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PointsBet Q4 2023 Financials Set Stage For Fanatics US Takeover

Written By Derek Helling on July 28, 2023 - Last Updated on January 23, 2024
bar graph demonstrating net win for pointsbet casino as fanatics is soon to take over operations

Based on how you read the tea leaves of PointsBet’s latest earnings report, Fanatics Betting and Gaming might be taking over that company’s United States operations at a perfect time. Another reading is that the data PointsBet shared is insufficient to show whether Fanatics is taking over a product with an upward trajectory.

PointsBet reported several positive metrics relative to its US business in the final quarter of its 2023 fiscal year. Fanatics faces many decisions on how to proceed once it takes the reins, though.

PointsBet says US online casino win almost doubled in Q4

According to an investor presentation from PointsBet, the final quarter of its FY23 was a solid one for its US online gambling products. Most notably, net win from its online casino product came to $12.6 million. That represents an increase of 89% compared to the net win of $6.7 million in Q4 FY22.

The final quarter of the past fiscal year was overall positive for PointsBet’s sports betting operations as well. From both in-person and online channels, net win improved by 20% compared to Q4 FY22.

Those numbers helped to put PointsBet’s net win from sports wagering up 58% for all of FY23 compared to FY22. In terms of real-money online casino activity, net win there grew by 122% in FY23 to $43.8 million.

PointsBet sweetened the presentation even further by stating that its US marketing expenses in Q4 FY23 dropped by 26%. Similarly, US promotional spending dropped 24% over the entire fiscal year.

As a result, PointsBet says its promotional spend represented 34% of gross win in the final quarter of FY23. In short order, it will be on Fanatics to maintain and improve upon these metrics. At the same time, it’s important to consider the context of these numbers.

Right time, right place for PointsBet Casino

The improvement in PointsBet Casino’s net win happened as US states with regulated online casino apps were setting revenue records. Therefore, there’s somewhat of a “rising tide that lifts all ships” affect visible in PointsBet’s improvement. Put another way, PointsBet Casino was in the right place at the right time to get a slice of a growing pie.

The impact of that becomes even more visible when PointsBet’s market share in states like Michigan, New Jersey and Pennsylvania are considered. For example, in a record-setting March for Michigan online casino revenue, PointsBet also set its own single-month record for online casino revenue in that state.

However, that record sum for PointsBet amounted to less than a percent of the statewide win for the month, putting PointsBet in dead last among all licensees. While market share isn’t the only potential measure of success, it’s possible to be profitable even with a small market share, Fanatics has never been a company to rest on minuscule laurels.

If Fanatics intends to grow PointsBet’s market share, it might take more investment. That, in turn, could disrupt the improvement in the expense-to-win ratio that PointsBet touted in its Q4 presentation. That’s another consideration for assessing the future of PointsBet Casino when Fanatics completes the acquisition.

Will Fanatics reverse the promotional spend cutbacks?

Even prior to the announcement of Fanatics’ takeover of PointsBet’s US operations, the writing was on the wall that PointsBet was keen to divest from the US. Such moves included ending its promotional deal with NBC for Sunday Night Football.

While Fanatics has a lot of name recognition within the consumer goods space, the gambling product will be novel to many consumers. Additionally, the extent to which it can deploy its customer database to market its gaming offerings could be quite limited. That has already drawn the ire of gaming regulators.

Thus, Fanatics could have incentive to reverse PointsBet’s cutbacks on promotional budgets. While there’s no concern about Fanatics having the financial resources to do so, the issue is more in what that means for the gaming product’s sustainability.

The customer acquisition strategy of simply throwing money at it has clear limits. At some point, the spend naturally becomes untenable. There’s a point at which potential customers are so inundated with brand mentions that it actually creates an adverse reaction.

It’s easy to say less is more when you aren’t at the helm of a business that is accustomed to dominating industries and sees a market share of less than a percentage point in a new category. In the near future, the promotional expense to win ratio for PointsBet Casino might not be so favorable.

However, Fanatics may be willing to endure a deterioration there if it sees its market share and win totals improve. Either way, Fanatics will have to make these decisions soon.

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Derek Helling

Derek Helling is the assistant managing editor of PlayUSA. Helling focuses on breaking news, including finance, regulation, and technology in the gaming industry. Helling completed his journalism degree at the University of Iowa and resides in Chicago

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