Penn Entertainment sees slight revenue increase in Q4, sports betting segment posts profit

Penn Entertainment has shared its financial results for the fourth quarter of 2022. During Q4, the casino and gaming company saw a small revenue increase, up by 0.8% to $1.6 billion. While revenue came in right around expectations, the company’s interactive gambling business made a profit, notable given it is tougher to deliver one during the third and fourth quarters, as sportsbooks spend more on marketing and promotions during football season.

The last quarter of the past year also saw a net income of $20.8 million and a net income margin of 1.3%, down when compared to income of $44.8 million and a margin of 2.8% in the prior year. Adjusted EBITDA came in at $438.3 million, an increase of almost 19% year-over-year. 

The Q4 results missed Wall Street’s forecasts: while earnings were expected to be $0.33 per share, instead they came in at $0.13 per share, sending Penn Entertainment’s stock down over 4% in early morning trading, reports WFMZ.

Revenues for Q4 and the year came in right around expectations, meaning expenses exceeded projections. The culprit was interest expense, increasing $60 million in the quarter and $195.4 million for the year, as the Federal Reserve raised interest rates multiple times to tame inflation. However, management for the Wyomissing-based company had a positive outlook for 2022. 

Jay Snowden, CEO and President, commented: “2022 was a solid year for Penn despite ongoing macroeconomic headwinds. I’m proud of Penn’s numerous financial and operational achievements in the past year as well as our continued progress on the ESG front. We remained focused on executing our leading omni-channel strategy, which drove database growth and further engagement with our expanding 21-44-year-old cohort.” 

Snowden noted Q4’s revenue of $1.6 billion was impacted by severe weather in certain parts of the country in December. But looking forward, the CEO said 2023 has “numerous near-term growth opportunities” in store for the company, including the transition of its Barstool Sportsbook brand to Penn’s proprietary technology platform in the US this summer.

For 2023, the company is providing revenue guidance in the range of $6.15 billion to $6.58 billion, and an Adjusted EBITDAR range of $1.875 billion to $2 billion. “This outlook reflects our momentum in both our Retail and Interactive segments and the potential for further economic headwinds as well as increased supply in a few of our markets,” said Snowden.

A highlight for 2022 saw Penn Entertainment achieve profitability in its Interactive segment in Q4, notwithstanding an unfavorable sports betting outcome in the World Series and inclusive of expenses related to launches in Maryland and Ohio.

theScore, Penn's Canada-facing brand

Penn’s interactive business, which also includes online casino games, made a $5.2 million profit on $208 million in revenue during the fourth quarter. The performance helped lift the company’s overall revenue for the period by nearly 1%.

“Following our successful playbook in Kansas and Maryland, our omni-channel marketing approach in Ohio led to one of our strongest launches to date of our Barstool Sportsbook,” management noted. “Our deep customer database, retail footprint, and powerful Barstool Sports marketing engine contributed to a record number of first-time depositors at launch this January despite minimal external marketing expense.”

Meanwhile, in Ontario, Penn’s theScore Bet continued to experience “strong momentum,” achieving record gaming revenue in December for both sports betting and online casino. According to the Pennsylvania-based gaming company, the transition to a proprietary tech stack last summer resulted in higher customer engagement and a noticeable increase in hold rates.

“In addition to expected cost synergies, our Ontario success suggests that there is meaningful revenue potential post-migration once we are able to leverage our advanced trading and promotional tools,” said Snowden. “Finally, we are excited about our recent launch of the Barstool Sportsbook in Massachusetts at Plainridge Park Casino and are looking forward to our launch of online sports betting in March.”

The business also provided an update on marketing activity on its mychoice database, which generated approximately 1.3 million new rated customers last year. Approximately 300,000 of those guests signed up in the fourth quarter, representing a 15% year-over-year increase. Over 50% of the database growth during Q4 came from online, and an emphasis on cross-channel experiences led to a 25% increase in guests who engage across multiple channels.

“Our 21-44-year-old demographic has steadily grown their share of total retail theoretical to 18.5% by year-end. We also saw positive momentum in our mychoice app downloads and the adoption of our industry-leading cashless, cardless and contactless technology – 3C’s –, which is now deployed at twenty-one properties representing approximately 70% of our retail EBITDAR,” added Snowden.

As for the financial performance for the full year, the company posted $6.4 billion in revenue. Total liquidity as of December 31 was $2.6 billion, inclusive of $1.6 billion in cash and cash equivalents. Traditional net debt as of the end of the quarter was $1.1 billion, an increase of $189.6 million from 2021 due to a lower cash balance.