Penn National Gaming Q2 Highlighted by Purchase of theScore and Beating Projections

Written By Kevin Shelly on August 5, 2021 - Last Updated on August 11, 2021
$PENN Q2 report and theScore announcement.

Penn National Gaming just scored a big day. The Pennsylvania-based company announced it is buying theScore for about $2 billion in cash and stock on the same day its Q2 announcement about the performance of $PENN beat expectations.

theScore is the top sports app in Canada and the third most popular sports app in all of North America. Penn National Gaming will use theScore to compliment Barstool sportsbook and tap theScore’s technology innovations and leadership before NFL season, especially by expanding in-game wagering.

The value of Score Media and Gaming,($SCR), shot up an astounding 75% on the Toronto exchange on the news and nearly 2% on NASDAQ.

$PENN and $SCR stocks jump on news of buying theScore

The news also positively affected Penn’s stock price, up around 10% by midday. Penn’s share price had peaked in late winter at around $140 a share and most recently drifted in the lower $60 range. Penn’s stock closed the day at $72.26, about a 12% gain on the day.

The Score has launched its digital sportsbook in four U.S. states. The company plans to add more states and there is an expected plan to grow sports betting in Canada once a pending approval is enacted there.

Shareholders of theScore will receive $17 in cash and 0.2398 shares of Penn common stock for each share. That comes to a total purchase consideration of $34 per share in US dollars.

theScore is the top sports app in Canada

While $SCR is a small player in the US, they are the top sports app in Canada. The app will combine news and wagering into a single platform once Canadian sports wagering is enacted.

The company will remain based in Canada and operate as a stand-alone company.

And while some moves will begin immediately, a fuller integration will not happen for 18 months or more.

The companies have had a strategic partnership since 2019. Penn already owns a 4.5% equity stake in Score. The partnership with $Penn had already allowed the Canadian company to access sports betting licenses in states where Penn operates.

Barstool CEO ‘to the moon’ on news of the buy and new possibilities

Joining Penn’s CEO Jay Snowden on the earnings call was John Levy, chairman and CEO of theScore and Barstool Sports founder Dave Portnoy and Barstool’s CEO Erika Nardini.

Including Barstool players on the call was the first time since Penn partially bought them. Penn holds a 36% share of Barstool.

“I’m ready to go to the moon,” said Nardini.

$Penn’s Snowden’s take on the purchase

Snowden summed up the buy:

“theScore’s unique media platform and modern, state-of-the-art technology is a powerful complement to the reach of Barstool Sports and its popular personalities and content.”

“We are now uniquely positioned to seamlessly serve our customers with the most powerful ecosystem of sports, gaming and media in North America, ultimately creating a community that doesn’t currently exist. Users will enjoy a unique mobile sports betting and iCasino platform with highly customized bets and enhanced in-gaming wagering opportunities, along with highly engaging, personalized sports and entertainment content, and real-time scores and stats. We believe this powerful new flywheel will result in best-in-class engagement and retention.

“Importantly, the transaction provides us with a path to full control of our own tech stack. theScore has developed a state-of-the-art player account management system and is finalizing the development of an in-house managed risk and trading service platform. This should lead to significant savings in third-party platform costs and allow us to broaden our product offerings – providing the missing piece for operating at what we expect to be industry-leading margins.

“In addition to the synergies, we’ll be gaining access to theScore’s deep pool of product and engineering talent and data-driven user analytics which will help drive our customer acquisition, engagement, retention strategies, and cash flows.”

theScore and $PENN

Snowden said the addition of theScore represents “doubling down” on their core strategies, making the company “wider and deeper” while building a deeper moat against competitors.

He likened Penn’s competitors to renters of tech, while Penn he said has decided to “buy and build.” Snowden also said they will be able to provide “deeply integrated events” due to theScore’s tech capabilities and owning the entire tech stack.

theScore CEO Levy added:

“We’ve built an innovative, technology-led integrated media and gaming business that has us poised for success across North America, including the highly anticipated upcoming rollout of commercial sports betting in Canada. With Penn’s support, we will continue to invest in building our Canadian operations, growing our footprint, and expanding our workforce.”

Portnoy repeatedly said he has personally relied on theScore’s app.

He added access to their tech would have a huge impact, calling it “synergistic.”

Barstool will soon make unique wagering offers and promotions. As a result, it will allow for more in-game wagering. Another feature he mentioned was sharing bets on social media.

Taking stock of $PENN

While the event was an earnings call, there was barely a mention of Penn’s business performance and not a peep about its meh stock performance in recent months.

This is remarkable since it was a strong Q2 performance for the company.

Highlights included:

  • Revenues of $1,545.8 million, an increase of $1,240 million year-over-year and $223 million versus 2019
  • Net income of $198.7 million and net income margin of 12.9% compared to a net loss of $214.4 million the prior year
  • The adjusted EBITDAR (earnings before interest, taxes, depreciation, and amortization and rent) of $586.6 million, an increase of $562.1 million year-over-year and $180.1 million versus 2019
  • Adjusted EBITDAR margins of 37.9%, up 2,993 basis points year over year and 722 basis points versus 2019
  • Adjusted EBITDA of $470.1 million, an increase of $549.4 million year-over-year and $153.6 million versus 2019

The company concluded:

“The strong results were driven by exceptional performance across our portfolio of core gaming business properties. Contributions from Barstool Sports, the media company, were also positive. We saw strong revenue growth across our Penn Interactive segment, which operated near breakeven for the quarter despite being live in only four states.”

$PENN growing in PA

Penn National Gaming currently owns the following casinos in Pennsylvania:

PlayPennsylvania has detailed the history of Penn National.

Lead photo of Barstool Sportsbook at Hollywood Casino York by Katie Kohler.

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Kevin Shelly

Kevin C. Shelly is an award-winning career journalist who has spent most of his career in South Jersey. He's the former assistant city editor of The Press of Atlantic City, where he covered the casino industry and Atlantic City government as a reporter. He was also an investigative, narrative enterprise, and features reporter for Gannett’s Courier-Post.

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