Thank you for standing by, and welcome to the PointsBet Holdings Limited Q1 FY 2022 Appendix 4C Investor Update. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Sam Swanell, Managing Director and Group CEO. Please go ahead.
Good morning, and thank you all for joining the PointsBet Holdings Limited Q1 FY 2022 Business Update and Activities Report. This is Sam Swanell, CEO. I'm joined on the call today by our Group CFO, Andrew Mellor, with our U.S. CEO, Johnny Aitken, and U.S. Chief Commercial Officer, Eric Foote, joining us from our U.S. head office in Denver. Please note all numbers referenced are on FY 2022. Turnover was up 42% at AUD 979.9 million. Sports betting gross win was up 66% at AUD 117.7 million, and group net win was up 82% at AUD 69.5 million. Now turning to slide five.
Australian trading business' Q1 marketing expense was AUD 22.1 million, which assisted in delivering 12-month rolling cash active clients to 30 September 2021 of 222,662, a 79% increase compared to the PCP. In the United States, U.S. marketing expense of $27.6 million assisted in delivering 12-month rolling cash active clients to 30 September 2021 of 185,880, a 367% increase on the PCP. We continue to have a constant focus on our cost per acquisition, and we're pleased that our working media CPA for first-time bettors across all operational U.S. states, except Illinois, which was an in-person registration environment, again tracked below $500 for the quarter.
It should be noted that a large portion of our U.S. marketing budget for the quarter is focused on audiences outside of our current seven live states. As I've stated previously, whether it be for states that are future imminent launches or more national brand awareness, we continue to focus on building a brand and a database to assist in future acquisition efficiency. Turning to slide six. The Australian trading business continued its outstanding performance, ending the quarter with turnover of AUD 631.4 million, up 20% compared to PCP, and net win of AUD 54.8 million, up 56% from the PCP. Gross win margin and net win margin were 13.9% and 8.7% respectively, continuing the trend of strong quarterly margins.
Compared to the PCP, the Australian trading business has seen improvement across a number of key KPIs. We achieved a record quarter for first-time bettors in Australia and significant gains in app download share with 10.1% of all wagering category app downloads, up from 6.8% in the PCP. We've seen continued growth in sports margin in Q1 as clients' sports betting behavior trends towards higher margin products. Multis and Same Game Multis now make up the majority of all sports gross win. We are pleased to report that Same Race Multi has now been released also. It is pleasing to report that our in-house proprietary system has been successfully processing record betting activity through September and October. Caulfield Cup and The Everest on October 16 saw new peaks reached for scale indicators such as bets per minute, concurrent active user sessions, and settlements.
I'm extremely pleased with the performance of the Australian trading business. This strong momentum has set us up very well, and we're prepared for a huge Melbourne Cup week beginning this Saturday with Derby Day, where we expect to see new betting activity records broken. MST estimate that Australia is now a AUD 5.7 billion net win wagering market, with circa 84% of this online. We see huge opportunity for innovation and acceleration similar to what we envision for the North American market. PointsBet has a role to play as a leader in this environment, and in line with this, we are creating the new role of Australian CEO, reporting to me as Group CEO, who once appointed, will be focused on ensuring we capitalize on these Australian opportunities.
The improved focus on Australia will not come at the expense of PointsBet's North American plans in any way, but rather is the natural evolution for the Australian trading business, given its strong position and its backing from the PointsBet global group. PointsBet's sports and race betting is a fun and entertaining product, and an opportunity exists for PointsBet and the wider digital gaming industry to grow the TAM at the expense of competing gambling verticals such as land-based gaming and lotteries. I will now hand over to U.S. CEO, Johnny Aitken, to provide commentary on our U.S. business.
Thank you, Sam. I will now speak to slides seven and eight. The U.S. business achieved quarterly sports betting gross win of $29.2 million, compared to a sports betting gross win of $9.8 million in the PCP. With a quarterly sports betting net win of $3.1 million for the PCP. Total net win generated from iGaming was $2.2 million. The U.S. business achieved a strong quarterly sports betting percent and a quarterly sports betting net win margin of 3.6%. These results were driven by New Jersey with a net win margin of 7.9%, and Illinois with a net win margin of 4.3%. We continue to focus on improving the customer in-play betting experience, including expanding bet offerings, increased uptime and automated bet acceptance.
We are very excited to be releasing our first major initiative following the acquisition of Banach Technology, now known as PointsBet Europe. NFL will be the first sport to receive this upgrade as we progress our roadmap towards delivering a market-leading in-play product that's customized for the U.S. market and consumer. We expect over 75% of all U.S. sports betting will be in-play in the coming years, and PointsBet's leading product will be critical in how we innovate with NBC and other media platforms for maximum effectiveness. Parlays are another area of focus within the U.S. market, with Same Game Parlay being a key driver of growing parlay handle. As is highly evident, the customer acquisition and retention market, specifically as it relates to gratuities and promotions such as bonuses and risk-free bets, remains highly competitive, and this has had an impact on our market share.
As we head into Q2 and beyond, while we still expect the environment to remain highly competitive, we continue to refine our approach as it relates to our client cohorts, and seek to gain an improved share of wallet from them by leveraging both tactical promotions and ongoing product enhancements. The positive of the high level of marketing and promotion seen in the U.S. during the quarter means that U.S. bettors are quickly becoming educated on sports betting. As noted by analysts and operators, as bettors become more familiar with operating a betting account, the product experience will be the primary driver of long-term success. PointsBet has a feature-rich, reliable, secure, and scalable product. However, we continue to invest in critical product areas such as in-play, parlays, and iGaming as we build the business for long-term sustainable success. Now turning to slide nine.
On the 13th of August, 2021, PointsBet launched online sports betting operations in West Virginia. On the 16th of September 2021, PointsBet announced it entered into an exclusive agreement with Austin FC of the Major League Soccer, appointing PointsBet as AFC's exclusive sportsbook partner. PointsBet has also executed a market access agreement with AFC's home stadium, which is operated by Austin StadCo, LLC, an affiliate of AFC. Under the market access agreement, contingent on enabling legislation, PointsBet is appointed the venue's exclusive partner for sports betting operations in Texas, a state with a larger population than the entirety of Australia. PointsBet is now operational in New Jersey, Iowa, Indiana, Illinois, Colorado, Michigan, and West Virginia. We expect to launch in an additional 11 U.S. jurisdictions over the next 14 months. Turning to slide 10.
Michigan saw the inaugural launch of PointsBet's iGaming product in May 2021, followed by New Jersey on the 23rd of July , 2021. We anticipate launches in West Virginia, Ontario, Canada, and Pennsylvania in the coming months. While we are pleased to be operational with iGaming, we took the time to design and build our platform and launch with an MVP version of our offering to gauge performance, stability, and player affinity. Importantly, we look forward to the continued product improvements we have in development as we move to the next phase of our iGaming offering, including a significantly enhanced games library, automated promotional functionality, personalized offerings, and other innovations. We are particularly excited to launch our live dealer table solution, which will include live dealer blackjack, live dealer roulette, live dealer baccarat, and live dealer ultimate Texas hold'em.
PointsBet has also secured exclusive use of several live dealer tables, which can be reserved for our high-value customers or for promotional activity. I'm looking forward to sharing with you our growth in this area in the coming periods. Finally, we are also pleased to announce that Kyle Christensen has been appointed as our U.S. Chief Marketing Officer. Prior to joining PointsBet, Kyle was the head of U.S. brand and consumer marketing for Facebook. Before joining Facebook, Kyle also held ex-executive roles at National Geographic and Netflix. We couldn't be happier and excited to welcome Kyle to our team at this exciting stage of our journey, and I can't wait to see what we can all build together. I will now hand it across to U.S. Chief Commercial Officer, Eric Foote.
Thank you, Johnny. Turning to slide 11. In August, PointsBet announced it had been selected by the NFL as one of seven approved sportsbook operators, enabling PointsBet to advertise in and around live NFL games. This includes all NFL broadcast partners, including NBC, Fox, CBS, ESPN, the NFL Network, and Amazon. Importantly, our NBC relationship has enabled PointsBet to receive a national, regional, and local exposure through various NBC Sports exclusive content integrations and targeted spot media advertising inventory. This spans across NBC's national broadcasts, regional sports networks and select DMAs, locally owned and operated stations, and Peacock, NBC's premier direct-to-consumer platform.
Our exclusive Sunday Night Football pregame show segment, the PointsBet Pulse, has created a national opportunity for us to enhance brand affinity in collaboration with the NFL and NBC, showcasing our deep array of betting markets while providing both visual and verbal call to action for consumers across North America to download and utilize the PointsBet app. NBC Predictor has now amassed more than 500,000 leads across the United States during the first year of the NBC partnership. Our top pick 'em style games within Predictor include NFL Sunday Night 7, NBA Pick and Roll, Premier League Pick 'Em, Major League Baseball Grand Slam Pick 'Em, and Lone Star Pick 'Em, a newly created game that solely features Texas-based professional and college teams. We have seen a positive correlation between our integrations and betting activity. For example, PointsBet's most searched terms see upticks on Thursdays and Sundays.
Sessions from new users increase after 6 P.M. on Sundays during the NFL season. PointsBet sign-ups increase at the start of Sunday NFL games, and the PointsBet Android and iOS app visitors and downloads spike aligning with the NFL coverage, particularly during the Sunday Night Football pregame show, Football Night in America. We believe that the ability to provide integration of odds and unique betting content into live broadcasts will set operators apart over the medium to long term, accelerating brand recognition and accessing clients directly when they are engaged with sporting events. This includes Football Night in America on Sunday Night Football, the PGA TOUR, and English Premier League live broadcasts on NBC.
With in-play estimated to make up 75% of all sports wagering activity within three years, integration into live broadcasts will become increasingly important, and we have been an early mover in securing some of the best premium broadcast assets. I will now hand over to Andrew Mellor.
Thank you, Eric. Turning to slide 12 for the quarterly 4C cash flow summary. At the 13th of September 2021, the company's corporate cash balance was AUD 626.7 million. The company has no corporate borrowings. Net cash used in operating activities in the quarter ending the 30th of September 2021, excluding movement in-player cash accounts, was AUD 38.1 million. Receipts from customers totaled AUD 72.4 million. Receipts from customers includes net wins from sportsbook and iGaming verticals, as previously detailed by Sam and Johnny. As well as cash receipts from our European B2B and U.S. racing ADW businesses.
Cash outflows during the quarter included cost of sales of AUD 33 million, non-capitalized staff costs of AUD 19.3 million, which increased quarter-on-quarter, given the timing of our annual staff bonus payments and also the increasing of our headcounts to now 500 staff globally. Marketing costs outflows of AUD 46.5 million and administration, corporate costs, and GST paid on Australian net win of AUD 11.7 million. Net cash used in investing activities in the quarter ending 30 September 2021 was AUD 11.6 million, driven mainly by the capitalization of developing our sports wagering and iGaming platform of AUD 6.4 million.
Net cash received from financing activities was AUD 424 million, including receipt from the August capital raise and exercise of listed and unlisted options, including AUD 35 million received from Penn Interactive Ventures, LLC, a wholly owned subsidiary of Penn National Gaming, following the exercise of their 10.3 million options that were due to expire on the 12th of September 2021. I will now hand back to Sam.
Thanks, Andy. Turning to slide 14. In conclusion, we continue to build a business that is undeniably positioned to play a material role within the huge North American market as it develops over the next 10+ years. We have a growing world-class team, a fully proprietary tech platform and product with an accelerating roadmap, and we have market access. We are the official sports betting partner of NBC Sports and an ever-evolving joint roadmap with them, which will lean into the critical area of in-play sports betting. Our in-play upgrade begins this quarter. We own our iGaming platform and have a clear pathway to product parity and then to proprietary innovation. We own a racing ADW business licensed in Oregon that is live and has clients in 18 states.
We will increase this to 21 states by the end of Q3, most of which are correlated with states that are expected to be live for sports betting. We will complement this racing ADW business with fixed odds race betting, leveraging our existing Australian experience. While New Jersey has already legalized fixed odds betting, the approval of fixed odds in other states will take time. However, the experience we will gain from running the racing ADW business will be invaluable for our strategic plans in this area. The combination of these elements means that PointsBet has positioned itself as a key participant in the growing U.S. market. We also have consistent strategies in Australia and Canada. I'm excited about the strategy our team has begun executing in Canada under the leadership of Scott Vanderwel.
Finally, M&A activity in the global gaming sector has evolved more rapidly than most would have predicted when PASPA was repealed. Given the strategic way PointsBet has positioned itself, we have the ability to apply a disciplined approach to assess inorganic opportunities that can accelerate our business plan and are active in doing so. Thank you for your time, and I will now take questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you are using a speakerphone, please pick up the handset to ask your question. The first question today comes from Joe Stauff from Susquehanna. Please go ahead.
Thank you very much. Good morning. I wanted to ask, in general, you know, Sam, you did provide some commentary, you know, just on in the U.S., you know, in the kickoff to the U.S. sports calendar. Obviously, it's heavily promotional. I'm kinda wondering, you know, if that environment eases, you know, kinda subsequent to the end of September, or is it still pretty heavy in terms of the overall environment for marketing spend and customer acquisition and CPA?
Hi, Joe, Sam here. I think in broad terms it's still, you know, it's pretty competitive. I'll throw to Johnny to see if he can apply any nuances as on a week-by-week basis as we got towards the end of September, early October, et cetera.
Hey, Joe. No, we've seen the competitiveness and the large spend continue among the competitive set through at least the middle of October, which, you know, timed in with the launch of the NHL and then the NBA seasons. You know, one of the pieces of rationality there would be that, you know, acquiring a customer, you know, through the start of college football, then NFL season through to the start of NHL and NBA season gives you the greatest run rate to commence that payback period of CPA.
You know, our expectation, whilst we expect the market to be ongoingly competitive, we would expect some of that, say, absolutely red-hot heat to drop away now with the launch of college football, NFL, and now this month, we've just undergone the launch of NHL and NBA.
Understood. I think, Johnny, you had talked about certainly having the product from Banach sort of integrated within sort of the U.S. product offering. Is that still expected to, say, be in place maybe by the end of this month? You know, what is the approximate timing when you think you could start really kinda increasing the number of products in particular for in-play through your, you know, U.S. distribution platform?
Yeah. We're putting the finishing touches, Joe, on the first sport that will be rolled out through our internalized feeds. It's powered by the former Banach team, now at the PointsBet Europe team. You know, we expect NFL to go out in the coming weeks, and that'll be closely followed by NBA. You know, what you'll see over time as we exponentially increase the quality of that feed is two main areas. The first is the product feature side of the in-play experience, delivering in-play player props, in-play micro markets, for instance, to support the core in-play markets.
On the experience side, where there is the true battleground, you'll see increased uptime and increased speed and automation of bet acceptance, which we believe will drive a clear point of differentiation for PointsBet against our competition and help us to win share of wallet with in-play bettors.
Thanks, guys.
Thank you. The next question comes from Rohan Sundram from MST Financial. Please go ahead.
Hi, guys. Just a couple from me. I might start with the net win and the gross win rates, especially in the U.S., which look very pleasing. Maybe Sam or Johnny, how much of that would you put down to any specific initiatives versus or the tech stack, versus the overall maturing of the book?
I'll start and then Johnny can add on. Look, I think there were some reasonably favorable results for the quarter. I think in terms of 8.4%, gross margin, we probably wouldn't guide to sort of that level just yet from a sustainability perspective. Longer term, as I've said before, we think that sort of number is well and truly in-play. You know, Johnny referenced, you know, three core areas for us to focus, you know, in-play, iGaming, and parlays, you know. While we, you know, we talk a lot about in-play and then the upgrades that we're making there, we continually look to enhance the parlay product as well.
You know, we're one of the operators that was first to market with Same Game Parlay and some features around Same Game Parlay. There's no doubt that as our product improvements hit the market and as the clients get more educated about the, you know, the entertaining value of these products, that's part of the strategy of taking our margins in the U.S., you know, let's say beyond that 5% historical Nevada margin, that where the market started at. Johnny, anything you'd add?
No, I think you covered it well, Sam.
Cheers, Sam. Thanks. Last one is, maybe are you able to share what early learnings you've discovered so far from iGaming operations?
Yeah. Look, I suppose as a baseline to that, you know, it's one thing to implement the product. You know, we always spoke about the fact that it was then about an MVP product being introduced into our ecosystem in Michigan and then subsequently in New Jersey and see what that meant for, you know, player behavior. You know, we obviously, we've upskilled our team, and we've inserted people with lots of iGaming experience to help us, let's call it, run the product on a daily basis and market the product from a cross-sell perspective. No, there's been plenty of lessons. Look, the trends that we're seeing are not that dissimilar from what the market on the whole is seeing.
You know, a propensity for sports bettors to enjoy table games. You know, a sports-led brand is gonna have a higher weighting towards the table game play rather than the slots play versus the casino-led brands. That's why a really key product release for us is the live dealer suite that Johnny spoke about. I mean, people that like playing tables like playing live dealer tables rather than necessarily the auto product. Yeah, we've learned a lot. It will be an evolution. You know, I think we laid out in one of the slides from a product perspective, a content perspective, we're aiming to make quick ground.
In parallel with that, you know, constantly learn about our clients' behavior, how to maximize, let's call it, that cross-selling. You know, it's an overall ecosystem, you know. iGaming doesn't operate in a vacuum from sports betting. It's how that new cohort of cross client base behaves and what's the best mix, you know, to maximize retention, maximize revenue, et cetera. No, we're learning a lot, and we'll continue to do so.
Okay. Thanks, Sam.
Thanks, Rohan.
Thank you. The next question comes from Sacha Krien from Evans & Partners. Please go ahead.
Good morning, guys. Just in terms of the U.S. market, I think you mentioned it looks extremely competitive at the moment. Just wondering in terms of your ability to keep that customer acquisition cost at around about that $500 level, how much has the NBC deal helped to do that? I think you've previously mentioned that you had some agreed rates that won't increase.
Yeah. Hi, Sacha. Yeah, I mean, one of the, you know, one of the pillars of the NBC deal, for those that can recall was, you know, we wanted to have a partner that had skin in the game and would continue to innovate with us. In particular in the area of in-play, because that's where we see, you know, betting and the enjoyment of consuming live sport through media can really start to converge. Part of it was also that, you know, we had an expectation that sports media assets would inflate, as we've seen in other markets as sports betting grew across the U.S. Yeah, we did, you know, let's call it lock in some baseline rates.
That is, you know, effectively what that would mean is that a dollar spent with NBC, for example, in the Chicago RSN, you know, is gonna be more efficient than a dollar spent, you know, through another channel or another similar media company. It certainly plays a role for us in helping with marketing efficiency. I think, you know, we've been quite open about the fact that, you know, something like Sunday Night Football, a show that we're, you know, doing the national integration on, you know, that's not necessarily about short-term cost per acquisition in the seven states where we're live. You know, we're building a business for the long term, you know. Where there is a fantastic asset like that available to us, you know, it's the premier asset, basically.
It's the most watched show on the you know the most favorable sport in the U.S. Where there is an asset available to us like that, you know, we grasp it with both hands. We measure that, you know, in how you know downloads are tracking. You know, the NBC Predictor app's predictor database is another measure of how that sort of non-live state spend is going. Because if that database is building, part of that is being driven by national media. We also spoke about the fact that we are investing in some states that are, let's call it, forward-looking states, so states that we're you know hoping to launch in the short term.
You know, all of that is aimed at so that when we go live in a new state, one, we've got better brand awareness. Two, we've got a database that we can leverage, hopefully on day one, and get off to a stronger start. NBC is critical to our plans and, you know, obviously there's a lot of focus on, you know, the states where we're live and the impact it's having there. Again, I just talk about the fact that the structure of the deal is in a way where, you know, we've got a joint roadmap together. In-play is the future of sports betting in the U.S. You will not hear anyone say otherwise.
You know, NBC's coverage and media assets is a great way for us to lean into that in-play strategy.
Yeah. Okay. Just on that Friday Night in America show, which does have huge ratings, and they look like they've improved again this year. I mean, can you see direct correlation between that show and downloads coming through?
Yes. Part of what we're obviously tracking in and outside of the seven states is those other indicators that the spend that we're making outside the seven live states is building brand, is building a database, is impacting downloads. Yes, we can.
Two more very quick questions. Are you gonna rebrand the ADW to PointsBet? Is that the plan?
Yep, that is the plan. At the moment we're just, let's call it, putting some polish on the existing technology. You know, obviously our number one fundamental is reliability, scalability, and security. Before you worry about bells and whistles, they're the three things, reliability, scalability, and security. We're just covering that off. When we get the platform to the point where, you know, it's safe and secure and a product that we're happy to put our brand on, we certainly will.
Okay. Just a quick question on iGaming. Had a look at the site, and it looks like you're primarily just using IGT content at the moment, which is possibly not the most popular content in the U.S. I mean, how important do you think it is to have the best slot content? Are you gonna be adding sort of further integrations in terms of slot content in addition to live tables?
Absolutely. We started with IGT. Obviously we've talked about Evolution. We've got Scientific Games lined up, Everi lined up. You know, our aim obviously is there's a lot of data in the marketplace. One of the advantages of being, you know, a latecomer to the iGaming space is that we do get to see some trend statistics and see what games our competitors are promoting to the, let's call it, to the forefront on their lobbies, et cetera. You know, we think we can get to a parity position, you know, via IGT, SciGames, Evolution, Everi, et cetera, reasonably swiftly. That's, you know, that's what we're aiming to do. Obviously we provided a bit of a roadmap through to February on slide 10. That's the first step.
You know, let's get the meat and potatoes right. Let's make sure, you know, we're getting close to parity as possible, and then, you know, then we'll turn our attention to some innovation. The planning for that innovation and, you know, the work is beginning and has begun. The first fundamental is, you know, getting the titles and the games that, you know, it's very clear are popular in the U.S. market and making sure that we have them.
Okay. Thank you. Thanks.
Thank you. The next question comes from Desmond Tsao from Goldman Sachs. Please go ahead.
Hi, guys. Two very quick questions from me. Apologies if I missed it earlier on in the presentation. What's the latest with Arizona and the licensing opportunity? I've noticed that it's been dropped from slide nine. Is there any timing that you can provide on the Ontario launch?
Yep. Arizona, I think it's been well publicized that we thought we had a license and then our partner was subsequently not included in the list of licenses that have been handed out. You know, I've stated previously that, you know, Arizona currently has 18 licenses, and there's a couple of licenses still to come to take it to 20. PointsBet will be in Arizona. Any state that has 20 available licenses, PointsBet will get into that state. The question, the big question is when? You know, is it a short, medium or longer term scenario? I won't comment on that.
You know, I think it's fair to say that through the initial round, the initial launch, and obviously Arizona's been a pretty good state from the launch statistics. You know, PointsBet hasn't been involved in that. The only comment I would make is I'm very confident that we will get into Arizona, and we do continue to work on it. But I couldn't give any, you know, strong guidance as to a timeframe on that. In terms of Ontario, you know, the regulator there was originally targeting a date of sort of early December. You know, we believe that from their perspective, that date might be under a little bit of pressure. You know, so maybe the launch moves back to sort of a January.
You know, our aim is to be there on the starting line. You know, I'm really excited about the strategy that our team is building for the Canadian market. I think it's very clever. We've obviously already announced a couple of deals. I'm really thrilled with the work that our team up there is producing so far. I think we're building a great team. You know, we're still to see I suppose how the Canadian market forms up in the early months, because you've got some different dynamics to U.S., so it won't be a mirror image of the U.S. There's gonna be differences in terms of market shares and the like, but you know, we're certainly aiming and planning to be a material player in that market.
Got it. No, that's very clear. Thanks, Sam. The other question I had was just around the Australian business. Another pretty strong result. Can you just talk a bit more about the competitive dynamics in the quarter? I think you guys were pretty aggressive with some of the promotions, particularly the past few weeks, with Saturday races. But yet margins held up very well. Just any comments around that would be great. Thanks.
Yeah, I think it's a bit of a common theme. There's no doubt that we've been a beneficiary of the land-based TAVs, you know, having decent periods of lockdowns in particular in Victoria and New South Wales. You know, in some ways we're as eagerly awaiting as everyone to see what does that mean when things come back. I think we've sort of got to look beyond that. You know, going into any sort of COVID, PointsBet already had huge momentum, you know. You know, we're coming from a position a year or two back, you know, with very little brand awareness. You know, a product that was just getting going.
You know, you fast forward and we've built a lot of brand awareness on the back of the Shaq campaign, which, you know, I think everyone has appreciated has been an absolute cracker. You know, the investment in that will pay itself off for many months and years to come. Then from a product perspective, you know, we continue to enhance the product. We're pretty confident of our continued momentum. We're not saying that it will be 56% again, you know, sort of quarter-over-quarter, by any stretch. You know, the Australian business is going strong.
I made comment in my, you know, in my speech that, you know, in some ways a lot of the innovative thinking that and the acceleration opportunities that we are actively considering in the U.S. and Canada, the North American opportunity, we've got to bring that same thinking to Australia. You know, we've got a great opportunity in Australia where we've obviously put ourselves in a strong position and we can see great opportunities for innovation. We are gonna hire an Australian CEO, put a little bit more extra oomph behind the Australian business. Yeah, we think there's great opportunity.
You know, the fact that we have some global strength, some group strength that obviously supports the North American market as Australia, you know, that gives us those reverse economies of scale back into Australia. We do have some weight behind us to compete with the likes of Sportsbet and Ladbrokes.
Appreciate it. Thanks, Sam.
Thank you. The next question comes from Don Carducci from JP Morgan. Please go ahead.
Morning, everyone. Just a quick one from me. How should we think about these NBC leads that you've started to disclose? Because last result, I think you said there were about 350,000 leads generated for PointsBet, and you just reported, I think, an increase of about 160,000 more leads generated to 19 October. What's the benefit of these leads? Because it doesn't appear to be assisting the rolling 12-month customer growth. They're driving below average CAC.
Yeah. Hi, Don. Yeah, I mean, obviously, the leads are a national number. You know, we're live in seven states, those 500,000+ leads are across the entire country. A portion of them definitely are coming into those seven live states. You know, obviously, our focus then is to convert them to first-time bettors. I think we need to be a little bit realistic about the seven live states versus, let's call it, the impact that they could have on a new state.
Just to give an example, you know, like a state like Maryland, you know, if we can be live on the starting line when that state goes live and we have a database of x thousand clients that haven't yet, you know, necessarily opened a DraftKings or FanDuel or MGM account, that gives us that opportunity to, you know, convert a decent chunk of those and get us off to a strong start in those new states. Versus, you know, a lead generated through Predictor into New Jersey, for example, where it's highly likely that that client already has a betting account in the New Jersey market. Hopefully it's already with PointsBet, but, you know, the effectiveness of that. You know, and again, a lot of the leads will be Texas, California, New York, because they're the big states, you know.
That's the reality, but again, that has value. Yeah, that hopefully explains it.
Yeah. You mentioned conversion. What's the appropriate conversion ratio that we should think of for the NBC leads for you folks? Like, what would be your expectation for a conversion ratio?
Yeah. I'd say the big test for that will come when the next state, you know, we go live on a starting line and see what we can make of that database. I think the measure and, you know, some part of the measure for the investment that we've been making in non-live states will be, okay, how did PointsBet go in terms of, getting off to a strong start in these new states versus, you know, historically, how have they gone?
Yeah. Gotcha. I guess maybe final point on that one, final question. If we assume that NBC was the only way that you've acquired customers in this last quarter, let's say you converted maybe one in six leads at the best. Do you think that NBC could give you the, you know, five or so million leads that you'd need to still get to that 1 billion customers by 2025? And is that still the target, 1 million by 2025?
Yeah. Doing it by 2025 is definitely still the target. I think, you know, NBC will be the, let's call it, the quarterback of our marketing spend. You know, it seemed like a big number, obviously a year ago when we did the deal, $393 million over five years back-ended. I think, you know, you can see that we're gonna need, we're gonna spend marketing dollars over and above whatever we're spending with NBC, obviously. You know, we would hope that NBC is gonna play its role as sort of that differentiator.
Because, you know, we are very confident, you know, in our relationship with NBC and the things that we're working on that, you know, this lean into in-play sports betting and how that, you know, correlates to the types of assets we wanna use with NBC. The fact, as an earlier question, you know, the rates that we've locked in with NBC, you know, we do expect NBC to be a, you know, a more efficient channel and a better source for us in terms of maintaining those CPAs versus spending an equivalent dollar with CBS or someone else. Yeah. Look, it's important. It's not obviously even close to 100% of our marketing spend. It's probably more like half.
We expect to lean more and more into NBC and work together with them to continually improve.
Okay. Those payments to NBC are going to increase. Correct me if I'm wrong.
Sorry, say that again. Don, didn't quite catch that.
Those payments to NBC, they're increasing in terms of the percentage that you owe them, correct? Correct. Through that deal term.
Yes. Correct.
Okay.
The expectation, obviously, of what we wanted to spend with them in year one when we're live in six states versus year five when we will be live in a multiple of that, yes, it increases over time.
Thank you very much.
Thanks, Don.
Thank you once again. To ask a question, please press star one on your phone. The next question comes from Larry Gandler from Credit Suisse. Please go ahead.
Hi. Thanks, guys. I guess a question for Johnny, 'cause I missed what you said with regards to what was impacting your market share. My specific question relates to maybe contrasting New Jersey and Illinois. I know Illinois is in-person signups, but you seem to maintain share there, and the in-person signups shouldn't have had a big factor. Whereas in New Jersey, shares really dropped away and it seemed to drop away in August. I'm just wondering if you can contrast what was happening in those two states and perhaps explain why that market share eroded in New Jersey.
I'll start and I'll let Sam jump in. I'd say the main point there would be the reported net win margin result in New Jersey was an extreme high of 7.9%. Sort of naturally, when net win is that high, there will be a sort of compression on handle. That would be the sort of major factor of why, you know, the handle market share, quarter-on-quarter, sort of, you know, was wound back slightly. Sam, is there anything that you wanted to add?
Yeah. I think, you know, Johnny spoke about the extreme, y ou know, the really strong competition from a promotions and a marketing perspective, across the U.S., you know, through the NFL season through to, you know, mid-October, end of October. I think, Larry, you know, in that in-person environment, in Illinois, you know, there's a bit more tempered because let's call it the DraftKings and FanDuels of the world. You know, they, the in-person environment culls their effectiveness a little bit, you know. I think there's an element of that. You know, we've got very strong assets in Illinois. I've spoken about that previously.
The NBC impact with that RSN certainly we believe is a you know a key advantage, and we wanna see that advantage in other RSNs like Philly and down in Washington for Virginia and Maryland and hopefully New York. You know, I think it talks to the fact that the NBC assets, where we can leverage those RSNs, are gonna play a good role in helping us build market share, but also a little bit to do with the in-person environment.
Okay. I wonder if you're having this conversation amongst yourselves in terms of strategy. You know, it's crossing my mind, you're building a business, I believe, to be a 10% market share player in the U.S. over time. Would you revisit that and consider building a business to be a 5% market share player in the U.S.? I'm not saying throw the towel in, believe me, I'm just asking, you have to ask yourself, can you, do you have that option available to you?
Yeah. Look, put it this way, if we're talking about a $50 billion market in the U.S. come sort of 2033, 2034, I think that's the Goldman’s estimate, and others are sort of gravitating up there. Obviously, it's very clear you could have a thriving, very strong business at 5% of that market. No, from our perspective, you know, we're setting up for the long term. You know, we were never naive as to the advantage that the bigger brands would have and the databases would have in the early days of the market. You know, the progress that we've made, knowing what we've got to come, you know, we're very comfortable.
You know, that 10% sports betting aim in the states that we're live, you know, over time, we firmly believe that a product-led strategy, and in particular, a strategy that means you have the market leading in-play product, will earn you that 10%. We also believe that, you know, subject to mass M&A, which just rolls everything up, that it's very hard for the large operators to maintain the sort of market share when they're coming under pressure from credible operators with credible product. You know, it's not like the challengers, let's call it, from fourth to sixth, are slouches, and they're just going to give it to them.
As consumers get more educated on the product and they seek out the best products and they have affinities with other brands other than ones that are, you know, just obvious to them at the moment, you know, we believe that that presents an opportunity, and PointsBet firmly still has that 10% market share aim for sports betting in the states where we're live.
Okay. Thank you for that. Still pursuing that strategy. Just a final question from me. Quick one. I didn't hear the last state or jurisdiction you're gonna be in in fairly short order. Is Virginia, Ontario, and what was the third jurisdiction?
We give guidance, and the main reason for that is I think everyone would be aware we're you know involved in some official processes that could impact that. There's a lot of states that you know could be in the mix. Virginia, Maryland, Tennessee, Louisiana. Ontario is definitely there, obviously, that Canadian launch. There's the ongoing process in New York, which we can't comment on.
Okay, great. Thanks.
Thank you. The next question comes from Wassim Kisirwani from Jarden. Please go ahead.
Yeah, good morning. Sam, just a quick follow-up on New Jersey, and I didn't quite catch the early comments by Johnny around potentially some refinements over the second quarter with regards to market share. Can you just maybe talk to that? Given the high net win rate, is there a view to reinvesting that over Q2? Just how you see that playing out, please.
Yeah. I think, you know, we, Johnny spoke about the competitiveness. It'll be interesting to see, you know, how that sort of changes from, let's call it this period of the most heightened spending on acquisition, marketing dollars and promotions. You know, we've certainly. It's been an informative period because, you know, last year we were coming out of the COVID sort of impacted cessation of sports. This year you've got the NFL in the game and accepting advertising. You know, obviously you've got, say a Caesars sort of there that perhaps wasn't there as strongly. There's definitely been good information gleaned. You know, our approach is, I think we've been consistent on this from the start, you know.
You know, we're not gonna get caught up in an arms race on marketing dollars. We'll spend an amount that we think is comfortable and can return us and have a positive ROI for us. You know, you can see probably from our cash numbers that, you know, we increase our marketing materially. We will continue to assess the market and the opportunities, but we've got to focus on our product, our people, and building the business for the long term. We have to make sure that we, you know, we're not saying we're not gonna compete, because we obviously will, and we've been competing ever since we got into the U.S.
You know, there's no doubt that the level of promotions and the marketing spend, I think had an influence on some share of wallet. You know, some share of wallet being taken away from PointsBet and maybe going to more like an MGM, if you look at the market share perspective, as they seem to be maybe the beneficiary, the highest beneficiary from a sports betting perspective. You know, we're very confident. We've got obviously the in-play product upgrades starting in the next couple of weeks. That's fundamental. We've outlined the product improvements from an iGaming perspective. We'll keep investing in parlay. Yeah, we'll keep adhering to our strategy, but not ignoring obviously the competitive pressures that are out there.
If we have to adjust, you know, promotions and think about where we allocate them, obviously that's part of what we do on an ongoing basis.
Great. Thank you.
Thank you. At this time, we're showing no further questions. That does conclude our conference for today. Thank you for participating. You may now disconnect.