PBTHF - PointsBet Holdings Limited (PBTHF) Q4 2022 Earnings Call Transcript
PointsBet Holdings Limited (PBTHF)
Q4 2022 Earnings Conference Call
August 30, 2022 20:30 ET
Corporate Participants
Sam Swanell - Chief Executive Officer
Johnny Aitken - Chief Executive Officer, U.S.
Scott Vanderwel - Chief Executive Officer, Canada
Andrew Mellor - Chief Financial Officer
Conference Call Participants
Larry Gandler - Credit Suisse
Rohan Sundram - MST Financial
Don Carducci - JPMorgan
Philip Chippendale - Ord Minnett
Chris Savage - Bell Potter
Presentation
Operator
Thank you for standing by and welcome to the PointsBet Holdings Limited FY 22 Financial Results conference call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions].
I’d now like to hand the conference over to Mr. Sam Swanell, Group CEO. Please go ahead.
Sam Swanell
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 to 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, to be referred to as the PCP.
Turning to Slides four and five. During the reporting period, we saw improvements in relation to many of our core financial metrics compared to the PCP. We've also made great strides in terms of expanding our North American TAM rolling out sports betting operations in four new U.S. states, West Virginia, Virginia, New York, and Pennsylvania, and iGaming operations in the states of New Jersey, West Virginia, Pennsylvania. Together with Sports Betting and iGaming operations in Ontario, Canada.
We now have live online Sportsbook operations in ten U.S. states and allied with iGaming four U.S. states. We also have online Sportsbook and iGaming operations in Ontario, Canada.
We've continued to scale our operation 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 the 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. These strong performance demonstrates PointsBet’s capability to grow market share in an advanced market where we compete successfully against global groups such as Flutter, [indiscernible] 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 one.
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 Corp in June of 2022. The company's 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 six and seven. 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 enabling 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 nine operators to operate mobile sports wagering in New York, launching our sportsbook operation to 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 its [Bennett] [ph] proprietary technology integration, which we refer to as Odds factory. Johnny Aitken will speak more to in play progress later.
PointsBet also have 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 viewership in the 10s of millions. Underpinning our operational success was PointsBets in-house technology, which again continued its impressive record of successfully managing peak days without incidents.
In April, we were thrilled to be honored by the eGaming Review as a top sports betting operator at the EGR. North America awards for the second consecutive year. We were also pleased in both April and August 2022 our U.S. App was ranked in the top three in the Eilers&Krejcik by app testing, with the 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 product.
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 PointsBets 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 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 on price, take bigger bets via increased wagering limits while maintaining an efficient and profitable business model. Excellent in technology, user experience and trading is at the forefront of everything we do at PointsBet.
Turning briefly to Slide eight, as previously disclosed in our quarterly activity reports, our global trading businesses delivered 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.
Andrew Mellor
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 been made, the GST paid in Australia, b2b revenue from PointsBet Europe and PointsBet U.S., revenue earned via U.S. racing ADW business and other fair value adjustments.
For the reporting period, PointsBet reported net revenue of $296.5 million across the 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 represent a 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 1, 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.
Please 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 government's 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 again 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 U.S.$180 million and Canada accounting for $12.8 million, CAD11.7 million, and note CAD4.7 million was spent in pre-launch marketing in Q3 FY '22. This increased marketing investment assisted in the delivery of over 513,000 Group cash active clients as at the 30, January, 22.
The reporting period saw aggressive marketing spend from our U.S. competitors. However, we maintained our disciplines an ROI focused approach to marketing and promotional spent. A pullback in competitive marketing and promotion aggression in the U.S., will lead to greater share of voice for PointsBets continued disciplined marketing investment, to provide greater client exposure to our ever improving market leading product and service offering.
In NBC, we have a supported 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 two years. We were very excited to have hosted Shaq in Sydney for the launch of the 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 marketing expense of CAD$7 million. Employee benefits expense increased over the reporting period. Global FTEs as of the 30, 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 that 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 state's launched in the reporting period, but only operation for part of FY 22. And we anticipate launching an additional four U.S. jurisdictions in FY 23, we would expect that the product and technology cost 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 determined to be appropriate.
Turning to Slide 11. I will now speak to our business segments, further details can be seen in note five 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 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 EBITDA loss of $197.4 million in the reporting period. This was primarily driven by the U.S. marketing expense of U.S.$118 million as we expanded operations across 10 U.S. states and as we continue to grow a 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 five to the financial accounts. Please note this revenue was eliminated in the company's consolidated financial statements.
In addition, during the reporting period, the technology segment recorded 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 $2.4 million, due mainly to an increase in employment benefits as a result of increased headcount of support staff, increase in the listed company related costs including share registry 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.
Startup costs before Canada became operational are also included in the corporate segment up to the end of H1 FY 22. The total group statutory EBITDA loss was $250 million for the reporting period, after accounting for net finance cost 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 a group having net assets of $736.4 million as of the 30, 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 raised 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 U.S.$25 million payment to the New York Gaming Commission for market access to the state of New York, and the U.S.$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 pre-payments balance as of 30. June 22, includes both cash pre-payments and equity pre-payments related to our NBC agreements. These pre-payments represent future offsets the total marketing commitment under that partnership, please reference 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 US dollars, please utilize the relevant end of the reporting period FX rates.
Liabilities includes a financial non-current liability relating to the fair value of the debt component of the share options issued as part of the NBC transaction, $79.7 million includes the notional interest charged and fair value change on the financial liability for the year. Other liabilities include an amount received as part of the New York license fee reimbursement from the results WELLBET, a subsidiary of [Genting Group] [ph] as part of their b2b platform provider agreement to power the results WELLBET 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 four states we plan to launch, we expect these to be relatively small amounts compared to those payments made for market access and licensure in the reporting period.
Turning to Slide 13. I'll briefly touch on the cash flows as these have been previously disclosed and detailed as part of our quarterly foresee reporting obligations in October 21, January 22, April 22, and July 22. 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 at the 1 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 and in the reporting period of turnover of 2.5 billion up 28% compared to the 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 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 the focus turned to profitability for the remainder of the financial year. As a result of this strategy, the Australian trading businesses full year marketing expense was $61.5 million, which assisted in delivering 12 month rolling cash actives to 30 June of 239,000, an increase of 22% compared to the PCP.
I'd like to now hand over to Johnny Aitken, our U.S. CEO to run through highlights for the United States.
Johnny Aitken
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%. For 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 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 technical promotions. A number of optimizations were 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 U.S.$118 million. And as previously reported, overall U.S. co-working media cost per FTB was under U.S.$500 for the reporting period. Cash active 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% to 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 per 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 number one 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 gaming in four U.S. states. And as announced earlier this week, we anticipate going live in Kansas this Thursday, 1 September.
As previously communicated, we approximately shifted to focus on four priority state rollout being Louisiana, Ohio, Maryland and Kansas. With the last three 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. PointsBets 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 multi-state operational approach, which as a result will not always align 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 US team 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. state. In avoidance of debt, 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 odds integration throughout the NFL, NBA, MLB and NHL seasons that highlighted a wide variety of betting markets, with a keen focus on NBC RSN viewers. A highlight from recent months where the Bet Casts that appeared across NBC Sports go regional networks in Chicago, Philadelphia, and Washington. Together with NBC, we developed four iterations that highlighted various markets, both pregame and live, signup offers and on-site promos with live updates throughout the entire game.
Our NBC plan was rounded out with investment across NBCs digital properties, including their fast growing streaming platform Peacock. This combination of regional assets continues to provide PointsBet with the ability to create bespoke marketing strategies to reach our target audience. And we will remain I should say a core focus of PointsBets in the next yearly iteration of the NBC plan. PointsBet has also continued to partner with effective Comcast audience focused solution for linear TV. Data led media plans reached potential PointsBet customers in eight states with a focus on custom build creative for the Comcast audience to kickstart to sign up journey via 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 three years. Odds Factory is our proprietary trading platform which houses our pricing algorithms. Owning the platform and the experience of eSports allows us to curate an experience around what our customer wants. Odds Factory 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 Odds Factory 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 a more accurate pricing. Time game parlay both pre match and in-play, lightning 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 Odds Factory for the six core U.S. Sports. To-date, we have launched NFL, NBA, college basketball and MLB with NHL due in Q2 and college football during Q3 FY '23. Once Odds Factory is launched 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 to 23 NFL season next Thursday, the 8 of September.
We finished last NFL season with a very strong in-play products and continue to be the only operator to offer in place same game parlays on all of our Odds Factory sports. Going into this NFL season, we will be building upon a strong foundation and will further enhance the overall user experience and specifically focus on our lightning best experience. This will provide our customers a market leading in-play experience, delighting them without 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.
Scott Vanderwel
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 were proud to be one of the first operators regulated by the Alcohol and Gaming Commission of Ontario, as it showed the competence the 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 Green 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 were 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 7200.
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 at the end of June. Our approach has been to stand out from the [indiscernible], customers are seeing through mass 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 offering that is no partner revenue share agreements. A nominal licensing fee and an effective tax rate of 18% of GGR make the overall future economic capable as our platform attains further scale.
I will now hand back to Sam.
Sam Swanell
Thank you, Scott. 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 continues to meet regulatory and community expectations in delivering a premium experience which integrates responsible gambling. FY 23 will continue to emphasize interdepartmental collaboration to reinforce our safer play commitment.
To highlight a couple of the key statistics we had during the reporting period, 126,000 global unique views of our responsible gambling page, and 1700 average global impressions per RSG social media postings. Country specific strategies are in place to meet the unique needs of our global customers to engage with relevant responsible gambling bodies. In Australia PointsBet contribute to the development of the 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 responsible 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 an authentic Canadian way.
Turning to Slide two, it is clear that North America will deliver the vast majority of regulated global gaming growth over the next decade. We have 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've developed best-in-class partnerships, which will help accelerate our trajectory to take advantage of this enormous opportunity.
As we've previously said, technology and product represent our right to weave with the execution demands of the growing in-play opportunity, ultimately determining those who will simply partake, and those who will thrive. Further to compete with scale operators who 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 thing was further enhanced today as we announced the appointment of Mr. Edward Hartman to the position of Group's Chief Strategy Officer. I'm now happy to take questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Your first question comes from Larry Gandler from Credit Suisse. Please go ahead.
Larry Gandler
Hi. PointsBet team thanks for taking the question. 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 a 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?
Sam Swanell
Good morning, Larry. You will 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 meet the standard that we would set ourselves. I think, yes, you can take it as win that is a ratio that we want to see continued improvement in. We've spent -- we've learned a lot over the last couple of years from our marketing. We [indiscernible] 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 high 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.
Larry Gandler
And as you looked into the fourth quarter in recent time, do you feel you guys are on track or close to achieving the new objectives that the momentum is there for that?
Andrew Mellor
Yes. 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 look at the fact that we will be expanding our TAM that talks to a more targeted, focused approach of marketing, and that we believe that will deliver that improving ratio.
Larry Gandler
Okay, great. And last question for me is, those other metrics market share revenue, and obviously, the employee betting was achieved, but the ones regarding market share revenue, those are also metrics for FY 23.
Sam Swanell
I think 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 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 likes of SIG, but we do set ourselves high standards when it comes to those SDI.
Larry Gandler
Okay, great. Thanks, Sam.
Operator
Thank you. The next question comes from Rohan Sundram from MST Financial. Please go ahead.
Rohan Sundram
Hi, team. Just a one 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?
Sam Swanell
We're not seeing any clear evidence. Yes, we've taken on 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 visitations original casinos, and a general thought process that if people are prepared to travel for entertainment, then they prepare 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.
Rohan Sundram
Thanks Sam.
Operator
Thank you. The next question is from Don Carducci from JPMorgan. Please go ahead.
Don Carducci
Morning, team. 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 there wasn't any market share breakdown or data split across OSBs or iGaming, it does seem like it's a bit 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.
Sam Swanell
Yes. I think, obviously, they've just reported on the regulated environment, Don. And there's, 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 launch heading into sort of a down part of seasonality, I think we've got to give Ontario the opportunity for those gray markets operators to get licensed to go through a football season and see how quickly it can pick up our expectations, sort of similar to most market commentary in terms of the potential size of that market. So we would expect to see it picking up aggressively over the next six to 12 months.
Don Carducci
So given the population and then when you competent in New Jersey’s, Pennsylvania’s, Michigan's et cetera, 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 is something, it's quite large, ordinary change to your expectations or results?
Sam Swanell
Not that doesn't -- these results don't change our expectations, but again, we'll be watching closely like everyone will over the -- next six to 12 months. Most of the Canadian population lives 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 appointment perspective, a lot of our partnerships and marketing initiatives are structured around the upcoming seasons. So yes, we're not ready to ride off Ontario just yet.
Don Carducci
Right. Thanks. 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 into a 20% -- 20 consumption tax? And can you walk us through how you're thinking about the level of generosity as a percentage of turnover going forward?
Andrew Mellor
Yes, I will take that. No, I can't break down the 10 million. It's an overall impact of point of consumption. As you know, in Queensland, some of that was related to the rise in the rate and then in the treatment of generosities. But that's just an overall impact. For our Aussie business, we do expect to be able to reduce the level of generosities over time, the way we to do that is to improve our products, because then we can rely on our product more strongly as our retention tool, rather than having to be generous -- more generous to retain clients.
So, that's the broad strategy for Australia, over the next 12 months is to rely on the product more, find efficiencies in overall generosity, but then also to probably like a lot of our competitors have done over the last year or two, be more targeted with those generosities to make sure that you're really allocating them to the clients that you want them to go to that generate the value. So, yes, that's why we believe that we can find improvements to overcome that $10 million impact, but it's certainly significant nonetheless.
Don Carducci
And I know the last time we spoke, you said that you weren't necessarily going to deprioritize Queensland, but have you found that there's maybe a natural shift in consumer behavior away from betting on Queensland or what has been the change of the trend that you've seen as a result?
Sam Swanell
Yes. We didn't follow the leads of some of the competitors in the market that took an approach to remove Queensland racing product from what's called their next to go screens. I mean, obviously, that was down to, I suppose send a message about the impact that they can have when they do deprioritize products. We didn't take those actions. Look, I would say that, again, that category of getting more efficient with how we use our promotional budgets and how we think about margins, will take into account state-by-state differences in the cost of doing business, a bit like we do in the U.S. already. So it will take that into account. It's not like it will be business as usual, and just carry on through those things.
Don Carducci
Awesome. Thanks, team.
Operator
Thank you. The next question is from Phil Chippendale from Ord Minnett. Please go ahead.
Phil Chippendale
Hi, guys, thanks for your time. First question. I just couldn't see it in the materials. But the balance of the three states that you would be launching, Louisiana, Ohio and Maryland. Can you talk to the timeframe around the target and sort of launches for those?
Sam Swanell
Yes. I can go get Johnny to talk to. Johnny, you want to take that one?
Johnny Aitken
Yes, sure. So sort of in relation to Louisiana, we're on towards the goal line of launch. And it just waiting a final clearance from the gaming sort of regulator down there in Louisiana, to launch our expectation and hope is, we launch within months, line of the NFL season. So within the month of September. Ohio, the state has come out and stated a clear launch time of sort of January 1, 2023, for all licensed operators. And we were one of the first to have our sort of license application in. So again, our expectation is to be on the starting line in Ohio from January 1, 2023. And then sort of Maryland, we're still a little bit unknown at this stage. But we expect between Christmas to sort of New Years’ time potentially to be the date that sort of Maryland sort of turns on the greenlight, will ask its operators to go live there for online sports betting operations. And we expect to be on the starting line there as well.
Phil Chippendale
Thanks for the extra color. Just final question from me, just on the U.S. marketing expense being no greater than FY '22. That's a little lower than I expected, especially given major states like New York and Pennsylvania only commenced operations in the second half of the financial year just gone. So I'm just wondering about, what this means for market share? Have you guys changed your market share, or desired market share level for the U.S. business?
Sam Swanell
No, we haven't felt, I mean, I think, again, we've had a lot of learnings over the last couple of years from the marketing activities that we've executed. And we believe there's plenty of sort of optimization that we can find from those learnings. So remember, when we were launching in New York, Pennsylvania, and Virginia as an example, we were spending pre life, so that in some ways, there has been like a full year impact for those states in the numbers. So really, we're sort of talking about launching these newest and finding the marketing budgets for sort of within that we're talking about.
Phil Chippendale
Okay, thanks. That's all for me.
Operator
Thank you. The next question is from Chris Savage from Bell Potter. Please go ahead.
Chris Savage
Thank you, and good morning. Sam maybe one for you, Canada, you disclosed was a 15 million EBITDA loss for Q4? Should we annualize that as a guide towards what the EBITDA will be in FY '23? Or do you think it'd be better or worse than that?
Andrew Mellor
Yes. Hi, Chris. It’s Andy. I mean, we don't provide obviously guidance on EBITDA. The comment that I made on the call was specifically in relation to marketing spend, to give you a feel of where we feel marketing spending will go and that was the Q4 marketing spend for Canada was 7 million Canadian and that should run right across the full year. But I can't really comment to EBITDA for the full year.
Chris Savage
Okay. And Andy, the market access was 53 all up in 22. You suggest that that will be smaller in 23 with the fourth states you are looking to launch in? Can you give us an idea what the total cost those four states will be?
Andrew Mellor
Yes. I mean, I can talk to -- let's Talk to FY ‘22. I mean, we had two very large payments in FY 22. That was 25 million in New York and 11 million US in Pennsylvania. So we don't anticipate payments of anything like that scale for the four states. And so yes, that's why the reference was made on the call, but we expect the market access payments in FY 22, to be significantly lower than FY -- in FY '23, to be significantly lower than FY '22.
Chris Savage
And I don't know, Sam, or Johnny, Johnny said this quite quickly. So is the target now 14 live state at the end of FY '23 because that seems a bit of a change from for when it was CY '22.
Sam Swanell
Yes. Well, we were ready to go for CY '22. I think what Johnny's intimated there, that Ohio, the regulators not going to be ready to go until the end of January. So they've sort of come out and said that so that's a little bit where -- behind where most would expect a few months ago. And Maryland's a little bit of a watching brief. So we're on the Kansas starting line, and the first will be on the Maryland starting line, whenever it's ready to go and Ohio, but yes, it might be out of our hands, but the one that is obviously a live market, a catch up state for us is Louisiana. And I think within a month of NFL season, so within the next month or so we'd be expecting to be launching in Louisiana, subject to regulatory [indiscernible].
Chris Savage
So just Sam, I'm not being critical. You get Kansas, Louisiana, Ohio and Maryland up sort of by January next year, does that then suggest you won't -- don't anticipate launching any more states for the remainder of the second half of FY '23?
Sam Swanell
Yes., I mean, I think that's the current intent. One state that's a little bit of a watching brief is Massachusetts. I think our general position feel at this stage is, is that we really don't want to let new states go by, because we do see that as an opportunity to be on the starting line and not give up that disadvantage. But we are conscious of sort of a quality over quantity approach. And we want to make sure that we're maximizing our execution. So but Massachusetts maybe a main sort of swing factor there.
Chris Savage
And last question, is the next big state likely to be Texas. I mean, you've always said Florida is unlikely, California is a way off. So you've got your partner set up. So is that likely to be the next big one?
Sam Swanell
Well, I mean, there's actually a really big ballot initiative playing out in California in November. So being a lot of money being spent by various online operators and tribal parties, and with some opposing initiatives on the ballot. So there is a chance that we see some action out of California at the end of the year, and perhaps a market going live late next year. I think our view is perhaps that it's maybe less likely than likely. But so California is, certainly in the discussion. And then, from a Texas perspective, we'd expect to see some discussion around that they have a bi-annual sort of process. So that discussion should happen like next year, middle of next year. I think he's right. So that we're not going to sort of get any more insight for probably another 12 months on Texas.
Chris Savage
Great, thank you.
Operator
Thank you. There are no further questions at this time. And that does conclude our conference for today. Thank you for participating. You may now disconnect.
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PointsBet Holdings Limited (PBTHF) Q4 2022 Earnings Call Transcript