Penn Reports Q4 Net Loss of $358.8m Amidst ESPN Bet Launch

BATS:PENN   PENN Entertainment, Inc.
Penn Entertainment announced a net loss of $358.8m for Q4 2023, a quarter in which the operator launched its ESPN Bet sportsbook.

ESPN Bet, the product of Penn’s $1.5bn deal with Disney-owned ESPN, launched across 17 states on 15 November. Penn’s Interactive segment recorded revenues of $31.5m in Q4, although its adjusted EBITDA loss stood at $333.8m.

Revenue across the whole company dropped 12.5% in Q4 year-on-year from $1.6bn to $1.4bn. Overall adjusted EBITDAR for Q4, meanwhile, plummeted from $468.3m to $112.5m year-on-year.

Penn’s northeast segment, encompassing 17 properties including Ameristar East Chicago and Hollywood Casino Lawrenceburg, accounted for $662.9m of the $1.4bn in revenue.

Diluted earnings per share also went from $0.13 to a loss of $2.37. Moreover, total liquidity dropped to $2.1bn from 2022’s figure of $2.6bn. Net debt at the end of Q4 stands at $1.6bn.

Penn’s full year results
The $1.4bn in Q4 revenue took PENN to $6.36bn for the year. This fell just $3.9m behind 2022’s figure of $6.4bn.

For adjusted EBITDAR, 2023’s $1.51bn fell significantly short of the $1.94bn accumulated in Penn’s 2022 financial year. Adjusted EBITDAR margin also fell from 30.3% to 23.8%.

Overall, PENN lost $491.4m throughout 2023. When compared to last year’s net income of $221.7m, there is a disparity of $713.1m between those two figures.

However, a key reason for the poor full-year results for Penn Entertainment ( PENN ) is the company’s $1 sale of Barstool’s brand back to founder Dave Portnoy in August. According to Penn, the divesture incurred a $923.2m loss for the 2023 financial year.

ESPN Bet goes live in Q4
Despite the significant adjusted EBITDA loss for the company’s Interactive segment in Q4, Penn president and chief executive Jay Snowden lauded ESPN Bet’s record handle and its conversion to over a million first-time depositors.

Snowden noted ESPN Bet’s download volumes, hitting the record for sportsbook downloads with over a million in the first six days following its introduction. Snowden highlighted ESPN Bet’s strong key performance indicators (KPIs), including monthly active users (MAUs) and handle.

However, ESPN Bet’s launch into a highly competitive US market means it could prove subtle to challenge the likes of giants DraftKings and FanDuel for market share.

In Snowden’s view, though, further product enhancements and deeper integrations should help ESPN Bet to grow and therefore make more of a dent in the market.

Difficult quarter for Penn
Significant drops in key financial statistics such as revenue and adjusted EBITDAR combined with a net loss for the quarter suggest it was a negative period for $PENN.

However, ESPN Bet’s encouraging early signs could lead to a turnaround shortly having largely been in the initial heavily promotional phase to boost player acquisition.

Penn also retains a positive liquidity status with $2.1bn available at the end of the year. This includes $1.1bn in cash and cash equivalents.

Penn’s future plans
ESPN Bet’s promotional expense has “started to normalize” after the early phase and Penn believes partnering with the US’ largest media brand has allowed for attractive cost-per-acquisition (CPA) over the initial stages.

Looking forward, Penn ( PENN ) is expecting to launch ESPN Bet in North Carolina this year, as well as New York, which is by far the most lucrative state for sports betting in North America. Those two launches alone will take ESPN Bet’s addressable online sports betting population in the United States from 37% to 46%.

Penn( PENN ) took another step closer to launching ESPN Bet in New York this week by acquiring Wynn Interactive Holdings’ sports betting licenses in the state. Upon relevant approvals, Penn will launch ESPN Bet in the state later this year.

Snowden said this acquisition will expose ESPN Bet to the most prominent sports betting market in the US. It remains a highly competitive market, though, with current brands active on the market including FanDuel, DraftKings, Bally Bet, BetMGM, Caesars Sportsbook, Fanatics Sportsbook, Resorts World Bet and BetRivers.

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