PENN Entertainment's Shocking Q4 Earnings: You Won't Believe the $1B Revelation!

PENN Entertainment (NASDAQ: PENN) has reported encouraging results during its fourth quarter earnings call, highlighting a notable improvement in profitability across both its retail casino portfolio and interactive segments. The company’s executives expressed optimism about generating significant free cash flow and reducing debt in 2026.

Chief Executive Officer Jay Snowden stated that the company’s “diversified retail portfolio delivered another solid quarter.” He noted that Adjusted EBITDAR increased year-over-year, even when accounting for adverse weather conditions in December, which cost the retail segment about $7 million. The most severe impact was felt in the Northeast region.

During the fourth quarter, Chief Financial Officer Felicia Hendrix reported retail segment revenue of $1.4 billion, with an Adjusted EBITDAR of $456.4 million, resulting in a robust 32.3% margin for the segment. Snowden further emphasized that theoretical revenue rose across all demographic segments, particularly among older players and VIP patrons, with regional strength noted in places like Ohio and St. Louis, as well as at L’Auberge Lake Charles.

However, management acknowledged competitive pressures in certain markets, specifically noting newly opened facilities in Baton Rouge, New Orleans, and Bossier City, Louisiana, as well as in Council Bluffs, Iowa. Snowden indicated that these competitive pressures are starting to ease, especially as the Bossier City impact will be fully absorbed by February, with lingering effects expected to last an additional month or two.

Snowden highlighted the ongoing success at the M Resort in Las Vegas, which has seen record gaming volumes in December and net revenue in January following the opening of a new hotel tower. He also reported impressive performance at Hollywood Casino Joliet, which has seen nearly a 130% year-over-year surge in active players. Operational comparisons revealed significant increases in daily visitation and table volumes, with non-gaming revenue also doubling, and slot revenue up between 40% and 50%.

Looking forward, Snowden expressed confidence in upcoming openings, including the Hollywood Columbus hotel tower and a new facility in Aurora, along with a property in Council Bluffs anticipated to debut in late 2027 or early 2028. He noted that these projects are expected to yield cash-on-cash returns exceeding 15%.

Hendrix anticipates approximately two weeks of downtime for Aurora in the second quarter of 2026 as the company transitions to a new land-based facility. She added that the second half of 2026 is expected to gain momentum as all four retail growth projects come online.

On the digital front, Snowden mentioned the successful rebranding of its U.S. online sportsbook to theScore Bet as of December 1, which achieved positive Adjusted EBITDA in December. The improvement has been attributed to momentum in iCasino, disciplined cost management, and strong hold rates in sports betting.

For the fourth quarter, Hendrix reported interactive segment revenue of $398.7 million, which included a tax gross-up of $182.7 million, alongside an Adjusted EBITDA loss of $39.9 million. Snowden stated that the interactive segment achieved record gaming revenue, driven by the growth of standalone Hollywood iCasino products, increased cross-sell strategies, and enhancements in sportsbook operations. Adjusted EBITDA improved by $70 million year-over-year, resulting in an impressive 95% adjusted flow-through.

Looking ahead, management reiterated its expectation that the interactive segment will reach break-even Adjusted EBITDA for the full year of 2026, which would represent a remarkable $268 million year-over-year improvement. Hendrix mentioned projections for approximately $1.6 billion in interactive revenue for 2026, inclusive of an estimated $760 million tax gross-up, signaling a projected 20% year-over-year revenue increase when excluding the gross-up. This is expected to be accompanied by a significant reduction in marketing expenses, which are projected to be $150 million lower than 2025.

Snowden also discussed the company’s corporate restructuring efforts aimed at creating a “leaner and flatter” organization, which is expected to save over $10 million in annualized run-rate expenses. Regarding capital expenditures, total spending for 2026 is forecasted to reach $445 million, with $225 million allocated for project CapEx and $220 million for maintenance.

By the end of the quarter, PENN recorded a total liquidity of $1.1 billion, comprised of $687 million in cash and cash equivalents. Funding from Gaming and Leisure Properties (GLPI) is expected to contribute $225 million near the opening of the $360 million Hollywood Aurora project and an additional $21 million from the City of Aurora by year-end.

Looking forward to 2026, PENN expects to generate more than $3 per share in free cash flow and aims to reduce lease-adjusted net leverage by more than one turn. Snowdon emphasized a balanced approach to capital allocation, focusing on share repurchases, deleveraging, and development investments. In 2025, the company repurchased $354 million of stock, representing about 14% of shares outstanding, and has repurchased $1.1 billion, or 25% of shares outstanding since 2022.

During the Q&A session, Snowden addressed the complex and evolving landscape of prediction markets, describing the legal framework as “clear as mud.” He expressed concern about recent developments in Maine, where legislation has granted a monopoly to a third party, a situation that is currently under legal challenge. He noted that PENN will assess ways to remain competitive if this structure remains in place.

Snowden pointed out that Alberta is the only new jurisdiction expected to launch in 2026. He estimated that marketing investment in Alberta could range from CAD 15 million to CAD 20 million, although plans are still being finalized. Hendrix clarified that the company’s 2026 forecast for interactive does not include any new jurisdictions launching, including Alberta.

In closing, Snowden highlighted the various catalysts anticipated in 2026, including the Aurora opening, the Columbus hotel tower launch, the continued ramp-up at Joliet and M Resort, and achieving interactive breakeven, while maintaining a focus on free cash flow generation and debt reduction.

PENN Entertainment, Inc. is recognized as a leading operator of gaming and racing facilities in the U.S., encompassing land-based casinos, pari-mutuel racetracks, off-track wagering, and associated amenities such as hotels, restaurants, and entertainment venues. The company rebranded from Penn National Gaming to PENN Entertainment in August 2022, reflecting its broader reach across both digital and traditional segments of the gaming industry.

The company’s diverse portfolio includes renowned properties under the Hollywood Casino and Ameristar Casino brands, located across states including Pennsylvania, Ohio, Missouri, and West Virginia.