Penn sports betting business shows profit in fourth quarter

In this photo illustration, the Penn Entertainment logo is displayed on a mobile screen of a smartphone.

Rafael Henrique | SOPA Images | Lightrocket | Getty Images

Pen entertainment on Thursday became the first American gambling company to turn a profit in its sports betting business during the last three months of the year.

Typically, it’s tougher to make sportsbook profits during the third and fourth quarters because companies spend more on marketing and promotions during the football season.

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

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

Caesars also took a hit from Mattress Mack’s baseball games, which blocked its own ability to make money from sports betting in the fourth quarter, according to pre-release results as a result of a debt refinancing.

FanDuel, the US online sports betting market share leader, announced a quarterly profit in the second quarter of last year and said it expected profitability for the full year. Its parent company, Flutterhas not yet announced earnings.

DraftKingsanother rival, has said it will be profitable by 2024. Shares fell more than 50% in January, after a punishing 2022, as investors focused on a lack of earnings despite massive spending on promotions and marketing.

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

Penn said Ontario, where theScore was founded, has become the top market in North America for sports betting and the iCasino business, despite intense competition.

The company’s interactive business also experienced its most successful launch ever, based on first-time deposits, when Ohio went live with sports betting on January 1. Penn credited the power of the Barstool brand, saying more than half of the money wagered came from those within its MyChoice customer rewards database.

Still shares fell Thursday after CEO Jay Snowden, on an earnings call, blamed overall weak fourth-quarter earnings on bad weather in December. The company issued guidance for 2023 that Deutsche Bank gaming analyst Carlo Santarelli called “realistic but probably uninspiring.”

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

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

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