New sexual misconduct allegations against Barstool Sportsbook founder Dave Portnoy hung over Thursday’s Penn National earnings call.
Barstool Sportsbook is the chosen brand of Penn for its US sports betting rollout.
Penn CEO Jay Snowden prefaced his prepared statement with comments about Portnoy.
Portnoy statement from Snowden
“I thought before I get into prepared remarks I first wanted to address the article about Dave Portnoy that dropped last night from the same paywall subscription-based publisher as the last article and which also happened to be on the same day of our earnings call exactly three months ago.
“The allegations are from anonymous sources made about Dave and his personal life. And Dave has responded publicly, many of you have probably seen that, just as he did last time. So before we get started, I just wanted to respectfully ask three things for the call today.
“One, if you have read or plan to read the article, I would just recommend that you also read and watch Dave’s response that he posted last night. Two, that like last time, we give this time to play out. There undoubtedly will be more to come in the coming days just as what transpired three months ago. And then lastly that we keep today’s call focused on Penn and our earnings release, and our exciting and unique future outlook.”
The statement concerned a second Business Insider story that details alleged sexual encounters involving Portnoy. Snowden later confirmed Penn still intends to buy 100% of Barstool Sports.
CEO: Barstool Sportsbook profitable next year
The US interactive operations of Barstool Sportsbook will be profitable this year, with the entire interactive division profitable in 2023.
Snowden said that during the company’s fourth-quarter earnings call. Penn reported strong overall results and a $750 million share buyback, causing the stock to briefly break the $50 per share mark in early trading. Penn’s stock has not closed above $50 since Jan. 3.
“I would say that you should think about our interactive operation in the US as a standalone as being profitable in 2022,” Snowden said.
Penn expects to lose $50 million on the interactive segment as a whole this year while the business continues to scale.
Low marketing costs help Barstool Sportsbook profitability
One of the biggest benefits of buying 36% of Barstool Sports was access to its followers. At the time in January 2020, Penn noted 66 million monthly unique visitors named Stoolies. That number changed to 54 million briefly in 2021, though Penn told LSR there was not actually a drop.
Now, Penn no longer provides the number of Stoolies and instead notes Barstool’s 144 million social media followers. Whatever the true number, though, the plan is working as Penn intended.
Marketing costs as a percentage of revenue are 17.6% for gross gaming revenue and 29.9% for net gaming revenue. That is compared to 63.7% of GGR and 104.7% of NGR on average for competitors. Penn based that comparison on public numbers from DraftKings, PointsBet and Rush Street Interactive.
Barstool Sportsbook sees a return on investment of 2.2 times the average customer acquisition cost in a year on sports betting alone. That number is higher in states with online casino as well.
Snowden impressed by customer retention
Penn cut its expected loss for the interactive segment in half based on some learnings during the fourth quarter, Snowden said. The company said it expected to lose around $100 million this year on its previous call.
“Over the course of the fourth quarter, we just continued to operate, I think, smart. We didn’t know what the heavy promotional environment and paid media spend environment was going to do in terms of pressuring our margins and maybe moving customers. I’ve been blown away, impressed, at the resiliency and the retention that we see in the online sports betting space.
“As we shared in a couple of our slides and as you saw throughout the fourth quarter, we didn’t change the way we market in the fourth quarter. And it was as irrational as you could ever imagine, the amount of money that’s being burned that I’m sure we’ll hear about on future earnings calls this quarter.
“And we didn’t jump into the fray yet. We grew our market share and were operating at better margins than we anticipated.”
Barstool Sportsbook expanding same-game parlays
Barstool Sportsbook same-game parlays were “very popular” after launching in time for NFL betting. That led to parlays as a percentage of total handle increasing significantly, Snowden said.
Snowden also wants to see in-game betting grow more. There is not much opportunity for that with basketball as it moves too fast but baseball is “perfect,” he added.
Same-game parlays will also be live for baseball season.