Penn’s Sports Betting Business Posts Head-Turning Fourth Quarter Profit – NBC New York
- Penn Entertainment said its interactive gambling business, which includes sports betting, made a profit in the fourth quarter.
- It’s tougher to turn a profit during the third and fourth quarters because sportsbooks spend more on marketing and promotions during the football season.
- The profit came in spite of a $10 million bet “Mattress Mack” won on the Houston Astros winning the World Series.
Penn Entertainment on Thursday became the first US gambling company to post a profit in its sports betting business during the final three months of a year.
Usually, it’s tougher to turn a sportsbook profit 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, made a $5.2 million profit on $208 million in revenue during the fourth quarter of 2022. The performance helped lift the company’s overall revenue for the period by nearly 1% to $1.6 billion.
The profit in sports betting came even in spite of a highly publicized $10 million bet Jim “Mattress Mack” McIngvale placed – and won – on the Houston Astros winning the World Series in November.
Caesars also took a hit from Mattress Mack’s baseball bet, which blocked its own ability to turn a profit in sports betting in the fourth quarter, according to results pre-released as a result of a debt refinancing.
FanDuel, the US online sports betting leader for market share, announced a quarterly profit in the second quarter last year and said it anticipated profitability for the full year. Its parent company, Flutter, has not yet announced 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 the lack of earnings in spite of 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 own in full later this month, and powerhouse Canadian media brand theScore.
Penn said Ontario, where theScore was founded, has become its top market in North America for sports betting and its iCasino business, in spite of 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 Jan. 1. Penn credited the power of the Barstool brand and said more than half of the money wagered came from those within its MyChoice customer reward database.
Still shares declined Thursday, after CEO Jay Snowden, on an earnings call, blamed overall lackluster fourth quarter earnings on bad weather in December. The company issued 2023 guidance which Deutsche Bank gaming analyst Carlo Santarelli called “realistic, though likely uninspiring.”
Snowden said the guidance is conservative, based on the broader economic outlook. “We took a haircut to what we anticipated seeing in 2023, just to build in some level of recessionary concerns,” he said.
But, he added, January has been very strong for both its brick-and-mortar casinos and the online platform. He said if the current trend continues, the midpoint of the guidance is likely to turn out to be low.