PENN Entertainment’s sports betting partnership with ESPN.
Estimates suggested PENN would post a net loss of close to $90 million in Q1, but the company instead reported a net loss of $114.9 million for the quarter. The company’s earnings per share were estimated around a loss of $0.59, but instead PENN reported a loss of $0.76 per share. PENN also reported a 3.8% year-over-year decline in revenue, falling short of estimated numbers.
“ittedly, we have not been as tight and accurate with our financial forecasts in the early days of ESPN BET, which is not representative of our long-term track record or internal expectations at PENN,” PENN Entertainment CEO Jay Snowden said during the company’s quarterly earnings call.
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Shortcomings related to hold percentage were cited as a top reason for PENN Interactive posting a revenue total of $208 million and adjusted EBITDA loss of $196 million. ESPN BET reported a 4.4% hold in Q1.
“The shortfall relative to our prior guidance is primarily due to lower than expected hold and spend per ,” Felicia Hendrix, PENN’s executive vice president and chief financial officer, said.
Snowden harped on product enhancements as a critical focus for ESPN BET’s future success. In particular, Snowden mentioned the need for improved parlay offerings, which should help the company more effectively reach its goal of a consistent hold of at least 7-8%.
Aaron LaBerge will take over as PENN Entertainment’s chief technology officer on July 1, a move Snowden believes will help the company enhance the ESPN BET product significantly. LaBerge comes to PENN after serving as the CTO for Disney Entertainment and ESPN. His hiring was announced on April 22.
“I’m excited to another talented team at PENN Interactive and lead our technology strategy,” LaBerge said in a press release. “PENN Entertainment is at the forefront of the fast-changing gaming and sports media industry. I plan to use my experience from Disney and ESPN to help make ESPN BET an essential piece of the sports fan experience. Together, we’ll push the limits and redefine how fans interact with sports and gaming.”
Among the changes LaBerge is expected to usher in are homepage tweaks, better parlay carousel functionality, dark mode, and expanded same-game parlay offerings.
According to PENN’s earnings call presentation, ESPN BET’s “lower mix of parlays” compared to other Illinois, PENN shared that parlays represented 22% of ESPN BET’s total handle. One competitor in the space reported 36% of its handle were parlays, which tend to have a higher hold percentage than other types of wagers.
“We’re seeing our parlay mix grow month after month after month,” Snowden said. “We’re trending a lot closer to mid-to-high 20s, as opposed to where we were even in Q1. That’s highly encouraging because we know our parlay offering is not where it needs to be yet.”
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Snowden pegged the start of the 2024-25 football season as an estimated timeline for when ESPN BET s can begin to expect notable product changes and improved integrations with other ESPN products.
By football season, ESPN BET is expected to be integrated into the ESPN Fantasy App. With over 12 million fantasy football players at ESPN, Snowden hopes an integration between the products leads to increased personalization and betting options for customers.
“The initial benefits to linking will include deeper and more customized integrations in the ESPN media app,” Snowden said. “Once s are linked and we know your favorite sports, sports teams, and players, we can deliver personalized betting options only found on ESPN BET.”
Although financial numbers weren’t where PENN Entertainment hoped, Snowden and company believe the partnership with ESPN will soon pay off.
“The future is very promising,” Snowden said. “The two most challenging quarters from a digital [profit and loss] perspective are now behind us. We greatly appreciate the investors that have and continue to us and trust us. We don’t take that lightly and are deeply committed to making sure you’ll be rewarded for that decision.”
