By - Team Kalkine Media
- PointsBet shares had a strong rally today after disclosing a partnership with NBCUniversal, which would also have a stake in the company.
- Market capitalisation of PointsBet soared past the two billion mark at around $2.14 billion, after shares closed almost 87% higher today. Traders are pricing PBH share over $13, which is the exercise price of options to be issued to NBCUniversal and shareholders.
- PBH is also seeking to raise capital, and has disclosed full-year results for FY20, highlighting strong growth across key KPIs.
PBH shares spiked this morning after the corporate bookmaker announced full-year results, partnership with NBC, and intentions to raise further capital. Being a growth stock, PointsBet offers high-growth potential due to its expanding markets and digital offering.
Market participants have really cherished the news of a five-year deal with NBCUniversal Media, LLC, a sports-based subsidiary of broadcasting giant Comcast Corporation.
Although sports betting was halted amidst COVID-19 because of no sports, PointsBet Holdings Limited (ASX:PBH) gave better visibility in its quarterly reports, as revenues soared and Australian business was EBITDA positive. Now the partnership with NBC is perhaps the icing on the cake.
PointsBet Enters Five-Year Partnership with NBC
NBC, with a sports audience of more than 184 million, could allow PointsBet to market its product across a wide audience because of dominant NBC sports offering in the United States.
Under the marketing agreement, PBH has committed spending around US$393 million progressively during the partnership period, including incentive payments to NBC on customer referrals. PointsBet will be an official sports betting partner of NBC Sports.
PointsBet will seek shareholder approval to issue 66.88 million options to NBCUniversal at an exercise price of $13, maturing and capable of exercise at five years. Upon approval, NBCUniversal will be issued with ordinary shares, representing a 4.9% stake in PBH.
NBCUniversal has an option to receive $105 million in cash as an alternative to options. If cash is paid by PointsBet and options are cancelled, it would represent consideration for media rights provided already.
As per the agreement, the company would have exclusive gameday integrations with NBC Sports Regional Networks. It would be an exclusive sports betting partner on NBC Sports Predictor app.
A senior executive from NBC suggested that the partnership provides âconsiderable opportunities in the fast-growing sports betting marketplaceâ. PointsBet is definitely going to have a wider reach under the agreement.
A platform like NBC Sports will enable PointsBet to unlock further growth for its offering and likely enable market share gains for the company. In addition to broadcast audience, the partnership provides an opportunity to touch base 60 million monthly active users on NBC digital platforms.
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Capital Raise Program to Support Growth
PointsBet intends to raise capital and has proposed an entitlement offer and a placement. The company is expecting a share trading halt on 2 September 2020 and launch of the capital raising after market close on the same day.
Entitlement offer ratio is one share for every 6.5 shares of the company. Under the entitlement offer, PointsBet plans to offer one free attaching option for every two shares, having an exercise price of $13. Attached options are anticipated to expire on 30 September 2022 and are exercisable at any time before the expiry.
Although the capital raising plans are expected to raise approximately $300 million, PointsBet may increase or decrease the size of offering.
FY20 Revenues Tripled Over FY19, While Losses Remain Almost Same
In FY20 ended 30 June 2020, PointsBet recorded a turnover of $1.15 billion, which means the amount of betting passed through its systems. The company has over 111k active clients and is now operational in three US states.
During FY20, over 17 million bets were placed on PointsBet platforms, and PBH had recorded net win of $82.1 million.
In less than three years of launch in Australia, the company has achieved the first year of positive EBITDA from the Australian business. During the year, it also increased US market presence significantly and had market access to 12 states at the end of the year.
PointsBet continued investing in cloud-based platform, and strategic hiring was undertaken, especially in technology and product development teams. The company is committed to develop its proprietary platform and improve marketing.
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On a normalised basis, FY20 revenue increased by 193% to $75.17 million from $25.61 million in the previous year. EBITDA loss for the year was $37.5 million compared to $32.6 million in the previous year. Loss widened 15% to $39.6 million from $34.35 million in FY19.
On a reported basis, the company incurred loss of $41.46 million compared to $41.88 billion in the previous year. EBITDA loss was $39.7 million compared to $37.1 million in the previous year.
Significant items incorporated in normalised results included stock-based payments of $3.41 million, AASB 16 impact of $700k, and unrealised FX losses of $2.3 million.
During the year, the company was extensively engaged in business development in the US states, penning partnerships and agreements with the US-based companies and organisations.
PointsBet also upgraded website and mobile apps for the US markets as well as Australian markets. The company strengthened its cyber systems and launched several new features.
As a cloud-based business, the company has visible profitability with a gross profit of $38.2 million on revenue of $75.2 million. Since it is a growing business, operating costs remain elevated at $78.4 million.
Majority of operating expenses were related to sales and marketing at $35.4 million, and employee benefit expenses of $30.9 million. It was said that gross margin in Australian business was consistent with previous year.
Gradually as the company transitions to execution phase from the launch phase in the US, PointsBet anticipates gross margin would improve over the future with lower promotional expenses.
On 28 August 2020, PBH settled the dayâs trade at $14, up by 88.667% from the previous close.
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