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Edited Transcript of PBH.AX earnings conference call or presentation 28-Jan-21 11:00pm GMT

·56 min read

Q2 2021 Pointsbet Holdings Ltd Earnings Call Feb 16, 2021 (Thomson StreetEvents) -- Edited Transcript of Pointsbet Holdings Ltd earnings conference call or presentation Thursday, January 28, 2021 at 11:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Andrew J. Mellor PointsBet Holdings Limited - CFO * Eric Foote PointsBet Holdings Limited - Chief Commercial Officer of US * Samuel J. Swanell PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director ================================================================================ Conference Call Participants ================================================================================ * Damien Williamson Bell Potter Securities Limited, Research Division - Fixed Income and Hybrids Analyst * Desmond Tsao Goldman Sachs Group, Inc., Research Division - Associate * Donald N. Carducci JPMorgan Chase & Co, Research Division - Analyst * Jed Kelly Oppenheimer & Co. Inc., Research Division - Director & Senior Analyst * Larry Gandler Crédit Suisse AG, Research Division - Director * Lloyd Danzig * Nick Maclean * Phillip Chippindale Ord Minnett Limited, Research Division - Senior Research Analyst * Rohan Sundram MST Marquee - Gaming and Contractors Analyst * Sacha Krien Evans & Partners Pty. Ltd., Research Division - Executive Director of Gaming & Leisure * Wassim Kisirwani Jarden Limited, Research Division - New Zealand Technology & Software Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thank you for standing by, and welcome to the PointsBet Holdings Limited Q2 FY '21 Appendix 4C and Activities Report Investor Conference Call. (Operator Instructions) I would now like to hand the conference over to Mr. Sam Swanell, Managing Director and Group CEO. Please go ahead. -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [2] -------------------------------------------------------------------------------- Thank you. Good morning, and thank you for joining the PointsBet Holdings Limited Q2 FY '21 Business Update and Activities Report. This is Sam Swanell, CEO. And I'm joined on the call today by our CFO, Andrew Mellor; and U.S. Chief Commercial Officer, Eric Foote. This morning, I would like to walk you through the Q2 FY '21 trading performance for the Australian and U.S. businesses as well as a trading update to 24 January of 2021. I will then hand over to Andrew Mellor to talk to the Appendix 4C quarterly cash flow update released to the ASX this morning. And Andrew -- Eric Foote will then provide an update on our first quarter with the NBC assets and our plans moving forward. Please note, all numbers referred to are unaudited and in Australian dollars, unless otherwise stated. Turning to Slide 4. The Q2 performance of the global trading business as compared to the prior corresponding period of Q2 FY '20 to be referred to as the PCP was as follows: Turnover was up 303% at $1.2 billion. Gross win up 189% at $83.4 million. Net win up 148% at $44.6 million. Active clients up 107% at 211,000 clients. As I've spoken to in the past, due to the nature of the sports wagering industry, quarterly figures are not always representative of the company's longer-term trends. As the company looks to grow its business across the United States and utilizes its deep sports wagering experience to risk manage those clients whose average bet size is significantly above the median, volatility of revenues across reporting periods can occur. Slide 4 addresses the volatility across reporting periods by showing the company's full year trading performance to 24 January 2021. The global business had a strong start to Q3 FY '21. And for the period 1 January to 24 January, the business achieved a net win of $22.9 million. The United States has reversed the aggregate H1 FY '21 negative net win of $2 million to record an FY '21 year-to-date net win to 24 January of $11.7 million. The Australian business recorded FY '21 year-to-date net win to 24 January of $94 million. As can be seen on Slide 6, in Australia, active clients were up 77% compared to the 12 months to 31 December 2019. The company recognized a structural change in the Australian online wagering market, including brand consolidation with the BetEasy brand being folded into Sportsbet in the previous quarter and a shift from retail to online wagering. As the company seeks to grow its net win market share in 2021, the Australian trading business marketing spend was $9.7 million in Q2 FY '21, as the company sought to acquire and retain clients during the important Spring Racing Carnival. PointsBet's investment in U.S. marketing during Q2 FY '21 of USD 18.2 million resulted in U.S. active clients during the 12 months to 31 December 2020, increasing by 222% to over 68,000 compared to the 12 months to 31 December 2019. In the U.S., Q2 FY '21 saw the continuation of the NBA, completing the '19/'20 season in October and commencing the '21 -- 2021 season in late December. The NFL and the MLB completing the 2020 season in October. As a result, PointsBet continued its targeted marketing investment in New Jersey, Indiana and Illinois, assisted by the NBC Sports media assets and launched operations, including targeted marketing investment in Colorado in November 2020. PointsBet continued to not make any significant marketing investment in Iowa during Q2. However, increased targeted marketing spend in that state from 1 January, where in person registration was replaced by online registration. Now turning to Slide 7. Before I comment on the Australian trading results, I was thrilled to announce earlier this week the appointment of basketball champion and 3-time finals MVP Shaquille O'Neal as our Australian brand ambassador. Shaquille will headline the company's new 2021 Australian brand campaign, which will roll out across television, digital, mobile and social media. U.S. sports, particularly professional basketball, continues to be the fastest-growing betting sport in Australia, and therefore, aligning with Shaquille O'Neal is particularly exciting for the business. The Australian trading business continued its strong performance, achieving record net win in each of October, November and December 2020, ending the quarter with net win of $49.8 million, up 240% from the PCP. Net win margin of 9.2% increased from 7.9% in the PCP, despite the company increasing promotional spend as a percentage of gross win across the Spring Racing Carnival. Q2 also saw an increase in the percentage of Australian turnover that was bet on the higher-margin multisegment compared to our prior corresponding period. The launch of the Same Game Multi for NFL and NBA in September and December, respectively, further contributed to higher overall margins. March 2021, will see the company's third anniversary since the launch of a full product suite in Australia. Pleasingly, H1 FY '21 marketing spend of $21 million assisted in delivering H1 FY '21 net win of $84.8 million, a marketing to expense ratio of 25% -- marketing to net win ratio of 25%. Q2 FY '21 turnover of $543.3 million almost tripled compared to Q2 FY '20, up 194%. The company continued its long-term national broadcast role as the exclusive Channel 7 Victorian odds integration partner for their Spring Racing Carnival coverage. This was an important media asset in Q2, especially given the current brand consolidation and reduced attendance at racetracks, pubs and clubs over the Spring Racing Carnival. Performance of the Australian trading business is an excellent blueprint for our aspirations in the United States. Our ability to operate a growing, profitable business in the advanced and competitive Australian market, backed by a continually improving product and growing brand recognition, provides confidence in the continued execution of our U.S. strategy. Before I comment on the U.S. trading results, I was thrilled to announce earlier this week the appointment of Paige Spiranac as a global, on-air talent and brand ambassador. The former professional golfer and social media influencer has built a following of nearly 3 million followers on Instagram and 7 million across all social platforms, the largest of any golf personality in the world. Now turning to Slide 8. I will now speak to the U.S. trading results for the quarter and comment on the trading update to 24 January 2021. The U.S. business achieved a quarterly gross win of $7.9 million compared to a gross win of $8.1 million in the PCP, with a quarterly net win loss of $5.1 million compared to a net win of $3.4 million for the PCP. As I noted earlier, due to the nature of the sports betting industry, quarterly figures are not always representative of the company's longer-term performance. This is evidenced by the United States business' strong start to H2 '21, reversing the aggregate H1 FY '21 negative net win of $2 million to record FY '21 year-to-date net win to 24 January of $11.7 million. Given the continuation of the major U.S. sport leagues and PointsBet's investment in marketing during Q2 FY '21 of USD 18.2 million, the U.S. business saw active clients during the 12 months to 31 December 2020, increased by 222% to just over 68,000 compared to the PCP. PointsBet is now operational in New Jersey, Iowa, Indiana, Illinois, Colorado and Michigan. Michigan will also see the inaugural launch of PointsBet's iGaming product in H2 FY '21, followed by New Jersey. Turning the slide now to Slide 9. I will now briefly touch on each state. New Jersey, PointsBet achieved 13.5% market share in New Jersey for online handle during the quarter on the back of increased activity from clients whose average bet size is significantly above the median. The company continues to target a long-term market share of 10%. New Jersey recorded a quarterly gross win loss of $5 million at a gross win margin of negative 1.1% and a net win loss of $9.3 million at a net win margin of negative 2.1%. As noted in the trading update, results in Q2 have corrected from this short-term variance, resulting in a year-to-date to 24 January 2021, positive net win in New Jersey. In Illinois, PointsBet achieved 14.7% market share for online handle in October. Whilst we are very pleased with this result, PointsBet acknowledges that the IGB recorded an online bet count market share of 3.6% for October, which is more reflective of our market share performance, as during the month, the company risk-managed clients whose average bet size is significantly above the median. Illinois recorded a quarterly gross win of $9.3 million at a gross win margin of 6%. And a net win of $4.2 million at a net win margin of 2.7%. Illinois remains a remote registration environment due to the emergency order extending remote registration in Illinois until at least 6 February 2021. In Indiana, PointsBet achieved 4.2% market share for online handle during the quarter, ranking as the fourth largest operator by handle in December. Indiana recorded quarterly gross win of $2.5 million at a gross win margin of 7.5% and a net win loss of $0.2 million at a net win margin of negative 0.6%. Given the early stage of this competitive state, the company continued to focus on acquiring and retaining clients, which resulted in promotions exceeding gross win. Details of the company performance in the recently launched Colorado and in-person registration jurisdiction, Iowa, are set out in the quarterly update released to the ASX this morning. I will now hand over to Andrew Mellor. -------------------------------------------------------------------------------- Andrew J. Mellor, PointsBet Holdings Limited - CFO [3] -------------------------------------------------------------------------------- Thank you, Sam. Now turning to the Q1 FY '21 Appendix 4C cash flow summary released earlier today. Please refer to Slide 10. At the 31st of December 2020, the company's corporate cash balance was $359.1 million, with the quarterly AUD/USD FX movement resulting in an unfavorable movement of $8.9 million during the reporting period, as the company held part of its corporate cash in U.S. dollars. The company has no corporate borrowings. Receipts from customers or net win for the quarter totaled $44.6 million, as previously detailed by Sam. Net cash used in operating activities in the quarter ending 31 December 2020, was $38.7 million. Excluding the positive movement in player cash accounts, net cash used in operating activities was $47.5 million. As previously detailed by Sam, the U.S. business had a negative net win of $5.1 million for the quarter, which impacted net cash used in operating activities. However, it should be noted that the short-term variance of trading results turned positive in January, resulting in a group net win year-to-date to 24th of January of $105.7 million. Cash outflows during the quarter included cost of sales of $29 million, noncapitalized staff costs of $9.4 million, marketing costs of $43.2 million and administration, corporate costs and GST paid on Australian net win of $10.5 million, to provide some further comments. The strong performance of the Australian business led to an increase in Australian cost of sales payments in Q2 FY '21. U.S. cost of sales also increased quarter-on-quarter as we were now operational in 5 states. U.S. marketing expense payments grew quarter-on-quarter, as the company marketed for the full quarter in New Jersey, Illinois, Indiana, Iowa and launched marketing investment in November in Colorado. There also continue to be prepayments of some U.S. marketing obligations. Net cash used in investing activities in the quarter ending 31 December 2020, was $20.1 million. The $11.9 million of noncurrent asset payments is primarily an escrow deposit relating to marketing commitments. Market access payments were $3.5 million, and capitalization of our technology and product staff costs were $3.1 million. I will now hand over to Eric Foote to provide an update on our NBC partnership. -------------------------------------------------------------------------------- Eric Foote, PointsBet Holdings Limited - Chief Commercial Officer of US [4] -------------------------------------------------------------------------------- Thank you, Andy. Turning to Slide 11. NBCUniversal remains the perfect partner for PointsBet as we execute on our U.S. media, customer acquisition and retention strategy. As previously communicated, NBCUniversal reaches 100% of all U.S. households with their digital platforms having more than 60 million monthly active users. NBCUniversal has a diverse media mix across local, regional and national platforms. This will provide PointsBet the ability to geo target and customize local, regional and national marketing campaigns. PointsBet's access to exclusive broadcast and digital integrations across NBCUniversal's expansive portfolio of live sports rights builds trust and credibility in the PointsBet brand. NBCUniversal has an incredible array of rights to the live sports broadcast with a market leading portfolio, including the NFL, PGA Tour, NHL, English Premier League soccer and NASCAR to name just a few. These rights are distributed across national broadcast and cable networks, including the Spanish language Telemundo Network, regional sports networks, local television stations and expansive digital platforms. Key digital platforms to note include Peacock, a direct-to-consumer streaming service, inclusive of live sports; Rotoworld, a sports betting news and information subscription service; and GolfNow, the largest online tee time marketplace in the world. I could not be more pleased with the progress we have made to date under this partnership. Both teams are aligned to the opportunities ahead and are working at a feverish pace to unlock value and execute on PointsBet's brand strategy. December was the strongest month-to-date of the partnership in terms of first-time betters acquired via NBC with January poised to perform even better. I would like to briefly highlight 2 areas of execution: broadcast integrations into NBC Sports' game and studio coverage; and integration into NBC Sports' digital products. PointsBet's advertising units have been deployed via national, regional and local sports networks, including throughout all Bulls, Blackhawks, Sixers and Flyers games on linear and streaming via the NBC Sports mobile application. In addition, PointsBet bet types and offers have been promoted throughout all pregame, in-game and postgame coverage. From a national perspective, PointsBet has been featured in NHL and EPL pregame coverage and ticker integrations, together with running order integrations during NASCAR and IndyCar races. In addition, PointsBet has garnered significant coverage as part of NBC's Golf Channel's Morning Drive and Golf Central programs, focused on odds for upcoming events with brand inclusion and coverage. Also, as announced earlier in the week, in collaboration with NBC Sports and the PGA Tour, PointsBet will power a first-of-its-kind golf betting companion BetCast, during the upcoming Waste Management Open at TPC Scottsdale, Stadium Course, one of the largest PGA Tour events of the year. The BetCast provides a distinct betting version of this major sporting broadcast, with PointsBet having exclusive integrations with our odds, unique markets and promotions. BetCast will be distributed via Peacock, the NBC direct-to-consumer platform and air for 2.5 hours each day, 10 hours total for the tournament. BetCast will aim to lay the framework for future activations of its kind with PointsBet and NBC. As previously mentioned, PointsBet has been able to leverage our technology capabilities to integrate into NBC digital products and platforms. To give you one example, Comcast has launched PointsBet Voice Plus ads back in November, which leverages the capabilities of the Xfinity X1 Voice Remote. A text overlay during the ad informs users to say PointsBet to get 2 free risk-free bets up to $1,000. And when spoken, triggers an SMS text message direct to the consumer with a unique sign-up code back to PointsBet. Similarly, PointsBet has integrated with the NBC free-to-play Predictor mobile application, including exclusive PointsBet branding, odds integration and promotional messaging for users to easily engage with sign-up offers to PointsBet for a seamless conversion process. Further, in 2021, PointsBet and NBC will co-promote bundling offers aimed to drive further partnership association of NBC and PointsBet and provides fans with discounted rates for NBC products after placing first-time bets with PointsBet. This, in addition, to the PointsBet sign-up offers, which are shared multiple times per week via e-mail communication to Comcast in NBC's marketing databases. While we are extremely pleased with the progress to date, we've just scratched the surface on the opportunities of the partnership. In the coming months, PointsBet's marketing and product teams will be collaborating with NBC on the development of an array of exciting projects. I will now hand back to Sam for some concluding comments. -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [5] -------------------------------------------------------------------------------- The outstanding progress that we have made was recently recognized at the eGaming Review North America Awards with PointsBet winning 3 awards: U.S. Sports Betting Operator of the Year, U.S. Socially Responsible Operator of the Year and U.S. Rising Star. I was particularly proud of the judge's comments, which reflect the strategic areas we have focused on in the U.S., including: most innovative marketing of all B2C operators; clear market leader in social responsibility in the industry; PointsBet has taken more time than many to truly understand what the U.S. player is looking for. Now turning to Slide 13. I would like to provide some comments on iGaming, which will become a key part of our U.S. strategy in H2 FY '21 and beyond. Our platform is built. We have integrated the first round of third-party content with a live-dealer solution to follow. And we are now in the process of production testing, which will be followed by certification. We're excited to launch in Michigan, pending the required approvals this half, with New Jersey, a fast follow. While an in-house built solution takes longer to execute than an off-the-shelf B2B product, we now control our iGaming technology solution. This will deliver ongoing benefits for speed to market and product enhancements as we expand our iGaming vertical across more states and in the medium to long term, a significant margin advantage as we avoid third-party platform fees. Moving to Slide 15. PointsBet continues to execute on its strategic and operational objectives. We are now operational in 6 U.S. states and continue to build our U.S. brand to capitalize on the ongoing growth of the addressable U.S. sports betting and iGaming markets. Lastly, turning to Slide 16. Since our last quarterly investor call, it is clear from the activity we have observed on the ground in North America from both industry and government organizations that the reality and the size of the North American sports wagering and iGaming opportunity is becoming more widely recognized. PointsBet was created to capitalize on this opportunity, and our team, technology and business strategy has been developed over the last 4 years with this at the forefront of our mind. It's a truly exciting time for the business. I'd like to thank you for your time today, and would welcome any questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Your first question comes from Don Carducci from JPMorgan. -------------------------------------------------------------------------------- Donald N. Carducci, JPMorgan Chase & Co, Research Division - Analyst [2] -------------------------------------------------------------------------------- So can we talk about New Jersey a little bit? I was reviewing the transcripts. And in the fourth quarter -- and your New Jersey turnover share was 8.7%. You said don't treat credit -- put any emphasis on that number because it was a low activity period. And you were targeting between 6% and 7%. Then in the first quarter, you hit, bang on 6.5% turnover market share and reiterated the same targeted share for this quarter. But now when you were just talking about New Jersey, you said you're targeting 10%. Can you clarify if it's 6% to 7% or it's now 10%, given you just did 13.5%, but with the resulting outcome of a negative net win? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [3] -------------------------------------------------------------------------------- Yes. Don, hope you're well. Yes. I think the answer is -- I think it's pretty clear from our numbers that through the staking of some bigger betting clients that had a good run of results, that resulted in our net win margins being below expectation. And when that happens, that can -- obviously, the punters are winning. They're cashed up, then they -- that results in driving a high level of turnover. So we certainly don't want to point to 13% as being our steady state from a handle perspective in New Jersey. The actual result will be somewhere between that 6% plus figure. And our aim remains to grow from that, towards that 10% market share. -------------------------------------------------------------------------------- Donald N. Carducci, JPMorgan Chase & Co, Research Division - Analyst [4] -------------------------------------------------------------------------------- Yes. So you highlighted the increased average bet size. And I'm looking back at the 3Q, 4Q, 1Q and obviously, this quarter, in terms of the promotional activity that you did in New Jersey, it seems like this one with [$4.3 million], it was probably the most. And these promotions, were they given early in the quarter and maybe the election got away from you and people are using these promotional activities to increase their bet size? And then was there something that got away from you? Or is there a one-off that resulted in this negative net win because Iowa or Illinois, presumably, you have the same strategy unless the New Jersey market is just that much different? But -- great turnover number, but disappointing otherwise. Can you maybe give a little bit of clarity around that? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [5] -------------------------------------------------------------------------------- Yes. I think if you look at the slide that breaks up our state-by-state performance, you'll get a bit of an insight by comparing New Jersey to Illinois. So to be honest, it was less about being extra generous with generosities, it was just that the punters had a good run of luck in New Jersey. So you can see that in Illinois, we had gross win margin of 6%. Whereas in New Jersey, we had negative gross win margin of 1.1%. So from a generosities and promotions perspective, where we want to be, but it's just that gross win margin -- that the punters had a good run of luck on us in that state for the quarter. -------------------------------------------------------------------------------- Donald N. Carducci, JPMorgan Chase & Co, Research Division - Analyst [6] -------------------------------------------------------------------------------- Yes. And you mentioned [walk in], it seemed like Australia really saved this quarter. And the January update is strong, but presumably, the year-to-date performance can't be extrapolated into February or March with the Super Bowl on the 7th. Can you maybe just tell us what the strategy is for the remainder of this quarter? Is it going to be to manage active customers or market share or turnover or yields or just play by ear, see how she goes? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [7] -------------------------------------------------------------------------------- Yes. I think -- look, I think the -- we're putting that year-to-date up to the 24 January because, yes, the longer a period that you report on, the more you can remove any short-term variance. So year-to-date in the U.S. to the 24th of January, you can see gross margin of 3.8%, net win of $11.7 million and the net win margin of 1.2%, which is a better reflection of how we are going in the U.S. overall. We would like to see, as we've spoken to before, that gross margin improve up to 5% plus. So we would still say that from a variance of results perspective, we came out a little bit under of where we would normally finish off. In terms of the strategy going forward, it really is based on the life cycle of certain states. So in New Jersey, we're certainly looking to see the percentage of promotions reducing because we've been in that state longer. We're building up scale from a client perspective and we expect to see some good net win. Whereas the newly launched states, we're going to be prepared to give away gross win for -- to grow actives and to get them familiar with the PointsBet app, turn them into hopefully lifetime clients. So those states will have higher percentage of promotions. So it really is a state-by-state basis, and it's based on the life cycle, where we're at in that state and I suppose, in some ways, the level of competition in the state as well. -------------------------------------------------------------------------------- Donald N. Carducci, JPMorgan Chase & Co, Research Division - Analyst [8] -------------------------------------------------------------------------------- Yes, that's fair. And then last question for me. Given you're still reporting actives on the rolling 12-month period, did you find the active customer growth of 28,000 in the U.S. disappointing since you had a full quarter of Illinois and it's the fifth most populated state in America? But your peers, they report on a monthly user basis. And it appears that you're under-indexing on active customer growth relative to them and reporting on a 12-month basis at that. -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [9] -------------------------------------------------------------------------------- No. Look, the purpose for reporting 12-month actives is it removes any annual seasonality. So from our perspective, that is the most accurate way to report it. But no, no, we're very happy with the jump in actives clients. Obviously, our -- we're spending a marketing amount that's aimed to acquire a 10% market share in these states. And a lot of our competitors are spending far larger amounts. So no, we're comfortable with the way the actives have tracked. -------------------------------------------------------------------------------- Donald N. Carducci, JPMorgan Chase & Co, Research Division - Analyst [10] -------------------------------------------------------------------------------- That keeps you on track for the [1 million] by 2025? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [11] -------------------------------------------------------------------------------- Certainly. Yes. -------------------------------------------------------------------------------- Operator [12] -------------------------------------------------------------------------------- Your next question comes from Larry Gandler from Crédit Suisse. -------------------------------------------------------------------------------- Larry Gandler, Crédit Suisse AG, Research Division - Director [13] -------------------------------------------------------------------------------- Well done. A few questions for me. First, just in terms of the U.S. Just curious about new states, if you could talk to -- I know it's not on your to-do list for H2 '21, but Tennessee, Virginia and then where you're positioned in New York. Maybe why sort of Tennessee and Virginia have not been maybe on the cards in the near term? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [14] -------------------------------------------------------------------------------- Larry, hope you're well. Look, Virginia -- yes, the state lottery continues to diligently work through their application and selection process. We're confident of our prospects to be ordered a permit to operate and launch this year, but we've got to let them work through their process. So that's Virginia. Tennessee is a state that we didn't immediately prioritize. One of the things I've spoken about, Larry, is -- before is we want to get better at being able to just launch multiple states more quickly. So to this point, we've prioritized others ahead of Tennessee. And depending on what happens with states like Virginia, Massachusetts, Ohio, New York, et cetera, there may come a point where Tennessee gets prioritized. But we're certainly not putting a line through Tennessee. And on that point about our ability to roll out states, one of the great pleasing things is, is we launched Illinois in September, Colorado in December, Michigan in January. So we're really picking up that velocity, which is great. In terms of New York, I think there's a lot of -- obviously, there's a lot of commentary about what's going on there. The governor has been pretty clear in some of his statements about perhaps we want to have a single, let's call it, lottery-style operator, that would pay a very large portion of their revenue to the state. Pleasingly, the legislation that's been, let's call it, progressed, allows for 2 skins per casino. As you're aware, PointsBet has a second-skin relationship with Tioga Downs. Our understanding is that the entire industry is behind that legislation, so we'll just have to see how that plays out versus what the governor has stated publicly so far. -------------------------------------------------------------------------------- Larry Gandler, Crédit Suisse AG, Research Division - Director [15] -------------------------------------------------------------------------------- And the -- in the 2-skin scenario, would you anticipate a large, upfront license fee for New York? Is that what your thinking is currently? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [16] -------------------------------------------------------------------------------- I think so. Yes. I think -- if, let's call it, that war is to be won where multiple skins get through, it's obvious that the governor is thinking about the budget deficits. And so there's likely to be a decent license fee there. -------------------------------------------------------------------------------- Larry Gandler, Crédit Suisse AG, Research Division - Director [17] -------------------------------------------------------------------------------- Yes. And just I want to maybe throw out a possibility here because I've read some very large numbers. Is this a sort of $100 million license fee or more? Is that sort of in the realm of possibility? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [18] -------------------------------------------------------------------------------- I don't think it's going to be that high, no, but let's wait for it. -------------------------------------------------------------------------------- Larry Gandler, Crédit Suisse AG, Research Division - Director [19] -------------------------------------------------------------------------------- No? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [20] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Larry Gandler, Crédit Suisse AG, Research Division - Director [21] -------------------------------------------------------------------------------- Okay. Great. And just switching over to Australia. Pubs and clubs sort of came back online, well, in Victoria in November. I'm just wondering if you could talk to -- as you guys talked about targeting the industry aggressively while pubs and clubs were closed, could you talk to how maybe your run rate evolved over the half or late into that fourth quarter as pubs and clubs are opening? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [22] -------------------------------------------------------------------------------- Well, I think we spoke to the fact that we had record turnover in each of October, November, December. So we actually outperformed December, outperformed November, outperformed October. Now that's pretty unique because, obviously, November is a peak month and December is not big month. So I think that's a pretty good indication of our continued momentum. I will say that part of our momentum, as we said, is it's the snowball. Our product is getting better. Our brand is getting stronger because we continue to invest in it year-on-year. And that's the recipe. So yes, it's an opportunity. There was some -- there was a change up in the marketplace, but we had pretty good momentum pre- -- any COVID changes as well. -------------------------------------------------------------------------------- Operator [23] -------------------------------------------------------------------------------- Your next question comes from Rohan Sundram from MST Financial. -------------------------------------------------------------------------------- Rohan Sundram, MST Marquee - Gaming and Contractors Analyst [24] -------------------------------------------------------------------------------- Just a question for me in terms of -- with NBC looking to shut down NBCSN at the end of this year, is there any impact at all from that? Are you able to clarify? Or how does that change your strategy in any way in that partnership or rather even opportunities amongst all of that? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [25] -------------------------------------------------------------------------------- Yes. I think, Rowan, it's probably a net positive to be obvious. So just to explain what's happened there. So NBC Sports Networks is one of the national cable networks that NBC have. But most of the content that would be relevant for us is going to end up on another one of their national cable networks, which is their U.S.A. network. And then some of the other content will end up on their streaming services Peacock. So the U.S.A. network has a larger footprint than the Sports Network did. So that sports content that goes across there is actually going to be in front of more eyeballs. So from our perspective, our rights apply across all of those NBC linear assets, and it's business as usual. -------------------------------------------------------------------------------- Operator [26] -------------------------------------------------------------------------------- Your next question comes from Jed Kelly from Oppenheimer. -------------------------------------------------------------------------------- Jed Kelly, Oppenheimer & Co. Inc., Research Division - Director & Senior Analyst [27] -------------------------------------------------------------------------------- Just going back to Illinois, you're getting nice share gains there. What have you learned? Or what are you doing in Illinois relative to perhaps like Indiana and Colorado? And then just on the Michigan launch, you had some nice incentives in terms of the larger bets relative to the other operators. Any early learnings from Michigan that you saw last weekend? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [28] -------------------------------------------------------------------------------- Yes. Jed, yes, I think Illinois, as we spoke to, there was the turnover or handle number, and then there was the bet count number. And with certain -- and that's for October. So keep in mind, Illinois hasn't released their November, December numbers. But the point about Illinois is, is that we're 1 of 5 competitors there. We were the 4th to launch, so we were still a bit behind a few of our competitors, including FanDuel and DraftKings. But as we've spoken to, we do have a very strong presence with the NBC assets in Chicago with the Bulls, the Blackhawks and the White Sox. And if you're watching those events, you're going to see us integrated into their pregame shows, intra-game shows and postgame shows. So that gives us a great opportunity to maximize the NBC advantage in Chicago. And we would hope to do well in that state. So perhaps compared to other states, we have that extra advantage in Illinois in that, one, there's less competitors so far; and two, the NBC assets are particularly strong. In terms of Michigan, no, it's pretty early. Obviously, a bunch of operators all went live at the same time, which was great. That was the first time that we had been equal first on the starting line and a great model, I think, in Michigan, where the regulator was able to facilitate that. So we were thrilled to be equal in the starting line and been competing, and -- but it is literally a couple of weeks in. -------------------------------------------------------------------------------- Jed Kelly, Oppenheimer & Co. Inc., Research Division - Director & Senior Analyst [29] -------------------------------------------------------------------------------- Okay. And then you talked about NBC, right? They're shifting a lot more to Peacock. And then your -- I mean how do you -- so this might be a better question for Eric. But as we move more into this OTT environment, I mean, how do you sort of see a potential to like integrate your content more into the games, the overlays, potentially on Peacock and then on the regional sports networks? I mean how do you see that developing? And then you do have a partnership with Genius. Do you ever think about building like a PointsBet OTT app for some of the longer-tail sports? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [30] -------------------------------------------------------------------------------- Eric, do you want to take that? -------------------------------------------------------------------------------- Eric Foote, PointsBet Holdings Limited - Chief Commercial Officer of US [31] -------------------------------------------------------------------------------- Yes. No, I'll take the first part, Sam, relative to the kind of the migration of content to digital. I would say it works in our favor. There's no question that as we structured our deal with Comcast NBC, we understood the cord cutters, the cord nevers and the gravitation towards the digital assets. They've made a massive investment in Peacock, getting back to July of last year. I saw today, they have 33 million monthly active users. We have those exclusivity integrations across Peacock, also the spot media opportunities with the discounted rates, preferred placement, preferred pricing, so it fits directly into our strategy. I would also comment on the digital front. Because it is a digital product, that direct-to-consumer platform, we can target state-specific opportunities. So it creates a limited wastage for PointsBet to concentrate our dollars on states where we are active or potentially on states where we are going in the near future. And again, I referenced in my discussion earlier, the Waste Management Open opportunity will be the first of its kind, and it will be on Peacock with those 33 million listeners. But also, we're focusing on Golf Channel, NBC Sports, for live tune-in and driving traffic back to Peacock. So again, the first of its kind. We're looking to really franchise that and develop that into more sports and also more into golf. Sam, I'll defer to you on the question of Betgenius. -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [32] -------------------------------------------------------------------------------- Yes. I mean -- I think, overall, when it comes to innovation with the media companies, Jed, this was the reason we structured. And it was great that NBC Sports wanted to structure the deal this way, with them having a large equity interest in the business. Because, as I've said before, it's not about them fulfilling contractual obligations, it's about them wanting to get behind us and ensure that we become a significant and material player in the U.S. sports betting market. So as they are evaluating their strategy, the great thing is that they recognize the role that sports betting can play in that strategy. And as a dip in the ocean to that, the Waste Management Open, as Eric said, this forthcoming week, I think we will be at the forefront of any linear and digital innovation from a sports betting perspective and that's what we're working on. That's why we own tech, and we can do some innovative things with them, but we're only 3 months into the partnership. -------------------------------------------------------------------------------- Jed Kelly, Oppenheimer & Co. Inc., Research Division - Director & Senior Analyst [33] -------------------------------------------------------------------------------- And then your iGaming strategy, is that more going to be a cross-selling to your existing sports betting? Or how are you going to attract users? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [34] -------------------------------------------------------------------------------- Yes. So initially, it will certainly be exactly that. We'll attract clients through the mass appeal of NFL, NBA and all the big American sports. Our brand will be a sports betting brand. And then we will cross-sell them. I suppose the most -- the clear like-for-like is the DraftKings strategy and what they've been executing in New Jersey to great success. Yes. So that will be our strategy. -------------------------------------------------------------------------------- Operator [35] -------------------------------------------------------------------------------- Your next question comes from Wilson Wong from Jarden. -------------------------------------------------------------------------------- Wassim Kisirwani, Jarden Limited, Research Division - New Zealand Technology & Software Analyst [36] -------------------------------------------------------------------------------- Sam, Andy, can you hear me? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [37] -------------------------------------------------------------------------------- We can. -------------------------------------------------------------------------------- Wassim Kisirwani, Jarden Limited, Research Division - New Zealand Technology & Software Analyst [38] -------------------------------------------------------------------------------- Yes. Sorry, it's Wassim Kisirwani from Jarden here. Just a question on the volatility in net win rate. Obviously, in the U.S., a strong sort of snap back in January. And just sort of interested in how much of that was sort of actively managed and just the thinking behind that? And sort of is it -- I guess, is it fair to just assume that this is going to be an ongoing feature of -- as you sort of play market by market, we should just continue to expect a lot of volatility between market share and the win rate in the short term? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [39] -------------------------------------------------------------------------------- Wassim, I mean, look, in Australia, we play some big clients, too. The difference in Australia is we have a more mature business. And so when those big clients perhaps have a good run, it's not so easily noticeable as you're dealing into a bigger number. So certainly, our competitors would be dealing with some big clients as well. But we do pride ourselves on the fact that we do all of our own risk management, and we have a strong pedigree in risk management and trading. And we've built proprietary systems in risk management and trading that we think are market leading. So when we talk about our company's propensity to handle such clients and ensure that you do receive a positive outcome, we believe that we can do that. And that's why -- you talked to the 24th of January number in the U.S. The gross margin number is 3.8%. We think that's still a little bit under. So we think in terms of who got the better of it, the punters or PointsBet in terms of run results, we think that we -- probably, they got the better of the run. So we'd like to see that at 5% plus, and then that will then pull up the net win as well. But certainly see that our trading and risk management systems and experience is a plus. And in the past, we've been asked the question, is this reflective of attracting lower margin players? That's not the case. We don't do anything in terms of a price sensitivity in nature, et cetera, to attract sharper turnover any more than any other competitor does. -------------------------------------------------------------------------------- Wassim Kisirwani, Jarden Limited, Research Division - New Zealand Technology & Software Analyst [40] -------------------------------------------------------------------------------- Okay. Great. And then just maybe perhaps a comment on Texas. Obviously, some news flow there around that market and kind of evolving a bit more quickly, perhaps. Just -- can you just remind us how you're positioned and how you're sort of viewing that opportunity? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [41] -------------------------------------------------------------------------------- Yes. Well, I think it's fair to say that Texas is reflective of what's happening on -- in North America. It is a state that most analysts would not have had as being a chance in the short term, whereas now there's growing talk that it is some chance to legalize in 2021. As we do in every state, we are hooked into those states where we're organized. We're talking to all the parties that we should be talking to. We'll see how it goes, but I think it does -- it just points to the fact that the sports betting and iGaming opportunity is rolling out far quicker than most estimated a year or 2 ago. -------------------------------------------------------------------------------- Operator [42] -------------------------------------------------------------------------------- Your next question comes from Phil Chippindale from Ord Minnett. -------------------------------------------------------------------------------- Phillip Chippindale, Ord Minnett Limited, Research Division - Senior Research Analyst [43] -------------------------------------------------------------------------------- First, I just wanted to circle back to Illinois. That performance was really strong, but it was strong across the key lines being turnover, gross and net win. And especially given it's been so early for you in that state. Can you just talk through what the key drivers were for the strength of that performance across each of those metrics? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [44] -------------------------------------------------------------------------------- Look, Illinois, I was just talking about New Jersey and how gross win margin sort of underperformed in New Jersey. You can see that Illinois had a good gross win margin of 6%. So that meant that even though we we're reasonably aggressive with generosities, we ended up with a positive net win margin of 2.7%. I suppose being sort of the first full quarter of operations in Illinois, we probably would have expected to give away nearly all margin in promotions in the pursuit of acquiring and retaining clients. But we were able to deliver a positive net win number, continued good growth. But the point being that, that 13% plus turnover or handle number in Illinois for the month of October, as we highlighted, we were at around 4% for bet count. So we're certainly not sitting here saying that we are a 13% player in Illinois. -------------------------------------------------------------------------------- Phillip Chippindale, Ord Minnett Limited, Research Division - Senior Research Analyst [45] -------------------------------------------------------------------------------- Okay. Just to switch to the Australian business. Obviously, that's continued to perform really well. And you've highlighted earlier, just the strength into December. But again, can you just walk us through what's been driving that strength? You pulled out the Same Game Multi as a factor. And then the related sort of follow-on point is given the strength of that business, what's the plan for calendar '21 to maintain that momentum? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [46] -------------------------------------------------------------------------------- Yes. Look, there's no doubt -- I talk about improving product. And from day 1, we spoke about, as our product improved, that would give us more confidence to put marketing -- more marketing dollars behind the business because we are confident of being able to attract and retain clients on the back of that improving product. So the performance of our app is lengths ahead of where it was 12 months ago and further ahead of where it was 24 months ago. So on the back of that improving product and part of that is expanding the Same Game Multi product to further sports, that helps with margin, that helps with retaining and attracting clients because that's an important product. I spoke about brand recognition. By -- let's call it, operator standards here in Australia, historically, we hadn't invested a huge amount in marketing in the last year or 2 as that product has improved and as the opportunity opened up with the BetEasy brand ceasing to exist and obviously, the off-line to online transference opportunity during COVID, we could confidently step up that marketing investment while maintaining a positive EBITDA for the Australian trading business. So what we've spoken to and we continue to speak to is that we'll continue to chase net win growth on our way to that 10% target by 2025 in Australia, but we'll do so while maintaining a positive EBITDA position for the Australian trading business. So we'll continue to look to grow. We wouldn't -- we always guide against saying that the previous quarter or the previous half is -- will be directly reflected in the next quarter or next half because there is seasonality, but we're confident that we're on the right trajectory. -------------------------------------------------------------------------------- Phillip Chippindale, Ord Minnett Limited, Research Division - Senior Research Analyst [47] -------------------------------------------------------------------------------- And just finally on iGaming. I just want to understand the time frames a little bit more. You said Michigan is sometime in the next 5 months. Presumably, that's more a June quarter story. And then just to be clear, on New Jersey, are you looking to launch that by 30 June as well? Or is that likely to be in the next period? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [48] -------------------------------------------------------------------------------- Yes, I think we've -- I'm deliberately being conservative with the language in Michigan because we are dependent on certification with regulators, et cetera. But yes, it should be well and truly early in this half. And that would mean that New Jersey is planned to be launched this half as well. So yes, by the end of June, we should have both Michigan and New Jersey live from an iGaming perspective. -------------------------------------------------------------------------------- Operator [49] -------------------------------------------------------------------------------- Your next question comes from Sacha Krien from Evans & Partners. -------------------------------------------------------------------------------- Sacha Krien, Evans & Partners Pty. Ltd., Research Division - Executive Director of Gaming & Leisure [50] -------------------------------------------------------------------------------- Sam, Andy and Eric, I just wanted to touch on Illinois again. First of all, that -- similar to the last question, it does appear to have reached profitability faster than where you're expecting. Sam, just from your comments, can we take from that, that you're expecting that we possible to go back into quarters where we see most of the gross win margin being paid away in promos? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [51] -------------------------------------------------------------------------------- No. I mean I'm not saying that because I think we've got off to a good start. I'm probably not saying no that 2.7 net percent -- 2.7% net win margin, I wouldn't want to sort of print that number. But no, I think with this, there's a good chance that we can continue to deliver positive net margins, mainly, Sacha, as I said to an earlier question, Illinois is a little bit different to the other states that we're in because there is only 5 operators at the moment and the strength of our NBC assets and the execution in Illinois points to the fact that we would hope to do well in that state. -------------------------------------------------------------------------------- Sacha Krien, Evans & Partners Pty. Ltd., Research Division - Executive Director of Gaming & Leisure [52] -------------------------------------------------------------------------------- Yes. So is there a little bit less competitive intensity in that state given there are only 5? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [53] -------------------------------------------------------------------------------- No. Certainly not, no, because the -- 2 of the 5 that are there are DraftKings and FanDuel. And they've been very clear on their strategy, which is to go very hard and to be very generous with the promotions, and they're certainly doing that. -------------------------------------------------------------------------------- Sacha Krien, Evans & Partners Pty. Ltd., Research Division - Executive Director of Gaming & Leisure [54] -------------------------------------------------------------------------------- Okay. And can you clarify your comment that you're not a 13% player? I didn't quite follow that when you said -- talked about 4% of the bet count. -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [55] -------------------------------------------------------------------------------- Yes. So Illinois regulator has only released -- the last set of results that they've released is October. And so from a turnover or handle perspective, we were into double figures. But from a bet count perspective, we were down at about 4%. So for October, we would say, look, that's probably more -- the bet count at 4% is probably more reflective of our market share position, given that, that was -- we launched mid-September. So that was sort of like our third to sixth week of operations in that state. So we're certainly not sitting here saying that we are a 10% player in Illinois yet, even though the handle number for October was 10% plus. We eagerly await the Illinois Gaming Board's numbers for November and December, and that will give a bit more insight. But we talk about working towards that 10% market share position, yes, we certainly don't expect to get there in the third month or the fourth month. -------------------------------------------------------------------------------- Sacha Krien, Evans & Partners Pty. Ltd., Research Division - Executive Director of Gaming & Leisure [56] -------------------------------------------------------------------------------- Okay. And just a question for Andy on marketing in the 4C. Can you quantify -- or clarify if there are any prepayments in the operating cash flow marketing number of $43 million? -------------------------------------------------------------------------------- Andrew J. Mellor, PointsBet Holdings Limited - CFO [57] -------------------------------------------------------------------------------- Just to answer that question on the marketing, we -- I can clarify that there was prepayments made in Q1 as also there were prepayments made in Q2. So there is working capital movements through the periods and that's one of the reasons why we disclosed the marketing expense in the quarter. So the $9.7 million in Australia and the circa U.S. -- $18 million in the U.S. to give clarity around that. -------------------------------------------------------------------------------- Sacha Krien, Evans & Partners Pty. Ltd., Research Division - Executive Director of Gaming & Leisure [58] -------------------------------------------------------------------------------- Yes. Okay. Great. I'll limit it to one more question given the dropouts. But I'm just wondering in terms of Australia, obviously, really impressive result, and you guys are taking share. I'm just wondering if you can sort of give some color on the average spend you're seeing from customers pre- and post-COVID in terms of those customers that have been with you for that time. -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [59] -------------------------------------------------------------------------------- What I would say there, Sacha, is that during, let's call it, the hard lock down period, we certainly saw when there was a lack of entertainment options and discretionary spend options for our clients to spend their money on, we were seeing bigger spend amounts. But I would say it's pretty much normalized now. And yes, the momentum that we've gained is as a result of those underlying factors that we've spoken about. -------------------------------------------------------------------------------- Operator [60] -------------------------------------------------------------------------------- Your next question comes from Damien Williamson from Bell Potter. -------------------------------------------------------------------------------- Damien Williamson, Bell Potter Securities Limited, Research Division - Fixed Income and Hybrids Analyst [61] -------------------------------------------------------------------------------- Sam, Andy and Eric, just a quick observation on the -- yes, well done on the turnover in America, given your first quarter to exceed Australia on half the active client base. Can you give an indication of what percent of the new clients are coming through the NBC partnership that you can track through the promotional codes that you used there? If you can just give some indication on that. -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [62] -------------------------------------------------------------------------------- Yes. I think for the quarter, Damien, NBC was about 1/3 of our marketing spend in the U.S. in terms of expenses that were allocated to NBC assets. And certainly, yes, let's call it, more than comparable to other channels when it comes to [CPA weight]. So certainly carrying their and -- doing their job, I suppose, is how I'd summarize it. -------------------------------------------------------------------------------- Damien Williamson, Bell Potter Securities Limited, Research Division - Fixed Income and Hybrids Analyst [63] -------------------------------------------------------------------------------- Okay. And just as a final question, in terms of the odds integration that you're looking at. In your results, you mentioned that you've done odds integration on Bulls, Blackhawks, Sixers, Flyers games. Are you going to -- is your strategy to do that on all of those, like Chicago teams in the 3 sporting comps you're looking at? Or yes, is there a limit -- yes, are you looking at all games or just selective games? Or you had -- just looking at how you're looking at choosing where you spend your marketing on these teams? And is it for the entire season? Or is it just a specific number of games? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [64] -------------------------------------------------------------------------------- No. We'll be very heavy around the 3 professional sports teams in Chicago throughout the season. As you're aware, as part of the NBC deal, we have basically a right to take up to 70% share of voice in terms of ad units as well. So again, just to take a round number, if there was 10 ads on a NBA Bears game -- or Bulls game, sorry, we might take 7 of those ads. So if you're watching those events, you're going to see us pregame, in-game, postgame integrated as well as seeing the vast majority of the ads being PointsBet ad. So in those RSNs where we're live or we will be going live soon and we want to build some brand retention, you can expect to see a heavy presence from PointsBet. -------------------------------------------------------------------------------- Operator [65] -------------------------------------------------------------------------------- Your next question comes from Desmond Tsao from Goldman Sachs. -------------------------------------------------------------------------------- Desmond Tsao, Goldman Sachs Group, Inc., Research Division - Associate [66] -------------------------------------------------------------------------------- Sam, Andy and Eric, just a couple of quick questions from me. Firstly, I just wanted to pick up on your comments around Illinois market share. Just, I guess, the disconnect between handle and bet count. Just want to clarify, is your expectation going forward that, that significantly higher bet size than medium would sort of normalize and sort of fall back down to the medium? And I guess what is actually driving that big -- I guess, higher than median spend across New Jersey and Illinois? And then -- and how sustainable is that? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [67] -------------------------------------------------------------------------------- Yes. I think it will -- we would expect it to normalize. Sort of as per my comment that -- obviously, that was the first month of operation in Illinois. So if you get some higher-staking betters, they're going to have a larger influence over the numbers and results than once you're building scale. To my comment in Australia, around Australia, we have lots of big betting clients in Australia, but you don't sort of necessarily see them in the results as clearly because they're absorbed accordingly. So yes, I would expect it to normalize and now the difference between our handle market percentage share and our bet count market percentage share to come together over time. -------------------------------------------------------------------------------- Desmond Tsao, Goldman Sachs Group, Inc., Research Division - Associate [68] -------------------------------------------------------------------------------- Okay. Great. And then just finally, I'm reading those snippets about just the Google Play Store over in the U.S. allowing sports betting apps to be downloaded. Just, I guess, your initial thoughts on that. Any color that you can provide and, I guess, what that might mean for your business going forward? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [69] -------------------------------------------------------------------------------- Yes. I'm glad you raised this, Desmond. So that is a strong positive for the industry. For those that aren't necessarily aware, if you want to download an app for the iPhone, it's very easy. You go to the Apple Store and you do so. But if you wanted to download an app for a Google mobile, you couldn't go to the Play Store. There's other mechanisms that we have to do to trigger that workflow. So it will certainly help with marketing cut through, cost per acquisition, conversions. It's a really good outcome for the sector as a whole. -------------------------------------------------------------------------------- Operator [70] -------------------------------------------------------------------------------- Your next question comes from Lloyd Danzig from Sharp Alpha Advisors. -------------------------------------------------------------------------------- Lloyd Danzig, [71] -------------------------------------------------------------------------------- Congrats on all the success in U.S. market share performance. There's been a lot of talk in this Q&A, even about product, technology. I definitely appreciate the value of in-house risk management. But as you guys think about the PointsBet of the future, all the new facets and functionalities that, that will contain, I was wondering if you could comment on the role that in-house tech development will play in relation to M&A and other third-party vendors and maybe just more generally about how you think about the competitive landscape and customer retention in the U.S. over the longer term. -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [72] -------------------------------------------------------------------------------- Yes. So in terms of in-house tech, that has been a pillar of our strategy from day 1. I mean that's been formed by the experiences we gained in the Australian market from previously businesses that I've been involved in about the need to control your destiny from a tech perspective. And I think as we've mentioned before, DraftKings are currently on Kambi, which is seen as one of the best B2B operator platforms out there. They've made the decision to go out and spend hundreds of millions of dollars purchasing SBTech, so that they can bring an in-house solution to their business because they see the importance of that strategy. And we've not only done it across sports betting, but as I've just announced, we've done it across iGaming. So aware of the view that the U.S. market on a state-by-state basis, where you've got -- in each state of America, you've got a different regulator. You've got different markets that are approved. You've got different responsible gambling measures that you have to comply with. Building a customized product for the U.S. sports betting and iGaming markets, we believe, will become an increasingly important strategic advantage. And I think some of the other transactions you've seen with Bally's buying Bet.Works for -- I think, for USD 150 million, which is a reasonably early stage sports tech platform talks to that strategy as well. So we're firmly in the camp of owning your own tech capability. And yes, as I've spoken to, we've -- we're really -- we're still a reasonably early stage company compared to some of our competitors. So the product that we have in the marketplace now has so much room for improvement. So that's what gives us great confidence. The fact that we can win Sportsbook Operator of the Year when -- we have a road map, but we know that this is going to take us to another level, that's what gives us great confidence of our ability to compete going forward. And in terms of customer acquisition -- okay. Look, it's -- the reality is that the 2 biggest players, in terms of DraftKings and FanDuel, have certainly set the agenda in terms of promotions and how strong they're going in that area. Yes, we expected that. We're prepared to be equally generous at our scale for promotions and generosities. That's the reality. When you have such a known, huge, potential total addressable market, which is sports betting and iGaming in North America, it's going to be there that you're going to have aggressive competition. And you've got to expect that when new states are opening up, everyone's going to throw the kitchen sink at acquiring clients. So... -------------------------------------------------------------------------------- Operator [73] -------------------------------------------------------------------------------- Your next question comes from Nick Maclean from Surrey Asset Management. -------------------------------------------------------------------------------- Nick Maclean, [74] -------------------------------------------------------------------------------- Just a question for you to sort of sum it all up. What, Sam, keeps you awake at night? Obviously, you've done really well, executed pretty much everything you've said you're going to do, but what gets you awake at night now going forward? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [75] -------------------------------------------------------------------------------- Nick, hope you're well. Hopefully, the phone doesn't drop out again. Look, not much, if I'd be honest, Nick. I know we've got the right strategy. We've got the right team. Our tech has kept pace with the opportunity and is only going to get better. I think the hardest challenge for PointsBet was when PASPA got repealed, and we were still very early stage, and it's all happened very quickly. But we've been able to work through our gears as the state-by-state rollouts happened. We over -- get that first deal in New Jersey, get the Penn National Gaming deal for the 5 states. Parlay that, to use a betting term, into obviously the transformational deal with NBC. Have now 12 states, market access states. We're now building up a team capability. We've added headcounts over the last year to help close the gap on some of our bigger competitors. So we feel we're heading in the right direction and that the, let's call it -- perhaps, not that it won't continue to be challenging. And like I said, when you've got such a massive opportunity at the end of 2025 and beyond, the competition is going to be extremely, extremely fierce. But in some ways, the somewhat remarkable journey of PointsBet to this point has been that the last 3 years from where we started, we're now in a very strong position to launch and really have a good go at this opportunity, both in Australia and the U.S. -------------------------------------------------------------------------------- Nick Maclean, [76] -------------------------------------------------------------------------------- So just following on, pretty much, from Wassim's question a little while ago, government regulation and whatnot, does that make you nervous at all? Or is that more a -- do you see that as a headwind or a tailwind? -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [77] -------------------------------------------------------------------------------- The governments that are legalizing sports betting are doing it for 2 main reasons: One, they recognize that there's a large black market out there and their constituents are betting. And they're doing so in an environment that's not regulated, and there's no consumer protections, et cetera. So yes, they might as well legalize sports betting, bring it into the white market. And then the second part, obviously, tax and create economic activity. But if governments put in place [cumulative] measures or tax rates that are -- sort of make the white operators, the legal operators uncompetitive versus those traditional black market operators that's going to -- that's not going to fulfill the aims of maximizing the economic activity, maximizing the taxation that we can pay to them. So far, the U.S. has largely taken a very good regulatory approach in terms of the way that most states have been structured. -------------------------------------------------------------------------------- Nick Maclean, [78] -------------------------------------------------------------------------------- Okay. Great. Well done, guys. -------------------------------------------------------------------------------- Samuel J. Swanell, PointsBet Holdings Limited - Co-Founder, MD, Group CEO & Director [79] -------------------------------------------------------------------------------- Thanks, Nick. -------------------------------------------------------------------------------- Operator [80] -------------------------------------------------------------------------------- That does conclude our Q&A for today. And that does conclude our conference. Thank you for participating. You may now disconnect.