Penn Entertainment’s third quarter report, issued Thursday, showed year-over-year increases in revenue and net income. The Pennsylvania-based gaming operator posted revenue of $1.6 billion for the quarter, an increase of 7.5% from 2021. Net income rose from $86.1 million in 2021’s third quarter to $123.2 million in 2022.
To maintain the upward trajectory in revenue and income, Penn National plans to appeal to the 21-44 age demographic regarding promotions and improvements to its properties. CEO and President Jay Snowden said this direction is due to the demographic growing from “just a bit over 10% of our total theoretical revenue to nearly 20%.”
“We are continuing to reimagine our properties to appeal to this demographic with dynamic retail support books and sports bars, third party F&D concepts, refreshed hotel products, new entertainment and best-in- class technology which we believe will pay meaningful dividends in the quarters and years ahead.”
Snowden said the strategy of promoting to the 21-44 demograhic was formulated because of two factors: the COVID-19 pandemic and the legalization of sports betting.
After most casinos were closed because of health-related mandates in 2020, Penn sites began to open in May, June, and July of that year.
“We were one of the very few entertainment destinations open at that time, and we saw an influx of younger demographics come in,” Snowden said. “Of course, our focus at the time was we got to get them into our loyalty program, we have to build relationships and so we worked very, very hard to do that. Otherwise, they come in, they’re not your loyalty program, they leave, and you don’t know how to contact them on the back end. I think our properties did a great job of getting people signed up into our loyalty program.”
The legalization of online sports betting also provided Penn Entertainment with an opportunity. Combined with online gaming, the appeal to the 21-44 segment has increased Penn Entertainment’s customer database. Snowden noted that 80 percent of the company’s online casino revenue comes from the 21-44 demographic. About 90 percent of the company’s sports betting revenue comes from the same population.
“The big opportunity is what does that growth look like in two years, five years, ten years down the road is what we’re most excited about,” Snowden said.
Penn Entertainment’s alliance with Barstool Sports is a key factor in attracting and keeping the 21-44 demographic. As previously reported, Penn will finalize a deal to acquire 100% of Barstool in February of 2023. Snowden said no major changes are expected in the relationship between the companies.
“From a media perspective, we’ll have a lot more to share when we close on that transaction in regard in to how to create synergies with our media assets,” he said
Snowden added that Penn has “not done a great job” monetizing foot traffic at its properties. The acquisition of Barstool Sports and Canadian digital sports media company theScore will provide blueprints on how to increase monetization opportunities.
“We’ve never really partnered with any third parties on monetization and partnership opportunities,” Snowden said. “The folks at Barstool and theScore have some of the best salespeople in the sports media industry, and we think there are great opportunities for us to grow that advertising and partnership revenue.”
In a statement, Jefferies Equity Analyst David Katz said that Penn Entertainment’s “modest growth in the quarter, and prospects for growth in the future, should reflect positively on the shares, notwithstanding the broader market weakness.”
“The quarter supports our positive view of the stability in regional gaming and digital opportunities it has created,” Katz wrote.
J.P. Morgan analyst Joseph Greff noted that while Penn’s land-based segment performed better than expected, its interactive segment reported an adjusted EBITDA loss of $49.3 million that is “greater than expected.”
“We’d point out that its $49 million loss in the interactive segment (or $29 million excluding one-offs) compares with Caesars Entertainment’s $38 million loss reported earlier this week, which has greater market share in online sportsbook and igaming,” Greff wrote. “So, Penn’s loss feels larger than anticipated to us. However, Penn also noted that its interactive business was profitable in October, commentary similar to Caesars.”