Why Betmakers (ASX:BET) share price jumped when losses deepened

The company's shares are rallying after it unveiled a big jump in revenue but also a big loss.

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The Betmakers Technology Group Ltd (ASX: BET) share price rallied after the company unveiled a big jump in revenue but a bigger profit loss.

The online bet technology group posted a 126.7% surge in FY21 revenue to $19.5 million. But its net loss blew out by three-fold to $13 million versus FY20's $4.4 million loss.

Betmakers share price beating the odds

The red ink did not deter investors. The Betmakers share price increased 3.1% to $1.16 in early trade as the S&P/ASX 200 Index (Index:^AXJO) added 0.4%.

In contrast, gaming heavyweight Crown Resorts Ltd (ASX: CWN) share price fell 0.4% to $9.28 when it released its results.

More red ink

The group's adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was a negative $2.9 million.

This is also worse than the previous year's $847,000. Adjusted EBITDA excludes impairment/recovery of receivables, share-based payments expense, and Sportech related deal costs.

The widening earnings loss is due to extra investments Betmakers needed to make to support its international expansion. For instance, it spent $2.4 million just in operating expenses for its US business alone during the year.

Why Betmakers share price can rally as bottom-line falls

But investors' focus tends to be more on the top- than the bottom line when it comes to high-growth ASX small caps.

In that regard, Betmakers is kicking goals. Its Global Betting Services division won a 130% revenue payoff with sales jumping to $14.6 million. This division accounts for around 75% of total group revenue.

Global Betting Services is a business-to-business (B2B) global racing solutions provider that offers services like fixed odds pricing and platform development.

Contributing to growth

Meanwhile, the group's Global Racing Network division expanded FY21 revenue by 44% to $3.2 million compared to the previous year. Management credits the expansion of its content and distribution network for the growth.

This division operates in 36 countries and covered over 300,000 races during the financial year. Some of the services the business provides include rights management, racing vision and reporting and analysis.

Further, the group's acquisition saw its Globel Tote business contribute $1.7 million to total revenue in the period. And this was just from the first 14 days of the acquisition.

Betting on more growth ahead

Betmakers also indicated it's hunting for other opportunities to grow inorganically – either through takeovers or partnerships. But management's focus will be on expanding its operations in the US market.

The Betmakers share price has surged by over 120% over the past year when the S&P/ASX SMALL ORDINARIES (INDEXASX: XSO) gained 25%.

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Betmakers Technology Group Ltd. The Motley Fool Australia has recommended Betmakers Technology Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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