PointsBet Holdings Limited (PBH) Earnings Call Transcript & Summary

Thank you for standing by. And welcome to the PointsBet Holdings Limited FY '22 Financial Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Sam Swanell, Group CEO. Please go ahead.

Good morning. Thank you for joining this call for the PointsBet Holdings Limited Full Year 2022 results. This is Sam Swanell, Group CEO, and I'm joined today by Group CFO, Andrew Mellor; our U.S. CEO, Johnny Aitken; and our Canadian CEO, Scott Vanderwel. Today, we will talk through our investor presentation, which was lodged with the ASX this morning, together with our full year financial report. All figures in this presentation are in Australian dollars, unless otherwise stated. We will refer to the 12 months to 30 June 2022 as the reporting period, with the 12 months to 30 June 2021. During the reporting period, we saw improvements in relation to many of our core financial metrics compared to the Pennsylvania, and iGaming operations in the states of New Jersey, West Virginia, Pennsylvania. Also have online Sportsbook and iGaming operations in Ontario, Canada. We've continued to scale our operations through key hires across all departments with a focus on delivering on our product and technology-led strategy. In the U.S., we were thrilled to report that sports wagering and iGaming net win increased by 122% to $93.9 million. In Australia, the trading business achieved year-on-year net revenue growth of 30% and its third year of annual EBITDA positivity. This strong performance demonstrates PointsBet's capability to grow market share in an advanced market where we compete successfully against global groups such as Flutter, Entain and Bet365. In Canada, we completed our first full quarter of operations in Ontario. Total net win came in at $200,000 with iGaming net win of $700,000, offsetting sports net win loss of $500,000 with our Casino offering live from day 1. Following the completion of the successful capital raise in August 2021, raising $400 million and a strategic placement of $94.2 million to SIG Sports investment called in June 2022. The company is adequately funded to execute our strategy in the near-term with a cash balance at 30 June 2022 of $472 million. Further, as we look to capitalize on the substantive opportunity in North America, the deferred bonus equity option instrument announced in June 2022, also provides the company with the flexibility to access additional capital as needed. Turning to Slide 6 and 7. From a market access perspective, in September 2021, we announced an exclusive agreement with the Austin FC of Major League Soccer, gaining market access in the state of Texas, subject to the passing of the labeling legislation and licensure. Texas has a growing population of over 29 million people. In November 21, we were pleased to be recommended by New York State Gaming Commission as one of only 9 operators to operate mobile sports wagering in New York launching our Sportsbook operation in January 2022. In that same month, PointsBet became the first sportsbook to offer live in-play, Same Game Parlay options for NFL and NBA contests as part of Hispanic proprietary technology integration, which we refer to as OddsFactory. Johnny Aitken will speak more to our in-play progress later. PointsBet also had a successful 2022 Super Bowl, becoming the first ever sports betting operator to integrate into Super Bowl programming via our partnership with NBC, including pregame segments and NBC ticker integration with viewerships in the tens of millions. Underpinning our operational success was PointsBet's in-house technology, which again continued its impressive record of successfully managing peak days without incident. In April, we were thrilled to be honored by regaining review as a top sports betting operator at the EGR North America Awards for the second consecutive year. We're also pleased that in both April and August 2022, our U.S. app was ranked in the top 3 in the Eilers & Krejcik’s App-by-App testing, with testing group commending PointsBet for in-app speed and a diverse feature set. This recognition is a testament to the continued investment we make in our technology and products. In June, we announced a strategic investment in partnership with SIG Sports Investment Corp, a member of the Susquehanna Group. As part of this partnership, PointsBet's European technology subsidiary entered into an agreement with Nellie Analytics Limited. A member of the SIG Sports Group based in Dublin. Nellie has built cutting-edge quantitative models and technology to trade and make markets for sports betting using trading acumen, advanced statistical forecasting models and quantitative research. These models and technology currently allow Nellie to trade successfully on sports betting exchanges around the world. Nellie applies to sport the same quantitative approach that drives Susquehanna's success in the financial markets. Now we can accelerate our focus on sharper in-play pricing, which will ultimately translate into a better in-play customer experience. With more confidence in our pricing, we can give customers differentiation and value and price, take bigger bets via increased wagering limits, while maintaining an efficient and profitable business model. Excellence in technology, user experience and trading is at the forefront of everything we do at PointsBet. Turning briefly to Slide 8. As previously disclosed in our quarterly activity reports, the global trading businesses delivered a net win of $309.4 million, representing growth of 48% for the reporting period as compared to the PCP. I will now hand over to Andrew Mellor to walk through our financial results.

Thank you, Sam. Now turning to Slide 10. I will speak to our normalized results. However, please note, there is a summary of our statutory results on Slide 34 and a reconciliation of the normalized results to the statutory results included in the review of operations and on Slide 35 of this presentation. The group's net win for the reporting period was $309.4 million. Net revenue is then calculated post adjustments being made for GST paid in Australia, B2B revenue from PointsBet Europe and PointsBet U.S., revenue earned by our U.S. racing ADW business and other fair value adjustments. For the reporting period, PointsBet reported net revenue of $296.5 million a growth of 52% versus the PCP. There is a reconciliation of net win to net revenue on Slide 36 of this presentation. Group gross profit of $121.6 million represented growth of 39% over the PCP. Group gross profit margin for the reporting period was 41%, slightly lower than the gross profit margin of 45% were achieved for the PCP. This was mainly due to a lower gross profit margin in the Australian trading business versus the PCP due to increases in some taxes and product fees, including an increase in the point of consumption tax in the state of Victoria from the first of July '21. As well as changes in product mix with the reporting period having a high contribution of revenue from betting events, which attract higher product fees. Note that the H2 FY '22 group gross profit margin was an improvement on H1. And pleasingly, the U.S. business gross profit margin during the reporting period increased as compared to the PCP. Recently, in Australia, both the Queensland and New South Wales governments announced increases to the point of consumption tax. We estimate that this will cost the Australian trading business circa $10 million in FY '23 prior to any remedial strategies we implement. The business is well placed to navigate these regulatory challenges, particularly with the recent appointment of Andrew Catterall as Australian CEO and a laser-focused management team determined to deliver ongoing operational efficiencies. We currently anticipate a gain being EBITDA positive for the coming full year in Australia. As previously disclosed in our quarterly activities report, group sales and marketing expense was $236.8 million for the reporting period with Australia accounting for $61.5 million the U.S. accounting for $162.6 million, being USD 118 million; and Canada accounting for $12.8 million, being CAD 11.7 million. Noting CAD 4.7 million was spent in prelaunch marketing in Q3 FY '22. This increased marketing investment assisted in the delivery of over 513,000 group Cash Active Clients as at the 30th of January '22. The reporting period saw aggressive marketing spend from our U.S. competitors. However, we maintained our discipline and ROI-focused approach to marketing and promotional spend. Full competitive marketing and promotion aggression in the U.S. will lead to greater share of voice for PointsBet's continued disciplined marketing investment and provide greater client exposure to our ever-improving market-leading product and service offering. In NBC, we have a supportive media partner and major shareholder, and we continue to work together to maximize U.S. marketing spend efficiencies. Looking towards FY '23, we anticipate the U.S. marketing expense will be no greater than the FY '22 U.S. marketing expense as we continue to regionalize our marketing expense and reduce spend in some of the less targeted acquisition channels. In Australia, we were thrilled to announce that following the successful Shaquille O'Neal marketing campaign in FY '22, we have signed Shaq for a further 2 years. We were very excited to have hosted Shaq in Sydney for the launch of a new campaign last weekend. In Australia, we anticipate FY '23 marketing expense to be slightly higher than FY '22. And in Canada, we anticipate the FY '23 marketing expense would run annually at a quarterly rate similar to the Q4 market expense of CAD 7 million. Employee benefits expense increased over the reporting period. Global FTEs as of the 30th of June 22, grew to 627, up 50% from 30 June '21. In addition, we also used the services of third-party service providers. As we are beginning to reach scale, we expect FTEs to grow only moderately in FY '23, with the majority of the additional staff adding to product and technology. However, we will see an increase in the employee benefits expense in FY '23 compared to FY '22, given the total expense in FY '23 will reflect the annualized employment of those hired throughout FY '22. Product and technology expenses increased versus the PCP as the company launched operations in West Virginia and Virginia in H1 and in Ontario, New York and Pennsylvania during H2. As a result, by the end of the reporting period, the company was operational in Australia, 10 U.S. states and Ontario. This led to increased betting volumes and activities and increased costs associated with hosting, operating and securing our technology and data platforms. This reflects a level of variability in this expense item. As the states launched in the reporting period behind the operation for part of FY '22, and we anticipate launching an additional 4 U.S. jurisdictions in FY '23, we would expect that the product and technology costs in FY '23 would increase compared to the reporting period. Finally, as it relates to administration and other expenses, we would expect to see only a moderate increase in FY '23 compared to FY '22, noting these expenses had increased 45% in FY '22 compared to FY '21. The normalized EBITDA loss was $243.6 million for the reporting period. As always, we will continue to take a disciplined and focused approach to cost management and always remain nimble and able to make relevant adjustments to expenditure where we determine it to be appropriate. Turning to Slide 11. Speak to our business segments. Further details can be seen in Note 5 of our consolidated financial statements. On a statutory basis, the Australian Trading Business segment recorded net revenue of $195.2 million, an increase of 30% versus the PCP and a positive EBITDA of $7.7 million in the reporting period compared to the EBITDA of $9.2 million in the PCP. The Australian Trading EBITDA was lower year-on-year due to lower gross profit margins as previously spoken to and an increase of marketing expense of circa $10 million versus the PCP. As communicated at the quarterly update in January, the company's FY '22 marketing strategy was to front-end the marketing expense significantly into H1 to take advantage of the Shaquille O'Neal campaign through the football finals and Spring Racing Carnival. The H1 FY '22 marketing expense of $44.7 million was reduced to $16.8 million for H2 FY '22. Turning to the U.S. On a statutory basis, the U.S. Trading segment recorded net revenue of $98.7 million and an EBITDA loss of $197.4 million in the reporting period. This loss was primarily driven by the U.S. marketing expense of USD 118 million as we expanded operations across 10 U.S. states and as we continue to grow our U.S.-based execution team during FY '22. The Technology segment derives its revenue from licensing fees charged to the Australian, U.S. and Canadian Trading businesses as well as from European B2B operations. The Technology segment recorded intersegment revenue of $26 million in the reporting period as can be seen in Note 5 to the financial accounts. Please note this revenue is eliminated in the company's consolidated financial statements. In addition, during the reporting period, the Technology segment reported B2B revenues of $2.4 million derived from PointsBet Europe. On a statutory basis, EBITDA for the Technology segment for the reporting period was a loss of $19 million compared to the PCP loss of $9.6 million. Corporate administrative costs are costs that cannot be readily allocated to individual operating segments. Statutory EBITDA for the Corporate segment for the reporting period was a loss of $25.6 million compared to a PCP loss of $12.4 million, due mainly to an increase in employment benefits as a result of increased headcount of support staff, increase in listed company related costs including share registering and stock exchange costs resulting from capital raising transactions that occurred in FY '22 and an increase in external consultant and legal costs from capital raisings and corporate transactions. Start-up costs before Canada became operational are also included in the Corporate segment up to the end of H1 FY '22. The total group's statutory EBITDA loss was $250 million for the reporting period. After accounting for net finance costs of $3 million, net foreign exchange gains of $14.1 million, depreciation and amortization expense of $31.4 million and an income tax benefit of $2.6 million. The statutory loss for the reporting period was $267.7 million. Turning to Slide 12. The balance sheet was strengthened over the reporting period with the group having net assets of $736.4 million as at the 30th of June 22. Net asset movements as compared to 30 June '21 are driven primarily by cash received upon completion of the $400 million capital raise in August '21 and $94 million capital raise from SIG Sports in June '22. Secondly, intangible assets increased from $142.5 million to $212.5 million as a result of the investment in U.S. licenses and market access fees including a USD 25 million payment to the New York Gaming Commission for market access to the State of New York and the USD 11 million payment to the Pennsylvania Gaming Control Board for market access to the State of Pennsylvania. Thirdly, continued investment in our betting platform through the capitalization of product and technology employee costs and other related development costs. And finally, an increase in trade and other payables as the operational size of the business continues to grow in both Australia and North America. The prepayment balance at the 30th of June 22 includes both cash prepayments and equity prepayments related to our NBC agreements. These prepayments represent future offsets to the total marketing commitment under that partnership. Please reference the Note 12 to the financial statements for more detail on NBC prepayment movements over the reporting period. Noting these are reported in Australian dollars. To convert to U.S. dollars, please utilize the relevant end of reporting period FX rate. Liabilities include a financial noncurrent liability relating to the fair value of the debt component of the share options issued as part of the NBC transaction. The $79.7 million includes the notional interest charge and fair value change on the financial liability for the year. Other liabilities included an amount received as part of the New York license fee reimbursement from the Resorts World Bet, a subsidiary of Genting Group, as part of our B2B platform provider agreement to power the Genting Group online sportsbook operation in the State of New York. This amount will be recorded as revenue on a straight-line basis over the life of the agreement. As previously noted, this strategic B2B agreement should be viewed as an accretive and valuable partnership for the company, but not indicative of a larger B2B strategy of PointsBet. Turning to FY '23 and the company's capitalized betting platform development costs. We currently expect these capitalized costs to increase compared to FY '22 as a result of the annualization impact on FY '23 of technology and product employees hired during FY '22 as well as some additional hires in FY '23. While we do anticipate some market access payments in FY '23 in relation to the next 4 states we plan to launch. We expect these to be a relatively small amount compared to those payments made for market access and licensure in the reporting period. Turning to Slide 13. I will briefly touch on the cash flows as these have been previously disclosed and detailed as part of our quarterly 4C reporting obligations in October 21, January [indiscernible]. In summary, net cash flow used in operating activities, excluding the movements in player cash accounts in the reporting period was $212.8 million. Net cash outflows from investing activities was $93.2 million and net cash inflow from financing activities was $515.3 million. The company held $472.7 million in corporate cash as of the first of June 22 and has no corporate debt. I will now provide an overview of the Australian Trading Business. Turning to Slides 15 and 16. The Australian Trading Business continued its strong performance, ending the reporting period to turnover of $2.5 billion, up 28% compared to PCP and net win of $215.4 million, up 30% from the PCP. Gross win margin and net win margin were 13.3% and 8.5%, respectively, for the reporting period. Given the growing scale of the Australian Trading Business, during H2, we established a dedicated technology and product structure to focus on-Australian-led initiatives as we continue to improve our Australian product offering. As previously communicated, the Q3 and Q4 results, H2 marketing expense was significantly lower than H1 as a focus turn to profitability for the remainder of the financial year. As a result of this strategy, the Australian Trading Business' full year marketing expense was $61.5 million, which assisted in delivering 12-month rolling Cash Actives to the 30th of June of $239,000, an increase of 22% compared to PCP. I'd like to now hand over to Johnny Aitken, our U.S. CEO, to run through highlights for the United States.

Thank you, Andy. Now turning to Slide 18. For the reporting period, the U.S. business achieved a sports betting gross win of $158.7 million at a gross win margin of 6.5%. And with the sports betting net win of $74.1 million at a net win margin of 3.0%. In addition, the U.S. business achieved iGaming net win of $19.7 million, this delivered an overall U.S. net win of $93.9 million for the reporting period, more than double that reported in FY '21. As a reminder, our focus in the U.S. is to ensure every client we acquire is capable of being net revenue generating. Rather than focusing on the sheer number of actives, our teams are focused on targeting, procuring and retaining the genuine customers that generate acceptable lifetime value. The improvement in net margin from the PCP is evidence of this approach. We noted in previous calls that there was an opportunity to better utilize our tactical promotions. A number of optimizations are made during the reporting period, refining our approach with a focus on rewarding our high-value, engaged super user client cohort and gaining an improved share of wallet from them. Now turning to Slide 19. For the reporting period, our marketing expenses were USD 118 million. And as previously reported, overall U.S. working media cost per FCB was under USD 500 for the reporting period. Cash Actives for the 12 months to 30 June 2022 grew to $266,000, up 67% compared to the PCP. It should be noted that this metric also reflects our retention efforts, not just acquisition volumes. PointsBet blended U.S. online handle market share in the states we are operational consolidated to 3.7% for Q4 FY '22 compared to 3.6% in Q3 FY '22. This updated blended share of 3.7% included the June handle numbers for Illinois, Colorado and Virginia that weren't yet released when we reported the blended market share number of 3.5% at the Q4 result last month. While we are pleased with the continued growth in Actives and Handle, our #1 priority is focused on delivering a world-class betting experience, which will manifest in continued net win growth. As of today, in the U.S., we have live online sportsbook operations in 10 U.S. states and our gaming in 4 U.S. states. And as announced earlier this week, we anticipate going live in Kansas this Thursday, the first of September. And 4 priority state rollouts being Louisiana, Ohio, Maryland and Kansas. With the last 3, we expect to be hard launching on the starting line. This would mean we currently anticipate finishing financial year 2023 being live in 14 U.S. states. PointsBet's total addressable market continues to grow. The trading results of the individual states for the full year can be seen on Slide 37. As we head into FY '23, it is an appropriate time to amend our reporting procedures and shift away from reporting U.S. state-by-state trading metrics. Our strategy into FY '23 will continue to evolve. In some states, we will take a localized operational approach; whereas in other states, we will take a regionalized, multistate operational approach, which as a result, will not always allow to a specific state trading performance metric. Operationally, this is the way we view the U.S. business and it is also the way in which our U.S. peers report. As a result, this will be the last reporting period in which we will provide a state-by-state breakdown of the key trading metrics. Noting many U.S. state gaming regulators provide detailed monthly performance data for their respective U.S. states. The avoidance of doubt, we will continue to report state-by-state market shares. Turning to Slide 20. The NBC and PointsBet partnership will shortly complete its second full year, delivering opportunities that broke new ground in many ways. NBC's wide portfolio of sports media rights allowed PointsBet to advertise locally, in and around the top leagues and moments in American sports, including, but not limited to the NFL, the NBA and the 2022 Olympic Games in Beijing. We also provided both seasoned betters and newcomers with contextual logs integration throughout the NFL, NBA, MLB and NHL seasons that highlighted our wide variety of betting markets with a keen focus on NBC RSN viewers. Our highlights from recent months were the bet costs that appeared across NBC Sports, [ GO regional Networks ] in Chicago, Philadelphia and Washington. Together with NBC, we developed 4 iterations that highlighted various markets, both pregame and live, sign-up offers and on-site promos with live updates throughout the entire game. Our NBC plan was rounded out with investment across NBCs and our digital properties, including their fast-growing streaming platform, Peacock. This combination of regional assets continues to provide PointsBet with the ability to create bespoke or marketing strategies to reach our target audience. And we will remain, I should say, a core focus of PointsBet in the next year iteration of the NBC plan. PointsBet has also continued to partner with Effectv Comcast’s audience-focused solution for Linear TV. Data-led media plans reached potential points of their customers in 8 states with a focus on custom-build creative for the Comcast audience that kickstarts to sign-up journey via a user's voice-activated remote. Turning to Slide 23. Our mission to create the best in-play betting experience for our customers continues to progress in a positive direction with in-play expected to represent 75% of all bets in the U.S. within the next 3 years. OddsFactory is our proprietary trading platform, which houses our pricing algorithms. Owning the platform and the experience of the sports allows us to curate an experience around what our customer wants. OddsFactory is a modern cloud-based technology, which allows us the ability to move faster than our competitors, who are either restricted by third-party providers or legacy technology that prevents the flexibility required to move fast. When we deliver our OddsFactory pricing algorithms to a particular sport, we unlock capabilities to deliver a full feature set to the customer, which includes a market-leading set of betting and player props including great breadth of offering and more accurate pricing. Same Game Parlay, both prematch and in-play, lightening bets, being the ability to bid on which team will score the next point and other similar micro-betting contingencies and cash out availability across all markets. Our strategy is to set the foundations in place by launching OddsFactory for the 6 core U.S. sports. To date, we have launched NFL, NBA, college basketball and MLB, with NHL during Q2 and [ college football ] during Q3 FY '23. Once OddsFactory launch for a sport, we will then continuously iterate on this experience to drive more player engagement and to delight our target customer. We are looking forward to the launch of the 2022, '23 NFL season next Thursday, the 8th of September. We finished last NFL season with a very strong in-play product and continue to be the only operator to offer in-place Same Game Parlays on all of our OddsFactory sports. Going into this NFL season, we will be building upon a strong foundation and will further enhance the overall user experience and specifically focused on our live-in bet experience. This will provide our customers a market-leading in-play experience, delighting them with our engaging and fast and easy product to use. Our NFL product is ready to go. I will now hand it across to Scott Vanderwel, our Canadian CEO.

Thank you, Johnny. Turning to Slide 26. We were pleased with the progress made in establishing and setting up a local operating jurisdiction in Canada in fiscal year '22. We are proud to be 1 of the first operators regulated by the Alcohol and Gaming Commission of Ontario, as it shows the confidence that regulators have in our ability to deliver an innovative, safe and responsible experience to Canadian consumers. The Canadian team has a mandate to compete in a very local manner, reflecting the competitive dynamics of Ontario and the permissive regulatory framework for [ game ] market repatriation. During the reporting period, our team has been scaling and focused on building partnerships with athletes, teams and organizations that matter to Canadians as we are focused on delivering an authentically Canadian gaming experience for Ontario sports fans. For full year '22, we were operational for the final quarter with the Ontario market opening on April 4. And as mentioned in our Q4 earnings call, we are pleased with the overall performance. Total Sportsbook handle was $16 million in the period, and total net win came in at $200,000, with iGaming net win of $700,000, offsetting Sportsbook net win loss of $500,000 and Cash Actives of $7,200. PointsBet is a new brand to Ontario. So we continue to focus on building awareness of who we are. Given the level of competitive intensity with 19 licensed sportsbook operators and other great market providers still in operation as of the end of June, our approach has been to stand out from the sea of seniors. Customers are seeing through advanced media and to engage with our target customers more directly through strategic partnerships with locally relevant sports teams and organizations. As we look ahead to full year '23, we are excited about the potential of our plan to deliver growth as we approach the busiest time in the North American sporting calendar for the first time. We'll be entering the first full season of our MLSE deal and expect to be able to drive significant top-of-funnel activity through those activations. We continue to invest in both our Sportsbook and Casino products and overall app experience, and we'll be bringing new and exciting markets to our customers throughout the year. Lastly, it should be noted that the Ontario market structure is well set up commercially for operators, not being tethered to a casino racetrack or retail footprint to operate, that is no partner revenue share agreements, a nominal licensing fee and an effective tax rate of 18% of GGR make the overall future economics favorable as our platform attains further scale. I will now hand back to Sam.

Thank you, Scotty. Before I conclude, I would like to comment on the group's continued commitment to responsible gambling. Responsible gambling initiatives will continue to remain central to our organization's ESG commitment, and we look forward to releasing our inaugural ESG report in the coming weeks. PointsBet continue to meet regulatory and community expectations in delivering a premium experience, which integrates responsible gambling. FY '23 will continue to emphasize into environmental collaboration to reinforce our safer play commitment. To highlight a couple of the key statistics we had during the reporting period, 126,000 global unit views of our responsible gambling page and 1,700 average global impressions per RSG social media postings. Country-specific strategies are in place to meet the unique needs of our global customers and engage with relevant responsible gambling bodies. In Australia, PointsBet contribute to the development of a national safer gambling media campaign with Responsible Wagering Australia, the independent peak body for Australian licensed wagering service providers. In the U.S., PointsBet partnered with the National Council on Problem Gambling on a research initiative which gathers feedback from regulators, industry stakeholders and safer gambling advocates to inform responsive gambling decision-making. In Canada, PointsBet developed a socially responsible campaign with brand ambassadors, the Trailer Park Boys, to promote gambling as a form of entertainment in our authentic Canadian way. Turning to Slide 30. It is clear that the North America -- sorry, it is clear that North America will deliver the vast majority of regulated global gaming growth over the next decade. We established ourselves as a global gaming operator, which has built material incumbency in both North America and Australia. We've now enhanced our product, scaled our team and possess the in-house technology and market access to successfully compete in North America. We have developed best-in-class partnerships, which will help accelerate our trajectory to take advantage of this enormous opportunity. As we have previously said, technology and products represent our right to win with the execution demands of the growing in-play opportunity, ultimately determining those that we simply partake and those who will thrive. Further, to complete its scale, operators will require operations in hard-to-access states such as New York, Illinois and Pennsylvania with PointsBet currently live in each of these key jurisdictions. Finally, we have built a best-in-class global team that understands what is required to deliver success in FY '23 and the years to come as the North American TAM continues to rapidly expand. That team was further enhanced today as we announced the appointment of Mr. Edward Hartman to the position of Group Chief Strategy Officer. I'm now happy to take questions.

[Operator Instructions] Your first question comes from Larry Gandler from Credit Suisse.

I guess with the release of the accounts, some of the new information was around the STIs and LTIs. So if I can ask around that. Sam, in the STIs, you had an objective of CPAs-to-LTV ratio, which wasn't achieved. I'm just wondering, I know you've talked to having better information going into F '23. How have you changed that objective? Whether it's still an objective? Is the objective changed? And how you're going to achieve that in F '23?

We'll certainly -- first of all, I suppose that we set ourselves some pretty demanding targets when we set our targets. So we definitely made progress in regards to that KPI, that ratio, but we just didn't need the standard that we set ourselves. I think, yes, you can take it as read that, that is a ratio that we want to see continued improvement. We've spent -- we've learned a lot over the last couple of years from our marketing. We were able to trial a lot of channels. And I think we've spoken pretty consistently about that ratio being sort of a critical step on that path to profitability. And we've seen improvement as we've improved our marketing execution and focused -- I suppose more on those higher-value clients. We're certainly seeing that CPA to client value ratio improving. So yes, we want to see it keep improving as we continue to refine our marketing execution in FY '23.

And as you look into the fourth quarter and recent time, do you feel you guys are on track or close to achieving the new objectives, that the momentum is there for that?

Yes, we do. We do. I mean we made a statement, obviously, just now, Larry, that we expect U.S. marketing to be no more than what it was in [ FY '22 ], when you [indiscernible] the fact that we will be expanding our TAM, that talks to a more targeted focused approach of marketing. And that -- we believe that, that will deliver that improving ratio.

Okay. Great. And last question for me is those other metrics, market share revenue and obviously, the in-play betting was achieved, but the ones regarding market share revenue. Are those also metrics for FY '23?

We'll report on that this time next year, Larry. I don't want to sort of disclose what our key criteria might be. But yes, I think the summary is, we're really proud of the year that we delivered. We've obviously, as we said, we've scaled our team. We've grown revenue dramatically. We've increased our TAM. We've formed strategic partnerships with the like of [indiscernible], but we do set ourselves high standards when it comes to those STIs.

The next question comes from Rohan Sundram from MST Financial.

Just 1 general question, maybe for Sam. Are you seeing any impacts to your customer base from the perceived consumer pressures, the macro environment? Or is it the case that the customer base is holding up really well. And has anything surprised you on this front at all?

We're not seeing any clear evidence. We've taken some of the commentary that's come from some of our competitors in North America where they've reported similarly that seems to be holding up pretty well. We take note of things like visitation to Las Vegas and visitation to regional casinos and a general thought process that if people are prepared to travel for entertainment, they're certainly prepared to pick up their phone and have a bet on the app for that entertainment. So no, I wouldn't say anything, but it is something that we're carefully continuing to monitor.

The next question is from Don Carducci from JPMorgan.

So first question is on Canada, and this is from Ontario, having just reported the first cut of OSB and iGaming results overnight. And given that there wasn't any market share breakdown or data split across OSBs or iGame, it does seem like it's been hard to make a good comparison. But I think the expectations were much higher than what came through for the total market size. Can you kind of comment on what you saw across either your Actives or engagement between OSB and iGaming and why that number was markedly lower than anticipated?

Yes. I think, obviously, they're just reported on the regulated environment. Don, as we know that there's a large gray market as opposed to the U.S. where there's still a substantial black market operating, but we know the gray market in Canada is far larger. And those operators, in the most part, intend to become licensed. So I think that, combined with the fact that the market launched heading into sort of the down part of seasonality, I think -- we've got to give Ontario the opportunity for those gray markets or raise to get licensed to go through a football season and see how quickly it can pick up. Now our expectations sort of similar to most market commentary in terms of the potential size of that market. And so we would expect to see it picking up aggressively over the next 6 to 12 months.

So given the population and then when you compete in New Jersey, Pennsylvania, Michigan, et cetera, is even still, I guess that Q2 sports betting and iGaming revenues were quite low, but you don't -- that doesn't change your perspective on that Ontario TAM. You still think it's quite large or any change to your expectations for the size?

No, no, that doesn't -- these results don't change our expectations. But again, we'll be watching closely, like everyone, well, over the next 6 to 12 months. Most of the Canadian population is close to the U.S. border. You'd expect that their sports betting seasonality would track pretty close to that of the U.S. So let's give them an opportunity to ramp up through the NFL season. I know from the PointsBet perspective, a lot of our partnerships and marketing initiatives are structured around the upcoming seasons. So yes, we're not ready to write off Ontario just yet.

Great. And then a question for -- based on a comment that Andy made, and that's around the $10 million impact that you expect on the Aussie business from the point of consumption tax changes. Can you talk about or maybe break down how much of this is due to the change for taxing generosities versus maybe going to a [ 20% ] point of consumption tax. And can you walk us through how you're thinking about the level of generosity as a percentage of turnover going forward?