PENN Entertainment Inc. says revenue from its online sports betting sites and internet-based casino gambling shot up in the third quarter — and that its digital segment was in the black in October — as the company eyes persistent profitability for the business in 2023.
“And… that was with an average hold percentage,” PENN CEO Jay Snowden said of the profitable October for the company’s interactive division. “That wasn't over-holding. We actually got beat up pretty good the last Sunday of [October].”
PENN runs 43 gaming and hospitality properties in 20 U.S. states, in addition to its Barstool Sportsbook and theScore Bet. Snowden said PENN anticipates its interactive segment that houses the two online sportsbooks will be profitable again in the fourth quarter, although there are a few variables that could affect the final results.
One factor will be the costs associated with the likely launch of online sports betting in Maryland during the last three months of 2022. Another will be some pre-launch spending in Ohio, which will start legal sports betting on Jan. 1, 2023.
And then there’s Mattress Mack.
While Caesars Sportsbook has been nabbing a lot of the headlines around Mack’s big World Series play, Snowden said the Houston-based furniture salesman has wagered a few million dollars with PENN that would pay out around $10 million if the Astros win.
“So go Phils, for sure,” Snowden said Thursday during Penn’s latest earnings call. “And I think if Mattress Mack doesn't hit, we’ll be profitable [in] Q4. If he does, then it'll probably be closer to break-even-ish, somewhere in that range.”
More details re: PENN's interactive segment, which includes @BSSportsbook and @theScoreBet
— Geoff Zochodne (@GeoffZochodne) November 3, 2022
PENN CEO Jay Snowden says the division was profitable in October and could be again in Q4... unless the Houston Astros win the World Series and Mattress Mack takes them for about $10M. pic.twitter.com/aDj0FA00Gh
The comments from the CEO come as the broader legal sports betting industry has grown more concerned about proving it can achieve profitability after years of healthy spending on marketing and promotions, such as big free bets. That focus has sharpened as customers are now grappling with higher interest rates and prices, and as stock values have been pulled lower amid the turmoil.
Wyomissing, Pa.-based PENN reported on Thursday that its quarterly revenue rose 7.5% year-over-year, to $1.6 billion for the three months that ended September 30. Net income shot up as well, to $123.2 million for the quarter, a 43% increase in profit compared to a year earlier.
The company’s interactive business segment, which includes its iCasino and online sports betting operations, grew revenue to $158.7 million during the third quarter, up from $93 million for the three months that ended Sept. 30, 2021. Yet, adjusted earnings for the division slipped even further into the red, as the segment reported negative $49.3 million in adjusted EBITDAR for the quarter, compared to a $32-million loss a year earlier.
A wind-fall?
There are, however, high hopes for profitability that were buoyed by a strong October.
“Our Interactive segment experienced strong year-over-year revenue and user growth in the quarter and was profitable in October,” Snowden said in a press release. “Results for the quarter included costs associated with the launch of Kansas, our first football season in Ontario and Louisiana, the $12.5 million lobbying expense for the California sports betting initiative and a payment processing fee adjustment of $7.9 million. Given our strong revenue growth and disciplined approach to marketing, we remain confident in our ability to deliver profitability in 2023.”
PENN, which owns Toronto-based theScore and theScoreBet, says Ontario has quickly become its top market in North America for online sports betting and internet casino gambling. The company has transitioned to a proprietary risk and trading platform in Ontario, leading to “increased utilization, new betting markets, and other features.”
Snowden said PENN remains on track to migrate its Barstool Sportsbook onto the same platform in mid-2023, “after which we will begin to realize significant cost savings and improved marketing capabilities.”
