PointsBet is talking to multiple parties regarding the sale of part or all of its North American business, CEO Sam Swanell confirmed Thursday.
The comments came on the company’s fiscal third-quarter conference call. Swanell could not divulge specifics about the ongoing calls though he did note certain negotiations “are well advanced.”
Swanell noted the most important thing is generating shareholder value, but shareholders were not moved by the sentiment. PointsBet’s stock fell 6.1% in Australia Friday on 8.2 million volume, nearly five times its 90-day average volume.
That drop came despite the company’s positive sale momentum, and a 12% reduction in employees following a cost and efficiency review that will save the company $4 million annually.
PointsBet short on cash
The main reason for looking at strategic alternatives sounds like a lack of cash, gleaning from what Swanell said.
“We’ve got a strong balance sheet but we acknowledge that at some point we’re going to need more capital,” Swanell said. “So we continue to assess all of these, sort of, credible strategic opportunities really carefully.
“But ultimately, in determining which of these opportunities will be pursued, we answer one key question, which is what will be most value accretive for shareholders.”
PointsBet was in negotiations to sell its Australian business late last year, which could have bolstered the balance sheet to continue US operations. A previously announced conversation with a potential buyer has ended but there are still talks around selling the Australian business, the company said in its trading update.
PointsBet had $166.6 million in corporate cash and no debt at the end of March, according to the company’s investor presentation.
No state launches in short term
Between PointsBet’s shrinking bank account and the attempt to show off a well-oiled yet inexpensive machine for potential buyers, there are no new state launches planned in the short term, Swanell said.
That helps explain why PointsBet decided not to pursue a Massachusetts sports betting license despite applying for one.
The company now has access to 35% of the US adult population following the Ohio launch, which he called “extremely large.”
PointsBet sees big live betting handle
PointsBet noted that 59% of its third-quarter US handle came from live betting. That is in line with last year and “well above” market average.
Net win grew 103% in the US to $33 million. Sports betting net win jumped 99% to $25.1 million, while online gaming net win was $7.8 million, up 115%.
Total US handle was $542 million, which is flat compared to last year.
Canada net win up too
Net win jumped in the Ontario market as well for both iGaming and sports betting.
Total net win hit $4 million, up 21% over the previous quarter. The majority of that came from iGaming’s $2.4 million, followed by the $1.6 million in net win from sports betting.
PointsBet had 28,000 Canadian customers during the quarter, Swanell said.
Marketing dollars working harder?
PointsBet has made “great strides” in improving payback on marketing, Swanell said.
North American rolling active customers are up 27% to 317,071 compared to the fiscal third quarter last year. That growth comes despite a 12% drop in marketing and a 28% decrease in promotions.
The company continues to work low-value bettors that are focused on promotions out of its system, which has led to average revenue per sportsbook user to grow 79%.
Players are placing more bets on average, Swanell said, noting the “super user” segment is highly engaged and driving up that average bet count. The company’s customer profile has shifted to a more sustainable, lower-average staking mix, he added.
Expenses dropping for PointsBet
PointsBet spent $22.3 million on marketing in the US and $5.2 million in Canada over the third quarter, CFO Andrew Mellor said.
Expect those marketing cash outflows to be significantly lower in the fourth quarter, he added.
