PointsBet narrative remains unchanged: Massive cash burn and continued US expansion

It’s always difficult to tell which direction PointsBet (ASX: PBH) will trade after burning through $93.8m in the March quarter.

Surprisingly, the PointsBet shares are up 8.5% at noon. Though, the uptick is inconsequential considering the stock remains down -60% year-to-date.

March quarter at a glance

• Turnover of $1.4bn, up 54%

• Gross win of $124.9m, up 24%

  • Gross win is the dollar amount received from losing bets less the dollar amount paid to clients who placed winning bets

• Total net win of $76.9m, up 18% 

  • Net wins is the same as gross win, less promotional costs

• Cash position of $475.1m

Australia: Steady she goes

PointsBet Australia has been a solid, cashflow positive business for quite some time now.

• Turnover of $579.4m, up 37% (41% of Group turnover)

• Gross win of $78.7m, up 44%

• Net win of $52.3m, up 37% (68% of Group net win)

Management said that the March quarter is historically seasonally quieter, given the sporting calendar. Though, reaffirmed that the Australian business will continue to be cashflow positive for the remainder of FY22.

US: Expansion momentum

For the uninitiated, the US Supreme Court overturned the federal ban on sports betting in 2018, allowing state governments to set their own policies. Currently, 32 states have legalised sports betting. 

It's not often that a new, +US$70bn market opportunity emerges in this day and age. The US sports betting market is often viewed as a land grab opportunity as bookmakers battle it out for market share. We’ve so far learnt that this is a rather ‘expensive’ opportunity. 

The good

The big picture for PointsBet US is quite simple - obtain licences or partnerships to launch in more states. The company continued its North American expansion during the quarter, including: 

• Launched New York online sportsbook in January

• Launched West Virginia iGaming in January

• Launched Pennsylvania online sportsbook in February, iGaming in April

• Launched Ontario online sportsbook and iGaming in April

PointsBet has some momentum behind its back, with March quarter turnover growing 70% to $818.6m.

The bad

Cash burn is an obvious sore spot for PointsBet. After all, with so many different sports betting providers to choose from, big bonus bet promotions are needed to lure new customers onto the platform.

Gross win for PointsBet US rose just 1% to $46.1m, this could indicate that big bettors are driving unusual outcomes.

Things were more underwhelming at the net win level, down -8% to $24.6m, indicating an outsized use of promotions.

PointsBet isn't getting awarded for its aggressive marketing spend, as its online handle market share declined to 3.6% from 4.8% in the December quarter.

Food for thought

PointsBet has just launched in New York, the largest sports betting market in America.

If PointsBet were to take this market seriously, it could suggest more cash outflows for marketing, sponsorship and promotions.

PointsBet 12-month price chart