US expansion costs see full-year losses widen for PointsBet
US expansion costs have led to a significant increase in PointsBet's net loss for its financial year ended 30 June, though the Australian online sports betting operator was able to more than double revenue for the period.
Statutory net revenue for the 12 months through to June 30, 2019 amounted to AUD$25.6m (£14.2m/€15.6m/US$17.3m), up 173% from $9.4m in previous year.
The growth of its core Australian business powered this increase, with revenue from operations in the country standing at $26.3m. This was driven by a 181% jump in net win, rising from $10.3m to $28.9m.
However, in the US, where PointsBet launched its services in January of this year, it reported a loss of US$515,000, from gross win of US$1.5m for the period. This was down to heavy promotional spend, totalling US$2.1m, but this had helped it establish a presence in a number of newly-regulated states, it said.
In particular the operator pointed to a growing presence in New Jersey, where it was responsible for 5.4% of overall online turnover in June 2019 – up from 2.2% in February.
Spending was up significantly year-on-year across the business, with statutory total operating expenses climbing from $11.8m in FY2018 to $47.8m in the past year.
Sales and marketing costs rocketed from $6.2m to $24.9m as PointsBet sought to promote its brand in the US market, while employee benefit expenses grew to $15.6m as it increased its staff headcount in the US.
Elsewhere, group product and technology expenses were up from $300,000 to $1.9m, while administrative and other expenses hiked from $900,000 to $5.3m for the period.
This higher spending led to an increase in statutory loss after income tax, which climbed from $6.7m to $41.9m. As a result its pre-tax loss also widened from $6.7m to $39.0m, while earnings before interest, tax, depreciation and amortisation loss increased to $37.2m.
However, the operator noted that statutory gross profit more than doubled to $10.9m for the period.
Reflecting on the results, group chief executive Sam Swanell was upbeat about the performance, describing FY2019 as a transformative year for the business, citing growth opportunities in the US as a key focus moving forward.
Aside from New Jersey, PointsBet is now cleared to launch in Illinois, Indiana, Iowa, Pennsylvania and West Virginia. Agreements are also in place to go live in Colorado, Louisiana, Missouri, Ohio and New York, as soon as commercial sports betting becomes legal in each state.
“The technology agility and operational focus that allowed PointsBet to launch so swiftly and effectively in New Jersey will be a significant competitive advantage as the company launches in numerous states in FY2020 and beyond,” he said. “PointsBet is on the starting line of the nascent US sports betting opportunity.”
Swanell also paid tribute to the operator’s performance in its native Australia, saying that its operations in the country remain a vitally important part of its global business.
In terms of FY2020, Swanell said the operator has started the period well, with gross win standing at $52.7m and turnover at $567.1m. Net revenue, after promotions, currently stands at $28.2m for the period.
“The team is laser focused on the clear opportunity ahead and is structured in such a way to deliver maximum economies of scale as we enter new markets,” he said.
“Through our in-house technology platform and one team global structure, PointsBet will benefit from operating margins that deliver a competitive advantage for the long term.”