PointsBet (ASX:PBH) share price slides 8% after Q1 trading update

Despite impressive growth across several metrics, PointsBet continues to burn through cash.

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The PointsBet Holdings Ltd (ASX: PBH) share price tumbled on open after the company released its first-quarter trading update for FY22.

At the time of writing, the PointsBet share price is down 8.62% to $9.65.

PointsBet share price slides despite triple digit growth in US

PointsBet recapped yet another solid quarter of growth fuelled by the fast-growing North American sports betting market.

Some key Group highlights include:

  • Turnover rose 42% on prior corresponding period (pcp) to $979.9 million
  • Gross win margin improved to 11.9% from 10.2% (gross win is the dollar amount received by PointsBet from clients who placed losing bets less the dollar amount paid to clients who placed winning bets, excluding promotional costs)
  • Net win increased 76% to $67.3 million (net win factors in promotional costs)
  • Cash active clients in Australia rose 79% to 222,622
  • Cash active clients in the US surged 367% to 185,880

What happened to PointsBet in Q1?

PointsBet’s Australia business grew at a moderate pace, with turnover up 20% to $631.4 million. This is in addition to achieving a record quarterly result for net win and numbers of first-time bettors.

PointsBet US continues to be the company’s focal point for growth. Its US business delivered triple-digit growth across the board. There was a 112% increase in turnover to $348.6 million and a 378% jump in total net win across sports betting and iGaming operations.

During the quarter, PointsBet successfully launched sports betting operations in West Virginia and iGaming operations in New Jersey.

PointsBet is ramping up its operations in Canada and has signed two long-term partnerships to offer its betting services.

From 27 August, single-game sports betting was made legal in Canada, at the discretion of its provinces and territories.

During the quarter, net cash from operating activities (excluding movement in player cash accounts) was negative $38.1 million.

Why is the PointsBet share price struggling?

At face value, PointsBet delivered an impressive first-quarter performance with double-digit growth for the Group and triple-digit growth in the US.

However, PointsBet continues to burn through cash, with negative cash flows of $38.1 million.

Looking back at its FY21 results, the company reported a 159% increase in revenue to $194.7 million. However, that wasn’t without its shortcomings, in the form of a 314% increase in losses to $164.3 million.

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Motley Fool contributor Kerry Sun 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 Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings 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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