PointsBet Holdings Ltd. has growing hopes for Canada, especially since it has almost completed its exit from the legal sports betting game in the United States.
The Australia-based bookmaker reported on Sunday its financial results for the six months ended December 31.
As part of that reporting, PointsBet said the market for online sports betting and internet casino gambling in Ontario, Canada's most populous province, is expected to grow to as much as $3 billion (Canadian) over the next five years from its current level of around $2 billion.
“This attractive total addressable market (TAM) is expected to be complemented by other provinces creating regulated markets in the coming years, thus providing a natural expansion of the Canadian regulated market,” PointsBet CEO Sam Swanell said during a call for analysts and investors.
Interesting PointsBet included both Alberta and British Columbia in the "opportunity" it sees in Canada in its latest investor presentation.
— Geoff Zochodne (@GeoffZochodne) February 26, 2024
AB has been contemplating an iGaming market similar to Ontario's for months. These public BC ambitions are new.https://t.co/LqN6DhK6vN pic.twitter.com/fzIQUSkYgU
The two Canadian provinces PointsBet is circling as potential spots for new competitive iGaming markets are out west: Alberta and British Columbia.
Legal online gambling in both provinces is currently confined to provincially owned companies. However, if they were to launch competitive markets, Alberta and B.C. would add another 12% and 14%, respectively, of the Canadian population to the total market for PointsBet, in addition to the 38% Ontario already provides.
While it is known that Alberta is examining an Ontario-like system for legal sports betting and online casino gambling, B.C. has not generated the same kind of buzz.
Lobbyist records show BetMGM and PointsBet have put out feelers in the province, but there has been no public announcement of interest in online gambling reform in the same way there has been in Alberta.
A big fan
Yet PointsBet sees an opening there. It also sees that opening as it has decided to abandon the U.S. online gambling market, selling its operations there to Fanatics for US$225 million. Ownership of 13 of PointsBet’s 14 U.S. state entities has now transferred to Fanatics Betting and Gaming, PointsBet says.
The U.S. exit leaves PointsBet with its bookmaking operations in Australia and Canada.
Australia is a much more mature wagering market, and PointsBet has been there for far longer than North America. For the six months ended Dec. 31, PointsBet reported revenue of A$101.7 million and a total gross profit of $50.1 million. In Canada, revenue was A$15.9 million, and profit was A$8.4 million for the same period.
The Canadian business also generated negative earnings before interest, taxes, depreciation, and amortization (EBITDA) of A$12 million for the first half of PointsBet's fiscal year, while in Australia EBITDA was just shy of positive A$1 million. PointsBet booked a total loss of A$36.4 million for the half-year ended Dec. 31, much improved from its A$178.2 million loss a year earlier.
Love those economics
However, online casino gambling is illegal in Australia. In Canada, it’s not, and there are also no fees to pay to partners for access to the regulated market, at least not yet. Those features make it attractive to PointsBet, although “Canada,” at the moment, really means “Ontario.”
Furthermore, PointsBet is partnering with Strive Gaming to bolster its iGaming offerings in Ontario, which will increase the company's selection of online casino games and possibly deliver more "casino-first" customers.
"Rollout of iGaming content and promotional offerings via Strive Gaming partnership will continue and, future legalisations (Alberta expected [in the second half of 2025]) would provide for an expanded TAM,” Jefferies analyst Simon Thackray wrote in a note to clients. “Whilst iGaming and Sportsbook economics differ (lower Net rates but Gross margins for iGaming), the absence of paying a cut of revenue to land casinos is a more attractive market opportunity than in the US, in our view, given higher margins."
PointsBet also says it is "on path to achieve or be close to" breaking even on an EBITDA basis in Canada by next year, which would be its third in the country.
That is "clearly an aim," Swanell said, but one that could benefit from the growth they expect from the Canadian regulated market.
“Alberta, British Columbia seem to be probably at the head of the list to legalize in the next couple of years and provide a natural expansion to that TAM,” Swanell said of the Canadian market.
