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Shares in Penn Entertainment are trading more than 13% lower after a controversial incident overshadowed the release of the operator’s Q1 2023 financial results.

Topline numbers

Penn Entertainment generated $1.67bn in revenue across the business in Q1 2023, up 7% year-on-year.

Adjusted EBITDA for the quarter was $332.2m, down 23.6% year-on-year.

The business generated overall net income of $514.4m, compared to $51.6m in Q1 2022.

Of the group’s total results, $233.5m of revenue came from Penn’s interactive division.

The interactive division (online) generated an adjusted EBITDA loss of $5.7m, compared to a $10m EBITDA loss in Q1 2022.

Penn said of the total interactive revenue, $28.2m was related to Barstool Sports following the firm’s acquisition of the outstanding shares of the brand in February this year.

News nugget

Shares in Penn are trading almost 14% lower today, after a controversial video led to the departure of presenter Ben Mintz from Barstool Sports.

Mintz was heard using a racial slur while singing along to recorded music on a live stream, which Penn decided was sufficient reason to remove him from his role, according to Barstool founder Dave Portnoy.

Portnoy, who is no stranger to controversy, suggested in a video posted to Twitter that Penn had enforced the decision to remove Mintz due to fears that keeping him on would impact their licensing arrangements with local regulators.

“Penn operates in a world that we don’t operate in,” Portnoy said. “They’re highly regulated by the government, they’re issued licences for gambling, which just as easily as they’re issued can be pulled back.”

He added: “Penn have been very clear since they took over. It’s a zero tolerance policy moving forward, you can’t do stuff like this.

“And they believe there’s a legitimate chance lots of the states would pull their licences because of this. Penn’s a multi-billion dollar company – but without their licences, they are a zero dollar company,” Portnoy said.

Without going into detail, CEO Jay Snowden added on Penn’s Q1 earnings call: ”There are going to be some dramas sometimes and we’ll manage through those.”

Best quote

“When you think about Barstool Sports, in some ways we’re a media company and in other ways we’re a collection of influencers.”

– Barstool Sports CEO Erika Ayers responds to a question on the dismissal of Ben Mintz

Best question

Omer Sander of JP Morgan asked Snowden for some more detail on the company’s expected turn to profitability in the coming years.

In response, Snowden was focused on product, and offered a better understanding of the importance of operating on Penn’s own tech stack.

In Canada, theScore already operates on Penn’s proprietary tech, while the Barstool Sportsbook brand in the US is still reliant on Kambi.

“We’re feeling really good about what bringing that product and technology stack to the US is going to allow us to do much better than we do today here in the US. 

“You have to recall that we really had kind of a ‘frozen’ product for the last six to nine months and it’ll continue to be frozen until we migrate in July.”

Snowden added that Penn believes the new Barstool product set to be launched on Penn’s own technology “is going to be as good if not better than most everything out there.”

He concluded: “I think 2025 will be a really important year and you’ll start to see the EBITDA growth really start to make a difference as we report numbers on a quarterly and annual basis.”

Current trading and outlook

Penn has raised its revenue guidance for full-year 2023 to between $6.37bn and $6.81bn, reflecting the firm’s acquisition of Barstool.

The acquisition is expected to be neutral to adjusted EBITDAR, meaning guidance for that figure remains the same at between $1.88bn and $2bn.

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