Penn Entertainment Made Q4 2023 Loss, Earnings Report Reveals

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To the surprise of few in the U.S. gambling business, Penn Entertainment’s Q4 2023 reports, published this week, reveal the operator made a loss after launching ESPN Bet in November 2023.

However, just how much Penn lost may raise some eyebrows.

The operator made a net loss of $358 million for the quarter, compared to an income of $20.8 million in Q4 2022.

It also saw company-wide revenues fall by 12% year-on-year for the period, down to $1.4 billion.

Q4 2023 was when Penn launched ESPN Bet, making a huge promotional spend to debut it in new markets. Launching ESPN also saw it axe its previous Barstool Sportsbook brand, on which it also took a massive loss.

Share prices initially increased after the seemingly successful launch of ESPN Bet. The new report says that this heavy initial interest, including one million app downloads in its first week, led to higher than expected promotional spending, as users took up enticing bonus offers en masse.

Outside of the headline losses amid the ESPN Bet launch, Penn highlighted the solid results of its physical casinos in Pennsylvania and dozens of other states. The biggest revenue driver was its northeast U.S. segment, which made $192 million from $662 million in revenues.

However, all the spin did little to settle investor confidence.

Since the Q4 2023 earnings announcement, the Pennsylvania-based operator’s share price plummeted by 10%.

Loss Drivers

The major loss-making unit for the year was ESPN Bet. Early in 2023, Penn completed the purchase of Barstool Sports for approximately $500 million.

However, in deciding to axe the brand in favor of ESPN Bet, it sold the media portion back to its founder Dave Portnoy for just $1.

Just how much it lost on that was previously unclear. Now, the full yearly reports are in, and it’s not good reading for investors. Penn wrote off some $923 million in losses on the Barstool divesture.

Then, once ESPN Bet launched, it spent a lot again promoting the operation. That has included offering very big odds boosts on football betting and millions in free bet promo winnings.

This heavy investment may well payoff in the long run. It is generally accepted that sportsbooks can start out loss-making and turn that into profit. See BetMGM’s recent full 2023 report as an example.

However, Penn has taken a bigger risk than most.

Management remains confident the big initial interest in the brand will carry it through to sustained business and profitability.

“In our Interactive segment, ESPN BET attracted significantly more first-time depositors (FTDs) than we anticipated, which drove higher than expected promotional expense. Our successful launch led to substantial expansion in key performance indicators (KPIs) including monthly active users (MAUs), handle, and cash handle,” said Penn CEO Jay Snowden.

“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… This foundation sets the stage for continued growth and market share gains as we introduce further product enhancements and deeper integrations into the ESPN media ecosystem.”

Penn’s Casinos Solid

On the flipside, the operator’s physical casinos posted a solid year. Adjusted profits were across the board, although not all markets showed growth compared to 2022.

“PENN delivered another quarter of solid property level performance while continuing to invest in our high growth digital business, which we believe will create significant long term shareholder value. Our retail results reflect strong customer demand and well-executed strategies across our portfolio,” Snowden said.

Those physical venues include casinos in Indiana, Illinois, Maine, and Massachusetts, among others.

Casinos in the Northeast and the Midwest showed the most growth, although nothing spectacular. Its Midwest gambling venues made $1.172 billion in revenues for the year, compared to $1.159 billion in 2022.

2024 Plans

Shortly after launching ESPN Bet, Penn did also announce groundbreaking at three big expansions of its Illinois casinos and at M-Resort, which is its sole venue among Nevada casinos in Las Vegas. Those will all have come at some expense.

Going into the new year, Penn is looking to continue on its expansion of ESPN Bet. It recently acquired a New York sports betting license, subject to regulatory approval, after spending $25 million to buy-out the failed WynnBET as it leaves the market.

ESPN Bet is also set to launch in the upcoming North Carolina sports betting market. It has partnered with Quail Hollow Golf Club and will be launching on March 11 when the market opens.

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