PointsBet will not require any further external funding to become EBITDA profitable in 2024, according to chairman Brett Paton.
Speaking at PointsBet’s Annual General Meeting, Paton updated shareholders on the company’s 2024 strategy following the ongoing sale of its US operations to Fanatics.
As part of an aim to reach profitability next year, Paton highlighted the improved structure of PointsBet’s Canadian business.
He suggested that Canada’s lower capital requirements and higher operating margins, relative to most US states, create “strong prospects for attractive future economics.”
In an accompanying speech, CEO Sam Swanell echoed this sentiment, highlighting the market’s lack of partner fees, workable tax rate, and inclusion of iGaming.
“We believe the early stage of the Canadian business compliments the more mature Australian business, as well as providing an opportunity to leverage attractive features of our tech stack that aren’t available in the Australian market,” said Swanell.
Alluding to the attempted purchase of PointsBet by Matthew Tripp’s Betr venture, Paton also said previous M&A interest validated the company’s “strategically important place” in the Australian market.
The business also provided an update on the ongoing sale of its US business to Fanatics Betting & Gaming.
The deal saw the sports merchandise giant gain access to 15 US states through the company’s market access agreements, with PointsBet having transferred control of 10 states total so far.
Paton said the completion of the $225m sale is “on track as anticipated” by March 2024.
He added that the remaining PointsBet business, active in both the Australian and Canadian markets, will benefit from a “more focused approach” given its newly streamlined nature.
After the full closing of the deal, he said the group’s EBITDA would be “close to breakeven”.
“Importantly, we do not anticipate any external funding requirements to deliver this result,” Paton concluded.
Swanell highlights strength of tech
Another theme highlighted by PointsBet’s senior management team was the value of its in-house wagering technology assets in Banach.
While the operator sold the provider’s live odds technology to Fanatics as part of the acquisition, it retained a licence to use and further develop Banach assets outside of the US. It also kept its proprietary platform and trading tools.
“I believe it is important for shareholders to understand just how valuable our technology has become,” said Swanell.
“It has been one of the critical features of our company and it bodes well for the value and future of the Australian and Canadian business,” he added.
Regulatory headwinds in Australia and India are likely to negatively impact 2024 revenue, Flutter Entertainment has warned.
Flutter reported £2.04bn in revenue for Q3 2023, an 8% rise year-on-year.
However, the operator forecast that group (excluding US) adjusted EBITDA for full-year 2023 would come in at £1.44bn, landing at the bottom of its previously stated range of £1.44bn to £1.6bn.
This led to an double-digit decline in the operator’s share price in morning trading to £120.70. The stock has subsequently rallied to £124.35 at the time of writing.
Flutter highlighted the impact of planned tax increases in Australia and India on revenue targets.
Flutter, which has a 42% share of the Australian sports betting market through Sportsbet, said that Victoria’s scheduled increase of point of consumption tax to 15% would dent earnings.
Coupled with an expected soft market for horse racing continuing into 2024, the company is now forecasting a single-digit decline in revenue for the region.
“There is some softness in the in the market,” said Flutter CEO Peter Jackson. “It’s still significantly bigger than it was pre-Covid. I think it’s important we continue to invest in the market to take advantage of the growth when it comes.”
The company also singled out India, where it is active in the regulated skill-based gaming market through its Junglee Rummy brand.
A new 28% deposit tax on real-money games is expected to impact the operator’s full-year 2024 EBITDA, which is now anticipated to be £30m lower.
“We had high hopes for profit inflection point in 2024 but the change [in tax] is going to push that back,” said CFO Paul Edgecliffe-Johnson (pictured).
“We thought in ’24, we would go from sort of a breakeven to about a £30m profit basis. That could come through and fall into in ’25, or we might only be half of that, it really depends on just how quickly we can adapt.”
Rival gaming operators including Super Group have taken the decision to withdraw from India altogether following the tax hike.
Flutter hails product amid competitive pressure
In October, Flutter’s principal US competitor DraftKings overtook it as the US GGR market leader, according to an Eilers & Krejcik report.
Jackson said the market has remained “incredibly intense from a competition perspective”.
“I believe the market is becoming more rational,” he added. “And then that’s actually a positive thing for all participants.”
Edgecliffe-Johnson pointed to improvements in Flutter’s product, in particular its functionality, as a prospect to push growth going forward.
Jackson also highlighted several product improvements, including the introduction of live same game parlays, a popular bets live feed, a quick deposit mechanism and a reward machine in its online casino offering.
“I can speak for a long time about the long list of advantages that we have in the market,” said Jackson.
“We have always had a leadership position from a product perspective, and we’re pushing hard on innovation and moving quickly,” he added.
Ed Young from Morgan Stanley sought clarification on the operator’s guidance, which forecasts a nearly doubled revenue projection for Q4 over Q3.
“Clearly, there is some very wonky phasing quarter on quarter – can you help us understand what might be driving that?” he asked.
Edgecliffe-Johnson argued the “phasing” was due to the customer-friendly sports results witnessed in Q3 2023.
Current trading and outlook
For the US division, Flutter is guiding to revenue of £3.75bn and adjusted EBITDA of £140m for full-year 2023.
For the wider business excluding the US, adjusted EBITDA is set to hit the low end of guidance at £1.44bn.
Flutter Entertainment shares took a steep dive, shedding almost 12% in the initial hours of trading following the release of its Q3 results.
The operator delivered a 8% year-on-year revenue boost to £2.04bn in Q3 2023.
However, at the same time, Flutter said it was now looking at the lower end of its full-year 2023 guidance.
This announcement caused the company’s stock to plummet by nearly 12%, leaving investors less than impressed.
Gaming offsets sports betting decline
Flutter revealed that sports betting revenue decreased by 2% year-on-year to £1.12bn in Q3 2023. However, this decline was offset by a 22% year-on-year rise in gaming revenue to £914m.
CEO Peter Jackson hailed the group’s “strong quarter”, in what he described as a “seasonally quieter period”.
“We remain the number one choice for sports betting and gaming customers globally, and our 16% growth in average monthly players augurs well for our continued growth and market leadership,” he said.
He added that Flutter’s diversified portfolio of brands is “well positioned to adapt to challenges and opportunities” in various markets.
US & UK growth
In the US, Flutter saw a 12% revenue growth to £668m, thanks to the strong FanDuel brand and significant investment in customer acquisition marketing campaigns.
This led to a 37% increase in new sports betting and iGaming players in Q3 compared to the previous year.
“We are particularly pleased by the great progress we are making in the US,” Jackson said.
“We are the first online operator to achieve structural profitability, and the strong ramp in EBITDA during 2023 will continue into 2024 and beyond, as our profit margins expand materially.”
In the UK & Ireland, Flutter generated an 11% increase in revenue, reaching £566m, with a 6% growth in sports revenue driven by increased Betbuilder adoption.
Revenue decline in Australia
However, in Australia, revenue declined by 18% year-on-year to £262m.
Flutter noted that the competitive racing market challenges that were prevalent in Q2 extended into Q3, leading to a 7% sequential decline in sportsbook revenue.
Furthermore, the subdued racing market is projected to continue into 2024, potentially causing an estimated mid-single-digit decline in the Australian market overall during that year.
Additionally, the market is witnessing increased regulatory scrutiny, including a prohibition on credit card deposits.
As a result of these developments, Flutter expressed concerns about its capacity to mitigate the effects of the previously announced Victoria point of consumption tax hike, set to take effect in July 2024, in the near term.
Nonetheless, Jackson stated: “While market conditions in Australian racing remain challenging, as the clear market leader with a player base 1.8 times that in 2019, we are confident that Sportsbet is the best positioned brand in the market.”
Mixed results for the international division
In its International division, revenue grew by 16% to £539m, mainly due to Flutter’s acquisition of Sisal and strong organic growth in the business.
However, on a pro forma basis, sports revenue was 7% lower due to customer-friendly sports results.
Gaming growth of 9% was primarily driven by strong performance in India (+52%) and Turkey (+192%).
In Italy, revenue was 4% lower due to a higher mix of sportsbook revenue and tougher comparatives from heightened player engagement in the prior year.
2023 full-year guidance
For full-year 2023, Flutter anticipates that adjusted EBITDA, excluding the US, will reach approximately £1.44bn, falling at the lower end of its previously stated range of £1.44bn to £1.6bn.
Flutter said this projection takes into account factors such as customer-friendly sports results in Q3 and adverse movements in foreign exchange rates.
For the US business, revenue is forecasted to be £3.75bn, aligning with the mid-range of the earlier guidance, which was set at $3.6bn to £3.bn.
Adjusted EBITDA is expected to amount to £140m, once again falling within the midpoint of the previously stated £90m to £190m range.
BetMakers Technology Group grew its revenue 9.3% to A$26.1m in Q1 of the financial year 2024 (three months ended 30 September 2023).
Following that growth, the group reported a narrowed EBITDA loss of A$767,000 for the quarter, down from a A$6.5m loss in the prior-year comparative period.
The business still declared a net loss of A$7.6m, however, compared to a A$5.9m net loss in Q1 FY23.
BetMakers ended the quarter with a cash balance of A$36.2m, including unrestricted cash of A$22.5m.
The company’s management team is now working towards maintaining an unrestricted cash balance of at least A$20m, it said.
US restructure completes
In addition to its improving financial situation, BetMakers also announced it had completed a restructure of its US operations, intended to streamline the business and reduce costs, thus providing it with “a strong footing to build further scale in the US in a profitable way.”
Now, the company is focused on continuing to reduce costs throughout the rest of the financial year, which it expects will help bring it towards a cashflow breakeven point.
“The team has done a great job in simplifying our operating model and sharpening our focus over the past six months,” said BetMakers CEO Jake Henson (pictured).
“With our suite of market-leading technology for the racing and wagering industries, the company is focused on growing our reach as a B2B operator on a scalable cost base.
“There will be a continued focus on reducing and normalising the cost base, and we expect to achieve stronger underlying cash receipts in Q2 due to, among others, the commencement of a new racing season and the onboarding of new clients.”
In addition to the above developments, the company also extended contracts for the provision of its pricing software and data delivery services with several of its key partners during the quarter, including Penn Entertainment, Dabble, PointsBet and William Hill/888.
It also continues to develop its NextGen platform, “that will underpin how it services its digital customers globally into the future,” it said.
“Refinement and customisation continues on this platform which will be a transformational year for BetMakers digital customers in the US, Australia, Asia and Ireland.”
The NextGen platform recently passed a successful load test of 10,000 bets taken per minute, while successfully processing and resulting more than 200,000 bets in production over a three-minute period.
Other business updates during the quarter included an agreement with Caesars Entertainment, which saw the operator embed BetMakers’ tote solution for point-of-sale wagering in Nevada.
The solution is now entering its final stages of testing and both parties are pushing to go live before the end of calendar year 2023, BetMakers said.
In addition, a new national tote system for Norway, implemented through state-owned operator Norsk Rikstoto, is on schedule to go live during Q1 of calendar 2024, marking the beginning of a 10-year service agreement.
PointsBet is on track to reach an EBITDA breakeven point around April 2024, according to the company’s Q1 FY24 interim report.
The company’s continuing operations – now consisting of the PointsBet brand in Australia and Canada – handled A$611m in bets during the three months ended 30 September, amid a year-on-year reduction in handle of 3.5%.
From that, the business declared a gross win of A$75.3m, up 0.9%, as the result of a higher gross win margin compared to the prior-year period (12.3% compared to 11.8%).
Sports betting net win, meanwhile, came in at a margin of 9%, up from just 7.6% in Q1 FY23, delivering A$55.1m to the business in total, up 14.8% year-on-year.
iGaming delivered a further A$3m in net win, up 130.8% year-on-year, to generate total net win of A$58.2m during the quarter.
Of the total net win, A$52.8m or 90.7% came from sports betting in Australia, up 11.2% year-on-year.
The remaining A$5.4m came from Canada, amid year-on-year growth of more than 200%.
A$2.3m came from sports betting in Canada, compared to just A$0.4m in the prior-year, while the remaining A$3m came from iGaming, compared to A$1.3m in Q1 FY23.
The sports betting net win margin in Canada remained very low at 5.3%, but marked a significant improvement on the 2.1% recorded during the same period last year.
PointsBet’s sale of its US business to Fanatics underwent initial completion on 31 August this year, and the business received its first installment of consideration worth $175m.
The subsequent completion and receipt of further consideration of $50m is on track for completion during Q3 of FY24.
This development has helped turn around PointsBet’s balance sheet significantly, leaving the company with A$71.8m in cash and cash equivalents as of the end of the latest quarter.
The best question on this quarter’s earnings call came from Chris Savage of Bell Potter Securities, who asked whether PointsBet’s performance in Canada had been better or worse than the company had hoped.
“In general, it’s definitely going better – we’re clearly on a path to profitability,” said PointsBet CEO Sam Swanell in response.
“We completed ‘year one’ in FY23, and that was the largest investment year. This year, in FY24, we increased revenue and reduced losses, and in FY25 we want Canada to be profitable.
“When we talked about the US as a whole, we never got that definitive about the path to profitability.
“That’s facilitated [in Canada] by the fact that the operating environment is more favourable from a gross profit margin and the path to profitability, but it’s also on the back of the fact that we’re very pleased with the progress that we’re making.
“So now it’s on track. Obviously, this is the big quarter for Canada, you have the NBA and NHL joining the NFL, so this is the biggest quarter and the next one is not far behind.
“We’ve talked about some improvements that we’re going to bring to the iGaming product as well, so we’re on track and really excited for the next two quarters.”
Current trading and outlook
PointsBet said it expects total net win for the financial year 2024 to be 10-20% higher than in FY23.
It also expected a gross profit margin of around 50%, while marketing expenses are expected to be 15-20% lower than in the prior year.
Normalised operating expenses are expected to fall between A$60m and A$70m, helping the business move towards an EBITDA breakeven point from April 2024.
With continued growth in Australia and Canada, combined with the strength of its proprietary technology, PointsBet said it now has a clear path to profitability in FY25, while the company remains well capitalised following the sale of its US business.
Tabcorp has reported a 6.1% decline in revenue for the three-month period between 1 July 2023 and 30 September 2023.
The figures were published as part of a trading update released today (12 October) and cover the operator’s Q1 2024 financial quarter.
The announcement was authorised for release by the Tabcorp board, which said the figures should be contextualised against the backdrop of a “softer” macro-economic environment.
Wagering and media revenue fell by 5.4% following a 0.9% decline in wagering turnover, reflecting the adverse impact of lower fixed odds yields due to sporting results.
There was modest 1% growth in digital wagering turnover during the period, but that was not enough to offset a 3.9% drop in digital wagering revenue.
The operator has released 13 updates to its TAB mobile app since it launched last spring.
Elsewhere, gaming services revenue slumped by 12.7%, which the operator attributed to the A$62m sale of its eBet loyalty systems business, which completed in February 2023. A lower number of contracted electronic gaming machines (EGMs) was cited as another reason for the decline.
Tabcorp MD and CEO Adam Rytenskild said: “Given the softer trading environment, I’m pleased we grew digital wagering turnover, which highlights that customers are responding to our new digital customer offering.
“We continue to be relentless in the way we execute our TAB25 strategy and remain focused on making the right decisions for the long-term success of the business.”
Trading conditions are expected to improve the ASX-listed wagering giant as the Spring Carnival approaches, with the new NBA season also set to begin.
“We’re in the midst of implementing significant change as a company and industry,” said Rytenskild.
“Our strategy is on track as level playing field and licence reforms commence, our customer reputation grows, and cost base reduces,” he added.
Tabcorp has set a target to achieve a 30% share of Australia’s online betting market as part of its TAB25 strategy, alongside cost savings of between A$80m and A$100m.
Tabcorp’s share price fell by 6% following the trading update.
The Star Entertainment Group intends to raise up to A$1.2bn through a blend of equity and debt measures to address existing debt concerns and enhance its financial position.
The beleaguered Australian casino operator has launched a A$750m equity fundraising initiative, offering shares at A$0.60 each through investment bank Barrenjoey Markets Pty.
This initiative comprises a 1-for-1.65 entitlement offer targeting existing retail shareholders, expected to generate around A$589m, along with a placement of shares valued at approximately A$161m, primarily aimed at institutional investors.
Simultaneously, the company has unveiled a comprehensive four-year debt package totalling A$450m, underwritten by Barclays Bank PLC and Westpac Banking Corporation.
This package includes a A$150m revolving credit facility and a A$300m underwritten term loan.
Addressing financial challenges
The casino operator said its existing “debt structure is no longer fit for purpose” and it has explored various funding and asset sale alternatives.
The selected refinancing and capital initiatives aim to extend debt maturity, improve liquidity and provide the company with greater flexibility to navigate “a range of operational and regulatory uncertainties”.
Group CEO and MD Robbie Cooke said: “Today’s announcement is a key milestone in the renewal of The Star.
“With an optimised capital structure, strengthened balance sheet and enhanced flexibility, we have a strong platform from which to deliver on our renewal programme and strategic priorities.”
Star Entertainment has faced several regulatory challenges in recent years, including compliance shortcomings at its Sydney casino.
The New South Wales Independent Casino Commission imposed an indefinite suspension and a A$100m fine.
Ongoing investigations and civil penalty proceedings have added to the company’s regulatory woes.
In addition, a securities class action has been filed against The Star in the Supreme Court of Victoria, raising concerns about the adequacy of existing insurance.
The raise is expected to secure cash for future penalties with cases against the casino still pending.
Back in February, the company had already obtained A$800m using a comparable equity fundraising approach, which included a A$685m rights offering and an A$115m institutional placement.
Furthermore, despite the company’s efforts to cut costs by A$100m and reduce its workforce by 500 jobs, a substantial turnaround in its financial situation has so far remained elusive.
Over the past six months, the group’s share price has seen a significant decline of 58%, with a nearly 70% decrease over 12 months.
The company has temporarily suspended the trading of its shares until 27 September.
The Australian Communications and Media Authority (ACMA) has requested that five unlicensed gambling operators be blocked by internet service providers.
The five online gambling sites – Viperspin, Just Casino, Betandplay, Play Fina and Comic Play Casino – were found to be in breach of the country’s 2001 Interactive Gambling Act.
All of the casinos are also unreachable from the UK due to location blocks, except for Comic Play Casino. Several of the sites in breach offer online gambling with cryptocurrencies.
Comic Play Casino offers Bitcoin, Litecoin and Ethereum as payment options, for example.
Online casino is not a regulated gambling vertical in Australia.
Since the ACMA made its first blocking request, 835 illegal gambling and affiliate websites have been blocked, while 215 illegal services have pulled out of the Australian market since the regulator started enforcing new offshore gambling rules in 2017.
Website blocking is one of a range of enforcement options used by ACMA to protect Australians against offshore online gambling.
Action is usually taken when a website is providing prohibited interactive gambling services to customers in Australia, such as online casino, or when gambling services are not protected by domestic laws.
Many of the sites prohibited by ACMA are licensed in Curaçao.
Earlier this year, the authority reached out to Curaçao finance minister Javier Silvania in an effort to prevent the island’s licensed operators from targeting Australian players.
Australia is set to rubber stamp a ban on online wagering with credit cards as the country’s Albanese Labor Government looks to further reduce the risk of gambling-related harm.
The ban, which was originally announced in April, looks set to be made official in parliament today (13 September) as part of The Interactive Gambling Amendment (Credit and Other Measures) Bill 2023.
Crucially, the bill will expand the remit of the Australian Communications and Media Authority (ACMA).
The regulator will now be awarded the power to fine operators in breach of the new guidelines for an amount up to A$234,750.
Once the legislation is approved, there will be a six-month grace period for the new credit card laws as gambling companies and their customers get accustomed to the transition.
Australia’s regulated gambling industry has largely come out in support of the ban. The UK outlawed gambling with credit cards in April 2020.
“It’s as simple as this: people should not be betting with money they do not have,” said Minister for Communications Michelle Rowland.
“The Australian government remains committed to protecting Australians from gambling harms.
“Legislating a ban on the use of credit cards for online gambling will help to protect vulnerable Australians and their loved ones,” she added.
Australia has the highest annual gambling losses per person in the world at around A$1,300 per adult, totalling more than A$25bn according to the Australian Financial Review.
The Australian government – led by Prime Minister Anthony Albanese – has introduced several gambling-related restrictions since taking charge in May 2022, including through implementing measures under the National Consumer Protection Framework.
These include the introduction of monthly activity statements to outline wins and losses and new evidence-based taglines to replace ‘Gamble Responsibly’.
Nationally consistent safer gambling training for staff working at online operators has also been introduced, while the BetStop self-exclusion register has also been launched.
Further regulation is coming, including mandatory customer pre-verification, where an operator must verify a user’s identity before allowing them to place a bet.
Future measures are expected to be revealed once the government has considered the recommendations outlined by a parliamentary inquiry into online gambling, with a meeting of state, territory and Commonwealth ministers to be held before the end of the year.
“You can’t use your credit card to place a bet for land-based gambling and the same rules should apply for online gambling too,” said Minister for Social Services Amanda Rishworth.
“We’re serious about protecting vulnerable Australians from the harm we know online gambling can cause. Any platform breaching the new rules will face penalties.
“We know minimising the harm caused by online gambling is not a set and forget exercise and I look forward to working with my state and territory counterparts on what comes next to continue this positive change,” she added.
Australian betting operator Tabcorp has been fined A$1m by the Victorian Gambling and Casino Control Commission (VGCCC).
The fine was issued due to Tabcorp’s failure to comply with two directions issued by the regulator during an investigation into the business.
The investigation related to a major outage of Tabcorp’s wagering and betting system (WBS), which was unavailable for a period of around 36 hours during the 2020 Spring Racing Carnival.
The size of the fine, which the regulator pointed out was the largest it had ever issued to Tabcorp, reflected the operator’s repeated failure to comply with orders to provide information about the outage.
Failure to comply
Tabcorp was issued with a first written direction in July 2021, by the VGCCC’s predecessor, the Victorian Commission for Gambling and Liquor Regulation.
The direction ordered the operator “to procure the conduct of an independent expert assessment of the suitability of Tabcorp’s business continuity and disaster recovery infrastructure and processes for the wagering and betting system.”
The operator then provided a report prepared by Deloitte which it claimed complied with the direction, but which the regulator did not accept as it was considered to be incomplete.
In December 2021, the regulator issued a second direction to Tabcorp, ordering it again “to procure an independent due diligence assessment of the Disaster Recovery (DR) capabilities associated with the Wagering and Betting System operated by Tabcorp.”
It offered an extended deadline of May 2022 for Tabcorp to provide the assessment, but the report was not submitted until several months later on 27 September 2022.
Tabcorp was therefore deemed to have failed to comply with both directions issued by the regulator, which is the main reason behind the issuance of a A$1m fine.
“We will not tolerate licensees that are not forthcoming and cooperative when the Commission investigates,” said VGCCC chair Fran Thorn (pictured).
“The Commission had to use its compulsory powers and issue directions because Tabcorp did not provide the information we required about the business continuity and disaster recovery capability of its systems.
“All entities we regulate – no matter how big or small – have an obligation to be open and honest with the Commission and responsive to its lawfully issued directions. We will not tolerate attempts to frustrate our investigations.”