PENN Entertainment, Inc. PENN reported a wider-than-expected loss in the fourth-quarter 2023 results. Both the bottom and top lines saw a year-over-year decrease. This decline was primarily attributed to the sale of Barstool and losses incurred during the relaunch of an online betting venture ESPN BET, both of which significantly impacted the quarterly financial performance.

Following the results, the company’s shares lost 13.8% during trading hours on Feb 15.

Earnings & Revenue Discussion

In the quarter under review, PENN reported an adjusted loss per share of $1.75, missing the Zacks Consensus Estimate of a loss of 57 cents. In the prior-year quarter, it reported adjusted earnings per share (EPS) of 22 cents.

Total revenues of $1.4 billion missed the Zacks Consensus Estimate of $1.5 billion. The top line declined 12% on a year-over-year basis. Softness in the South and Northeast regions led to the decline.

The Northeast segment delivered revenues of $662.9 million, which was down from $667.1 million a year ago. Revenues from the South, West and Midwest segments came in at $285.1 million, $133.7 million and $290.6 million, down 6.3%, up 2.3% and up 3% year over year, respectively.

The Interactive and Other segments’ revenues totaled $31.5 million and $3.7 million, down 84.9% and 5.1% year over year, respectively.

Notably, Penn Entertainment's Interactive gambling division incurred an adjusted EBITDA  loss of $333.8 million in the fourth quarter, largely due to expenses related to the introduction of its new ESPN BET sports-wagering product on Nov 14, 2023.

Nonetheless, sign-ups for the service surpassed management's expectations, with more than 1 million new customers joining within the initial two months. Penn Entertainment anticipates that ESPN BET will capture 46% of the online sports betting market once North Carolina and New York are included.

Operating Headlines

In the quarter under discussion, adjusted EBITDAR declined 76% from the year-ago quarter’s level to $112.5 million. Adjusted EBITDAR margin contracted to 8.1% from 29.5% a year ago.

2023 Highlights

Total revenues were $6.36 billion, down from $6.4 billion in 2022. Adjusted EBITDAR came in at $1.51 billion, down from $1.94 billion in 2022. Adjusted EBITDAR margin contracted to 23.8% from 30.3% in 2022.

Other Financial Information

As of Dec 31, 2023, the company had cash and cash equivalents of $1.07 billion compared with $1.62 billion as of Dec 31, 2022. Traditional net debt as of Dec 31, 2023, was $1.57 billion, up from $1.08 billion at 2022-end. The company’s total liquidity as of Dec 31, 2023, was $2.1 billion.