 11.8 million, a 138% increase on the prior corresponding period, which was AUD 5 million in Q1 FY19. The company's wagering turnover for Q1 FY20 increased to AUD 235.8 million, an increase of 138% on PCP. For the 12 months ending 30 September 2019, PointsBet accepted more than 10 million individual bets.
Net cash used in operating activities, excluding the positive movement in play out cash accounts in the quarter ending 30 September 2019, was AUD 10.685 million, 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