Operators are bailing out of the US sports betting industry seemingly on a daily basis, but at least one company sees opportunity in the pullback.
PointsBet said late last week the recent news was positive for the company as sanity is restored to the market.
“There is no doubt that some operators over-invested from a marketing and promotions perspective,” said PointsBet CFO Andrew Mellor at the company’s H1 22 results. “This led to challenging economics for the entire sector and a skewed view of some operators’ market share. We believe market share gained on the back of over-aggressive promotions will be eroded as these promotions are wound back.”
PointsBet said it stands to benefit thanks to a “market-leading” product. The company recently finished second among US sportsbooks in Eilers & Krejcik app testing, behind only FanDuel.
Swimming against the flow
Though PointsBet did not name names, last week Caesars Sportsbook halted national marketing having “achieved its goals.” Churchill Downs then pulled out of the online betting business entirely.
PointsBet CEO Sam Swannell hinted that his company could pick up some customers from Caesars.
“In a market where operators were giving away $3,000 free bets, that’s going to be very attractive to the average person, and that might be where they go first,” Swannell said. “But once that’s no longer available, consumers ultimately end up at the product that gives them the best service.”
A fair fight
The Australia-listed operator also said it expected better results in new markets like Ontario, where PointsBet would be “on the starting line” from day one.
“In most states, we have been a share-of-wallet bookie because we had to win every client off BetMGM, FanDuel, DraftKings, etc,” Swanell said. “Here is an opportunity for us to get clients first onto our platform.”
He said advertising restrictions in the Canadian province would push focus onto product rather than bonuses.
Can PointsBet afford to be patient?
Despite Swanell’s optimism, analysts had plenty of questions about the company’s future.
For one, PointsBet had around $360 million cash at hand at the turn of the year.
Schroders analyst Joseph Koh suggested that would fund around two years of operations.
“Do you think you will be able to get to cash-flow neutral or generative by the time the cash runs out, or do you have other plans in terms of sources of capital?” Koh asked.
Cash is king
Swannell said he was “confident” in the company’s cash position but might need to raise more capital in the future. While that could be difficult in the current environment, it might be a “different question” in 12 months or 24 months, Swannell said.
“I think we have flexibility,” Swannell added. “We are always nimble if there is a need. If equity markets are looking poor at certain points in time, there are levers we can pull.”
PointsBet made a net loss of $99 million in the six months to December 31. US GGR in the same period was $51 million, up nearly 300% year on year.
Are you sure about that?
Swannell also was challenged by Larry Gandler from Credit Suisse about the focus on product.
“What if you’re wrong [about the importance of product]?” Gandler said. “And you’ve got a time window and a capital resource that’s finite.”
Swannell stressed that FanDuel and DraftKings had similar messaging on the importance of product.
“It’s been proven in Australia. It’s been proven in Europe,” Swannell added. “Product will ultimately win out.”
PointsBet New York nuggets
- New York bettors were “significantly more likely” to use the proprietary PointsBetting product than other states. PointsBet attributed that to the financially minded clientele in the state.
- Deposits from first-time depositors in New York are on average 3x higher than other states.
- PointsBet saw “a bit of cannibalization” in New Jersey from New York sports betting, “but nothing too much.”
