Penn National Gaming (PNG) said it plans to acquire the remainder of Barstool Sports in early 2023 as part of its strategy to transform “into a major media and entertainment company,” according to CEO Jay Snowden.
Days after launching Barstool Sportsbook in Louisiana, the Wyomissing, PA-based company announced plans to launch its products in Maryland, Ohio, and Ontario, Canada in 2022. PNG’s board of directors also authorized a three-year, $750 million share repurchase program, prompting the company to revise its guidance for 2022.
CEO Lauds Barstool on Revenue Growth
PNG acquired a 36% stake of Barstool in a cash-and-stock deal valued at $163 million in January 2020. The original agreement has PNG increasing its stake in Barstool to 50% within three years for an additional $62 million.
During an earnings call to discuss Q4 2021 and the full-year 2021, PNG executives did not disclose how much the company would ultimately spend to acquire the rest of Barstool. But Snowden said PNG “couldn’t be more excited” about owning all of the sports betting company.
“They’ve been great partners of ours,” Snowden said during the February 3 call with investors. “They’ve grown their revenues over the last two years somewhere close to 150% in total. Sports media businesses don’t make money — they burn quite a bit. So, we’re really excited for the third anniversary [of the original deal].”
While Snowden opened the earnings call with remarks defending Dave Portnoy — the controversial founder of Barstool who still leads the brand under the moniker of “El Presidente” — the CEO hinted at structural changes post-acquisition. Whether those changes involved Portnoy’s future with PNG was unclear.
“Those are things that we’re continuing to work through internally,” Snowden said. “It won’t just be, we acquire Barstool and then we don’t announce anything beyond that. There’s going to be some structural implications as well and we’re working through all of that behind the scenes. You should expect to hear something before the end of the year.”
Ontario Agency Gives OK to theScore
With the launch of Barstool Sportsbook in Louisiana, the brand is now live in 12 states for online sports betting and four for online casino. While launches of Barstool Sportsbook in Maryland and Ohio are highly anticipated, deployment of theScore Bet in Ontario has captivated PNG.
“We’re going to definitely make sure that everybody in Toronto and Ontario knows that we’re live, that it’s a legal market, and that there are legal operators that have offerings there,” Snowden said. “Our expectation is to be no lower than low double-digits in market share from an online sports betting perspective. On the Ontario online casino side, we’d like to start off in the mid-to-high single-digit range and then just continue to grow both of those from the beginning.”
PNG acquired Toronto-based Score Media and Gaming, aka theScore, in a cash-and-stock deal valued at $2 billion in October 2021. The Alcohol and Gaming Commission of Ontario — Ontario’s provincial regulatory agency — approved theScore Bet on February 2, making the operator one of the very first to receive an internet gaming operator certificate of registration from the AGCO for Ontario’s new regulated market.
Revenue Hit $1.6 Billion in Q4 2021
PNG reported revenue of $1.6 billion in Q4 2021, up from $1 billion in the year-ago quarter and up from $1.3 billion in Q4 2019, before the pandemic. Net income was $44.8 million in Q4 2021, compared to $12.7 million in Q4 2020 and a net loss of $92.9 million the year before.
For the full year of 2021, PNG had $5.9 billion in total revenue, up from $3.6 billion for the pandemic year of 2020 and $5.3 billion in 2019. PNG had a net income of $420.5 million for the full year of 2021, compared to a net loss of $669.1 million in 2020 and a net income of $43.1 million in 2019.
We are employing a very unique strategy and we are already seeing the benefits of our disciplined marketing approach and numerous structural advantages.
In its February 3 investor presentation, PNG laid out plans to transition to theScore’s proprietary risk and trading platform in Ontario during Q3 2022. It plans to integrate Barstool Sportsbook into theScore’s mobile app in the US during the second half of 2022 and will migrate Barstool to theScore’s player account management and trading platforms in Q3 2023.
PNG opened Hollywood Casino Morgantown, its fourth casino in Pennsylvania, in December 2021. It opened Hollywood Casino York four months earlier. Both openings helped boost PNG to 8.9% of handle and 15.2% of gross gaming revenue in Pennsylvania in December 2021.
Snowden also bragged on Barstool’s performance in New Jersey, where it launched in mid-August 2021 on the license of Freehold Raceway. Despite the late launch, Barstool actually had Borgata NJ in its sights for third place in sports betting revenue in October and November, but let their rival off the hook in December.
“Our performance in New Jersey, which is perhaps the most competitive online sports betting market in the world, is particularly notable as we captured meaningful share despite launching three years or more after our primary competitors,” the CEO said, adding that the brand is currently performing at a 2.2-times rate of return on investment one year after an initial investment in a state for sports betting. In online casino states, the rate of return is even higher, Snowden said.
PNG reinstated its guidance for 2022 net revenue to a range of $6.07 billion to $6.39 billion. The company anticipates that its *Penn Interactive *segment will have an EBITDA (earnings before interest, taxes, depreciation, and amortization) loss of about $50 million in 2022, with “positive contributions expected in 2023” following the introduction of technology developed in-house and launches in new jurisdictions.
“I think there is a misperception right now in the market that there is no clear path to near-term or even medium-term profitability in the sports betting sector,” Snowden said. “But I’d like to remind you that we are employing a very unique strategy and we are already seeing the benefits of our disciplined marketing approach and numerous structural advantages.
“We have all seen the incredible level of marketing spend in this space, which we all know is not sustainable in a competitive environment. We have not at Penn and will not jump into that fray.”
Learn more in the pokerfuse complete guide to Ontario online poker & iGaming,»
