PENN Entertainment‘s year-and-a-half with ESPN Bet has not gone as hoped, management conveyed to investors during the fourth quarter earnings call on Thursday.
PENN Interactive, which houses brands like ESPN Bet, Hollywood Casino and theScore, reported $275 million in revenue for the fourth quarter. The segment posted an EBITDA loss of $109.8 million, and while it was a $224 million improvement compared to the same quarter last year, it still lagged on the company’s overall performance as it fends off a proxy battle tied to its online casino and sports betting segment.
CEO Jay Snowden acknowledged that PENN has yet to achieve its objective of establishing a profitable standalone online gaming business with sustainable growth potential.
“While that opportunity and strategy are very much intact we haven’t met this one yet,” Snowden said of growing ESPN Bet to compete for the top spots in sports betting. “We believe that’s about to change.”
ESPN Bet Goals Unchanged By Pressure
Penn’s online gaming strategy has faced heavy investor scrutiny, culminating in a proxy battle led by HG Vora. The firm labeled PENN’s interactive business an “abject failure” after the company took an $850 million loss on Barstool Sports and then committed $1.5 billion to ESPN Bet, which is behind on key benchmarks.
The goal is to achieve breakeven for the Interactive segment this year, with expectations of sequentially reducing losses each quarter and attaining profitability in the fourth quarter. PENN projects a roughly $350 million improvement in EBITDA at the midpoint for 2025 and anticipates full profitability for the segment by 2026.
Snowden emphasized the company’s commitment to enhancing ESPN Bet’s market position, focusing on increasing handle market share through improved integrations, product upgrades, and promotional strategies aimed at bolstering customer retention. Collaborative efforts with ESPN are underway to optimize spending and resources to drive better outcomes, he said.
ESPN Bet Exit On The Table
Snowden addressed an opt-out clause that allows ESPN to exit the agreement in August 2026 if certain market share goals are not met.
“If for whatever reason we’re not hitting the levels that we need to, then obviously as you’re approaching that third year anniversary you have a three year clause in the contract that both sides will have to do what’s in their best interest. That’s aways out there.”
During the football season, ESPN Bet captured approximately 3% of handle share in its active states, ranking sixth among all reporting operators—a notable gap from the initial goal of competing for a top position. Executives expressed optimism about increasing ESPN Bet’s sports betting market share to over 5% by the next fourth quarter, with an immediate target of 3.5% for online casino operations.
Parlays A Bright Spot In Historically Bad Football Season
The quarter was influenced by a historic trend of NFL favorites winning, leading to one of the most customer-friendly periods in the legal sports betting era. That negatively impacted PENN Interactive’s revenue by $44 million and EBITDA by $32 million.
Despite these challenges, the company reported success in pushing higher-margin bets, with parlays accounting for over 30% of handle in December and January.
Some competitors have touted the Super Bowl as their largest single day of betting ever. CFO Felicia Hendrix noted parlays made up 34% of handle, up more than 15 percentage points over last year.
More than three out of four users, 76%, placed a same-game parlay. That was up 18 percentage points from last Super Bowl.
TheScore Grows In Canada
Ontario, where it operates theScore Bet, is Penn’s number one online gaming market in North America in terms of revenues, gross profit and contribution margin. The company is bullish on its Canadian prospects expanding once it launches in Alberta, subject to approval.
Monthly active users in Canada were up 16% for sports betting and 43% for iGaming during the quarter.
More Integration On The Way
Chief Technology Officer Aaron LaBerge highlighted the successes of account linking between ESPN Bet and ESPN’s core app, aiming to boost live betting traffic through these technological advancements.
“It’s a large percentage of our monthly active users are linked. That personalization data is flowing. We are starting to build personalized experiences that you will see launching throughout the year,” LaBerge said.
ESPN Bet launched live streaming in some markets this week, which execs hope can provide a significant lift to live betting traffic. It will also natively integrate ESPN Bet with ESPN’s popular Men’s NCAA Tournament Challenge for March Madness.
“The integrations are just going to continue to get deeper and more meaningful and we’re very excited about that. We think that’s going to yield a positive result.
“We are deeply integrated with that product and are incredibly excited about it and can’t wait for the world to see what those integrations look like,” LaBerge, a former ESPN exec, said of ESPN’s plans to go direct to consumer in the Fall. “When you think about ESPN and the video business, they produce or distribute 35,000 live events a year, which is pretty powerful in terms of our aspirations.”
