PENN CEO insists the two "most challenging" quarters are behind ESPN Bet

PENN Entertainment CEO Jay Snowden has declared that ESPN Bet’s most difficult quarters from a P&L perspective are behind the company after an underwhelming Q1 for the group’s digital arm.

PENN’s Q1 results published yesterday, May 2, showed revenue of $207.7m, down 11.1% year on year (YOY) from the $233.5m that Q1 2023 generated. 

As well as a dip in revenue, the interactive arm’s adjusted EBITDAR losses soared to $196m, a steep rise from a loss of $5.7m in the same period a year prior.

Following the release of PENN’s Q1 results, the operator’s share price dropped nearly 17% in early trading, albeit with a slight recovery by the end of the day.

Snowden has subsequently addressed concerns, and made it clear that Disney, which signed a 10-year $2bn deal with PENN to create ESPN Bet in August 2023, did not do so to operate as fourth or fifth best competitor in the market.

Speaking on PENN’s Q1 2024 analysts call, Snowden noted: “We are both in this to deliver best-in-class digital betting products and unique omnichannel experiences for our loyal customers, users, and fans and to be on the podium competing long term for profitable market share, all of which will result in the delivery of significant value for our shareholders.

“The future is very promising. The two most challenging quarters from a digital P&L perspective are now behind us.”

The CEO stressed that PENN is passionate about the firm’s investors seeing a return, as he doubled down on his commitment to grow the brand.

He said: “We greatly appreciate the investors that have and continue to support us and trust us. We don’t take that lightly and are deeply committed to making sure you’ll be rewarded for that decision.”

Snowden did go on to address ESPN Bet’s lower spend per user during the quarter, with the New York-listed firm claiming the result was “lower than expected”.

PENN did not provide any concrete figures on the metric, but did include some slides in its investor presentation to demonstrate the progress.

Snowden identified two “primary factors” influencing the reduction in spend, firstly citing the fact that ESPN Bet has grown the total addressable market due to the strength of its brand and therefore brought new players that are currently more “casual betters”.

The CEO explained: “We should expect their engagement with the app and overall spend to grow over time as they become more comfortable, experienced, and knowledgeable with the app and sports betting in general and the integrations with ESPN become deeper and more seamless, so any friction between ESPN’s ecosystem and ESPN Bet is eliminated.

“We are also seeing this new casual segment is much more likely to engage with parlay bets, which bodes well for us as we expand our offerings.”

The second factor was that Q1 showed ESPN Bet is yet to generate a significant share of wallet among experienced and VIP betters due to gaps in the product that PENN claim has already been identified.

Snowden continued: “Number two, we are not yet generating our fair share of wallet with experienced and VIP bettors, commensurate with our weekly active users share by virtue of our parlay, same game parlay, player prop, and live betting features currently trailing the market.”

However, the CEO lauded the recent appointment of Aaron LaBerge as chief technology officer (CTO) and stressed how his vast experience will further address those factors.

Snowden said: “Aaron was deeply involved in the technology due diligence of PENN Interactive and felt that our new fully owned, built for North America proprietary technology stack, along with our talented technology teams, were what would make PENN the perfect partner for ESPN to launch ESPN Bet. 

“Now, he gets to lead those efforts from inside PENN.”

Elsewhere, the New York-listed company has vowed to launch a stand-alone icasino app in early 2025 after Q1 2024 returned record handle and GGR for the vertical.

PENN’s online casino offering, which includes Hollywood Casino, saw a 166% YOY increase in monthly active users and a 32% YOY increase in GGR, with Snowden shedding light on how the app is progressing.

He added: “We’re making really good progress on it. It’s going to look great.  We just need a little bit more time given the priorities between now and the start of the football season on the OSB side.

“If you look over the medium to longer term, we would expect our online casino market share to be right there with our online sports betting market share. It has trailed [but] we think we’ve got the right people and plans in place to be able to close that gap.”