PENN records Q4 net loss of $359M amid ESPN Bet launch, overall revenue drops 12.5% to $1.37B

PENN Entertainment recorded a net loss of $358.8 million for the fourth quarter of 2023, the period during which it launched its ESPN Bet sportsbook. 

Despite the early success of the sportsbook, Penn Interactive witnessed a sharp decline in quarterly revenue, plummeting from $208 million in Q4 2022 to $31.5 million in 2023, reflecting an 84.9% dip. It also posted an adjusted EBITDA loss of $333.8 million, although officials remain positive about the product's future prospects.

“The November 14th launch of ESPN BET led to tremendous download volumes, conversion to over 1 million FTDs, and record handle, supported by our partners at ESPN and our proprietary technology. Our comprehensive strategic alliance with ESPN is providing exceptional value, leading to attractive customer acquisition costs and marketing efficiencies,” Jay Snowden, Chief Executive Officer and President, said.

PENN signed a $2 billion deal to license Disney’s ESPN brand in August last year. It then launched across 17 US states in November.

Snowden also said its Hollywood-branded iCasino product within the ESPN BET app has started to benefit from cross-sell opportunities, with solid revenue growth and record MAUs over the last several months. The company is expected to launch ESPN BET in North Carolina in March and New York before football season. These launches extend the brand's addressable online sports betting U.S. population from 37% to 46%, significantly expanding its reach and scale.

Strong customer demand in casino segment

While interactive revenue was down, the company's core land-based casino segment posted encouraging results in the fourth quarter of 2023, driven by strong customer demand.

“Property level performance this quarter benefitted from strong customer demand trends, mild weather, and our focus on customer experiences and operational excellence,” added Snowden. “Notably, 10 properties spread across our portfolio achieved their highest-ever fourth-quarter revenue, demonstrating the benefits of our geographic diversity and unique omnichannel strategy.

"In the quarter, we expanded our PENN Play database by 1.2 million members, with 90% of this growth coming from our ESPN BET customers. In addition, we will rebrand Greektown’s market-leading sportsbook to ESPN BET this spring – in time for the Detroit NFL draft – and we look forward to potential additional ESPN BET retail launches at key properties as we continue to create meaningful cross-sell opportunities,” he added.

However, these positive developments were not enough to prevent overall revenue from decreasing 12.5% from $1.6 billion in Q4 2022 to $1.37 billion in the fourth quarter of 2023. Overall adjusted EBITDAR for the quarter reduced from $468.3 million to $112.5 million year-on-year.

Penn's northeast segment, comprising 17 properties like Ameristar East Chicago and Hollywood Casino Lawrenceburg, contributed $662.9 million to the total revenue. The South segment contributed $285.1 million and the West contributed $133.7 million.

Hollywood Casino Lawrenceburg

Penn's full-year 2023 report

For the full year, Penn registered revenue of $6.36 billion, $3.9 million less than the 2022 figure of $6.4 billion. The adjusted EBITDAR for 2023 at $1.51 billion fell considerably short of the $1.94 billion achieved in Penn's 2022 financial year. The adjusted EBITDAR margin also experienced a decline, dropping from 30.3% to 23.8%.

One of the reasons that explain the drop in full-year results for Penn is the company’s $1 sale of Barstool’s brand back to founder Dave Portnoy in August. According to the company, the divesture incurred a $923.2 million loss for the 2023 financial year.

“Our retail results reflect strong customer demand and well-executed strategies across our portfolio. In our Interactive segment, ESPN BET attracted significantly more first-time depositors (FTDs) than we anticipated, which drove higher-than-expected promotional expense," added Snowden.

"Our successful launch led to substantial expansion in key performance indicators (KPIs) including monthly active users (MAUs), handle, and cash handle. Importantly, strong early retention and consistent user acquisition have led to steady month-over-month increases in cash handle as our promotional expense has started to normalize entering 2024. ESPN BET has also attracted the mass market sports fan, highlighting the potential to expand the appeal of sports betting and grow the overall market."