PointsBet Holdings Limited (ASX: PBH) has released a positive Q1 FY '25 Business Update, revealing a 12% increase in net win to $65.3 million year-over-year, driven by improved sports betting margins and a significant rise in iGaming net win.
The company also outlined its revenue and EBITDA forecasts for FY '25, expecting to achieve between $280 million and $290 million in revenue and an EBITDA of $11 million to $16 million, while maintaining a cash flow break-even outlook.
Key Takeaways
- PointsBet's net win rose by 12% year-over-year to $65.3 million.
- Enhanced sports betting margins reached 9.7%.
- iGaming net win increased by 50% to $4.6 million.
- PointsBet Australia paid $26.9 million in taxes and fees, 47.6% of net win.
- The number of cash active clients grew by 5% to 238,400.
- The company launched three innovative products.
- Canadian net win surged by 62% to $8.7 million.
- Revenue forecast for FY '25 is between $280 million and $290 million, with EBITDA of $11 million to $16 million.
Company Outlook
- PointsBet anticipates FY '25 revenue between $280 million and $290 million.
- EBITDA forecast for FY '25 is estimated to be between $11 million and $16 million.
- The company maintains a cash flow break-even outlook for FY '25.
Bearish Highlights
- PointsBet Canada is not expected to break even in FY '25.
- The Victorian point of consumption tax increase did not affect the gross profit margin in Australia.
Bullish Highlights
- The company reported a 7% increase in market share in Australia.
- Group-level gross profit rose by 15%.
- The company is outperforming the market's growth in Canada with a 69% rise in constant currency.
Misses
- Despite the overall growth, the racing segment in Australia remains flat.
Q&A Highlights
- CEO Samuel Swanell discussed performance and market dynamics in Australia and Canada.
- The company focuses on pricing accuracy and higher-margin products to maintain margins amid competitive pressures.
- PointsBet expects to run profitably in Canada by the end of FY '26.
In conclusion, PointsBet Holdings Limited has demonstrated a strong start to FY '25, with significant growth in net win and client base expansion. The company's strategic focus on higher-margin products and market expansion in Australia and Canada is expected to contribute to its revenue and EBITDA targets.
Despite some challenges, such as the unlikely break-even in Canada for FY '25, PointsBet remains confident in its long-term profitability and market share growth.
Full transcript – None (PBTHF) Q1 2025:
Samuel Swanell: Good morning and thank you for joining the PointsBet Holdings Limited Q1 FY '25 Business Update. I'm Sam Swanell, and joining me on the call today is our Group CFO, Alister Lui. Please note the safe harbor statement. All the numbers referred to are unaudited and in Australian dollars, unless otherwise stated. We'd like to start with a few comments on our global commitment to responsible gambling. PointsBet endorses the principle of informed choice, which is aimed at empowering customers to make informed decisions and exercise choice regarding their betting expenditure. PointsBet's commitment to responsible betting is demonstrated through its wide range of responsible wagering initiatives and tools. Responsible gambling initiatives will continue to remain central to our organization's sustainability commitment. In addition to paying $0.48 in a dollar to governments and racing and sports bodies, as just referenced, we make a material investment in achieving best-in-class compliance with important consumer protection measures. In Australia, PointsBet has committed significant resources to deliver initiatives such as monthly activity statements, zero-day KYC, integration to the National Self-Exclusion Register and a ban on using credit cards to deposit. This package of initiatives and others means the regulated online wagering sector in Australia is clearly operating to a very strong consumer protection standards. When it comes to advertising, PointsBet has restated many times our support for significant advertising reform. However, we do believe it is important that reputable, licensed, compliant Australian operators that pay significant taxes and fees can distinguish ourselves from unregulated offshore service providers via sensible advertising. We've consistently outlined a logical advertising model to be adopted that will clearly protect children and vulnerable people. Turning to Slide 3. The September quarter has been another period of strong progress for the company. The group delivered net win of $65.3 million, up $7.1 million or 12% on the PCP. This impressive result has been assisted by improved sports betting net win margins of 9.7%, driven by strong gross win margins and efficient use of gratuities. IGaming net win was $4.6 million, up 50% versus the PCP, driven by higher actives, higher turnover and targeted generosity spend. Importantly, the efficient delivery of net win has resulted in group gross profit for the quarter increasing 15% versus the PCP, outpacing the 12% growth for net win. Turning to Slide 4 to discuss the Australian trading business. Australia continued the growth trend from our record FY '24 results to report another strong quarter with net win improving 7% versus the PCP. Cash active clients grew 5% versus the June '24 quarter to 238,400 as we continue to invest for growth in the Australian market. The mix of revenue continued to improve with double-digit growth in net win from our mass market cohort and marginal growth from our VIPs. We continue to see improvement in our structural margin performance above long-term averages. Gross win margin of 13.2% was driven by growing sports trading margins as customer preferences shift towards higher-margin sports products. Net win margin of 10.2% was further enabled by improving generosity spend efficiency to 23% of gross win versus 26.3% in the PCP. This improved promotions efficiency was driven by more personalized allocations, which saw generosity spend to non-genuine clients reduced by 20% — 27% versus the PCP. Our higher and more efficient net win margins, combined with growth in international sport, which is higher margin than racing at a gross profit level, has helped absorb the recent increase in the Victorian point of consumption tax. Gross profit margins for Australia remained stable versus the PCP, coming in at 52.4%. In Q1 FY '25, PointsBet Australia paid $26.9 million in GST, point of consumption tax and product fees to Australian governments and racing and sports bodies. This represented 47.6% of our net win for the quarter. Sport again delivered strong double-digit net win growth versus the PCP to be the driving force behind our market share growth. The strongest drivers of our sports growth were the AFL and NRL with strong performance in the respective finals series. We've also made a very positive start to the NFL season, which kicked off in September and more recently, the NBA season over the past 2 weeks. Turning to Slide 5. Over 67% of our Australian actives for the quarter were customers that either bet exclusively or predominantly on sports, up from 58% in the PCP. Sports activity continues to head towards higher-margin, lower staking recreational products. All core metrics for multis improved versus the PCP. Total turnover across all sports multi and same-game multi products grew 24% with net win growing 116%. A case study on this trend was the 2024 AFL Grand Final. 81% of all actives placed the same game multi on the game and same game multi turnover grew 72% versus 2023. The same trend repeated for the NRL Grand Final following on from the previously reported record performance across the State of Origin series. Pleasingly, we are also seeing these themes continue into the start of the NFL and NBA seasons. Our strategy through FY '24 and into FY '25 has been consistent. We align our brand, media assets, product development and generosity spend with the overall growth in demand for premium sport. We invest in enablement through our world-class in-house technology, Odds Factory pricing and personalized generosity capability. This materializes in our competitive advantage to continuously release new and improved features fully integrated across all functions of the business. Furthermore, we service our clients through a 24/7 around-the-clock onshore capability in trading, risk management, customer service, live betting, payments compliance and responsible gambling intervention. As can be seen on Slide 6, we successfully released 3 new first-to-market innovative products during the quarter that evidence our capability Hourly Quaddie, Beast Mode and Five For $25. Conception to delivery for each product via our proprietary technology was less than 6 months. And while early days, we are seeing some very impressive results from these products. A fully integrated plan has been executed for each product to reinforce our overall sports-led built different brand proposition and provide the core narrative for our Shaq-led brand campaign released in September, to grow actives and share of wallet from actives by appealing to mass market recreational clients who like fast, fun and easy-to-use products, utilize our ability to personalize generosity to specific clients and bet types and lean into growing customer preferences for higher-priced, lower-staked recreational bet types. These new products add to our positive momentum in sports actives and margin leading into the start of the NBA season in October, which is our most popular sport. Our results also display the capability-based competitive advantage PointsBet has to successfully launch innovative products to continue to grow actives and net win in a sustainable and responsible manner within the boundaries of expected government-led advertising reforms. Turning to Slide 7 to discuss the Canadian trading business. We again delivered strong net win growth in Q1 of $8.7 million, up 62% on the PCP and in Canadian dollars, 69% versus the PCP, outpacing the total Ontario market, which grew at circa 37%. This growth was driven by a strong year-over-year uplift on both Sportsbook and iGaming. Sportsbook net win came in at $4.1 million, up 77% versus the PCP. This growth was driven by higher turnover, combined with improved efficiency on generosity. Our in-play mix of total handle was 76%, a new quarterly high as our top-tier in-play offerings continued with our Sportsbook customers. On the iGaming side, we delivered $4.6 million in net win, an increase of 50% versus the PCP. Marketing expenses were flat versus the PCP as we continue to invest to deliver strong customer growth. Total first-time betters were up 36% in Q1 versus the PCP and 12-month rolling cash actives reached just shy of 49,000, up 9% from Q4 '24. Our Ontario business now provides circa 17% of our group active clients. Turning to Slide 8. Since we announced our partnership with Strive Gaming last year, we have been focused on accelerating the growth of our iGaming business. Step 1 in that journey was to establish the new platform, which we completed late in FY '24. This quarter saw us make significant progress on the second critical step, expanding the breadth and depth of leading content. We've now launched 3 new content providers and grew our games portfolio by 50%, including some of the top-performing games in Ontario from Pragmatic Play, Relax Gaming and AGS. We have ambitious plans to continue the rollout of leading content throughout the rest of FY '25. Efforts will now shift to the third step of our acceleration journey, the development of critical tools to improve generosity and loyalty that will help drive improved outcomes such as expanded margins, lower churn rates and higher customer lifetime values. I will now hand to Al Lui to walk through our quarterly cash flow statement.
Alister Lui: Thank you, Sam. Turning to Slide 9. At 30 September 2024, the company held $16.7 million in statutory corporate cash. Net cash outflows from operating activities, excluding movement in player cash accounts, was $5.6 million. Receipts from customers for the quarter totaled $65.2 million, including $60.6 million from Sportsbook and $4.6 million from iGaming. Operating cash outflows during the quarter included cost of sales of $29.8 million, sales and marketing of $16.5 million, representing the company's investment for the start of the peak customer acquisition period in Australia and Canada. As Sam mentioned, we continue to invest in marketing at a level that will grow our market share in both Australia and Ontario. Non-capitalized staff costs of $12.5 million, which included FY '24 annual performance payments and administration corporate costs and GST paid of $12.1 million. Net cash outflows from investing activities were $5.6 million, including capitalized software development costs, which included FY '24 performance payments. These will normalize lower for the rest of the financial year. However, as with marketing, we have a significant level of technology investment baked into our P&L that powers our top-tier product in both Australia and Canada. As previously stated, we expect the company to be cash flow break-even for FY '25 and to finish the financial year with circa $28 million in corporate cash. I'll now hand it back to Samuel.
Samuel Swanell: Thanks, Al. Turning to Slide 10. We communicated guidance in our FY '24 results, and we confirm that guidance today. We expect to deliver revenue of between $280 million and $290 million and EBITDA of between $11 million and $16 million. As mentioned earlier, baked into our EBITDA guidance is significant investment in areas such as marketing and product that will continue to drive our revenue growth in both Australia and Canada. Our globally powerful product, proprietary technology, strong brand, international regulated market experience and outstanding team is very valuable and is driving our market share growth in both the large Australian market and the rapidly growing Canadian market. We will now take questions.
Operator: [Operator Instructions] Your first question today comes from Kai Erman from Jefferies.
Kai Erman: Could you guys please just give some color on how the Australian wagering market is performing? Noting the uptick you guys had in active clients shows you guys are gaining share in the AFL, NRL Grand Final comparison. It's quite helpful just to understand how the market is performing and how you guys are performing. But how is the overall market in sports and in racing as we sort of comp to the Melbourne Cup over the last quarter?
Samuel Swanell: Kai, thanks for the question. Look, it's still a little bit hard to tell. We've had some data points from, say, Entain that showed that they were back in some growth. But obviously, until the likes of Sportsbet and Tabcorp report for the quarter, it's a little bit tough to tell. But look, from our data points, we're positive that we've continued to grow our share. The market certainly hasn't grown at the 7% that we've grown at. And again, from our perspective, as we sort of called out on the call, the vast majority of our growth is coming from sport. Racing is pretty flat. So if that trend was sort of continuing across the country, there's probably a doubt whether racing is back in growth. It's probably still lagging for everyone else and maybe they're getting some growth on sports. But I did note that Entain spoke to the fact that racing was a little bit healthier for them. So I mean, at the start of the financial year, we expected modest growth in the Australian market, single — low single digits. We don't have any reason from many of the data points that we've seen to think otherwise. So we think our 7% is clearly a market share growth number.
Operator: Your next question comes from Rohan Gallagher from Jarden Group.
Rohan Gallagher: A couple of questions, if I may. Firstly, how would you quantify the impact from the POC tax increases in Victoria to your business?
Samuel Swanell: Yes. Look, I think one thing that we spoke about at the FY '24 results again was that we expected to — despite the increase in Victorian point of consumption tax, we expected to be able to absorb that and maintain our sort of margin from FY '24 into '25. I think a really positive data point out of the quarterly is that for Australia, we've maintained PCP gross profit margin at 52.4%. But we also called out that at a group level, gross profit is up 15% PCP versus net win that's up 12%. So at a group level, we've actually outperformed our net win growth. So I think that's pretty impressive given that we've had to absorb that Victorian point of consumption tax increase. Some of that is driven by our strategy, clearly to lean into international sport, which is high gross profit margin and to be more effective — increasingly more effective with personalization from [indiscernible] perspective. And some of it's driven by consumer preference that clients are just preferring those higher-margin multi-products, which gives us a little bit more to work with. But yes, I think great start from us from the first quarter in terms of absorbing that bit point of consumption tax.
Rohan Gallagher: Yes. And I don't think you've quantified it, but where would you sit in terms of your mix of racing versus sports now given the recent leaning into sports?
Samuel Swanell: Yes. What we basically said previously is that it's approaching 50-50. It's not quite there yet. That's at a net win level. But again, if you go down to a gross profit level, which takes into account the fees and taxes that we pay, then you might have a slightly different view in terms of what's more important to us. And that's part of our strategy to be leaning into. That's our brand around sports. That's our key capability around sport, and it's also where the margins are most favorable. So that's good for PointsBet.
Rohan Gallagher: And finally, and thank you for indulging me, Canada, we see as a free option for you guys. Obviously, you saw spectacular growth in the quarter, above category growth. What are the risks — where are the risks that you see around Canada hitting break-even this year? And how do you see the long-term structural margins relative to Australia?
Samuel Swanell: Yes. I think we've called out that for the full year Canada is unlikely to be even or break-even. What we've said is that towards the end of the financial year, we expect it to be run rating profitably. But the first full year, we would expect would be FY '26 rather than '25. So as long as we keep sort of growing strongly versus the PCP, could be happy. And obviously, an overarching aim is to keep outgrowing the market. So we know our — we've got a benchmark there, what's the market doing and we'd like to keep outperforming the market. We were — in constant currency, we were up 69% and the market was up 37%. So we've done a good job of growing our market share for this quarter, which is great. In terms of margins, FY '24, we actually had 9% gross trading margins in Canada. And this quarter, we started at 8.3%, which is the same as the PCP. I think we'd say that gross margins will be in that 8% to 9% range and we'd like net to be around the 6%. I think that's sort of what we put a circle around that 6%.
Operator: Your next question comes from Rohan Sundram from MST Financial.
Rohan Sundram: Just one for me. And coming back to that topic of gross margins and net win. On Australia, do you see further opportunities to grow the gross and net win margins just given what you were talking about regarding generosities, efficiencies, product mix? I know luck is a big factor, but just keen to get your thoughts on how you see the outlook for margins.
Samuel Swanell: Yes. Well, I think with the full year results, we were still sort of talking to a line that gross trading margins, put a circle more around 12%, maybe up to 13%. But I think what we're saying now is we're feeling more comfortable about talking about 13% as sort of the standard for Australia, even talking about how October started, that sort of trend has continued. So I think we're getting comfortable around 13%. The question about whether there's upside to that, look, I think you can always invest more in your pricing accuracy and pricing capability and to get better at pricing. So the trend is obviously consumers continuing to move towards these higher-margin products. So it could happen just naturally that we go there. Keep in mind, though, that racing as a whole is still higher margin. So if we take from racing and give to sport, that, in theory, should be a drag on margin. So I think — look, I think we feel comfortable saying 13% is sort of put a circle around that for FY '25. Consumer taking a share, we'll continue to try and make our prices as accurate as possible to maximize our margin. But I think 13% is about right.
Operator: Thank you. That does conclude our questions for today. I'll now hand back to Mr. Swanell for any closing remarks.
Samuel Swanell: No, all good. Thanks, everyone, who joined the call.
Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
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