PENN Entertainment has reported a slight revenue uptick in the second quarter of 2023 following “stable property level performance” during the measuring period.
The company releases its financial update after announcing that it would be divesting Barstool Sports and instead partnering with ESPN, rebranding its US sportsbook from Barstool Sportsbook to ESPN Bet as a result.
Stable Q2 for PENN
Publishing its Q2 financials, PENN declared revenue of $1.67bn, a 2.9 per cent increase in comparison to the previous year (Q2 2022: $1.63bn) with $1.29bn coming from gaming operations. This is in line with the $1.67bn earned during Q1.
Northeast and interactive were the only segments to see year-over-year improvements, with most others remaining stable compared to what was reported one year ago.
The former improved to $688m (2022: $684.9m), south fell to $308.3m (2022: $338.6m, west dropped as well to $130m (2022: $153.8m) and midwest declined too to $293.3m (2022: $296.3m).
Interactive – which includes online sports betting, icasino and social gaming operations, management of retail sports betting, media, and the operating results of Barstool – rose to $257.5m (2022: $154.9m), while other revenue came in at $6.2m (2022: $5.9m).
Net income rose during the period to $78.1m with a margin of 4.7 per cent (2022: $26.1m, 1.6 per cent), but adjusted EBITDA and adjusted EBITDAR both declined YoY.
The company’s adjusted EBITDA fell by 30.7 per cent to $330.4m (2022: $476.5m) while adjusted EBITDAR dropped by 5.5 per cent to $476.8m (2022: $504.5m).
Jay Snowden, CEO and President, commented: “The company experienced stable property level performance this quarter with each month showing sequential improvement.
“Additionally, we are excited to have successfully re-launched our sportsbook app, which features major product improvements that significantly upgrade the user experience, including streamlined navigation, faster load times, expanded wagering markets, enhanced promotions and deeper media integrations.
“The migration reflects a significant achievement for our company that was completed seamlessly and with minimal disruption to our customers.”
ESPN Bet rebrand
As previously mentioned, PENN has partnered with ESPN to rebrand its US sportsbook from Barstool Sportsbook in ESPN Bet, divesting from Barstool Sports as a result.
Through the deal, PENN will have exclusive rights to the ESPN Bet trademark for an initial 10-year term which can be extended for an additional decade upon mutual agreement. Cash payments made to ESPN during the initial term will amount to $1.5bn, with the group also granted $500m of warrants to purchase approximately 31.8 million PENN common shares.
If certain unspecified market share performance thresholds are met, ESPN could receive bonus warrants to purchase up to an additional 6.4 million PENN common shares. The deal is expected to deliver an estimated $500m to $1bn of annual long-term adjusted EBITDA to PENN’s interactive segment.
PENN also said that it had divested 100 per cent of Barstool Sports to back Founder David Portnoy in exchange for certain non-compete and other restrictive covenants, as well as 50 per cent of the gross proceeds in any subsequent sale or other monetisation event.
Snowden added: “Our state-of-the-art technology platform continues to drive strong results for theScore Bet in Ontario. Additionally, as we announced yesterday, in connection with our agreement with ESPN, our online Barstool Sportsbook will be rebranded ESPN Bet in Fall 2023.
“The powerful combination of our operational expertise, improved product, unparalleled market access and industry-leading PENN Play database with the number one sports brands in both the US and Canada with ESPN and theScore, will create a best-in-class user experience and allow us to significantly expand our digital footprint and more efficiently grow our customer database.”