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Penn Entertainment Updates Stockholders On Unsightly Q4, Full-Year 2023 Earnings

Written By Derek Helling on February 15, 2024 - Last Updated on February 16, 2024
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Penn Entertainment CEO Jay Snowden spent a lot of time during the company’s most recent earnings call talking about how Penn’s investments and transactions from 2023 will pay off for the company. Given the bottom line for Penn for the final quarter of 2023 and the entire year, it’s easy to see why that was the approach.

Amid full-year revenues of $6.3 billion during 2023, Penn’s operating loss for the year came to $690.2 million. The final quarter of the year represented an operating loss a little less than half of that size. During the earnings call, Penn executives highlighted the business components they believe will get the company back in black.

Some of that emphasis focused on Penn’s interactive division and its online gambling products. Snowden pointed to existing statistics from the performance of those platforms to support his argument for better days ahead.

A look at the raw numbers for Penn’s Q4 and entire year in 2023

According to Penn’s earnings release, Penn recorded net losses for the fourth quarter of 2023 and the entire year. Those sums came to $358.8 million and $491.4 million respectively. Revenue for the fourth quarter was $1.3 billion.

The company’s brick-and-mortar casinos accounted for the vast majority of those revenues. Revenues there stayed quite consistent for both the fourth quarter and the full year. For example, Penn’s Northeast segment saw $662.9 million in revenue for Q4 2023, a drop of just 0.6% compared to Q4 2022.

During the call, Snowden shared updates on four development projects in three states. Those include the transition of the Hollywood Aurora (Illinois) to a new inland site after spending decades as a riverboat casino. Snowden expects all those projects to be complete and publicly accessible by the beginning of 2026.

Penn Interactive, including ESPN Bet Sportsbook and Hollywood online casino, contributed $31.5 million in revenue for the fourth quarter and $718.8 million for the entire year. Penn launched its re-branded online sportsbook on Nov. 14 and separate Hollywood casino app around the same time.

That means that for most of the year and part of the fourth quarter, a joint online casino/sportsbook app was operating under the old Barstool brand. Speaking of that company, Penn attributed a loss on its disposal of Barstool of $923.2 million to the full-year balance sheet.

Gaming in general was the company’s greatest source of revenue and most significant expense in 2023. It’s also where Penn is looking to produce a more attractive bottom line in the future. That includes ESPN Bet and Hollywood online casino.

Snowden discusses investments in online gambling for 2023

A theme that ran throughout the presentation when it came to Penn Interactive could be simplified by the statement, “it takes money to make money.” As Snowden put it:

“In our Interactive segment, ESPN BET attracted significantly more first-time depositors (FTDs) than we anticipated, which drove higher than expected promotional expense,” Snowden said.

Revenue for Penn Interactive was down almost 85% year-over-year for the fourth quarter of 2023, which increased promotional expense for ESPN Bet’s launch provides a reason for. At the same time, revenue for the interactive division rose by 7.7% for all of 2023, hearkening to Snowden’s further comments on the topic.

“Our successful launch led to substantial expansion in key performance indicators (KPIs) including monthly active users (MAUs), handle, and cash handle,” Snowden added. “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.”

In simpler language, ESPN Bet and Hollywood online casino users are starting to use up their introductory promos and make actual cash deposits. Amid that situation, Snowden expressed optimism about Penn Interactive for 2024.

Penn Interactive seeking expansion, maturation in 2024

For the current quarter and the rest of 2024, Snowden and others on the call expressed optimism that Penn Interactive would move closer to profitability. To support that argument, they pointed to some statistics from the fourth quarter of 2023.

For example, the annual growth for Penn Interactive’s share of the sports betting dollars in the markets ESPN Bet launched was up 12% compared to the part of 2023 before ESPN Bet went live. Additionally, Penn says it saw a 280% increase in monthly average users for Hollywood casino in the fourth quarter.

Going forward, Penn points to further integrations into ESPN properties and a planned reduction in customer acquisition/marketing spend in new markets for its online gambling products as another part of the profit puzzle.

Those new markets for ESPN Bet are potentially in New York and eventually in North Carolina, pending regulatory approvals. While Penn did not share any figures of what share of those new markets they expect ESPN Bet to command upon entry, Snowden did express that they expect to be competitive.

Overall, Snowden expressed confidence that investments in online gambling “will create significant long-term shareholder value.” Those investments were significant during 2023 and the numbers reflect that. Snowden and others likely hope that the benefit of those investments will become more tangible in the bottom line moving forward.

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Derek Helling

Derek Helling is the assistant managing editor of PlayUSA. Helling focuses on breaking news, including finance, regulation, and technology in the gaming industry. Helling completed his journalism degree at the University of Iowa and resides in Chicago

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