PENN targets positive interactive EBITDA in Q4 2025 amid strong omnichannel growth

Earnings Call Insights: PENN Entertainment, Inc. (PENN) Q2 2025

Management View

• Jay A. Snowden, President and CEO, highlighted that “our diverse portfolio of retail properties delivered another solid quarter, particularly in those markets not impacted by new supply, where we saw revenue growth of 4% year-over-year.” Snowden emphasized the milestone that “year-over-year theoretical revenue growth in unrated play, visitation and spend per visit” was achieved for the first time since Q1 2022.
• The CEO addressed strategic responses to new market supply: “we are responding with the land site relocations of our Hollywood casinos in Aurora and Joliet to vastly superior locations and with new best-in-class, best-in-market assets.” He also announced the early and on-budget opening of Hollywood Casino Joliet, part of a major development ahead of schedule, stating “this opening is occurring on budget and nearly 6 months ahead of its originally scheduled time line.”
• On digital, Snowden said, “our omnichannel engagement continues to positively impact our results,” noting an 8% year-over-year increase in online-to-retail player count and a 28% rise in online-to-retail theoretical revenue.
• Snowden also confirmed ongoing product evolution, including “the upcoming launch of FanCenter,” a key integration with ESPN, and described it as “an exciting feature, which leverages our connectivity with the ESPN ecosystem to enable players to bet on their favorite teams, players and fantasy lineups in ESPN BET.”
• Felicia Rae Kantor Hendrix, Executive VP & CFO, stated, “Our Interactive segment generated 2Q adjusted revenues, excluding the skin tax gross-up of $178 million and Interactive adjusted EBITDA of a loss of $62 million. Record quarterly gaming revenue for both OSB and iCasino was driven by higher holes and continued momentum on stand-alone iCasino.”
• CFO Hendrix further disclosed, “We ended the second quarter with total liquidity of $1.2 billion, inclusive of $672 million in cash and cash equivalents. In the second quarter, we repurchased $90 million of shares at an average price of $15.47 per share.” She outlined a plan to repurchase at least $350 million of shares in 2025.

Outlook

• Hendrix reiterated, “Our 2025 retail guidance is unchanged from the ranges and drivers we provided in our earnings call in February.” She added, “On Interactive, we continue to expect sequential quarter-over-quarter adjusted EBITDA improvement for both the third quarter and the fourth quarter, with the fourth quarter inflecting positive.”
• Updated guidance for the Interactive segment now reflects “$10 million of incremental costs related to the OSB launch in Missouri in December, which was not contemplated in our prior guidance and the impact of legislative tax increases in Illinois, New Jersey, Louisiana and Maryland.”
• Hendrix shared, “For the third quarter ’25, our Interactive revenue guidance range is $295 million to $335 million, including a $125 million skin tax gross-up, and our adjusted EBITDA guidance range is a loss of $65 million to a loss of $45 million. For the fourth quarter of ’25, we expect Interactive adjusted EBITDA of approximately $5 million, assuming normal hold.”

Financial Results

• Snowden reported, “For the second quarter of 2025, we reported retail revenue of $1.4 billion and adjusted EBITDAR of $490 million and adjusted EBITDAR margins of nearly 34%.”
• Hendrix stated, “Of our total $159 million CapEx in the quarter, $100 million was project CapEx related to our 4 development projects.”
• She indicated, “On June 20, we repurchased roughly 70% of our convertible notes due 2026 for $233.5 million, which eliminated approximately 9.6 million potentially dilutive shares that were associated with the convertible notes.”

Q&A

• Barry Jonathan Jonas, Truist Securities: Asked about the upside for ESPN BET given ESPN’s DTC initiatives and product enhancements. Snowden responded, “We really don’t have anything to comment on beyond what Disney ESPN has shared publicly…We think those are all just going to continue to solidify ESPN’s position…and all of those announcements are good for the entire ESPN ecosystem of which ESPN BET is certainly part.” Jonas followed up on retail trends and sustainability, to which Snowden attributed performance to strong employment and consumer confidence, while Todd George added, “We’re also seeing this in the food and beverage side, the hotel side…the improvements we’ve made to our property…really starting to see that pay off.”
• Brandt Antoine Montour, Barclays: Inquired about hold rates and Interactive segment performance. Snowden said, “Our hold percentage is continuing to really close the gap between where we’ve been and where the top tier operators are. We held in the mid- to high 9s…We’ve been battling obviously, on the handle side of things, and we will continue to.”
• Shaun Clisby Kelley, Bank of America: Sought confirmation on 2026 profitability targets for ESPN BET. Snowden confirmed, “It’s very much dependent, Shaun, as up hitting our targets for the remainder of the year and exiting 2025 on the path that we just laid out…We would be exiting with some real momentum heading into 2026, and we would build on that every quarter in 2026 as well.”
• Joseph Robert Stauff, Susquehanna: Asked about the timing of competitive headwinds and tailwinds from new projects. Snowden explained, “The headwinds that we’ve been facing…those start to slow down and once you get past anniversarying what the new opening in Bossier City, Louisiana, really everything from that point on…is PENN.”

Sentiment Analysis

• Analysts showed a neutral-to-slightly positive tone, focusing on operational execution, product integration, and the sustainability of recent gains. Questions frequently probed the sustainability of market share gains, profitability targets, and the competitive landscape.
• Management maintained a confident and optimistic tone in prepared remarks. Snowden stated, “We are very appreciative of the hard work, strong partnership and long hours from our friends at ESPN…We’re excited and optimistic about our new product enhancements.” During Q&A, management was disciplined, reiterating targets and addressing headwinds without defensiveness.
• Compared to the previous quarter, both analysts and management were more focused on digital profitability timelines and integration milestones, while maintaining similar levels of confidence.

Quarter-over-Quarter Comparison

• Guidance for retail remained unchanged, with Interactive outlook updated to reflect new costs and tax impacts.
• Management’s tone on digital inflection was consistent, but the Q2 call placed greater emphasis on the timing and expected ramp to profitability, especially for the Interactive segment.
• Analysts this quarter concentrated on the impact of digital initiatives and ESPN integrations, whereas the previous quarter saw questions more evenly split between retail and digital.
• Key retail metrics, like 4% year-over-year growth in markets not impacted by new supply, mirrored trends from Q1, but there was a notable increase in focus on omnichannel momentum and digital cross-sell performance.

Risks and Concerns

• Management acknowledged the impact of new supply in key markets and ongoing pressures in Bossier City, Louisiana, where “the new incremental supply…has mostly cannibalized the incumbent operators.”
• Interactive segment exposed to $2.9 million in severance costs as part of strategic workforce adjustments.
• Hendrix noted ongoing legal and advisory costs, but expects them to be “significantly below the $17.1 million of legal and advisory costs we incurred in the first half.”
• Legislative tax increases in several states and incremental costs for the Missouri OSB launch were highlighted as new headwinds.

Final Takeaway

PENN Entertainment management emphasized the resilience of its core retail operations and the accelerating momentum in its omnichannel and digital businesses. Strategic investments in property upgrades and digital product enhancements, particularly through its ESPN partnership, remain central to its growth strategy. The company anticipates Interactive segment profitability in the fourth quarter of 2025 and full-year 2026, while ongoing share repurchases and improved free cash flow are intended to drive long-term shareholder value.

Read the full Earnings Call Transcript