“Unfavourable hold” a drag on Penn earnings, but new products, tech are things to look forward to
During the presentation Snowden pointed to “unfavourable hold” in the northeast and a decline in the number of customers visiting casinos in the south due to weather and construction as drags on revenue. He said that retail customer demand remained stable. With regard to hold, Snowden said the low hold in the third quarter was industry-wide and not unique to Penn. The third quarter includes two of the slowest wagering months of the year in the US.
At least one analyst, Joseph Greff from JP Morgan, had lowered expectations ahead of the release. On Thursday morning Jefferies Equity Research released a note saying the numbers were “in-line with expectations”.
In terms of hard numbers, Penn has $1.8 billion (£1.38 billion/€1.66 billion) in cash and cash equivalents, which Snowden said leaves it well positioned going forward. The company reported $1.4 billion in revenue on the retail side, including $471.7 million in EBITDAR and adjusted EBITDAR margins of 33.8%. On the digital side, Penn had $244.6 million in revenue, but an adjusted EBITDA loss of $90.9 million.
At its investor day in Las Vegas last month, executives revealed that financials would be down. But Snowden said on Thursday that the start of the fourth quarter has been promising.
ESPN Bet-ESPN integration already a success
Penn last week announced its latest upgrade to the year-old ESPN Bet platform. That launched on 14 November 2023. Consumers can now link their ESPN and ESPN Bet accounts, which the company believes will be a game changer. The new technology will allow ESPN and ESPN Bet to personalise not only betting offerings, but media offerings as well.
“We’ve had tens of thousands of people link already and, as you would expect, they are placing more bets, so that means higher GGR, higher handle,” chief technology officer Aaron LaBerge said during the call. “They are also consuming more on ESPN. They are real superfans. It’s really a foundational experience that will allow us to really personalise. Not just on ESPN Bet, but also on ESPN where you’ll see personalisation of players and teams that I think that people are really going to like.”
Snowden called the integration “a big technical feat”.
During the call, executives were clear in saying that ESPN Bet draws a “casual bettor” and the company is tailoring its offerings to that demographic. Penn saw consistent growth in per-player handle during the quarter and continues to roll out additional offerings. Coming next will be improvements to the same-game parlay offerings, more branded feature bets and upgraded in-play betting.
In addition, through the new integration Penn can now “see your fantasy lineup” and that will open the door to a host of possibilities. In September, the company began using “pseudo personalisation” around fantasy and saw a 20% jump in growth. Going forward, Penn will leverage that access, but said consumers will see it as “natively integrated”.
New York, New York
EPSN Bet went live in New York during the tail-end of the third quarter. Snowden said the company is seeing a “higher quality customer” and higher handle per customer. For many platforms, New York is a challenging market. The tax rate is 51% and promotions cannot be written down. To that end, Penn has been “disciplined” in promotional offerings.
The focus, instead, has been on customer retention and reactivation.
Snowden also pointed out that his company is trying to be nimble in New York, given the amount of out-of-state consumers in the state each day. He said there are endless cross-sell opportunities with customers from neighbouring states, including New Jersey and that those opportunities differ between Monday and Friday as opposed to on the weekends.
On the retail front, Penn rebranded seven existing sportsbooks to ESPN Bet, including three in Louisiana and two in Ohio.
Hollywood casino platform coming
While much of the focus Thursday was on the growth and evolution of ESPN Bet, executives also pointed to the coming launch of the Hollywood Casino digital platform. Currently, Penn is directing its casino customers to ESPN Bet for online wagering and casino. Snowden called the situation “messy” while vice president of operations Todd George said Penn has “a whole group of people who don’t understand that they can access the icasno through ESPN Bet. So this will make it more clear.”
Penn is planning to launch the new platform in Pennsylvania in the first quarter of 2025. It also plans to go live in other US jurisdictions, which likely includes Michigan, New Jersey and West Virginia.
The company also has four retail casino projects underway, as it is relocating two Hollywood casinos in Illinois and adding hotel towers to locations in Ohio and Nevada.