Penn Entertainment Reports Q2 Earnings

Penn Entertainment (NASDAQ: PENN) released its second-quarter earnings on Thursday, amid industry buzz about layoffs and a potential takeover by Boyd Gaming. However, during the earnings call, Penn CEO Jay Snowden focused solely on the company’s financial performance and future plans, leaving the rumored buyout unaddressed.

The company reported revenue of $1.66 billion for the second quarter, a slight decline of 0.7% compared to the same period last year. Gaming revenue, which has been a central component of Penn's business, showed a modest increase of 3%, reaching $1.33 billion. However, the overall positive gaming performance was offset by a 13.4% drop in revenue from hotel rooms, food, beverages, and other services.

Penn's adjusted EBITDA for the quarter stood at $367 million, reflecting a significant 23% decrease from last year. Additionally, the company reported a net loss of $27.1 million for the quarter, a stark contrast to the $78.1 million profit it posted during the same quarter in 2023.

Key Points

• Financial Performance: Penn Entertainment reported a slight decline in Q2 revenue to $1.66 billion and a net loss of $27.1 million, with a significant 23% decrease in adjusted EBITDA, driven by lower performance in non-gaming segments.
• Interactive Division Challenges: The interactive division, including iGaming and sports betting, saw a 9.7% drop in revenue and deeper losses, though CEO Jay Snowden emphasized ongoing investment with profitability expected by 2026.
• Strategic Growth Plans: Penn announced the launch of a standalone iCasino app in 2025 and the expansion of ESPN Bet, aiming to strengthen its position in the competitive online gaming and sports betting markets.

Interactive Division Performance and Future Plans

Penn’s interactive division, which includes iGaming through Hollywood Online Casino, Social Gaming via Penn Play Casino, and sports betting through ESPN Bet, experienced a downturn. Revenue for the division dropped by 9.7% to $232.6 million, and its adjusted EBITDA loss deepened to $102.8 million, compared to a $12.8 million loss in the second quarter of the previous year. For the first half of 2024, the division's revenue fell by 10.3% to $440.3 million, with a cumulative loss of $298.8 million.

Despite these losses, Snowden emphasized that the interactive division is still in an investment and growth phase, with profitability not expected until 2026. He also outlined ambitious plans for the division, particularly focusing on the company's iCasino operations.

Standalone iCasino App Set for 2025 Launch

One of the most significant announcements during the earnings call was Penn's plan to launch a standalone online casino app by early 2025. Currently, Penn’s Hollywood Online Casino is accessible through the ESPN Bet app. However, the new app will aim to capitalize on the Hollywood brand and leverage Penn's extensive casino database.

Snowden provided a glimpse into the future of Penn's iCasino, noting that the new app will feature an expanded selection of games and promotions. The company also plans to develop more proprietary games through its Penn Game Studios while increasing the availability of third-party games. Although Snowden did not specify an exact launch date for the new app, the move signals Penn's intent to strengthen its position in the rapidly growing online casino market.

While Penn's long-term strategy includes the standalone iCasino app, the company is currently more focused on enhancing its sports betting operations through ESPN Bet. As football season approaches, Penn is preparing to roll out new features on the ESPN Bet app, including improved user interfaces and an emphasis on parlay options, which are both popular with players and lucrative for operators.

The ESPN Bet app will also be more deeply integrated with ESPN's platforms, including the ESPN Fantasy app, aiming to capture a larger audience. Additionally, Penn plans to rebrand eight existing retail sportsbooks to promote ESPN Bet, bringing the total number of ESPN Bet sportsbooks in Penn casinos to nine by the end of the year.

Looking Ahead

Penn Entertainment's Q2 earnings reflect the challenges and opportunities facing the company as it navigates a competitive and evolving gaming industry. With a strategic focus on both its interactive and sports betting divisions, the company is positioning itself for long-term growth, despite short-term financial setbacks. The upcoming launch of a standalone iCasino app and the expansion of ESPN Bet signal Penn's commitment to innovation and adaptation in a rapidly changing market.