Penn sports betting business posts fourth quarter profit

Penn sports betting business posts fourth quarter profit

In this photo illustration, the Penn Entertainment logo appears on a mobile smartphone screen.

Rafael Henrique | SOPA Images | Light Rocket | Getty Images

Penn Entertainment on Thursday became the first US gaming company to post a profit in its sports betting business over the last three months of a year.

Usually, it’s harder to make a profit from sportsbooks during the third and fourth quarters because companies spend more on marketing and promotions during football season.

Penn’s interactive business, which also includes online casino games, posted a profit of $5.2 million on revenue of $208 million during the fourth quarter of 2022. The performance helped lift the company’s overall revenue for the period of nearly 1% to $1.6 billion.

The sports betting win came despite a highly publicized $10 million bet that Jim “Mattress Mack” McIngvale placed — and won — on the Houston Astros winning the World Series in November.

Caesars also took a hit from baseball betting firm Mattress Mack, which blocked its ability to turn a profit on sports betting in the fourth quarter, according to pre-release results as a result of a debt refinancing.

FanDuel, the US online sports betting leader by market share, reported a quarterly profit in the second quarter of last year and said it expected to be profitable for the full year. Its parent company, Flutter, has yet to announce earnings.

DraftKings, another rival, has said it will be profitable by 2024. Its shares rebounded more than 50% in January after a punishing 2022 when investors focused on a lack of profits despite massive spending on promotions and marketing.

Penn credits its profitability in the interactive segment to a marketing approach that differs from its competitors. It relies on cross-platform promotion from Barstool, a sports media company that Penn will fully own later this month, and Canadian media powerhouse theScore.

Penn said Ontario, where TheScore was founded, has become its top North American market for sports betting and its iCasino business, despite intense competition.

The company’s interactive business also experienced its most successful launch ever, based on the first term deposits, when Ohio went live with sports betting on January 1. Penn praised the strength of the Barstool brand and said more than half of the betting money came from those within its MyChoice customer reward database.

Stocks still fell on Thursday after CEO Jay Snowden, in an earnings call, blamed poor overall fourth-quarter earnings on bad weather in December. The company issued guidance for 2023, which Deutsche Bank gaming analyst Carlo Santarelli called “realistic but likely uninspiring.”

Snowden said the guidance is conservative, based on the broader economic outlook. “We took a haircut on what we expected to see in 2023, just to build a level of recession worries,” he said.

But, he added, January has been very strong for both its brick-and-mortar casinos and its online platform. He said that if the current trend continues, the midpoint of the guidance is likely to come out low.

Leave a Reply

Your email address will not be published. Required fields are marked *