Penn Entertainment has reported a 3.8% decline in revenue to $1.61 billion for the first quarter. Revenue was down across all core businesses during the three months through March 31, although the company remains positive about longer-term growth prospects for the full year.
The drop includes the Interactive segment, which has been a growth area for Penn in recent times. Revenue here was down due to unfavourable hold from major sporting events.
Meanwhile, Land-based gambling revenue declined in each of the Northeast, South, West, and Midwest segments, attributed to severe weather conditions that impacted the US in January and February, leading to reduced visitor numbers.
CEO and president Jay Snowden acknowledged the revenue decline but remained undeterred. “We look forward to unveiling additional product enhancements and unique media integrations with ESPN ahead of the 2024 football season,” Snowden said.
“Our improved online product offering will help engage, reactivate and retain our expanding database, while also advancing our strategy to create a highly differentiated experience for sports fans and sports bettors.”
To bolster its technology and product improvements, Penn announced last month the appointment of Aaron LaBerge as its new chief technology officer. LaBerge, with over 20 years of experience at The Walt Disney Company, will lead the technology strategy and execution for Penn, focusing on enhancing the digital experience for customers and strengthening integrations with ESPN.
Taking a closer look at Penn’s Q1 performance, gaming revenue fell 5.1% to $1.26 billion, while revenue from hotel, food, beverage, and others remained level at $348.6 million. The Northeast segment remained the main revenue source for Penn, generating $648.7 million, albeit 2.3% lower than the previous year due to adverse weather conditions.
The South, Midwest, and West segments also experienced revenue declines. However, Penn noted positive momentum in its Ohio properties and highlighted progress with its four growth projects, “all of which remain on budget and on schedule.”
Penn’s Interactive segment faced a double-digit decline in revenue, down 11.1% to $207.7 million, attributed to unfavorable hold from major sporting events. Despite challenges, Penn continued its expansion strategy, launching ESPN Bet in North Carolina and acquiring Wynn Interactive’s New York sports betting licenses.
“While we are pleased with the early ESPN Bet adoption and engagement results, our focus heading into this football season will be on enhancing our product offerings, including a refreshed home screen and expanded parlay offerings,” said Snowden. “Simultaneously, with our partners at ESPN, we will reveal additional ESPN Bet media integrations within their digital media app and industry-leading fantasy product.”
Turning to operating expenses in Q1, these increased by 10.5% to $1.63 billion, primarily driven by higher gaming costs. Penn reported a net loss of $114.7 million for the quarter, compared to a net profit of $514.5 million in the previous year.
Truist Securities provided insights into Penn’s performance, upgrading it to a ‘Buy’ rating. Analysts highlighted Penn’s growth potential and strong core KPIs, emphasizing the compelling risk/reward when considering low expectations.