Pointsbet Holdings Ltd

ASX:PBH

Earnings Call Transcript 2022-Q1

[Operator]

Thank you for standing by, and welcome to the PointsBet Holding Limited Q1 FY '22 Appendix 4C Investor Update. [Operator Instructions] I would now like to hand the conference over to Sam Swanell, Managing Director and Group CEO. Please go ahead.

[Samuel J. Swanell, Co]

Good morning, and thank you all for joining the PointsBet Holdings Limited Q1 FY '22 Business Update and Activities Report. This is Sam Swanell, CEO. I'm joined on the call today by our group CFO, Andrew Mellor; together with our U.S. CEO, Johnny Aitken; and U.S. Chief Commercial Officer, Eric Foote, joining us from our U.S. head office in Denver. Please note, all numbers referenced are unaudited and in Australian dollars, unless otherwise stated. Turning to Slide 4. Compared to the group results for Q1 FY '21 to be referred to as the PCP, in Q1 FY '22, turnover was up 42% at $979.9 million, sports betting gross win was up 66% at $117.7 million, and group net win was up 82% at $69.5 million. Now turning to Slide 5. Australian trading businesses Q1 marketing expense was $22.1 million, which assisted in delivering 12-month rolling cash active clients to 30 September 2021 of 222,662, an increase of 79% compared to the PCP. In the United States, U.S. marketing expense of USD 27.6 million assisted in delivering 12-month rolling cash active clients to 30 September 2021 of 185,880, a 367% increase on the PCP. We continue to have a constant focus on our cost per acquisition, and we're pleased that our working media CPA for first-time bettors across all operational U.S. states, except Illinois, which was an in-person registration environment, again, tracked below USD 500 for the quarter. It should be noted that a large portion of our U.S. marketing budget for the quarter is focused on audiences outside of our current 7 live states. As I stated previously, whether it be for states that are future imminent launches or more national brand awareness, we continue to focus on building a brand and a database to assist in future acquisition efficiency. Turning to Slide 6. The Australian trading business continued its outstanding performance, ending the quarter with turnover of $631.4 million, up 20% compared to PCP, and net win of $54.8 million, up 56% from the PCP. Gross win margin and net win margins were 13.9% and 8.7%, respectively, continuing the trend of strong quarterly margins. Compared to the PCP, the Australian trading business has seen improvement across a number of key KPIs. We achieved a record quarter for first-time bettors in Australia and significant gains in app download share with 10.1% of all wagering category app downloads, up from 6.8% in the PCP. We've seen continued growth in sports margin in Q1 as clients sports betting behavior trends towards higher-margin products. Multis and same-game multis now make up the majority of all gross or sport gross win. We're pleased to report that same race multi has now been released also. It is pleasing to report that our in-house proprietary system has been successfully processing record betting activity through September and October. Caulfield Cup and Everest Day on October 16 saw new peaks reached for scale indicators, such as bets per minute, concurrent active user sessions and settlements. I'm extremely pleased with the performance of the Australian trading business. This strong momentum has set us up very well, and we are prepared for a huge Melbourne Cup week beginning this Saturday with Derby Day, where we expect to see new betting activity records broken. MST estimate that Australia is now a $5.7 billion net win wagering market with circa 84% of this online. We see huge opportunity for innovation and acceleration similar to what we envision for the North American market.PointsBet has a role to play as a leader in this environment, and in line with this, we are creating the new role of Australian CEO, reporting to me as Group CEO, who once appointed, will be focused on ensuring we capitalize on these Australian opportunities. The improved focus on Australia will not come at the expense of PointsBet's North American plans in any way, but rather is the natural evolution for the Australian trading business given its strong position and its backing from the PointsBet Global Group. PointsBet sports and race betting is a fun and entertaining product, and an opportunity exists for PointsBet and the wider digital gaming industry to grow the TAM at the expense of competing gambling verticals, such as land-based gaming and lotteries. I will now hand over to U.S. CEO, Johnny Aitken, to provide commentary on our U.S. business.

[Johnny Aitken, Chief Executive Officer of US]

Thank you, Sam. I will now speak to Slides 7 and 8. The U.S. business achieved quarterly sports betting gross win of $29.2 million compared to a sports betting gross win of $9.8 million in the PCP, with a quarterly sports betting net win of $12.5 million compared to sports betting net win of $3.1 million for the PCP. Total net win generated from iGaming was $2.2 million. The U.S. business achieved a strong quarterly sports betting gross win margin of 8.4% and a quarterly sports betting net win margin of 3.6%. These results were driven by New Jersey with a net win margin of 7.9%, and Illinois with a net win margin of 4.3%. We continue to focus on improving the customer in-play betting experience, including expanding bet offerings, increased uptime and automated bet acceptance. We are very excited to be releasing our first major initiative following the acquisition of Banach Technology, now known as PointsBet Europe. NFL will be the first sport to receive this upgrade as we progress our road map towards delivering a market leading in-play product that's customized for the U.S. market end consumer. We expect over 75% of all U.S. sports betting will be in play in the coming years, and PointsBet's leading product will be critical in how we innovate with NBC and other media platforms for maximum effectiveness. Parlay is another area of focus within the U.S. market, with same game Parlay being a key driver of growing Parlay handle. As is highly evident, the customer acquisition and retention market, specifically as it relates to gratuities and promotions, such as bonuses and risk-free bets remains highly competitive, and this has had an impact on our market share. As we head into Q2 and beyond, while we still expect the environment to remain highly competitive, we continue to refine our approach as it relates to our client cohorts and seek to gain an improved share of wallet from them by leveraging both tactical promotions and ongoing product enhancements. The positive of the high level of marketing and promotion seen in the U.S. during the quarter means that U.S. bettors are quickly becoming educated on sports betting. As noted by analysts and operators, as bettors become more familiar with operating and betting accounts, the product experience will be the primary driver of long-term success. PointsBet has a feature-rich, reliable, secure and scalable product. However, we continue to invest in critical product areas such as in-play, Parlays and iGaming as we build the business for long-term sustainable success. Now turning to Slide 9. On the 13th of August 2021, PointsBet launched online sports betting operations in West Virginia. On the 16th of September 2021, PointsBet announced it entered into an exclusive agreement with Austin FC of the Major League Soccer. Appointing PointsBet as AFC's exclusive Sportsbook Partner. PointsBet has also executed a market access agreement with AFC's home stadium, which is operated by Austin Stadco LLC, an affiliate of AFC. Under the market access agreement contingent on enabling legislation, PointsBet is appointed the venue's exclusive partner for sports betting operations in Texas, a state with a larger population than the entirety of Australia. PointsBet is now operational in New Jersey, Iowa, Indiana, Illinois, Colorado, Michigan and West Virginia. We expect to launch an additional 11 U.S. jurisdictions over the next 14 months. Turning to Slide 10. Michigan saw the inaugural launch of PointsBet's iGaming product in May 2021, followed by New Jersey on the 23rd of July 2021. We anticipate launches in West Virginia, Ontario, Canada and Pennsylvania in the coming months. Whilst we are pleased to be operational with iGaming, we took the time to design and build our platform and launched with an MVP version of our offering to gauge performance, stability and player affinity. Importantly, we look forward to the continued product improvements we have in development as we move to the next phase of our iGaming offering, including a significantly enhanced games library, automated promotional functionality, personalized offerings and other innovations. We are particularly excited to launch our live dealer table solution, which will include live dealer Blackjack, live dealer roulette, live dealer Baccarat and live dealer Ultimate Texas Holdem. PointsBet has also secured exclusive use of several live dealer tables, which can be reserved for our high-value customers or for promotional activity. I'm looking forward to sharing with you our growth in this area in the coming periods. And finally, we are also pleased to announce that Kyle Christensen has been appointed as our U.S. Chief Marketing Officer. Prior to joining PointsBet, Kyle was the Head of U.S. Brand and Consumer Marketing for Facebook. And before joining Facebook, Kyle also held executive roles at National Geographic and Netflix. We couldn't be happier and excited to welcome Kyle to our team at this exciting stage of our journey, and I can't wait to see what we can all build together. I will now hand it across to U.S. Chief Commercial Officer, Eric Foote.

[Eric Foote, Chief Commercial Officer of US]

Thank you, Johnny. Turning to Slide 11. In August, PointsBet announced it had been selected by the NFL as 1 of 7 approved sports books operators, enabling PointsBet to advertise in and around live NFL games. This includes all NFL broadcast partners, including NBC, Fox, CBS, ESPN, the NFL Network and Amazon. Importantly, our NBC relationship has enabled PointsBet to receive a national, regional and local exposure through various NBC Sports exclusive content integrations and targeted spot media advertising inventory. This spans across NBC's national broadcast, regional sports networks in select DMAs, locally owned and operated stations, and Peacock, NBC's premier direct-to-consumer platform. Our exclusive Sunday Night Football pregame show segment, the PointsBet Pulse, has created a national opportunity for us to enhance brand affinity in collaboration with the NFL and NBC, showcasing our deep array of betting markets while providing both visual and verbal calls to action for consumers across North America to download and utilize the PointsBet app. NBC Predictor has now amassed more than 500,000 leads across the United States during the first year of the NBC partnership. Our top pick 'em style games within Predictor include NFL Sunday Night 7, NBA pick and roll, Premier League Pick 'Em, Major League Baseball Grand Slam Pick 'Em and Lone Star Pick' Em, a newly created game that solely features Texas-based professional and college teams. We have seen a positive correlation between our integrations and betting activity. For example, PointsBet most search terms see upticks on Thursdays and Sundays. Sessions from new users increased after 6:00 p.m. on Sundays during the NFL season. PointsBet sign-ups increased at the start of Sunday NFL games and the points that Android and iOS app visitors and downloads spiked, aligning with the NFL coverage, particularly during the Sunday Night Football pregame show, Football Night in America. We believe that the ability to provide integration of odds and unique betting content into live broadcast will set operators apart over the medium to long term, accelerating brand recognition and accessing clients directly when they are engaged with sporting events. This includes football night in America on Sunday Night Football, the PGA Tour and English Premier League live broadcast on NBC. With in-play estimated to make up 75% of all sports wagering activity within 3 years, integration into live broadcast will become increasingly important, and we have been an early mover in securing some of the best premium broadcast assets. I will now hand over to Andrew Mellor.

[Andrew J. Mellor, Chief Financial Officer]

Thank you, Eric. Turning to Slide 12 for the quarterly 4C cash flow summary. At the 30th of September 2021, the company's corporate cash balance was $626.7 million. The company has no corporate borrowings. Net cash used in operating activities in the quarter ending the 30th September 2021, excluding movement in player cash accounts, was $38.1 million. Receipts from customers totaled $72.4 million. Receipts from customers includes net win from Sportsbook and iGaming verticals, as previously detailed by Sam and Johnny, as well as cash receipts from our European B2B and U.S. racing ADW businesses. Cash outflows during the quarter included cost of sales of $33 million, noncapitalized staff costs of $19.3 million, which increased quarter-on-quarter given the timing of our annual staff bonus payments and also the increasing of our head count to now 500 staff globally. Marketing costs outflows of $46.5 million and administration, corporate costs and GST paid on Australian net win of $11.7 million. Net cash used in investing activities in the quarter ending 30 September 2021 was $11.6 million, driven mainly by the capitalization of developing our sports wagering and iGaming platform of $6.4 million. Net cash received from financing activities was $424 million, including receipt from the August capital raise and exercise and listed -- and exercise of listed and unlisted options, including $35 million received from Penn Interactive Ventures, LLC, a wholly owned subsidiary of Penn National Gaming, following the exercise of their 10.3 million options that were due to expire on the 12th of September 2021. I will now hand back to Sam.

[Samuel J. Swanell, Co]

Thanks, Andy. Turning to Slide 14. In conclusion, we continue to build a business that is undeniably positioned to play a material role within the huge North American market as it develops over the next 10-plus years. We have a growing world-class team, a fully proprietary tech platform and product with an accelerating road map, and we have market access. We are the official sports betting partner of NBC Sports and an ever-evolving joint road map with them, which will lean into the critical area of in-play sports betting. Our in-play upgrade begins this quarter. We own our iGaming platform and have a clear pathway to product parity and then to proprietary innovation. We own a racing ADW business license in Oregon that is live and has clients in 18 states. We will increase this to 21 states by the end of Q3, most of which are correlated to states that are expected to be live for sports betting. We will complement this racing ADW business with fixed odds race betting, leveraging our existing Australian experience. While New Jersey has already legalized fixed odds betting, the approval of fixed odds in other states will take time. However, the experience we will gain from running the racing ADW business will be invaluable for our strategic plans in this area. The combination of these elements means that PointsBet has positioned itself as a key participant in the growing U.S. market. We are also in consistent strategies in Australia and Canada. I'm excited about the strategy our team has begun executing in Canada under the leadership of Scott Vanderwel. Finally, M&A activity in the global gaming sector has evolved more rapidly than most would have predicted when PASPA was repealed. Given the strategic way PointsBet has positioned itself, we have the ability to apply a disciplined approach to assess inorganic opportunities that can accelerate our business plan and are active in doing so. Thank you for your time, and we'll now take questions.

[Operator]

[Operator Instructions] The first question today comes from Joe Stauff from Susquehanna.

[Joseph Robert Stauff, Credit Analyst]

I wanted to ask, in general, Sam, you did provide some commentary just on the -- in the U.S., in the kickoff to the U.S. sports calendar. Obviously, it's heavily promotional. And I'm kind of wondering if that environment is kind of subsequent to the end of September? Or is it still pretty heavy in terms of the overall environment for marketing spend and customer acquisition of CPA?

[Samuel J. Swanell, Co]

Joe, Sam here. I think in broad terms, it's still -- it's pretty competitive. I'll throw it to Johnny to see if he can apply any nuances on a week-by-week basis as we got towards the end of September, early October, et cetera.

[Johnny Aitken, Chief Executive Officer of US]

Yes, Joe. No, we've seen the competitiveness and the large thing continue amongst the competitive set through at least to the middle of the month of October, which timed in with the launch of the NHL and then the NBA seasons, and one of the pieces of rationality there would be that acquiring a customer through the start of college football and NFL season through the start of NHL and NBA season gives you the greatest runway to commence that payback period of CPA. So our expectation, whilst we expect the market to be ongoingly competitive, we would expect some of that, say, absolutely red hot heat to drop away now with the launch of college football NFL. And now this month, we've just undergone the launch of NHL and NBA.

[Joseph Robert Stauff, Credit Analyst]

Understood. And I think, Johnny, you had talked about certainly the -- having the product from Banach sort of integrated within sort of the U.S. product offering. Is that still expected to, say, be in place maybe by the end of this month? What is the approximate timing when you think you could start really kind of increasing the number of products, in particular, for in-play through your U.S. distribution platform?

[Johnny Aitken, Chief Executive Officer of US]

Yes. So we're putting the finishing touches, Joe, on the first sport that will be rolled out through our internalized feeds that is powered by the former Banach team, now at the PointsBet Europe team. And we expect NFL to go out in the coming weeks, and that will be closely followed by NBA. What you'll see over time is we exponentially increase the quality of that feed is 2 main areas. The first is the product feature side is the in-play experience, delivering in-play player props, in-play micro markets, for instance, to support the core in-play markets. And then on the experience side, where there is the true battleground, you'll see increased uptime and increased speed and automation bet acceptance, which we believe will drive a clear point of differentiation for PointsBet against our competition and help us to win share of wallet with in-play bettors.

[Operator]

The next question comes from Rohan Sundram from MST Financial.

[Rohan Sundram, Gaming and Contractors Analyst]

Just a couple for me. I might start with the net win and the gross win rates, especially in the U.S., which look very pleasing. Maybe Sam or Johnny, how much of that would you put down to any specific initiatives versus order tech stack versus the overall maturing of the book?

[Samuel J. Swanell, Co]

I'll start, and then Johnny can add on. Look, I think there were some reasonably favorable results for the quarter. So I think in terms of 8.4% gross margin, we probably wouldn't guide to sort of that level just yet from a sustainability perspective. Longer term, as I've said before, we think that sort of number is well and truly in play. Johnny referenced 3 core areas for us at focus, in-play, iGaming and Parlays. And so while we talk a lot about in-play and the improvements that we've and the upgrades that we're making there, we continually look to enhance the Parlay product as well. So we're one of the operators that was first to market with same game Parlay and some features around same game Parlay. So there's no doubt that as our product improvements hit the market and as the clients get more educated about the entertaining value of these products that, that's part of the strategy of taking our margins in the U.S., let's say, beyond that 5% historical Nevada margin where the market started at. Johnny, anything you'd add?

[Johnny Aitken, Chief Executive Officer of US]

No, I think you covered it both, Sam.

[Rohan Sundram, Gaming and Contractors Analyst]

And last one is, maybe are you able to share what early learnings you've discovered so far from iGaming operations?

[Samuel J. Swanell, Co]

Yes. Look, and I suppose as a baseline to that, it's one thing to implement the product. We always spoke about the fact that it was an MVP product being introduced into our ecosystem in Michigan and then subsequently in New Jersey and see what that meant for player behavior. We obviously -- we've upskilled our team and we've inserted people with lots of iGaming experience to help us, let's call it, run the product on a daily basis and market the product from a cross-sell perspective. So no, there's been plenty of lessons. Look, the trends that we're seeing are not that dissimilar from what the market on the whole has seen, a propensity for sports bettors to enjoy table games. So a sports-led brand is going to have a higher weighting towards the table game play rather than the slots play versus the casino-led brands. And that's why a really key product release for us is the live dealing suite that Johnny spoke about. I mean people that like playing tables, like playing live dealer tables rather than necessarily the auto product. So yes, we've learned a lot. It will be an evolution, but I think we laid out in one of the slides from a product perspective, a content perspective, we're aiming to make quick round. And in parallel with that, constantly learn about our clients' behavior, how to maximize, let's call it, that cross-selling. And it's an overall ecosystem. iGaming doesn't operate in a vacuum from sports betting. It's how that new cohort of cross-client base behaves and what's the best mix to maximize retention, maximize revenue, et cetera. So no, we're learning a lot, and we'll continue to do so.

[Operator]

The next question comes from Sacha Krien from Evans & Partners.

[Sacha Krien, Executive Director of Gaming & Leisure]

In terms of the U.S. market, I think you mentioned it looks extremely competitive at the moment. Just wondering, in terms of your ability to keep that customer acquisition cost at around about that $500 level, how much has the NBC deal helped to do that? I think you've previously mentioned that you had some agreed rates that won't increase.

[Samuel J. Swanell, Co]

Yes. Sacha, Yes, I mean, one of the pillars of the NBC deal, for those that can recall, was we wanted to have a partner that had skin in the game and continue to innovate with us and in particular in the area of in-play because that's where we see betting and the enjoyment of consuming live sport through media can really start to converge. But part of it was also that we had an expectation that sports media assets would inflate, as we've seen in other markets as sports betting grew across the U.S. So yes, we did -- let's call it, lock in some baseline rates. And that is effectively what that would mean is that a dollar spent with NBC, for example, in the Chicago RSN is going to be more efficient than a dollar spend through another channel or another similar media company. So it certainly plays a role for us in helping with marketing efficiency. I think we've been quite open about the fact that something like Sunday Night Football show that we're doing the national integration on, that's not necessarily about short-term cost per acquisition in the 7 states where we're live. We're building a business for the long term. And so where there is a fantastic asset like that available to us, it's the premier asset basically. It's the most watched show on the most favorable sport in the U.S. So where there is an asset available to us like that, we grasp it with both hands. And we measure that in how downloads are tracking. The NBC Predictor app is a predictor database as another measure of how that sort of non-live state spend is going because if that database is building, part of that is being driven by national media. And then we also spoke about the fact that we are investing in some states that are, let's call it, forward-looking states. So states that we're hoping to launch in the short term, all of that is aimed so that when we go live in a new state, one, we've got better brand awareness. Two, we've got a database that we can leverage hopefully on day 1 and get off to a stronger start. So yes, NBC is critical to our plans. And obviously, there's a lot of focus on the states where we're live and the impact it's having there. But again, I just talked to the fact that the structure of the deal is in a way where we've got a joint road map together. In-play is the future of sports betting in the U.S., you will not hear anyone say otherwise. And NBC's coverage and media assets is a great way for us to lean into that in-play strategy.

[Sacha Krien, Executive Director of Gaming & Leisure]

Yes. Okay. And just on that Friday night in America, which does have huge ratings, and they look like they've improved again this year. I mean can you see direct correlation between that and downloads coming through?

[Samuel J. Swanell, Co]

Yes. Part of what we're obviously tracking in outside of the 7 states is those other indicators that the spend that we're making outside the 7 live states is building brand, is building a database, is impacting download. So yes, yes, we can.

[Sacha Krien, Executive Director of Gaming & Leisure]

And 2 more very quick questions. Are you going to rebrand the ADW to PointsBet? Is that the plan?

[Samuel J. Swanell, Co]

Yes, that is the plan. So at the moment, we're just, let's call it, putting some polish on the existing technology. Obviously, our number one fundamental is reliability, scalability and security before you worry about the bells and whistles. They're the 3 things: reliability, scalability and security. And so we're just covering that off. And when we get the platform to the point where it's safe and secure and a product that we're happy to put our brand on, we certainly will.

[Sacha Krien, Executive Director of Gaming & Leisure]

Okay. And then just a quick question on iGaming. How to look at the side, and it looks like you're probably just using ITT content at the moment, which is possibly not at the most popular content in the U.S. I mean how important do you think it is to have the best slot content? And are you going to be adding sort of further integration in terms of slot content in addition to live tables?

[Samuel J. Swanell, Co]

Yes, absolutely. So we started with IGT. And obviously, we've talked about evolution. We've got scientific games lined up, [ Erie ] lined up. So our aim, obviously, is there's a lot of data in the marketplace. One of the advantages of being a latecomer to the iGaming space is that we do get to see some trend statistics and see what games our competitors are promoting to the, let's call it, to the forefront on their lobbies, et cetera. So we think we can get to a parity position via IGT, sci games, evolution of [ Erie ], et cetera, reasonably swiftly and that's what we're aiming to do. And obviously, we provided a bit of a road map through to February on Slide 10. So that's the first step. Let's get the meat and potatoes right. Let's make sure we get it close to parity as possible. And then we'll turn our attention to some innovation. And the planning for that innovation and the work is beginning and has begun, but the first fundamental is getting the titles and the games that it's very clear are popular in the U.S. market and making sure that we have them.

[Operator]

The next question comes from Desmond Tsao from Morgan -- from Goldman Sachs.

[Desmond Tsao, Associate]

Two very quick questions from me. Apologies if I missed it earlier on in the presentation. But what's the latest with Arizona in the licensing opportunity? I've noticed that it's been dropped from Slide 9. And is there any timing that you can provide on the Ontario launch?

[Samuel J. Swanell, Co]

Yes. So Arizona, I think it's been well publicized that we thought we had a license and it was subsequently not -- our partner was subsequently not included in the list of licenses that have been handed out. I've stated previously that Arizona currently has 18 licenses, and there's a couple of licenses still to come to take it to 20. PointsBet will be in Arizona. Any state that has 20 available licenses, PointsBet will get into that state. The question -- the big question is when. Is it a short, medium or longer-term scenario. So I won't comment on that. I think it's fair to say that through the initial round, the initial launch, and obviously, Arizona has been a pretty good state from the launch statistics, PointsBet hasn't been involved in that. The only comment I would make is I'm very confident that we will get into Arizona, and we do continue to work on it, but I couldn't give any strong guidance as to a time frame on that. In terms of Ontario, the regulator there was originally targeting a date of sort of early December, we believe that from their perspective, that date could be under a little bit of pressure. So maybe the launch moves back to sort of a January. Our aim is to be there on the starting line. We are -- I'm really, really excited about strategy that our team is building for the Canadian market. I think it's very clever. We obviously already announced a couple of deals. I'm really thrilled with the work that our team up there is producing so far. I think we're building a great team. So we're still to see, I suppose, how the Canadian market forms up in the early months because you've got some different dynamics to U.S. So it won't be a mirror image of the U.S. There's going to be differences in terms of market shares and the like. But we're certainly aiming and planning to be a material player in that market.

[Desmond Tsao, Associate]

Got it. That's very clear. The other question I had was just around the Australian business, another pretty strong result. Can you just talk a bit more about the competitive dynamics in the quarter? I think you guys were pretty aggressive with some of the promotions, particularly in the past few weeks with satellite races, but yet margins held up very well. So just any comments around that would be great.

[Samuel J. Swanell, Co]

Yes. It's a bit of a common theme. There's no doubt that we've been a beneficiary of the land-based TABs having decent periods of lockdowns, particularly in Victoria and New South Wales. So in some ways, we're as eagerly waiting as everyone to see what does that mean when things come back. But I think we've sort of got to look beyond that going into any sort of COVID, PointsBet already had huge momentum. And we're coming from a position a year or 2 back with very little brand awareness, a product that was just getting going. You fast forward, we've built a lot of brand awareness on the back of the Shaq campaign, which I think everyone has appreciated has been an absolute cracker. And the investment in that will pay itself off for many months and years to come. And then from a product perspective, we continue to enhance the product. So we're pretty confident of our continued momentum. We're not saying that it will be 56%, again, sort of quarter-on-quarter by any stretch. But the Australian business is going strong. And I made comments in my speech that, in some ways, a lot of the thinking -- the innovative thinking and the acceleration opportunities that we are actively considering in the U.S. and Canada, the North American opportunity. We've got to bring that same thinking to Australia. We've got a great opportunity in Australia, where we've obviously put ourselves in a strong position, and we can see great opportunities for innovation. So we are going to hire an Australian CEO, put a little bit more extra oomph behind the Australian business. And we think there's great opportunity. And the fact that we have some global strengths, some group strength that obviously supports the North American market is Australia, that gives us those reverse economies of scale back into Australia. So we do have some weight behind us to compete with the likes of Sportsbet and Ladbrokes.

[Operator]

The next question comes from Don Carducci from JPMorgan.

[Donald N. Carducci, Analyst]

Just a quick one for me. How should we think about these NBC leads that you've started to disclose because last result, I think, you said there are about 350,000 leads generated for PointsBet, and you just reported, I think, an increase of about 160,000 more leads generated until 19 October. But what's the benefit of these leads because it doesn't appear to be assisting the rolling 12-month customer growth or driving below average CAC?

[Samuel J. Swanell, Co]

Yes, Don. Yes. I mean obviously the leads are a national number. So we're live in 7 states, those 500,000-plus leads are across the entire country. So a portion of them definitely are coming into those 7 live states. And obviously, our focus then is to convert them to first-time bettors. I think we need to be a little bit realistic about the 7 live states versus, let's call it, the impact that they could have on a new state. Just to give an example, like a state like Maryland, if we can be live on the starting line when that state goes live and we have a database of x,000 clients that haven't yet necessarily opened a DraftKings or FanDuel or MGM account, that gives us that opportunity to convert a decent chunk of those and get us off to a strong start in those new states versus a lead generated through Predictor into New Jersey, for example, it's highly likely that, that client already has a betting account in the New Jersey market. Hopefully, it's already with PointsBet, but the effectiveness of that. So again, a lot of the leads will be Texas, California and New York because they're the big states, so that that's the reality. But again, that has value. But yes, that -- hopefully, that explains it.

[Donald N. Carducci, Analyst]

Yes. So you mentioned conversion, so what's the appropriate conversion ratio that we should think of for the NBC leads for you folks? Like what would be your expectation for a conversion ratio?

[Samuel J. Swanell, Co]

Yes. One, it's a big test for that to come in the next state -- we go live on a starting line and see what we can make of that database. So I think the measure in some part of the measure for the investment that we've been making in long-life states will be, okay, how did PointsBet go in terms of getting off to a strong start in these new states versus historically, how have they gone?

[Donald N. Carducci, Analyst]

Yes. Got you. So I guess maybe a final point on that one, a final question. So if we assume the NBC was the only way that you've acquired customers in this last quarter, let's say you converted maybe 1 in 6 leads at the best, do you think that NBC could give you the 5-or-so million leads that you'd need to still get to that 1 million customers by 2025? And is that still the target, 1 million by 2025?

[Samuel J. Swanell, Co]

Yes, 1 million by 2025 is definitely still the target. I think NBC will be the, let's call it, the quarterback of our marketing spend. It's -- it seemed like a big number, obviously, a year ago when we did the deal, $393 million over 5 years back ended. But I think you can see that we're going to need -- we're going to spend marketing dollars over and above whatever we're spending with NBC, obviously. But we would hope that NBC is going to play its role as sort of that differentiator because we are very confident in our relationship with NBC and the things that we're working on that is leaning into in-play sports betting and how that correlates to the types of assets we want to use with NBC and the fact, as an earlier question, the rates that we've locked in with NBC. We do expect NBC to be a more efficient channel and a better source for us in terms of maintaining those CPAs versus spending an equivalent dollar with CBS or someone else. So yes, so look, it's important. It's not obviously -- it's even close to 100% of our marketing spend. It's probably more than half. But we expect to lean more and more into NBC and work together with them to continually improve.

[Donald N. Carducci, Analyst]

Because you're going to -- those payments to NBC are going to increase, correct me if I'm wrong?

[Samuel J. Swanell, Co]

Sorry, sorry, I didn't quite catch that.

[Donald N. Carducci, Analyst]

Sorry, those payments to NBC, they're increasing in terms of the percentage that you owe them, if I'm correct, through that deal term?

[Samuel J. Swanell, Co]

Yes. So the expectation, obviously, of what we wanted to spend with them in year 1 when we're live in 6 states versus year 5, we'll be live in a multiple of that, yes, it increases over time.

[Operator]

[Operator Instructions] The next question comes from Larry Gandler from Credit Suisse.

[Larry Gandler, Director]

I guess a question for Johnny because I missed what you said with regards to what was impacting your market share. My specific question relates to maybe contrasting New Jersey and Illinois. I know Illinois is in-person sign-ups, but you seem to maintain share there. And the in-person sign-ups shouldn't have had a big factor, whereas the New Jersey shares really dropped away and it seemed to drop away in August. So I'm just wondering if you can contrast what was happening in those 2 states and perhaps explain why that market share eroded in New Jersey?

[Johnny Aitken, Chief Executive Officer of US]

Yes. I'll start, and I'll let Sam jump in. I'll tell you the main point there would be the reported net win margin result in New Jersey was an extreme high one of 7.9%. And sort of naturally when net win is that high, there will be a sort of compression on handle. So that would be the sort of major factor why the handle market share quarter-on-quarter sort of was wound back slightly. Sam, is there anything that you wanted to add?

[Samuel J. Swanell, Co]

Yes. I think Johnny spoke about the extreme, there's really strong competition from a promotions and a marketing perspective across the U.S. through the NFL season through to mid-October, end of October. I think, Larry, in that in-person environment in Illinois, there's a little -- that's a bit more tempered because let's call it the DraftKings and FanDuels of the world, the in-person environment calls, they're affecting us a little bit. So I think there's an element of that. We've got very strong assets in Illinois. I've spoken about that previously. The NBC impact with that RSN certainly, we believe, is a key advantage, and we want to see that advantage in other RSNs, like Philly and down in Washington, Virginia and Maryland and hopefully New York. So I think it talks to the fact that the NBC assets where we can leverage those RSNs are going to play a good role in helping us build market share, but also a little bit to do with the in-person environment.

[Larry Gandler, Director]

Okay. And I wonder if you're having this conversation amongst yourselves in terms of strategy. It's crossing my mind you're building a business, I believe, to be a 10% market share player in the U.S. over time. When you revisit that and consider building a business to be a 5% market share player in the U.S. I'm not saying throughout the town, and believe me, I'm just asking, you have to ask yourself, can you -- do you have that option available to you?

[Samuel J. Swanell, Co]

Look, put it this way, if we're talking about a $50 billion market in the U.S. come sort of 2033, 2034. I think that's the Goldman's estimate and others are sort of gravitating up there. Obviously, it's very clear, you could have a thriving very strong business at 5% of that market. But no, from our perspective, we're setting up for the long term. We were never naive as to the advantage that the bigger brands would have and the databases would have in the early days of the market. But we're very -- the progress that we've made, knowing what we've got to come, we're very comfortable. That 10% sports betting aim in the states that we're live, over time, we firmly believe that a product-led strategy and in particular, a strategy that means you have the market-leading in-play product will earn you that 10%. And we also believe that subject to mass M&A, which just rolls everything up, that it's very hard for the large operators to maintain the sort of market share when they're coming under pressure from creditable operators with creditable product. It's not like the challenges, let's call it, from fourth to sixth are slouches, and are just going to give it to them. As consumers get more educated on the product and they seek out the best products and they have affinities with other brands, other than ones that are just obvious to them at the moment, we believe that, that presents an opportunity and points that firmly still have that 10% market share aim for sports betting in the states where we are live.

[Larry Gandler, Director]

Okay. So still pursuing that strategy. And just a final question for me, a quick one. I didn't hear the last state you're going to -- or jurisdiction you're going to be in fairly short order. So is Virginia, Ontario? And what was the third jurisdiction?

[Samuel J. Swanell, Co]

So we gave guidance. And the main reason for that is, I think everyone would be aware, we're involved in some official processes that could impact that. But there's a lot of states that could be in the mix, Virginia, Maryland, Tennessee, Louisiana. Ontario is definitely there, obviously, that Canadian launch. And then obviously, there's the ongoing process in New York, which we can't comment on.

[Operator]

The next question comes from Wassim Kisirwani from Jarden.

[Wassim Kisirwani, New Zealand Technology and Software Analyst]

Sam, just a quick follow-up on New Jersey, and I didn't quite catch the earlier comments by Johnny around potentially some refinements over the second quarter with regard to market share. Can you just maybe talk to that. And given the high net win rate, is there a view to reinvesting that over Q2, just how you see that playing out, please?

[Samuel J. Swanell, Co]

Yes. I think Johnny spoke about the competitiveness would be interesting to see how that sort of changes from, let's call it, this period of the most heightened spending on acquisition, marketing dollars and promotions. We've certainly -- it's been an informative period because last year, we were coming out of the COVID sort of impacted, cessation of sports. This year, you've got the NFL in the game and accepting advertising. Obviously, you've got, say, a Caesars sort of there that perhaps will narrow strongly. So there's definitely been good information to lean. Again, our approach is, I think, we've been consistent on this from the start. We're not going to get caught up in an arms race on marketing dollars. We'll spend an amount that we think is comfortable and can return us -- have a positive ROI for us. So our -- you can see probably from our cash numbers that increase our marketing materially. We will continue to assess the market and the opportunities, but we've got to focus on our product, our people and building the business for the long term. We have to make sure that we're not -- we're not saying we're not going to compete because we obviously will, and we've been competing ever since we got into the U.S. But there's no doubt that the level of promotions and the marketing spend, I think, had an influence on some share of wallet, some share of wallet being taken away from PointsBet and maybe going to more like an MGM. If you look at the market share perspective, they seem to be maybe the beneficiary, the highest beneficiary from a sports betting perspective. But we're very confident. We've got obviously the in-play product upgrades starting in the next couple of weeks. That's fundamental. We've outlined the product improvements from an iGaming perspective. We'll keep investing in Parlay. So yes, we'll keep adhering to our strategy, but not ignoring, obviously, the competitive pressures that are out there. And if we have to adjust promotions and think about where we allocate them, obviously, that's part of what we do on an ongoing basis.

[Operator]

At this time, we're showing no further questions. That does conclude our conference for today. Thank you for participating. You may now disconnect.