Penn Entertainment's Q4 profit misses analysts' estimates over interactive losses, casting ESPN Bet uncertainty

Penn Entertainment reported fourth-quarter revenue of $1.4 billion, with adjusted EBITDAR reaching $461.2 million and a margin of 33.1%. While the company showcased financial stability in its core operations, its interactive segment, which includes ESPN Bet, continued to report losses, raising questions about the long-term viability of the partnership.

Despite the challenges, Penn Entertainment announced plans to repurchase at least $350 million in shares throughout 2025. CEO Jay Snowden explained the rationale behind the move: “We picked that number because we felt like if you’re going to do something, you want it to be substantive. That’s a little north of 10% of the market cap overall."

"I would say that our approach is to be opportunistic throughout the year, and it will be less programmatic and certainly with more options than previously.”

During the call with investors, Snowden addressed the company’s relationship with ESPN, making it clear that Penn Entertainment is not locked into a long-term commitment beyond the initial three-year contract.

“As you get into 2026, you get the third anniversary of our relationship with ESPN, and both sides expect to be in a really good place,” Snowden said. “We are head down, laser focused. We have tremendous plans in place for 2025 and 2026."

"But for one, if we’re not hitting the levels that we need to then, obviously, as you’re approaching that third anniversary, you have a three-year clause in the contract that both sides will have to do what’s in their best interest. That’s always out there.”

The company has alternative marketing strategies beyond its ESPN deal, Snowden noted: “We have not just the spend with ESPN, we have a pretty significant marketing spend outside of ESPN. And we have a cost structure in place today that is built for this business to be at scale. And if we’re not trending to be at scale, then you’re making changes to your cost structure. That’s just Business 101.”

Penn Entertainment continues its expansion efforts, with multiple projects underway in Nebraska, Illinois, and Louisiana. A newly opened facility in Bossier City, Louisiana, is among the company’s latest developments, while a proposed land-based casino in Council Bluffs, Iowa, could yield high returns, according to Snowden.

Head of Operations Todd George provided updates on the progress of these projects, noting that construction timelines have been moving faster than expected. “Typically, when you open a property, you’re looking at a 90-day, maybe a six-month ramp to start creating some of those efficiencies,” George said.

“The amazing thing about these projects … you can really trim that ramp timeline by half or more, because a lot of your staff is already hired, you already have a very active strong database.”

As the gaming industry faces increasing state tax burdens, Snowden expressed frustration over the regulatory processes, arguing that lawmakers should focus on targeting illegal gambling operations rather than increasing levies on licensed businesses.

“We are competing in many cases against the illegal or gray-market games in many of these states that don’t pay taxes, they’re not regulated,” Snowden said. “We compete against offshore illegal operators that are offering casino-like games and sports betting in many of these states that are unregulated and untaxed.”

The company's reported fourth-quarter profit missed analysts’ estimates. Analyst David Katz of Jefferies noted that while the company’s core business slightly exceeded expectations, the interactive segment’s losses were higher than projected. The Q4 results include an EBITDAR loss of $109.8 million at the interactive business, while analysts had been expecting a loss of $108.2 million.