PENN Entertainment has increased its revenue guidance to the range of $6.37bn to $6.81bn for 2023 following the acquisition of Barstool Sports and a positive start to the year.
The company’s revenue rose by 7 per cent year-over-year in the first quarter of 2023 to $1.67bn (Q1 2022: $1.56bn) with $1.32bn in gaming revenue (2022: $1.29bn).
Retail earnings came in at $1.44bn (2022: $1.42bn) with a “strong performance in the Northeast” mostly offsetting “softer year-over-year results in the South”, while interactive income amounted to $233.5m (2022: $141.5m).
PENN reported a net income of $514.4m for the quarter, up on the previous year’s $51.6m, as well as an increase in net income margin of 30.7 per cent (2022: 3.3 per cent).
The company’s adjusted EBITDAR came in at $478.2m, down 3.3 per cent YoY (2022: $494.7m) with margins of 28.6 per cent.
Adjusted EBITDA for the period was $332.2m, a 23.6 per cent decrease YoY (2022: $434.6m). Net debt rose YoY to $1.38bn (2022: $1.08bn).
Jay Snowden, CEO and President, stated: “We are pleased to report that PENN delivered another solid quarter in what remains an uncertain macroeconomic environment.
“PENN generated first quarter revenues of $1.67bn and Adjusted EBITDAR of $478.2m as strong performance in the Northeast mostly offset softer year-over-year results in the South. In addition, our proprietary sports betting and icasino technology platform, which is live in Ontario, continues to drive compelling results and market share.”
Taking a closer look at retail, Snowden noted that the segment’s $1.44bn revenue performance was driven by growth in the older demographic and strong VIP play. However, higher taxed jurisdictions and certain property litigation matters “negatively impacted retail EBITDAR margins by approximately 100 basis points”.
PENN reported “consistent engagement” from the 21-44-year-old demographic, while VIP play remained strong “driven by both guest count increases and frequency of visitation” following a 13 per cent YoY increase in database members (350,000) with 63 per cent of that growth coming from online offerings.
Coordinated marketing efforts also attributed to growth, including the launch of the customer loyalty programme PENN Play in April.
Per segment, Northeast operations generated $700.5m in revenue (2022: $658.5m), South produced $314.8m (2022: $341.4m), West achieved $129.7m (2022: $140.9m) and Midwest came in at $295.3m (2022: $282.9m). Retail adjusted EBITDAR came in at $511.2m with a 35.5 per cent margin.
Interactive’s Q1 $233.5m revenue performance was assisted by the completion of the Barstool Sports acquisition, as PENN acquired the remaining interest in Barstool for $388m in February.
However, the segment did incur an adjusted EBITDA loss of $5.7m, which the company attributes to two state launches (Ohio and Massachusetts) and a low hold in January and February.
PENN noted it has been able to leverage the PENN Play database and the Barstool Sports audience “to drive incremental revenue” online and in retail properties, while live streams during March Madness helped to increase brand awareness and digital engagement.
The company has also highlighted the benefits of its proprietary technology stack across North America, helping to enhance its online presence.
Snowden commented: “In Ontario, we are seeing the benefits of our proprietary technology stack, which has led to our sustained market share in one of the most competitive markets in North America.
“Having full control of our product roadmap in the US, which remains on track for July, will enable us to connect with our customers on a more personalised level and quickly add new features and betting markets to the Barstool Sportsbook, while also enhancing our icasino product with new content and bonus mechanics.
“In addition, with an improved guest experience post-migration, we will be well positioned to drive stronger loyalty and retention, while offering seamless cross-play in our omni-channel ecosystem.”
Snowden added that Barstool has doubled its annual revenues since the company’s initial investment in February 2020, while theScore media is “delivering strong results in both revenue and engagement metrics, with total user sessions up 22 per cent year-over-year”.
PENN also highlighted its ESG efforts including hosting events for Black History Month in February and International Women’s Day in March, providing support to those affected by tornados in the Rolling Fork area of Mississippi, and launching a mental health awareness initiative on college campuses with Barstool as part of its Viceroy and Chicks Ambassador Program.
Looking ahead, and as a result of acquiring the remaining interest in Barstool, PENN has raised its revenue guidance for 2023 to the range of $6.37bn to $6.81bn with its adjusted EBITDAR guidance remaining unchanged with a range of $1.875bn to $2bn.