Penn Entertainment’s first quarter earnings call elicits questions about Barstool personality

May 4, 2023 4:05 PM
Photo: Shutterstock
  • Rege Behe, CDC Gaming Reports
May 4, 2023 4:05 PM

Penn Entertainment’s 2023 first quarter report revealed revenue of $1.67 billion, a year-over-year increase of 6.8%.  Net income increased from $52 million in the first quarter of 2022 to $514.5 million, a jump of 897%.

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But Thursday’s earnings call with analysts, media, and investors was at least partially overshadowed by another controversy concerning a Barstool Sports personality. May 3 reported that Barstool’s Ben Mintz was fired after reading a racial slur from a song’s lyrics on air. After being queried about the incident Penn Entertainment CEO Jay Snowden said “we’re obviously not commenting on personnel issues on the call.”

“We felt like we dealt with it appropriately,” Snowden added. “And I would also say that you’ve been following us and the relationship, and I think the public markets and financial community has gotten to know Barstool pretty well over the last three years, and there’s going to be some drama sometimes. There’s going to be some things that pop up here and there, and we’ll manage through those as we always have.”

Penn Entertainment completed its acquisition of Barstool Sports in February 2023.

Barstool CEO Erika Ayers added that “we also are a company that talks about anything and everything incessantly.”

“This is a company that is authentic, it’s a company that is unapologetic, it’s a company that exists on the internet 24/7,” Ayers said. “And that’s part of what makes Barstool interesting, that we are not particularly corporate in how we think about the culture of our content.

“Now there are certain lines you don’t cross, there are guardrails that exist. Those have obviously increased now that we’re in a highly regulated category. And we knew that going into the Penn acquisition, we knew that prior to that going into the Penn investment.”

Regarding Penn Entertainment’s financials, Snowden reported that the first quarter was solid and “with  consistent retail performance across most of our portfolio. Our properties proved to be more resilient than initially anticipated given the increased supply on the market and the ongoing uncertain macroeconomic environment.”

Snowden said the operator is cognizant of the variables of the gaming industry. He said the last weekend of April was the company’s strongest of the year in terms of slot volume after a “relatively slow start around Easter.”

“You go through these pockets of two or three weeks where trends start to soften up, and then they come back real strong,” Snowden said. “And we’re still kind of going through that in real time. So as of right now, we’re feeling really good about the volumes and customer trends and behavior.”

Analysts had mixed feelings about Penn’s first quarter report.

David Katz of Jefferies wrote “The lower than consensus results, albeit better than our conservative forecast, coupled with the sustained guidance, should be neutral to modestly negative for the shares. However, the progress in the loyalty program, the formative progress in interactive and the prospective impact to the land-based business are longer term positives. We expect management to address.”

“Relative to others who have reported 1Q23 earnings thus far, we would have thought there would be more upside to Penn’s regional estimates ($511m versus our $513m) even on our recently raised estimates,” wrote J. P. Morgan analyst Joseph Greff. “Recall, in mid-April we took land based EBITDAR to $513 million from $504 million. Penn called out some softness in the South, but noted this was offset by stronger trends in the Northeast (similar to recent commentary from Boyd on its 1Q23 call).”