PENN Entertainment’s Q1 earnings call became a de facto postmortem for the launch of ESPN Bet, with CEO Jay Snowden admitting areas the collaboration could improve upon in the quest for 20% market share.
“The path to getting to this point has not been without some bumps in the road, as no nascent digital strategy ever is, but we are now strongly positioned to deliver on our vision and deliver on the shareholder value that comes with it,” said Snowden early in the earnings call.
Penn expects another negative EBITDA quarter in Q2
“As we have discussed previously, the first quarter will be the largest loss of the year. The fourth quarter will be the smallest. For the second quarter of ’24, we expect to generate an EBITDA range of negative $115 million to negative $135 million. We expect 2024 corporate expense of roughly $105 million, inclusive of our cash settled stock-based awards,” added Penn EVP and CFO Felicia Hendrix.
He was nonetheless optimistic about the path forward.
“With our primary acquisition and investment phase in today’s available market is now largely behind us, our key focus is on monetization via engagement, retention and reactivation and making sure we deliver a best-in-class product.”
Reporting on a disappointing quarter, Snowden echoed other CEOs that both the Super Bowl and March Madness were tough for the sports betting business.
“During the first quarter, we achieved record quarterly online sports betting iCasino handle. Our online sports betting results were negatively impacted by a slightly lower handle per user than we modeled and well-documented unfavorable hold in the quarter, which continued through March Madness with the favorite UConn winning their matchups by large margins throughout the tournament and ultimately, the National Championship,” he noted.
Customer acquisition exceeding expectations for ESPN Bet
One area that did out-perform projections was customer acquisition. While those did not come without substantial investment in promotional funds, Snowden said that spending was in line with expectations.
“ESPN BET attracted significantly more registrations and first-time deposits than our internal assumptions and even the most bullish of predictions, garnering over 1 million new to PENN online sports betting first-time deposits in just the first two months of operation, having done so with competitive at market promotional offers. We did not have to over reinvest to deliver these results. This speaks to the power of the ESPN brand.”
Tech dev will focus on more integration with ESPN media apps
While the strength of the brand is not in question, the strength of the tech is something even Snowden admitted needs work. He did note that the recent hiring of Aaron LeBerge as the new CTO speaks to the commitment the company has to improve the app as well as integration with ESPN tech.
“We provided in the investor presentation this morning a sneak peek of what you can expect to see at the beginning of the NFL football season in early September from a product and feature enhancement perspective, which will include things like dark mode and improved home screen experience and navigation, and a much more competitive parlay, same game parlay and player pop market offering and overall experience,” Snowden noted.
He also alluded to creating a more cohesive online casino experience so Hollywood Casino patrons don’t have a user journey through the ESPN Bet app to get to Hollywood Casino content.
The tech focus will also be on better maximizing synergy across ESPN and the ESPN Bet app.
“We’ll have account linking done at some point throughout the football season. We’re shooting for as early in the football season as possible. But once you do the account linking, that’s when you can get really sophisticated on personalized offers, within the Fantasy app, within the ESPN media app.”
