Management View

• Jay Snowden, President, CEO & Director, stated that “PENN’s diversified retail portfolio delivered another solid quarter during which retail adjusted EBITDA grew year-over-year after adjusting for poor weather in December.” He highlighted the successful rebranding of the U.S. online sportsbook to theScore Bet and achieving positive adjusted EBITDA in December for the Interactive segment. Snowden announced, “2026 is an exciting year for us in which we expect to generate year-over-year segment adjusted EBITDAR growth of 20%.” He emphasized strategic investments, a focus on free cash flow generation, deleveraging, and returning capital to shareholders.
• Snowden detailed operational improvements including a new organizational structure aimed at becoming “a leaner and flatter organization,” with expected annualized run rate expense savings of over $10 million, most of which will phase in over the first half of the year. Maintenance CapEx levels have been reduced by $20 million, returning to near pre-COVID spending.
• Snowden reported that M Resort achieved record gaming volumes in December and record net revenue in January, while Hollywood Casino Joliet saw a nearly 130% year-over-year increase in active players. He reiterated confidence in development projects, anticipating “15% plus cash-on-cash returns.”
• Felicia Kantor Hendrix, Executive VP & CFO, reported, “Our Retail segment generated revenues of $1.4 billion, adjusted EBITDAR of $456.4 million and segment adjusted EBITDAR margins of 32.3%.” She noted December weather negatively impacted retail adjusted EBITDAR by $7 million. Hendrix forecasted 2026 retail net revenues of $5.7 billion to $5.85 billion and retail adjusted EBITDAR of $1.86 billion to $1.98 billion. For the Interactive segment, she reported Q4 revenues of $398.7 million (including $182.7 million tax gross-up) and an adjusted EBITDA loss of $39.9 million.
• Hendrix stressed, “We anticipate our marketing spend to come in approximately $150 million lower than in 2025 as we align spending with our revised regional strategy focused on iCasino and Canada.” She projected total 2026 CapEx of $445 million, with $225 million in project CapEx and $220 million in maintenance CapEx.

Outlook

• The company expects 2026 Interactive revenues of approximately $1.6 billion (including $760 million tax gross-up), with growth driven by iCasino and cross-sell. Hendrix stated, “We continue to expect our Interactive segment to generate breakeven adjusted EBITDA in 2026 and note that we will expect all components U.S. OSB, iCasino and our Canadian operations to generate positive contribution margin in 2026.”
• PENN projects to generate more than $3 per share of free cash flow in 2026 and aims to reduce lease-adjusted net leverage by over 1 turn. Management expects U.S. OSB MAUs to decline due to the transition from ESPN BET to theScore Bet, while U.S. iCasino and Canadian MAUs should increase.

Financial Results

• Retail segment revenue was $1.4 billion, with adjusted EBITDAR of $456.4 million and a margin of 32.3%. Interactive segment revenue was $398.7 million, with an adjusted EBITDA loss of $39.9 million. Hendrix reported ending the quarter with total liquidity of $1.1 billion, including $687 million in cash and cash equivalents. Project CapEx was $85 million for the quarter, primarily for four development projects.
• Hendrix stated that in 2025, PENN repurchased $354 million worth of shares, equating to 14% of shares outstanding for the year. Since 2022, $1.1 billion of stock has been repurchased, representing 25% of shares outstanding.

Q&A

• Brandt Montour, Barclays: Asked about drivers of the 20% Interactive segment revenue growth target. Snowden replied, “Certainly being driven primarily by growth in iGaming… Our product continues to get better on the stand-alone Hollywood app. We’re seeing really, really strong retention.”
• Barry Jonas, Truist: Inquired about guidance range assumptions for new supply and growth projects. Snowden explained, “We probably feel stronger about the second half of the year than the first half. There’s some weather impacts here in the first quarter… We’ve built that into our full year guide.”
• Jordan Bender, Citizens: Asked about future development pipeline and interactive segment profitability. Snowden indicated ongoing analysis of further projects in Louisiana, Mississippi, and Illinois, and cited “positive EBITDA in December,” but guiding to breakeven for the full year due to a conservative budget approach.
• Shaun Kelley, BofA Securities: Sought clarity on Alberta launch costs. Snowden estimated, “probably somewhere in that $15 million to $20 million range, but give us another quarter to fine-tune our marketing plans.”
• Multiple analysts focused on promotional environment, margin expectations, and capital allocation; management emphasized disciplined cost control and a balanced approach between buybacks, deleveraging, and investing in growth.

Sentiment Analysis

• Analysts were generally inquisitive, seeking details on revenue drivers, guidance assumptions, and capital allocation, with a neutral to slightly positive tone. Some skepticism arose regarding interactive segment profitability and market competition, but no overt negativity.
• Management maintained a confident and constructive tone in prepared remarks, using phrases such as “we feel pretty good,” “we’re right where we wanted to be,” and “feeling really good about M Resort.” During Q&A, management remained detailed and direct, sometimes reiterating prior points for emphasis.
• Compared to the previous quarter, both management and analysts exhibited increased confidence regarding execution of the new strategic direction and the anticipated benefits of restructuring and cost discipline.

Quarter-over-Quarter Comparison

• Guidance language shifted from breakeven or better for Interactive in 2026 to a reiteration of breakeven as a midpoint, referencing positive December EBITDA but remaining conservative for the full year.
• Strategic focus sharpened around cost optimization, capital returns, and a more regionally targeted digital strategy following the ESPN BET exit and rebrand to theScore Bet.
• Analysts continued to probe interactive profitability and competitive promotional environments, but with greater detail on the impact of recent strategic changes.
• Key metrics such as retail revenue and margin remained stable, though Interactive segment revenue and adjusted EBITDA improved quarter-over-quarter.
• Management’s tone signaled greater control over cost levers and optimism regarding the impact of new projects and restructuring.

Risks and Concerns

• Poor weather in December and early Q1 2026 negatively impacted retail EBITDAR, with $7 million and $5–$10 million effects respectively, though management indicated this was accounted for in guidance.
• Ongoing competitive and supply pressures in Louisiana and Midwest markets were noted, but management expects these impacts to diminish by mid-Q2.
• The launch timeline and investment requirements for new markets, such as Alberta, remain uncertain.
• Management emphasized a need to monitor labor negotiations and utility/insurance costs, but expressed confidence in managing inflationary pressures.

Final Takeaway

PENN Entertainment’s management outlined a year of strategic execution, emphasizing robust free cash flow generation, disciplined cost management, and a streamlined organizational structure. With the successful rebranding of its U.S. online sportsbook to theScore Bet, a reduction in marketing expenses, and targeted investments in high-return development projects, PENN aims to achieve 20% Interactive segment adjusted EBITDAR growth, generate over $3 per share in free cash flow, and deliver meaningful deleveraging in 2026. Management’s confidence in operational improvements and future growth opportunities is highlighted by a focus on shareholder returns and a readiness to capitalize on new market openings.

Read the full Earnings Call Transcript

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Heather Ace

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In addition to the corporate organizational structure, PENN Entertainment (PENN) is also evaluating additional opportunities to strengthen and streamline its operations. The casino operator plans to provide an update when it reports its fourth quarter 2025 financial results in February 2026, including the anticipated annualized cost savings and improved free cash flow generation related to the new corporate organizational structure and optimization initiatives.

“As we turn the calendar to 2026, we are restructuring our corporate organization in order to achieve greater operational efficiencies, deepen customer engagement across channels, maximize free cash flow, and drive shareholder value,” highlighted CEO Jay Snowden.

Shares of PENN (PENN) are down 24% over the last 52 weeks.

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The company said it was a seamless customer transition for ESPN Bet customers to theScore Bet, with all existing account details and features carried over. PENN (PENN) noted that theScore Bet app offers a robust wagering menu, innovative features, and deep integration with theScore sports media app, aiming to deliver a unified media and betting experience.

This rebranding occurs amid significant challenges for PENN’s former joint venture, ESPN Bet. Despite high-profile marketing and the strength of the high-profile ESPN brand, ESPN Bet has struggled to gain significant market share against dominant players like FanDuel (FLUT) and DraftKings (DKNG) after getting off to a late start in key states. Analysts have pointed to issues such as inefficient user acquisition costs, product integration delays, and fierce promotional competition. Looking ahead, PENN Entertainment’s (PENN) pivot to theScore Bet is seen as strategic due to the brand’s successful track record and brand equity in Canada.

“We look forward to creating the same fan connection with theScore Bet brand in the U.S. as we’ve done in Ontario and delivering players more of what they want – rewards, offers, and creative promotions,” highlighted PENN (PENN) Chief Technology Officer Aaron LaBerge.

Shares of PENN Entertainment (PENN) edge 0.7% higher in afternoon trading. The gaming stock is down more than 24% on a year-to-date basis.

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The new agreement relates to on-property sportsbooks active by the end of 2025, with Kambi currently supporting 30 PENN (PENN) properties in 13 U.S. states. Under the terms of the extension, Kambi’s (KAMBI) (OTCPK:KMBIF) premium retail sportsbook technology will continue to power PENN’s on-property sportsbooks, providing PENN with additional flexibility as it prepares for migration to its proprietary technology. Notably, PENN (PENN) is unwinding its ESPN BET partnership, pivoting its digital strategy toward an iCasino- and theScore Bet–led model. “This agreement ensures PENN can continue to benefit from our high-performance technology while maintaining the flexibility to execute its long-term strategic plans,” stated Kambi CEO Werner Becher.

Kambi (KAMBI) (OTCPK:KMBIF) is primarily traded on the Nasdaq First North Growth Market in Stockholm. It is also available via secondary listings on venues such as the London Stock Exchange and over-the-counter markets.

Shares of PENN were up 1.7% in Wednesday afternoon trading. The gaming stock is up more than 7% over the last week.

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The firm said the ability for players to drive return on invested capital and shareholder returns over time is its North Star. Given the rapid growth of online betting alternatives, analyst Trey Bowers and his team are generally negative on traditional casino companies.

“We see individual opportunities in the sector, but we believe the vast majority of forward growth, net of promotional activity, will accrue to digital. Our neutral digital gaming outlook reflects our strong growth expectation vs. competitive, regulatory, and hold-related dynamics,” wrote Bowers.

Some of the notable calls from Wells Fargo are listed below.

Wynn Resorts (WYNN) – Overweight rating

Wells Fargo believes management at Wynn Resorts (WYNN) continues to pursue a strong strategic plan to diversify away from Macau. Shares were said to be are on EBITDA as well as free cash flow, especially given a heightened level of spending related to the Al Marjan. For the Las Vegas part of the business, Wells Fargo sees no reason the Las Vegas property will not remain a share taker in the market and viewed by consumers as the top destination.

Churchill Downs (CHDN) – Overweight

Q3 results were noted to be back on track, and forward estimates on Churchill Downs (CHDN) were called conservative. “Looking ahead, we believe shares are attractive, and believe management’s strong track record backs our expectation of value creation over time. The company has optionality given full ownership of its regional assets, and we foresee solid growth ahead for its HRM properties,” advised Bowers.

Flutter Entertainment (FLUT) – Overweight

The view is that the sports betting giant is a best-in-class digital OSB/iGaming operator that provides exposure to a high-quality management team, high-growth U.S. digital markets, diverse international mkts, and free cash flow generation. “Sentiment has shifted negatively on the U.S. OSB markets given tax changes, prediction market competition, and event outcomes, but we would expect FLUT to overcome near-term hurdles and think the stock is undervalued at current levels,” read the Wells breakdown.

MGM Resorts International (MGM) – Underweight

Due to concerns around the health of the Las Vegas market and the casino operator’s reliance on Las Vegas EBITDA, Bowers and his team see MGM shares as fully valued with downside risk in the coming quarters given capital commitments in Japan, escalating rent levels, and potential for secular share loss due to digital.

PENN Entertainment (PENN) – Underweight

Wells Fargo holds a negative outlook on long-term regional gaming growth in general and does not buy into PENN’s (PENN) OpCo model. “PENN’s approach to digital has not gone according to plan. We understand the attempt to partner with widely recognized brands like ESPN and Barstool. However, the company’s pursuit of Branded OSB partners ultimately did not create value and burned significant amounts of precious cash flow,” highlighted Bowers.

See how the casino and gaming sector stacks up based on Seeking Alpha’s Quant Rating system.

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ESPN will replace Penn by appointing DraftKings (DKNG) as its official sportsbook and odds provider, with a multi-year exclusive integration across all ESPN platforms set to begin on December 1. DraftKings (DKNG) sportsbook, fantasy products, and Pick6 games will be directly accessible via ESPN’s digital channels, with a wider rollout planned into 2026.

Meanwhile, Penn will rebrand its sportsbook operations as theScore Bet and write down an estimated loss of $825 million following the failed ESPN Bet venture. Penn (PENN) currently operate theScore Bet brand in Ontario, and its online sports betting product across both the U.S. and Canada will now leverage connectivity with the theScore media app, which has approximately 4 million monthly active users across North America. “Our OSB offerings will continue to provide a top of funnel cross-sell opportunity for our Hollywood-branded iCasino, which will remain integrated into our OSB product offering in states where legal, in addition to serving as a standalone iCasino app,” highlighted CEO Jay Snowden. Looking ahead, the company aims to refocus on its core digital and retail casino businesses.

Weighing in on the development, Morgan Stanley analyst Stephen Grambling said the firm expects a fairly positive response to the development as the major ESPN Bet partnership overhang has been eliminated. “While the softer Regional results will be a greater concern post print, we think the PENN/ESPN Bet situation has been a major drag on the stock,” updated Grambling. He noted that ESPN Bet has cumulatively burnt about $1.1 billion in EBITDA since inception without a positive EBITDA quarter.

CBRE Equity Research analyst John Decree upgraded Penn Entertainment (PENN) following the ESPN BET announcement. Decree said although there remains some uncertainty in the company’s interactive segment, he sees less risk going forward with the elimination of $150 million in fixed marketing expenses related to ESPN. He observed that unlike the previous Barstool to ESPN BET migration that required users to re-register and re-deposit, the upcoming rebranding should be relatively seamless on the same technology platform with the same user experience. “We see the potential for upside from better-than-expected customer retention and even some incremental success as PENN leans into its theScore brand and other customer acquisition channels,” he highlighted.

Needham is more cautious on Penn (PENN). Analyst Bernie McTernan said there is risk of a potential negative flywheel with the company cutting back on marketing and other costs when competition is heating up from traditional OSBs and prediction markets. “We have questions on the cost structure of the business and revenue retention/growth, giving us less confidence in this high floor strategy until we learn more and have greater disclosure, creating a less favorable risk reward in our view,” he wrote.

On Seeking Alpha, Howard Jay Klein said PENN (PENN) may still be a Buy despite the sports betting failure. “Roll the dice with my bet that the GGR or brick and mortar casinos will turn around in two years, offering great results for the patient investor,” he advised.

Shares of PENN (PENN) jumped 8.8% in Monday trading.

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