Penn Entertainment (NASDAQ: PENN) announced a revised outlook today, signaling a smaller-than-expected loss for its interactive division, which includes ESPN Bet, for the third quarter.
In a Form 8-K filing with the Securities and Exchange Commission (SEC), Penn indicated that its digital gaming business is expected to report a loss between $90 million and $100 million for the September quarter, a favorable adjustment from its initial projection of $115 million to $135 million in losses.
Penn’s comments on hold rates and parlay mix suggest building momentum for ESPN Bet, aligning with recent analyst observations. However, some have highlighted that the platform may still need to expand its parlay offerings to better compete with industry leaders like DraftKings and FanDuel.
This optimistic update comes about three months after Penn announced workforce reductions in its digital division.
Strong Regional Casino Forecast from Penn
Despite the attention ESPN Bet has garnered, Penn’s regional casino operations remain the backbone of the company’s financial performance. While the third-quarter close is still pending, Penn provided positive guidance on its EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) for its retail gaming segment. This may reassure some investors amid recent concerns over spending slowdowns at regional casinos.
Penn anticipates third-quarter 2024 Retail Operations Adjusted EBITDAR to be between $465 million and $475 million. The company noted a $10 million impact due to unfavorable hold rates in its Northeast segment and reduced volumes in the South segment, which faced severe weather and hotel renovations. Comparatively, the third-quarter 2023 EBITDAR benefited from $14 million in business interruption proceeds due to Hurricane Laura, impacting the South segment.
Penn is set to release full third-quarter results before the U.S. markets open on Thursday, Nov. 7.
ESPN Bet’s Impressive September Metrics
While challenging the DraftKings and FanDuel duopoly remains a long-term goal, ESPN Bet has shown promising growth. At an investor event held at Penn’s M Resort & Casino in Henderson, Nevada, the company highlighted a 161% year-over-year increase in monthly unique users for ESPN Bet in September, with parlay users up by 211%.
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