PointsBet Posts Profits in Q3

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Australian-listed sportsbook operator PointsBet is a feel-good story for the global sports betting industry as evidenced by some surprising Q3 revenue numbers. Despite COVID-19 stopping major sports around the world, PointsBet posted a 139.7% increase in net revenue for the third quarter according to one published report.

The surge in revenue has been traced back to success in Australia and in the emerging US markets. Currently, PointsBet has a presence in New Jersey, Iowa, and Indiana with an eye on further expansion once the world gets back to normal and the US sports betting scene continues to evolve at lightning speed.

Reasons for revenues

As mentioned, PointsBet's revenue increase for Q3 can be attributed to success in both the Australian and US markets. During the quarter which ended March 31, Australia's arm of the company posted about $12 million US in overall revenues while the US contributed about $8 million in revenue. The company’s active clients climbed to 106,000 users combined in those markets which amount to a 63% spike.

Australia recorded the biggest handle over the quarter with $116 million coming into PointsBet, a 58.3% increase with record net win and positive earnings before interest, tax, depreciation, and amortization (EBITDA). The US market, limited by just three states recorded $59 million - $55 million of which came from New Jersey. The numbers out of the Garden State are considered positive considering that more than half of March was lost including the lucrative March Madness tournament.

$15.5 million of PointsBet’s net win came from Australia, up 89.8% compared to just $3.3 million from the US, which actually posted a loss in net win in Q3 of the previous fiscal year.

Losses?

PointsBet, not unlike other major sports betting providers around the world actually reported a net loss of about $10 million in Q3 of the fiscal year (which was down from $14.4 million in Q2) according to igamingbusiness.com. Simply put, revenues were outpaced during the quarter by expenses. The reason is a familiar one to those that follow the financials of sportsbooks in the US over the last year.

The losses are due to company costs which can be attributed to the price of expansion. License acquisition and the launch of sites in multiple jurisdictions costs money, as does the initial marketing of their brands. PointsBet plans to reduce marketing costs in Q4 from the $7.7 million it recorded in Q3 to $1.2 million in Q4.

The future looks bright

The coronavirus has acted as a body blow to the US sports betting industry but there may be a silver lining for PointsBet. First and foremost is the shift in how people will look to place their bets post-COVID. Online platforms are sure to dominate the wagering scene, even more than pre-shutdown numbers that saw a few states report over 85% of their monthly handle coming via mobile means.

PointsBet is also in a good position to capitalize on states not only hoping to, but needing to find a way to generate some tax revenue in order to dig their states out of what is sure to be an enormous coronavirus hole once the world returns to normal. States may be more willing than ever to launch their own legal betting platform and PointsBet will be there to pounce if that opportunity ever arises.

Then there is PointsBet's impending expansion to three more states - Colorado, Illinois, and Michigan. The company will also gain a foothold in Kansas and will roll with a third digital sportsbook in an already successful state, Indiana.

The results

PointsBet has served notice that they are a serious global brand. Not only did they post profits during a time of global shutdown, but the company's share price was up 12% at the start of trading on Tuesday.

Q4, which ends June 30 will surely be painful but PointsBet seems to be in a strong capital position for the eventual return of sports to our lives. The company has a strong presence in the most bet-friendly states in the US, has proven to be well prepared and hasn’t been afraid of expansion during this unprecedented time in the earth’s history.

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