Penn Entertainment Q4 Earnings Highlights: Revenue Miss, EPS Miss, ESPN Bet's Impact

Casino and sports betting company PENN Entertainment PENN reported fourth-quarter financial results Thursday before the market open.

Here are the key highlights, including the early impact of ESPN Bet.

What Happened: Penn reported fourth-quarter revenue of $1.4 billion, which missed a Street consensus estimate of $1.53 billion, according to data from Benzinga Pro.

The company reported a loss of $1.75 per share, which missed a Street consensus estimate of a loss of 52 cents per share.

Property revenue was $1.37 billion in the fourth quarter. The company said 10 properties had their highest ever fourth-quarter revenue, with customer demand and weather cited as reasons for the boost. Penn has 43 properties in 20 states.

"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," Penn CEO Jay Snowden said.

ESPN Bet revenue was $31.5 million in the fourth quarter.

The company posted a net loss of $358.8 million in the fourth quarter, compared to a profit of $20.8 million in the year prior period. The loss came from the investments in the interactive segment and ESPN Bet.

Penn is paying The Walt Disney Company DIS annually for the ESPN license for its sportsbook.

Adjusted EBITDA was a loss of $39.6 million in the fourth quarter for the company, compared to a profit of $438.3 million in the year ago period.

Related Link: Disney CEO Bob Iger Says ESPN Bet Had Multiple Suitors. Here’s Why Penn Entertainment Won The Rights

ESPN Bet Results & Future: ESPN Bet launched in 17 states in November and had a big impact on the fourth-quarter results.

Penn highlighted the record online sports betting handle it had in December and January, which were the first two full months of ESPN Bet. The handle was up 190% year-over-year in the two months.

The company has added over 1 million new customers into its database since the launch of ESPN Bet, which is on top of the existing Barstool Sportsbook customers who were migrated over to ESPN Bet.

ESPN Bet had market share of 15% to 16% in the months of December and January, which ranked third and trails the market leaders that have shares of around 23% to 24% and 21% to 22%. The results are based on the states in which ESPN Bet operates.

Penn had record monthly active users for its online sports betting thanks to the launch of ESPN Bet and is reporting that more time is being spent on the app in recent weeks. The company is also seeing a higher mix of female customers, who were up 35% year-over-year in the fourth quarter.

"ESPN Bet attracted significantly more first-time depositors than we anticipated, which drove higher than expected promotional expense," Snowden said.

"Our successful launch led to substantial expansion in key performance indicators including monthly active users, handle and cash handle."

Penn reported that it is seeing strong early retention and has lowered its user acquisition costs since launch.

The company launched in November with $200 in free bets promotion for all users, including old Barstool Sportsbook customers. The company reported promotional spend of 32.2% in November. Promotional spend as a percent of revenue decreased to 10.7% in December and 2.8% in January.

Penn said it saw a higher mix of non-NFL betting volume, which comes from integrations with ESPN and the use of ESPN personalities that are part of the licensing agreement with Disney.

The company also saw a higher percent of parlays, which includes ESPN personalities creating parlays that bettors can use. The company had a 360% year-over-year increase in parlay handle in the fourth quarter.

The launch and rebrand of ESPN Bet also helped boost Penn's iCasino operations in the states in which it is legal, with monthly active users up 28% for iCasino in the fourth quarter.

Going forward, ESPN Bet highlighted its upcoming launches in the states of North Carolina and New York, which are expected in March 2024 and prior to the start of the 2024 NFL season, respectively. The states represent 3% and 6% of the U.S. population, respectively, and their addition will result in ESPN Bet covering 46% of the U.S. population in 2024.

The company is also rebranding the retail sportsbook in the Hollywood Casino at Greektown in Detroit, with a planned grand opening that will coincide with the 2024 NFL Draft hosted in the city in April.

PENN Price Action: Penn shares are down 11% to $20.12 on Thursday versus a 52-week range of $18.35 to 32.86.

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