During the company’s fourth-quarter earnings call on Thursday, 27 February, Penn’s CEO emphasized a positive outlook for the future, focusing more on upcoming opportunities than past experiences. Snowden highlighted that Penn is witnessing “green shoots” in various departments and acknowledged the need to further leverage its partnership with ESPN to unlock full value.
Penn reported digital gaming revenue of $275 million for the fourth quarter. Its adjusted EBITDA loss of $109.8 million was a $224 million improvement over the same period in 2023. However, these figures still impacted the company’s overall performance and fell short of analyst expectations.
Overall, the company surpassed Truist’s adjusted EBITDA forecast with $320.7 million, though this was 1% below general expectations. Penn’s stock price dipped from $20 to $19.28 after the call and later closed at $20.39. The $461.2 million in adjusted EBITDAR from its land-based operations exceeded estimates, while digital losses of $110 million matched expectations. Net revenue also showed mixed results, coming within 1% of both Truist’s and general projections.
Snowden announced plans for Penn to repurchase “at least” $350 million in stock in the coming year as a sign of confidence.
**Growth Slow and Parlays Not Paying**
Since its launch in November 2023, ESPN Bet has struggled to compete with top sports betting platforms. FanDuel and DraftKings maintain dominant positions, with BetMGM in third. ESPN Bet, aiming for a 20% market share by 2027, currently holds under 5%, a figure executives hope to increase this year.
A key challenge for ESPN Bet, aside from favorable football months for bettors, is capitalizing on parlays. These multi-leg bets make up at least 50% of wagers on DraftKings and FanDuel, but only 30% on ESPN Bet, impacting profitability as parlays are lucrative for operators.
**Snowden: More Improvements Coming**
Snowden promised enhancements and more cross-selling for ESPN Bet. Last year, the company introduced personalized experiences for bettors and new livestreaming features, aiming to attract more consumers and benefit from Penn’s omnichannel strategy.
Penn’s customer base is skewing younger, and the company continues to expand its retail locations. Hollywood Joliet in Illinois is scheduled to open in the fourth quarter of 2025, with three more locations planned for 2026. The company also launched online casino products in Michigan and Pennsylvania last year.
However, Snowden recognized that Penn is managing ESPN Bet like a “scale player.” He indicated that if goals aren’t met by year-end, “operational levers” might be necessary, particularly in the digital marketing budget.
“We have a cost structure designed for scale because that’s our expectation. If we don’t meet that trend, operations will need to adjust accordingly.”
**What Analysts Are Saying**
Truist analyst Barry Jonas suggested that if the platform doesn’t reach a turning point soon, Penn’s remarks imply potential reductions in marketing, a streamlined cost structure, and other adjustments as the agreement nears its three-year mark in 2026, when both parties have opt-out options.
Deutsche Bank’s Carlos Santerelli noted strong momentum in the online casino segment and observed a shift in executives’ tone, suggesting they view the digital business as a valuable asset. He interpreted this as an indication of the asset’s worth in terms of technology and brand collections, potentially signaling a willingness to monetize.