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PointsBet reported impressive growth in its US operations during Q3 of its 2023 financial year (three months ended 31 March), while earnings in Australia dipped year-on-year.

Topline numbers

Total group net win for the quarter was a record A$106.6m, up 39% on the prior-year period.

The total net win consisted of A$91.2m from the sports betting division (up 28%), covering the US, Canada and Australia, and A$15.4m from iGaming in the US and Canada, up 181% year-on-year.

The operator’s net win was derived from A$1.45bn in sports betting handle, up 4% year-on-year, on a sports betting net win margin of 6.3%, up from 5.1% in the comparative period.

By region, Canada accounted for A$6.1m of the total net win, up 21%, the US accounted for A$49.8m, up 103%, and Australia brought in A$50.7m, a reduction of 3% compared to Q3 FY22.

News nugget

Having confirmed rumours that it is seeking a buyer for its US division, PointsBet’s impressive growth in North America – alongside more modest results in its native Australia – is undoubtedly the biggest news to come out of this report.

Alongside increases in overall net win in North America (US and Canada combined) by 128%, PointsBet has also been able to reduce its marketing and promotional costs in the region.

Marketing costs were 12% lower than the previous Q3, while the cost of targeted promotions fell by 28%.

The business also streamlined its North American workforce during the quarter, resulting in a 12% reduction in headcount. That is expected to generate annualised cost savings of some A$6m.

Still, the number of 12-month rolling active customers rose 27% in North America to 317,071.

CEO Sam Swannell said revenue was growing much faster than customer numbers as the business was able to monetise its users more efficiently than before.

Sports betting margin in the US improved to 4.6% in the latest quarter (up from 2.3%) due to continued improvements in PointsBet’s pricing model and trends in customer behaviour towards parlay bet types.

The average revenue per user among North American sports bettors in Q3 also grew by 79% year-on-year.

PointsBet is now live in 14 US states following its launch in Ohio on 1 January 2023.

Meanwhile in Australia, a slight increase in betting handle was offset by ‘softness’ in racing, PointsBet said, in line with the rest of the market.

Marketing expenses were also down 59% sequentially in the operator’s home country, at A$8.3m, but the firm was able to increase its number of cash active clients by 2% to 238,054.

Best quote

“There’s no doubt that when you deliver a better product to clients, they respond. And sports has probably seen a bit more innovation – with same-game parlays and multis – than racing has in recent times.”

– PointsBet CEO Sam Swannell on the shift in betting revenue from racing to sports

Best question

Although CEO Swannell said he could not comment specifically on any upcoming strategic sell-offs, MST Financial’s Rohan Sundram asked him to elaborate on the primary focus for deals down the line.

In response, Swannell said his key consideration for any future transaction was generating shareholder value.

“We’ve built a valuable business as I’ve said consistently. We’re pleased with our market conditioning, and we clearly have a growth plan that we’re delivering on,” he said.

“But at the same time, we’re conscious we operate in a rapidly evolving market. We’ve got a strong balance sheet, but we acknowledge that at some point, we’re going to need some additional capital. 

“So we continue to assess all of these credible strategic opportunities really carefully, but ultimately, in determining which of these opportunities would be pursued, we answer one key question, which is: what will be the most value accretive to shareholders?”

Swannell was later asked what a potential timeline might be for a strategic transaction, given that PointsBet said it had been in ‘advanced’ talks with potential buyers.

Swannell declined to comment.

Current trading and outlook

For the second half of its financial year 2023 (ending 30 June), PointsBet expects its normalised group EBITDA loss to be between A$77m and A$82m.

As reported last week, PointsBet is focused on exploring the possibility of a sale of its US division.

The strategic shift came about after it failed to secure a buyer for its Australian arm, as talks with News Corp-backed Betr stalled due to the company’s reluctance to reduce its A$250m price tag.

Shares in PointsBet are down more than 45% over the past 12 months.

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