While most companies create grand plans to enter the US, online wagering company PointsBet (ASX: PBH) is glad to wash its hand off its American arm since selling it off to Fanatics Betting and Gaming in August 2023.
With the first installment of $275.4 million being received, PointsBet is finally focusing on its Australian and Canadian divisions.
In Q1 FY24 which included the AFL and NRL finals, it made quite a bit of progress in Australia, with its total net wins amounting to $52.8 million, up 11% on PCP. It continued its improvement in generosity efficiency, with promotions as a % of Gross Win at 26.3%. The Company’s marketing expenses were 41% lower than PCP, and its trading margin stabilised, returning towards the long-term average of 12.6%.
Canada’s turnover increased from about $20.9 million in Q1 FY23 to $44.2 million in Q1 FY24. Though lesser than Aus, its total net wins of $5.4 million were up majorly (about 212%) on PCP. The Company’s sports betting gross win margin expansion was driven by a higher mix of parlays (combining multiple bets in one wager, aka a combo bet). In-play betting represents 68% of sports handles, up 9% on PCP.
PointsBet is an Australian corporate bookmaker with operations in Australia and the United States (it remains affiliated with its PointsBet USA arm). The Company has developed a cloud-based wagering platform that offers its sports and racing wagering products, advance deposit wagering on racing (ADW), and iGaming. In 2022, over 33% of Aussies bet on sports and horse racing, among other avenues, with billions spent on setting up these infrastructures. People have managed to sustain their pandemic-level spending on wagering, and PointsBet is the better for it.
PointsBet’s US arm was becoming rather costly, requiring major capital raises; so it decided to sell it off for $333 million to Fanatics Betting and Gaming. Proceeds from the disposal of its US Business amount to $220.5 million right now. This includes the initial instalment proceeds of $275.41 million (comprising some agreed adjustments) with deducted transaction costs such as legal, tax and financial advisor fees and a significant portion of the agreed funding requirement (capped at $33.03 million).
Following the sell-off, the Company undertook an initial capital return of $1 per share, completed on September 22, 2023. Plus, 10 out of 14 US states were transferred to Fanatics Betting and Gaming during Q1 FY24. Subsequent completion and receipt of the balance of consideration ($78.65 million) and second capital distribution is on track for completion in Q3 FY24.
Overall, PointsBet’s total cash receipts from customers stood at $58.2 million, including $55.1 million from Sportsbook and $3.0 million from iGaming. It also focused on new products, with its in-house tech powering its Live Sports Betting offering, like New NFL “Lightning Bets” and New NFL and NBA “To Get” markets.
The Company ended the year with $71.8 million in cash, down from $212.1 million at the start of the quarter. That’s because it distributed over $315.4 million in first capital returns to shareholders following the US deal, an appeasement to shareholders who lost quite a bit over the past year due to the underperforming segment.
In FY24, PointsBet expects total net wins to be 10 to 20% higher than in FY23. Marketing expenses are expected to reduce further by nearly 15 to 20%, and the Company believes it will deliver positive group EBITDA come FY25.
Alinda is a Business Reporter for The Sentiment
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