Revenue was down across all core businesses during the three months through to 31 March. This includes the Interactive segment, which has been a growth area for Penn Entertainment in recent times.
Land-based gambling revenue was lower in each of the Northeast, South, West and Midwest segments. This, Penn says, is due to severe weather that hit the US in January and February. This is understood to have severely impacted visitor numbers.
As for Interactive, which includes the ESPN Bet brand, revenue here was also down year-on-year as a result of unfavourable hold from major sporting events.
However, CEO and president Jay Snowden was undeterred by the revenue decline. He says the business is in a strong position to pursue and post growth throughout the remainder of 2024. This will come with the help of various initiatives.
“We look forward to unveiling additional product enhancements and unique media integrations with ESPN ahead of the 2024 football season.” Snowden said. “Our improved online product offering will help engage, reactivate, and retain our expanding database, while also advancing our strategy to create a highly differentiated experience for sports fans and sports bettors.”
Penn drives development with new tech chief
To accelerate technology and product improvements, Penn last month announced Aaron LaBerge as its new chief technology officer. LaBerge will officially join the company in July.
As CTO, LaBerge will be responsible for driving the technology strategy and execution for Penn. He will lead a multinational team of technologists and also serve as the key business leader for Penn Interactive.
Snowden says LaBerge, formerly a president at The Walt Disney Company, will play a key role in product development, which will in turn help Penn hit its growth targets.
“Mr LaBerge brings more than 20 years of experience at The Walt Disney Company, most recently serving as the CTO for both Disney Entertainment and ESPN,” Snowden said.
“We are incredibly excited about the arrival of Mr. LaBerge. He is uniquely qualified to help us create a best-in-class digital experience for our customers, while further deepening our connections and integrations with ESPN.”
Land-based revenue down across the board in Q1
Taking a closer look at Penn’s Q1 performance, it is clear to see where the decline came. Gaming revenue fell 5.1% to $1.26bn, whereas revenue from hotel, food, beverage and other was level at $348.6m.
As for its segments, the Northeast business remains the main source of revenue for Penn, generating $648.7m. This, however, was 2.3% lower than last year, primary due to poor weather in Q1.
Elsewhere, revenue from physical operations South segment was fell 5.2% to $298.5m, while revenue from the Midwest segment was also down 1.4% to $291.2m. As for the West, this was the best performing land-based segment in terms of decline, with revenue only down by 0.7% to $128.8m.
“Across the portfolio, we continue to capitalise on cross-sell opportunities from our retail sportsbooks, which has helped sustain our momentum in our Ohio properties and re-energise properties such as Plainridge Park in Massachusetts and Hollywood Casino at Kansas Speedway,” Snowden said.
“With winter now behind us, we are seeing great progress with our four growth projects, all of which remain on budget and on schedule.”
Double-digit decline for Penn Interactive
Turning to Interactive, revenue was 11.1% lower for Q1 at $207.7m following unfavourable hold on larger sports events. This segment covers all online sports betting and casino across the Penn group, including ESPN Bet.
The brand went live in North Carolina in mid-March, marking the latest phase of an ongoing expansion strategy. Tying in with this is Penn acquiring Wynn Interactive’s New York sports betting licences. This clears the way for Penn to launch ESPN Bet in the state in 2024.
In other non-digital ESPN Bet news, Penn last month opened is first ESPN Bet retail facility at the Hollywood Casino at Greektown in Detroit, Michigan.
“ESPN Bet continued to attract new users while maintaining a disciplined approach to promotions and marketing expenses,” Snowden said. “However, our financial results were impacted by lower-than-expected hold and spend per user.
“While we are pleased with the early ESPN Bet adoption and engagement results, our focus heading into this football season will be on enhancing our product offerings, including a refreshed home screen and expanded parlay offerings. Simultaneously, with our partners at ESPN, we will reveal additional ESPN Bet media integrations within their digital media app and industry leading fantasy product.
“We believe our enhanced product offering and media integrations will result in superior experiences for our customers, leading to higher retention, share of wallet, and spend per user.”
Penn slips to net loss in Q1
In terms of spending, operating expenses in Q1 were 10.5% higher at $1.63bn. The primary outgoing for Penn was gaming costs, which were 20.6% up at $879.5m.
Penn noted a further $106.1m in non-operating costs, mainly made up of interest expense. In contrast, Penn in Q1 last year posted $514.5m in additional income, helped by a $500.8m gain on real estate investment trust (REIT) and $83.4m from the Barstool acquisition.
As such, Penn was left with a pre-tax loss of $127.5m, in contrast to last year’s $682.3m profit. The group received $12.6m in tax benefit and discounted $200,000 in losses from non-controlling interests.
This resulted in a net loss of $114.7m for Q1, compared to a net profit of $514.5m in 2023. In addition, adjusted EBITDAR fell 46.4% to $256.2m and adjusted EBITDA was down 69.5% to $101.4m.
Truist backs Penn to survive without ESPN Bet
The quarterly come results come after a new report from Truist Securities last week opined Penn would continue to operate as normal if ESPN Bet failed, saying it would be kept afloat by its Interactive division.
At the same time, Truist upgraded Penn’s rating from Hold to Buy. This was downgraded to Hold last August when Penn revelaed it would relaunch Barstool Sportsbook as ESPN Bet in a $1.5bn deal with the broadcasting giant,
Penn’s divestment of Barstool Sports saw it sell the sportsbook back to Barstool founder Dave Portnoy for $1. ESPN Bet then launched across 17 states in November 2023.
Truist praised the growth of ESPN Bet, admitting that while it is early days, Penn is in a good place to capitalise on this success.
Original article: https://igamingbusiness.com/finance/quarterly-results/penn-entertainment-upbeat-on-growth-prospects-despite-3-8-revenue-drop-in-q1/
