Despite a huge winning bet by Jim “Mattress Mack” McIngvale and inclement weather in December, Penn Entertainment’s 2022 fourth-quarter results were consistent, according to CEO Jay Snowden during Thursday’s investors’ call.
McIngvale’s bet on the Houston Astros to win the World Series via Penn’s Barstool Sportsbook cost Penn $10 million. And Snowden claimed that “severe weather in certain parts of the country” before the Christmas holiday put a drag on revenue.
Despite those deterrents, Penn’s revenue for the fourth quarter reached $1.6 billion, a year-over-year increase of 0.8%. But net income for the quarter, $20.8 million, decreased by more than 50% compared to the $44.8 million generated in the fourth quarter of 2021.
“As you can see from our earnings release and corresponding investor presentation, we wrapped up another solid year despite ongoing macroeconomic headwinds throughout the year,” Snowden said during the call.
“The quarter ended on a high note with strong performance between Christmas and New Year’s across the portfolio, which has continued through January,” Snowden added.
Snowden cited the scheduled completion of the acquisition of Barstool Sports on Feb. 17 as a reason for optimism for the first quarter of 2023. That acquisition ties into the rollout of sports betting in Massachusetts earlier this week, where a Barstool Sportsbook opened at Plainridge Park Casino.
“We have high expectations for sports betting in Massachusetts for obvious reasons,” Snowden said. “Barstool was founded there and has a huge following. They’re celebrating Barstool’s 20th year since being launched in 2003, so there’s a long-term relationship and loyalty there with the audience.”
Snowden added that he’s also optimistic about Penn’s prospects in Ohio, which launched sports betting on Jan. 1.
“Based on what we’re seeing in Ohio — and again, we haven’t seen market share results, all we’re seeing is our own numbers, but — we’re feeling really good about our launch in Ohio,” he said. “We expect that to be one of our top-performing states.”
Snowden said Penn currently operates 31 retail sports books across 14 states, with a market share of approximately 18%. He particularly emphasized the company’s success in Ontario, Canada, where Penn purchased the Toronto-based Score Media and Gaming (TheScore) for $2 billion in 2021
“Ontario is now our top market in North America for both sports betting and icasino, with strong growth and positive trends through our first NFL season, including record growth and net revenues in December,” Snowden said. “We were able to maintain our market share in Ontario this quarter despite a 50% increase in the number of operators in the province.”
Snowden also cited other positive outcomes as reasons for optimism, including:
- Approximately 1.3 million new rated customers in Penn’s MyChoice database, with 300,00 signing up in the fourth quarter;
- Increased adoption of Penn’s card-less and contact-less technology, now deployed at 21 properties that represent 70% of the company’s EBITDAR;
- Plans to go live across all states with its proprietary tech stack during Major League Baseball’s All-Star week that starts July 10, 2023.
Analyst Joseph Greff of J.P. Morgan noted that there are “nits to pick” with Penn’s results, but they are explainable. In a statement, Greff wrote that the company’s fourth-quarter shortfall “shouldn’t be surprising given the weather impact in December (recall Caesars Entertainment mentioned this last week). We probably think Penn’s full-year 2023 guidance (a wider than normal range, too) likely has some conservatism baked in given an uncertain and evolving macro. And we ask ourselves this — how many gaming operators are proving full-year 2023 guidance this earnings season? One, and that’s Penn. We rate Penn neutral.”
Jeffries Analyst David Katz termed Penn’s results “solidly sideways for now.”
“The modest performance versus expectations and flattish guidance based on margin pressures and external headwinds are expected, and ultimately neutral for shares,” Katz wrote in an analyst’s statement. “We also note the progress in interactive is an incremental positive for the longer-term set-up. Nevertheless, the near-term operating pressures appear to mitigate upside share prospects for the time being.”