Key points:
- Total revenue reached $1.64bn, up 1.2%
- Adjusted EBITDAR reached $348.4m, down 21.7%
- Net loss narrowed significantly, down from $725.1m to $37.5m
Penn Entertainment has reported its financial results for the third quarter of 2024. In total, revenue came to $1.64bn, up by 1.2% year-on-year, with an adjusted EBITDA of $193.5m, down 35.2% and adjusted EBITDAR of $348.4m, down 21.7%.
Despite this decline in EBITDA and EBITDAR, net loss narrowed significantly, from $725.1m to $37.5m. Penn was also able to report positive operating income for the quarter, making $67.5m compared to last year’s $786.4m loss. Primarily, this was driven by last year’s $923.2m operating expense for Penn’s loss on the disposal of Barstool, which came to $923.2m. Another notable factor here is a shift in income tax expense, which came to $2.8m this quarter compared to last year’s -$161.7m.
Operating expenses for the quarter were $1.57bn, compared to $2.41bn last year.
Revenue by segment
Of Penn’s $1.64bn revenue, $1.29bn, or 78.6%, came from gaming. This reflects segment growth of 2.9%. Operating expenses from the segment also grew, it must be noted – the only segment to do so. Gaming operating expenses grew to $826.1m from $709m; up 16.5%.
Food, beverage, hotel and other revenue came to $351.2m, declining slightly from the $367.3m reported this time last year. Expenses were down by over $15m to $244.4m. General and administration expenses were down to $392.5m, while depreciation and amorisation costs increased by just under $3m to $108.7m.
Revenue by geo
Penn’s Northeast segment was its highest earner this quarter, making $684.8m. This reflects only a minor decrease in year-on-year revenue, down 0.4%, while adjusted EBITDAR dropped 4.3%, making $199.3m. This segment consists of over a dozen properties, including Ameristar East Chicago, Hollywood Casino at Greektown, Hollywood Casino at The Meadows, and Plainridge Park Casino. ‘Unfavourable hold’ was Penn’s explanation for this decline.
The South segment, which includes Ameristar Vicksburg, Boomtown Biloxi, Boomtown Bossier City and Margaritaville Resort Casino, reported revenue of $288.1m. This, like the Northeast segment, is a decline year-on-year, down 6.5% year-on-year. Adjusted EBITDAR did not fare much better, down 22.1% to $106.4m. This decline was attributed to severe weather by Penn.
The West segment reported revenue of $131.8m; a slight dip, though more severe than the Northeast segment, at 2.4%. Adjusted EBITDAR was also down, making $47.5m to last year’s $54.7m. Properties in this area include Ameristar Council Bluffs, Argosy Casino Alton and Hollywood Casino Joliet. Revenue from this segment also includes Penn’s 50% investment in Kansas Entertainment, which owns properties such as Prairie State Gaming and River City Casino.
Penn’s Midwest segment suffered a similar fate to the other three land-based segments, with revenue down 0.4% to $244.6m, while adjusted EBITDAR dipped by over $5m to $118.5m.
Penn Interactive
The only segment to show any growth year-on-year for Penn was its Interactive segment. After selling 100% of its Barstool stocks last August and rebranding its sportsbook segment to ESPN Bet (after having only bought the brand in February), Penn was able to secure revenue of $244.6m this quarter, up 24.6% year-on-year. However, adjusted EBITDAR was was down to -$90.9m.
For a more in-depth look at the history of Barstool and its relationship with Penn, check out our timeline in the March edition of Trafficology.
Indeed, despite being a relatively new market player, ESPN Bet has found success across the US. Since its launch last August, it has launched in states including North Carolina, has received a licence in New York, opened its first retail location at Hollywood Casino in Greektown and more. After launching in New York in September, ESPN Bet now operates in 19 states.
Compared to Penn’s Q1 results, EBITDAR loss has risen sizably. While in Q1 2023 adjusted EBITDAR for the segment was -$196m, and in Q3 2023 it was -$50.2m; in Q3 2024 adjusted EBITDAR increased year-on-year to -$90.9m; despite Q1 adjusted EBITDAR suggesting a potential for recovery at just -$5.7m. As such, is it challenging to predict when the operation will become EBITDAR positive for Penn; something that would be highly beneficial to the operator’s overall financial help, given that overall adjusted EBITDAR was down 21.7%.
Share price impact
As of writing (14:21 BST), Penn’s stock price sits at $19.51 at pre-market price, up 1.46% from its closing price of $19.23 on 6 November.
Comparison
While FanDuel and DraftKings have yet to release their Q3 results as of writing, compared to competitor Bally’s, it seems these results are in line with others in the segment.
Bally’s saw its revenue decline 0.4% to $630m, while adjusted EBITDAR fell 47.9% to $166.3m. Its net loss also more than tripled, coming to $247.9m compared to last year’s $61.8m. However, Bally’s North America Interactive segment significantly outperformed Penn Interactive in terms of year-on-year growth, having increased its revenue by 54.5% to $45.7m for the quarter.
Caesars Digital, meanwhile, was able to report a positive adjusted EBITDA for Q3, making $52m compared to $2m last year. Its revenue growth also outperformed both Bally’s and Penn, growing by 40.9% year-on-year.
Comments
On the results, CEO and President Jay Snowden said: “Penn’s third quarter results were consistent with the preliminary estimates we disclosed last month in connection with our investor event in Las Vegas... The fourth quarter is off to a stronger start, led by several markets including Michigan, Ohio and St. Louis.
"In the third quarter, our Interactive segment benefited from better-than-expected hold, driven by a higher parlay mix from our improving product and lower promotional expenses. Additionally, on October 30th, we launched account linking between ESPN Bet and ESPN, which is foundational for creating a personalised sports betting experience across the ESPN ecosystem."
