PointsBet announced a $300 million (A$400 million) capital raise to continue its North American expansion during its fourth-quarter conference call Wednesday evening.
During the call, PointsBet CEO Sam Swanell laid out positives from the Australian company’s 2021 fiscal year. The company’s net revenue growth was 159%, up to $143.2 million, but expenses left the company with an $87.6 million operating loss. The earnings call did not include an analyst question-and-answer portion.
As the company continues to mature in Australia, Swanell pointed optimistically toward its US start, where its sports betting app is live in six states.
“In each state we’re live, we’re either the fourth or fifth operator in terms of handle,” Swanell said on the call. “We will continue to invest to remain a top-five operator. We’ve established the long-term strategic foundations to ensure we’re a market leader in North America.”
Money for growth
Swanell expects marketing costs to continue to rise with market expansion in North America. The $294.2 million capital raise will help PointsBet bolster its growth plans, building on the company’s $180.5 million of cash and cash equivalents on hand at the end of its fourth quarter.
To raise the cash, approximately 21.5 million new shares will be issued at A$10 per share and an accelerated entitlement offer will issue 23.1 million new shares at A$8 per share. Both Goldman Sachs and MST Financial are involved.
The fresh capital will be used for:
- North American marketing and client acquisition
- Technology and product development
- US market access and government fees
- Talent investment
- Balance sheet flexibility
Separate from the capital raise, co-founders Swanell, Nick Fahey and Andrew Fahey will sell 2.9 million of their shares. Chairman Brett Paton will buy 1.45 million of those shares, with the rest placed at an institutional investor at A$10 per share.
PointsBet US growth in fiscal year 2021
US handle for PointsBet grew more than 450%, from $236.1 million to $1.3 billion. That jump was thanks to the growth in cash-active clients, which reached 159,321 in June 2021, up 661% compared to June 2020.
With a gross hold of 5.3%, that jump in handle led to $70.5 million in gross revenue. Net revenue was $30.1 million, a 481% increase from the year prior. The company also recorded $1.1 million in revenue from iGaming.
The company spent $26.3 million in the fourth quarter on marketing.
PointsBet US market share by state
Swanell went through PointsBet’s performance state-by-state:
|State||Handle||Market Share||Gross Win||Gross Hold||Net Win||Net Hold|
|New Jersey||$728.7 million||7.8%||$30.2 million||4.1%||$17.5 million||2.4%|
|Illinois||$349.4 million||7.8%||$23.2 million||6.7%||$10.7 million||3.1%|
|Indiana||$99.7 million||5.5%||$6.8 million||6.9%||$0.7 million||0.7%|
|Colorado||$59.3 million||5.0%||$4.3 million||7.3%||$1 million||1.8%|
|Michigan||$48.3 million||4.9%||$3.2 million||6.7%||($1.1 million)||(2.3%)|
|Iowa||$31.7 million||3.1%||$2.6 million||8.2%||$1.2 million||3.7%|
|Total US||$1.3 billion||--||$70.5 million||5.3%||$30.1 million||2.3%|
PointsBet’s relatively low hold is attributed to VIP action.
Cost per user acquisition in five of those states was below $500, Swanell said. The lone exception was Illinois, which returned to in-person registration, driving up the cost.
Similar to the company’s third-quarter call, Swanell also spent time highlighting marketing efforts, including its NBC partnership. To help amp up that partnership, PointsBet recently added former NFL quarterback and new NBC analyst Drew Brees to its spokesperson lineup.
PointsBet North American growth opportunities
Along with the six live US markets for PointsBet, the company has market access in 11 other states. By December 2022, PointsBet plans to be live in 19 states and Canadian provinces.
According to the investor presentation, states it plans to launch by 2022 include:
Swanell spoke briefly about the $3 billion iGaming and sports betting market opportunity in Canada. PointsBet hired a CEO for PointsBet Canada, Scott Vanderwel, to go along with COO Nic Sulsky and VP of Legal, Compliance & People Chantal Cipriano.
iGaming future offers shiny new toy
Since May 2021, PointsBet launched iGaming operations in Michigan and New Jersey. Since the May 5 launch of iGaming in Michigan, approximately 40% of the state’s active customers placed an iGaming wager.
The company hired Aaron O’Sullivan, previously of Bet365, as vice president of online casino revenue.
Swanell expects iGaming to go live in Pennsylvania, West Virginia and Ontario in the near future. He also said the company will continue to add slot games and live dealer games to its offerings.
“Owning and controlling in-house tech will become an increasingly important strategic advantage,” Swanell said.