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  • Q3 2023: Barstool sale proves costly as Penn prepares to unleash ESPN Bet
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Penn Entertainment has unveiled its financial results for Q3 2023, showcasing stable property-level performance and robust online growth.

Retail stability and digital expansion

Penn Entertainment CEO Jay Snowden highlighted that property-level performance remained consistent in Q3, thanks to contribution from casinos in Ohio, Kansas, Massachusetts, and Missouri.

He attributed their success to the diversified range of regional gaming assets and the introduction of retail sports betting options across multiple locations.

For Q3, the retail segment posted revenue of $1.42bn and an adjusted EBITDAR of $523.4m, with a solid adjusted EBITDAR margin of 36.8%.

This was driven by a moderate increase in customer volumes as Snowden credited their performance to new and consistent customer engagements triggered in retail sportsbooks.

Snowden further emphasised the growth of the company’s database, which now boasts more than 27 million members, revealing that 40% of customer growth this quarter was propelled by online platforms.

This resulted in 2.2 million app downloads for the reporting period.

Furthermore, the rollout of Penn’s cashless, cardless, and contactless technology, known as the “3C’s”, was successful, with 21 properties having implemented the feature to date.

This has led to deposits amounting to around $225m in the PENN Wallet, said Snowden.

Plans to initiate construction on four new growth projects between November and December were also unveiled.

These projects, expected to open in late 2025 and early 2026, are designed to augment long-term shareholder value and contribute significantly to the company’s free cash flow.

Gearing up for ESPN Bet launch

Penn’s Interactive segment reported revenue of $196.3m, up 23.7% year-on-year, despite curtailed marketing as the company transitions its online sportsbook brand to ESPN Bet.

Notably, this figure included a tax gross up of $102.6m. The segment registered an adjusted EBITDA loss of $50.2m, however.

ESPN Bet is now set to go live on 14 November in 17 US states, in time for an action-packed sports week that includes the NCAA college football rivalry week and a Super Bowl rematch between the Kansas City Chiefs and the Philadelphia Eagles.

ESPN’s collaboration with Penn will target the network’s 200 million fans through a wave of promotions featuring an ad campaign led by renowned SportsCenter anchors, Scott Van Pelt and Elle Duncan.

This partnership is set to deepen over the coming months as the company seeks to combine media and betting into one product offering.

Barstool sale proves costly

ESPN Bet will take over from Barstool Sportsbook as Penn Entertainment’s US sportsbook brand.

In Q3, the operator recorded a substantial net loss of $724.8m following its move to divest the Barstool brand back to its founder, Dave Portnoy, for a symbolic $1.

Portnoy reclaimed full ownership of the Barstool media business by purchasing 100% of its share capital. This purchase agreement included certain non-compete clauses and additional restrictive conditions.

Penn made the announcement of parting ways with Barstool, its sports betting affiliate since 2020, back in August. This decision significantly influenced the company’s Q3 financial standing.

The Q3 report from Penn revealed the Barstool divestment led to a hefty loss of $923.2m for the quarter.

Maintaining strong liquidity

The company reported a healthy financial position in Q3, with total liquidity standing at $2.3bn as of 30 September 2023.

This included $1.3bn in cash and cash equivalents. The traditional net debt at the close of the quarter was recorded at $1.3bn, and the lease-adjusted net leverage ratio was 4.7x.

More to follow following the operator’s Q3 2023 results webcast.

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