PENN reports solid Q3 results with $1.6B in revenue, but faces challenges amid expansion efforts

PENN Entertainment (PENN) reported solid third-quarter earnings on Thursday, driven by stable retail operations but marred by challenges in its digital segment. The company highlighted its ongoing integration of ESPN Bet and other expansion efforts, despite a sluggish quarter for consumer demand in certain regions. Gross revenue amounted to $1.6 billion, up by 1.2% year-on-year, but a net loss was indicative of the challenges the company faced over the quarter. 

PENN posted $1.4 billion in revenue from its retail operations, with an adjusted EBITDAR of $471.7 million —a margin of 33.8%. The company’s digital segment, however, showed mixed results, with $244.6 million in revenue but an adjusted EBITDA loss of $90.9 million, reflecting the hurdles faced in its sports betting business. This was a considerable increase on the $50.2 million loss seen in Q3 of 2023.

CEO Jay Snowden noted that while consumer demand remained relatively stable overall, the company faced challenges in certain regions. Unfavorable hold in the Northeast and lower betting volume in the South, primarily due to severe weather and ongoing hotel renovations, weighed on performance.

"The third-quarter results were consistent with our preliminary estimates we disclosed last month in connection with our investor event in Las Vegas," Snowden said. "Stable consumer demand in our retail business was offset by unfavorable hold in our Northeast segment and volume declines in our South segment associated with severe weather disruptions and accelerated hotel remodeling."

Despite the slow performance in some markets, the company remains optimistic about the fourth quarter, with a positive outlook in states like Michigan, Ohio, and St. Louis.

A key focus for PENN has been the integration of ESPN Bet and its sports betting offerings, which now feature personalized experiences for users. PENN has linked tens of thousands of ESPN accounts to ESPN Bet, enhancing engagement and driving increased betting activity.

The recent launch in New York has been particularly successful, the company said, attracting a higher-quality customer base with a focus on retention rather than aggressive promotions, due to the state's high 51% tax rate.

Aaron LaBerge, Chief Technology Officer, said: “We’ve had tens of thousands of people link already and, as you would expect, they are placing more bets, so that means higher GGR, higher handle.”

He further added: “They are also consuming more on ESPN. They are real superfans. It’s really a foundational experience that will allow us to really personalise. Not just on ESPN Bet, but also on ESPN where you’ll see personalisation of players and teams that I think that people are really going to like.”

Looking ahead, PENN plans to enhance its digital platform further with improvements to parlay offerings, branded feature bets, and expanded in-play betting options.

In its retail operations, PENN has begun rebranding seven of its sportsbooks to ESPN Bet, with new locations in Louisiana and Ohio. Additionally, PENN is moving forward with four major development projects, including relocations of its two Hollywood casinos in Illinois and new hotel towers in Ohio and Nevada.

In Q1 2025, the company will launch a dedicated iCasino platform in Pennsylvania to reduce confusion with ESPN Bet and streamline access to its online casino offerings.