Pennsylvania sports betting operation posts fourth-quarter profit

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

Rafael Enrique | SOPA Images | Light Rocket | Getty Images

Penn Entertainment Thursday became the first U.S. bookmaker to report a profit in its sports betting operations in the last three months of the year.

Typically, sportsbooks struggle to turn a profit in the third and fourth quarters, as companies spend more on marketing and promotions during football season.

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

The sportsbook profits came despite Jim “Mattress Mack” McIngvale betting $10 million on the Houston Astros winning the World Series in November and winning.

Caesars also took a hit from Mattress Mack’s baseball bet, which hampered its ability to turn a profit from sports betting in the fourth quarter, according to pre-released results of a debt refinancing.

FanDuel, the market share leader in online sports betting in the U.S., reported quarterly earnings in the second quarter of last year and said it expects to be profitable for the full year. its parent company, flutterhas yet to announce earnings.

draft kingAnother rival, says it will be profitable by 2024. Its shares rallied more than 50% in January after a poor performance in 2022, when investors focused on a lack of earnings despite spending heavily on promotions and marketing.

Penn attributes its profitability in the interactive space to marketing differently than its competitors. It relies on the cross-platform promotion of Barstool, a sports media company that the University of Pennsylvania will fully own later this month, and theScore, a powerful Canadian media brand.

Despite intense competition, Ontario, where theScore was founded, has become the largest market for its sportsbook and iCasino operations in North America, Penn said.

The company’s interactive business also experienced its most successful launch ever, based on first deposits, when Ohio began sports betting on Jan. 17. 1. Penn believes in the power of the Barstool brand and says more than half of all wagers come from wagers in its MyChoice customer rewards database.

Shares were still down on Thursday after Chief Executive Jay Snowden blamed the overall lackluster fourth-quarter earnings on bad weather in December during an earnings call. The company issued guidance for 2023, which Deutsche Bank gaming analyst Carlo Santarelli called “realistic, but probably unattractive.”

Snowden said the guidance was conservative based on the broader economic outlook. “We’ve made cuts to our 2023 forecast just to add some level of recession fear,” he said.

However, he added that both brick-and-mortar casinos and online platforms were very strong in January. If current trends continue, the midpoint of the guidance could be lower, he said.

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