PENN’s online EBITDA loss hits $103m in Q2 as revenue slides 8%

PENN Entertainment has reported a $102.8m adjusted EBITDA loss in Q2 for its Interactive division as bosses suggested benefits remain in the pipeline for the ESPN Bet brand.

Losses ballooned more than 700% against Q2 2023’s negative $12.8m, although CEO Jay Snowden described the bottom-line performance as “better than expected.”

PENN’s Interactive arm includes ESPN Bet and Hollywood Casino, with the former having launched last November following the $1.5bn licensing deal over 10 years inked with ESPN’s parent company, Walt Disney Corporation.

However, losses have continued to mount since the product went live, with total adjusted EBITDA in H1 for the division now almost negative $300m.

Q4 2023 losses alone reached $333.8m as part of ESPN Bet’s initial launch period, including a slew of promotional spending.

PENN had been running Barstool Sportsbook before shelving the operation and switching to ESPN Bet, with media outlet Barstool Sports sold back to founder Dave Portnoy for $1.

Meanwhile, revenue tumbled 8.3% year on year (YOY), falling from $257.5m in Q2 2023 to $232.6m in the three months ended June 30.

However, the Wyomissing, Pennsylvania-based company did note it was a record quarter for gaming revenue.

In terms of average monthly active users (MAUs), there was a 138% YOY surge, reaching 465,000 versus 196,000 in Q2 2023.

Within that, online sports betting MAUs increased 142% YOY while igaming MAUs soared 123%.

The operator also revealed its total digital database of customers was 3.8 million as of June 30, an increase of 81% since the launch of ESPN Bet.

Included within the presentation deck attached with the trading update, PENN also pointed to data from market intelligence firm Sensor Data which suggests the operator holds a top three ranking in weekly active users.

Digging into online sports betting, PENN said its Q2 hold was 8.2%, as determined by collated information from Eilers & Krejcik Gaming reports, state gaming data and internal data.

In Illinois, where spend by parlay is broken down by the state, ESPN Bet reported 24.2% of total handle came from parlays in April and May, the second highest of any licensed operator there.

The deck also includes information on ESPN Bet’s upcoming rollout in New York after PENN Entertainment acquired a license from Wynn Resorts for $25m.

The brand is set to launch this month in the Empire State, with the move putting EPSN Bet in front of 46% of the US population – up from 40% today.

The company said “organic user acquisition strategy” was well placed, given ESPN sites receive an average of 10 million visitors from New York each month.

Ahead of the start of the NFL season in September, PENN Entertainment detailed its plans around deeper ESPN integration, with the sportsbook now being plugged into a series of the media giant’s apps.

ESPN Bet will also be integrated into the ESPN Fantasy app in the “coming weeks,” while it has also been bolted into theScore app in the US, including ‘add to betslip’ functionality.

In terms of product, management pointed to a “refreshed user interface and experience,” as well as the addition of profit boosts, enhanced parlays and same game parlays and bet-and-watch options.

On New York and NFL preparations, Snowden said: “We will maintain our disciplined approach to customer engagement when we launch ESPN Bet in New York in late August, where we will benefit from ESPN’s extensive linear and digital reach.

“We recently began the rollout of our ESPN Bet product enhancements and will launch the remaining key upgrades prior to the start of college football and our launch in New York.

“In parallel, our partners at ESPN are expanding our unique ESPN Bet media integrations, including those with ESPN’s leading fantasy football product which boasts over 12 million active users.”

At a group level, total revenue reached $1.66bn, down from $1.67bn in Q2 2023 as total adjusted EBITDAR shrunk from $476.8m to $367m.

Total net loss slumped to $27.1m, flipping from a positive $78.1m in the corresponding period last year.

Snowden added: “Our retail properties delivered solid results this quarter as our best-in-class team of operators continues to execute across our diverse portfolio of market leading assets.

“In our Interactive segment, top-of-funnel growth, improved risk and trading execution, and refined promotional strategies contributed to better-than-expected revenue and adjusted EBITDA results.”

PENN’s stock is down 1.2% at the time of writing in pre-market trading.