The Pointsbet Holdings Ltd (ASX: PBH) share price has fallen 6% in morning trade after the company provided an underwhelming second-quarter trading update.
The business has lost market share in five of its seven North American markets, with just one improving its position during the quarter.
PBH share price
Turnover moderates, cash burn accelerates
Key financial results for the second quarter include:
- Wagering turnover of $1.19 billion, up 11% year-on-year (YoY)
- Gross Win (losing bets subtracted by winning bets) of $133.8 million, a 60% YoY jump
- Total Net Win (gross win minus in-app promotions) of $77.3 million, up 73% YoY
- Cash used in operating activities of $51.8 million
- Cash on hand of $523.3 million
Pointsbet achieved a marginal increase in betting turnover relative to what it has spent on marketing and new market entries over the past 12 months.
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The marketing expense was $65.6 million while adding roughly 36,000 new customers. This implies Pointsbet is spending upwards of $1,800 to acquire a new customer.
Cash burn accelerated compared to the prior quarter. Pointsbet currently has approximately 10 quarters of cash to support the current cash burn.
Positively, the turnover Pointsbet is receiving is becoming more profitable, evident by the increase in gross and net win margin line items over the period.
Australia
Australia recorded a big bump in turnover of 34%. However, it failed to translate into a meaningful revenue increase, with net win rising just 7% to $53.1 million.
This implies that Pointsbet largely used in-game promotions such as bonus bets to entice customers.
The company continues to attract new customers to its platform. Clients who have placed a bet in the last 12 months increased 63% YoY.
Furthermore, app downloads have increased 121%.
United States
Despite launching several new markets throughout the year, North America recorded a turnover decrease of 9% YoY.
But it was positively impacted by a higher win margin leading to a 425% jump in gross win to $41.6 million.
Subsequently, net win was $18.8 million compared to a loss of $5.1 million one year ago.
Pointsbet iGaming product, which provides a casino and mini-games via the app, added another $5.4 million in net win.
Positively, the business has been able to triple its customer base from 68,094 to 211,113 over the past year.
My take
The Pointsbet cash burn is troubling to say the least.
It looks to be overpaying for new customers, and the North American expansion is struggling based on the market share and turnover declines.
Subsequently, I’d be avoiding the Pointsbet share price for the time being.
If you’re looking for new share ideas, check out four ASX shares I’m watching in 2022.
