Pointsbet has racked up $450m losses in two years chasing US betting market dream

North America is the dream market for wagering companies. But it has been an expensive process for Pointsbet as it tries to win market share in a heavily competitive sector.

Pointsbet has racked up more than $450m in losses over two years as it chases market share in the fast-growing US betting market, but management claim the business has now reached sufficient scale to finally slow its marketing spend.

The North American-centric wagering firm had almost $240m in sales and marketing expenses in 2022, including about $162m in the US alone as it began operations in new jurisdictions and rolled out offerings and enticements to more customers.

Chief executive Sam Swannell says the spend for the current 2023 will not be more that $162m figure, after several years of big marketing budgets. “We’re now at a point where we’re going to be in more jurisdictions [and] have the opportunity to earn more revenue and acquire more clients, but you actually got to spend the same or less than you did this year.”

Mr Swannell said Pointsbet now has about a 3.7 per cent market share in the US, a country where all the world’s biggest betting firms have piled into in recent years as sports betting becomes increasingly legalised.

“We think people should keep in mind is we are the seventh biggest operator in North America now and that‘s where for the next 10 years the, growth in the global gaming market is going to be,” he said.

“So we have put in place the building blocks, scaled the team, got the product and learned a lot from marketing. So from our perspective the hardest part has been getting to this point from a few years ago. We are well and truly in the game now and we have licences that others don’t have.”

The company, which also has former basketball star Shaquille O’Neal endorsing its products in Australia, on Wednesday unveiled a $267m loss for the year to June 30, up from $187m in the previous 12 months.

A one-time market darling, Pointsbet shares have more than halved since January 1 and were down more than 10 per cent in morning trading on Wednesday. Analysts predict the company could be profitable by 2025, but Mr Swannell said investors needed to be aware that North America was the best market to be in globally despite the heavy competition his firm faces.

“Growth may slow in Australia, it will definitely slow in Europe, but for regulated growth the place to be is America. We expect New Jersey to turn positive [financially] this year for us, and once you get that first state going others can follow from there.”

Online sports betting has flourished in America since the US Supreme Court in 2018 struck down the Professional and Amateur Sports Protection Act. Goldman Sachs projects the size of the US sports betting market to rise to $US39bn ($57bn) by 2033 as more states around the country legalise digital betting on sports and racing.

But Pointsbet is one of almost 40 betting operators competing for market share in the US, leading it to spend heavily to gain first market awareness and then also win customers.

Pointsbet has racked up more than $450m in losses over two years as it chases market share in the fast-growing yet intensely competitive US betting market. Picture: Brett Hemmings/Getty Images

Earlier this week, Pointsbet said it will launch sports betting in Kansas, via a “skin” agreement with the existing Kansas Crossing Casino. Kansas will be Pointsbet’s 11th online sports betting market after previous launches in states such as New Jersey, Indiana, Illinois, Colorado, New York and Pennsylvania.

“The path (or speed) to profitability in particular in the United States is a key focus for management,” Pointsbet said in its annual report.

One region where Pointsbet is making money for now at least is Australia, where it announced a positive trading EBITDA (earnings before interest, tax, depreciation and amortisation) of $7.7m for the year to June.

That result was down slightly from the $9.2m EBITDA the Australian arm of the business, which reportedly was recently subject to a takeover offer by the Matthew Tripp-led BetR, last year.

Betting turnover in Australia increased 28 per cent to $2.5bn, slightly more than the $2.45bn in betting Pointsbet took in the US – a 37 per cent rise.

Pointsbet said it has $519.6m cash on its balance sheet, including $46.9m representing client cash, after a $400m capital raise in August last year and a $94m capital investment from the US-based SIG Sports Investment Corp in June.