Home > Finance > Quarterly results > Snowden talks up ESPN deal after Penn Q2 revenue ticks up 2.9%

Snowden talks up ESPN deal after Penn Q2 revenue ticks up 2.9%

| By Marese O'Hagan
Penn Entertainment's $1.67bn (£1.31bn/€1.52bn) second quarter revenue hailed a slight improvement of 2.9%, but more significant growth is yet to come as the operator divests the Barstool brand and launches ESPN Bet later this year.
Penn ESPN Bet

Penn’s partnership with ESPN is part of a $1.5bn deal, which was announced yesterday (8 August).

As part of the deal, Penn’s Barstool Sportsbook will relaunch as ESPN Bet in November this year. Penn is divesting the Barstool brand and will sell it back to founder Dave Portnoy.

Jay Snowden, CEO and president of Penn, said the deal will allow Penn to “significantly” expand its digital footprint.

“A best-in-class user experience”

“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.”

On Penn’s earnings call earlier today, Snowden said that he believes the deal is set to follow the success seen with Penn’s acquisition of Canadian operator TheScore.

“We have seen first-hand the integration of media and betting from TheScore,” said Snowden. “This is a proven playbook and will be effective in the US.”

Positive outlook for Penn Interactive

Penn’s Interactive division brought in revenue of $257.5m, which was up 66.2% year-on-year. This follows the relaunch of its sportsbook on a proprietary tech stack, rolling out first with TheScore in Ontario followed by Barstool across the US after the quarter end in July.

“We are excited to have successfully relaunched 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,” Snowden explained.

“The migration reflects a significant achievement for our company that was completed seamlessly and with minimal disruption to our customers.”

But this isn’t the only positive development from the segment. As part of its ESPN announcement yesterday, Penn raised long-term adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) potential for the division. Projected adjusted EBITDA now stands between $500m and $1.0bn for interactive.

Around the US with Penn’s properties in Q2

Looking at its best performing segments by location, Penn’s northeast segment accounted for the most revenue at $688.0m. This accounts for performances from 16 casinos. That segment was up just slightly, by 0.4%.

The south segment, consisting of ten casinos, accounted for $308.3m in revenue, down 8.9%. The third-highest performing segment was the midwest, which brought in $293.3m.

The remaining revenue consisted of $130.0m from Penn’s west segment and $6.2m for Penn’s racing operations. Intersegment eliminations at $8.5m brought the revenue to the total of $1.67bn.

Turning to the operational segments gaming revenue came to $1.29bn, a decline of 2.4%. Food, beverage and hotel revenue made up the remaining $382.0m.

Q2 bottom line

Increased operating expenses came close to wiping out the revenue. These expenses grew by 10.9% to $1.46bn, bringing the operating income for the quarter to $205.5m. This operating income signified a decline of 32.0%.

Other income consisted of $115.6m in interest expense, $9.9m in interest income and $7.2m in income from unconsolidated affiliates. After considering $5.8m in other costs, total other expenses came to $92.7m.

This brought the pre-tax income to $112.8m, up by 36.9%. With tax totalling at $34.7m, the total net income for the quarter was $78.1m, an improvement of $52m.

Adjusted EBITDA totalled at $330.4m for the quarter, down by 30.6%.

Penn’s half-year performance

For the six months to 30 June, revenue stood at $3.34bn, a rise of 4.9% year-on-year. A total of $2.61bn came from gaming, up by just under $1.0m year-on-year. Food, beverage, hotel and other revenue was $730.7m.

Operating expenses for the six months came to $2.93bn, up by 13.3%. Once these were factored in, Penn’s operating profit for H1 stood at $404.6m.

Although interest expense cut the drop by $228.6m, this was partially offset by other sources of income. These included an $83.4m gain on the Barstool acquisition and $500.8m gain on real estate investment trust (REIT) transactions.

This left the pre-tax income at $795.1m, a rise of $613.5m year-on-year. Following tax of $202.6m, the net income for the six months totalled at $592.5m, up by $514.8m year-on-year.

Adjusted EBITDA for the six months was down by 27.2% to $662.6m.

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