PointsBet CEO Talks Next Steps After US Sale To Fanatics

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With the $225 million purchase of PointsBet US by Fanatics moving further into the rearview mirror, the Australian-based gaming operator is shifting its focus towards software development and turning a profit in other markets.

Phase one of the purchase is “tracking according to plan,” CEO Sam Swanell said during the PointsBet year-end earnings call Thursday in Australia. Fanatics announced the initial closing later in the US Thursday afternoon, announcing 11 states will have the Fanatics presence by the start of NFL betting next week.

Capital from the initial closing will be returned to shareholders in mid-September, with the remaining slated for March, under a plan agreed to earlier this week. At that point, growth in Canada and Australia become the company’s main priorities, along with maximizing opportunities from the technology that helped spark a bidding war for its US business.

PointsBet shares closed at A$1.62 on the Australian Stock Exchange Thursday, a 2.2% increase on the day.

PointsBet 2.0 growth planned for 2025

PointsBet expects to maintain break even EBITDA, or close to it, over the next two years in Canada and Australia.

For FY23, PointsBet reported a loss of $23.21 million in Canadian EBITDA for the business that opened in April 2022. It reported $64.8 million of positive EBITDA from Australia, where it’s been live since 2017.

The company plans for meaningful growth in those markets by fiscal 2025 through a 15% to 20% reduction in marketing expenses. Swanell is calling the plan “PointsBet 2.0.”

“I think everyone can understand that the US has been somewhat all-encompassing getting through this process and now getting through the sale process,” Swanell said. “Bringing that focus and that expertise [to] purely play in Australia and Canada, combined with our already strong trajectory, we’re really confident in our ability to grow our market share in Australia.”

PointsBet reports FY23 earnings

PointsBet took over $126 million of sports bets in Canada from July 2022 to June 30, 2023, its first full year of reporting. Its Canada sports betting net win was $6.8 million and $18.3 million for iGaming, where it saw 30,423 cash active clients.

Swanell called it a more attractive market than most US states due to lower capital costs and higher operating margins from lower taxes. In the US last year, PointsBet accounted for a seventhbest 3.2% of the sports betting market, according to LSR projections. 

It reported $1.7 billion of handle in Australia, up 4% year-over-year, and an 8% win margin, half a percentage point more than last year. Swanell said the market is still rationalizing from the pandemic, but PointsBet will approach that challenge from a “people, and tech and product perspective.”

PointsBet accounts for 5% of the Australian sports betting market, behind Sportsbet, TAB, Entain and bet365.

Can tech be an even more potent asset?

Swanell provided fewer details about new technology, but repeatedly pointed out that PointsBet retains the rights to use and develop its tech stack post-sale, adding that the purchase has “validated” its promise.

“While we have sold a copy of the technology to the Fanatics, importantly, we get to keep the technology. That means we can develop and exploit it in a manner that creates the most value for PointsBet shareholders,” Swanell said.

The Banach Odds Factory software Swanell referred to powers PointsBets live betting and same-game parlay capabilities. PointsBet purchased the company the software comes from in 2021 and has heavily invested in its development. It is not yet a part of Fanatics Sportsbook, which uses technology built from a copy of source code from B2B supplier Amelco, though the company has said it plans to “integrate the best parts of the PointsBet tech platform to supercharge its sports betting engine.”

“It’s very important for shareholders to understand how valuable the PointsBet technology has become,” Swanell said. “It has been one of the critical features of the interest in our company by numerous groups and it bodes well for the value and the future of the Australian and Canadian businesses.”