PointsBet invests heavily in US operations based on Q2 update

PointsBet Holdings published its Quarterly Cash Flow Report for the quarter ending 31 December 2019 showing strong customer growth in both Australia and the US. With the NFL (September to February) and NBA (October to June) both live seasons, the US industry took advantage of the opportunity to work in a December quarter for the first time.

In the US, the company has continued to invest in brand marketing and visibility as more states legalise online wagering, and PointsBet accesses additional US states. The vast majority of active US customers in New Jersey are registered here.

A US net win margin of 3 per cent was achieved during Q2 PointsBet, marking the company’s first positive margin quarter for US business since its launch. While the high-staking consumer segment reported an excellent quarter, reporting a net win margin of 16.2 percent, the company expects a lower standardisation in the medium to long term.

As reported by the New Jersey Department of Gaming Enforcement, Total New Jersey sports betting handle reached three successive all-time high months to November 2019 with strong momentum continuing into December 2019.

Using the NJDGE handling measurement technique, PointsBet’s online market share of retail turnover in New Jersey was 5.9 percent, down from 6.7 percent in the previous quarter, affected by lower turnover of high staking customers. New Jersey Digital Q2 FY2020 sales of $99.6 m was an 80.9 per cent increase on Q1 FY2020 as the NFL and NBA seasons progressed.

While the gross win margin obtained was 6.4 percent, the net win margin represented 1.8 percent, the company said, a significant period of acquisition and retention resulting in higher targeted promotional spending.

“It should also be noted that gross win margin was lower in Q2 FY2020 (to 6.4% from 8% in Q1 FY2020) reflecting a movement towards more sustainable long-term yields,” it said.

After launch on August 20, 2019, Iowa retail recorded its first full quarter of operations in Q1 FY2020. Iowa retail net win margin was lower than expected suggesting a streak of customer-friendly results. This is magnified by the low absolute Net Win value. It is expected that the net win margin will stabilise as retail turnover increases and results normalise.

The company launched digital operations in Iowa during the quarter, accepting on November 20, 2019, the first online wagers. It is the second online market for the company to launch operations. “While it is early days for the Iowa digital business, the company is pleased with the progress made,” it noted.

Pointsbet added that it will utilise its structured and focused marketing and promotional strategy in other states that also include in-person sign-ups.

“PointsBet is well-positioned to take advantage of the growing opportunity in the wider US as other states go live, with strong leadership and experienced management,” said the firm.

“This has been bolstered by the nomination of Becky Harris, the first ever Chairwoman of the Nevada Gaming Control Board and former Nevada State Senator, to the Board as a Non-Executive Director.”

PointsBet also told investors it was investing in brand building and free to play platform outside New Jersey. It noted:  “Not only does this mean that PointsBet is going into new states with existing brand recognition but it also assists in PointsBet’s market access strategy as we expand across the United States.

“In January 2020, PointsBet further expanded its US footprint announcing a partnership with Lac Vieux Desert Public Enterprise and Finance Commission, an arm and instrumentality of and organised under the laws of the Lac Vieux Desert Band of Lake Superior Chippewa Indians, to provide online and mobile sports wagering and gaming (casino) in Michigan.

“PointsBet is also in exclusive negotiations to operate LVD’s retail operations in the state. This represents the company’s first tribal market access deal and further demonstrates continued confidence in PointsBet’s brand and product offerings,” it stated.

The company said it anticipated cash outflows related to obligations under its market access agreements on the outlook for Q3 FY 2020, and a portion of the Illinois retail sportsbook fit the total cost of $7.5 million.

It stated: “We also expect Denver office fit-out costs to be $1.2m. We will continue to grow our staff and build and develop our capabilities in our Denver, Colorado USA headquarters, with our staff and research and development costs expected to be $9.3m and $2.5m respectively for the quarter. In the US, our Q3 FY2020 marketing efforts will see the introduction of an Indiana marketing campaign as we prepare to launch operations in that state.”