PENN posts $334m Q4 online loss following ESPN Bet’s launch but hails soaring handle and actives

PENN Interactive has posted a $333.8m year on year (YOY) adjusted EBITDAR loss for Q4 2023 after an aggressive marketing launch following ESPN Bet’s debut on November 14 saw costs surge for the operator.

As detailed in PENN Entertainment’s Q4 report, the division, which encompasses ESPN Bet and Hollywood Casino, announced that EBITDAR losses soared in the final three months of the year.

Comparatively, in Q4 2022, PENN’s digital arm recorded adjusted EBITDAR of $5.2m.

Investors were unimpressed with the bottom-line numbers, resulting in the company’s stock plunging more than 11% to below $20 in early trading on the Nasdaq.

Looking at the losses for full-year 2023, PENN Interactive posted an adjusted EBITDAR loss of $402.5m, compared to a negative $74.9m in 2022.

The full-year figures also include a contribution from the Barstool Sportsbook, which PENN axed in favour of ESPN Bet in August via a $1.5bn licensing deal with Disney-owned sports broadcasting giant ESPN.

Additionally, the group’s interactive arm reported revenue of just $31.5m in Q4 2023, down from Q4 2022’s $208m.

PENN said the interactive revenue is inclusive of a tax gross-up of $107m and $82.9m for Q4 2023 and Q4 2022, respectively.

As detailed in the group’s investor presentation as part of the Q4 results, average monthly active users leapt 207% in Q4 2023 to 771,000.

PENN said its average monthly actives amounted to just 196,000 and 189,000 in Q2 and Q3, respectively.

The operator also reported a tightening of its promotional spend since the launch of ESPN Bet in November.

Promotional expenses as a percentage of handle landed at 32.2% in November, before slipping to 10.7% in December and 2.8% in January 2024.

PENN said handle had risen by 289% by January 2024 versus October 2023 prior to the launch of the brand.

Elsewhere, the New York-listed company pointed to Sensor Tower data which put the ESPN Bet brand in third place in terms of weekly active users versus its main rivals.

The operator also lifted the lid on parlay growth, with ESPN Bet helping the firm to reach “new demographics of sports fans”.

Bosses also said there had been a 63% YOY increase in parlay mix as a percentage of handle and a 360% surge in parlay handle alone.

There was also a 40% jump in NBA handle and a 35% YOY higher mix of women in the group’s digital database.

Finally, PENN championed the cross-selling ability of ESPN Bet to support Hollywood Casino, which has seen average monthly active users jump 280% YOY in Q4.

On the launch of ESPN Bet, Snowden added: “The November 14 launch of ESPN Bet led to tremendous download volumes, conversion to over one million FTDs, and record handle, supported by our partners at ESPN and our proprietary technology.

“Our comprehensive strategic alliance with ESPN is providing exceptional value, leading to attractive customer acquisition costs, and marketing efficiencies.

“Additionally, our Hollywood-branded icasino product within the ESPN Bet app has started to benefit from cross-sell opportunities from ESPN Bet, with solid revenue growth and record MAUs over the last several months,” he added.

Snowden also noted upcoming launches in North Carolina and New York, following the acquisition of Wynn Interactive’s license in the Empire State, would take the operator’s total addressable market from 37% to 46% of the US population.