Penn posts record revenue in interactive segment amid lawsuit by investor
Casino gambling and interactive entertainment major Penn Entertainment (Nasdaq: PENN) posted its financial results for the first quarter ending 31 March 2025 on Thursday. The company announced record revenue for its Interactive segment in its first-quarter 2025 results, a bright spot as it simultaneously contends with a lawsuit filed by HG Vora Capital Management concerning alleged manipulations of its upcoming board elections.
Interactive segment shines
Penn Entertainment’s Interactive segment was a top performer in Q1 2025, posting revenues of $290.1 million. This is inclusive of a tax gross-up of $128.2 million. The segment posted an adjusted EBITDA loss of $89 million, which is an improvement from the $196 million loss posted during the same quarter last year. Company executives attributed this record revenue performance to strong revenue generation and effective customer acquisition and marketing strategies, particularly for its ESPN Bet platform.
“… These results are despite customer-friendly sports betting outcomes that negatively impacted Adjusted EBITDA by approximately $10 million in the quarter. Importantly, ESPN BET and theScore BET continue to provide a strong top of funnel for our online casino platforms, which achieved record gaming revenue in the quarter …,” CEO Jay Snowden said in a statement.
Across all Interactive brands, adjusted revenue rose from $151 million to $162 million, even with an estimated $15 million negative impact from customer-friendly results during March Madness.
Also read: HG Vora vs. Penn Ent: Shareholder woes clash with casino’s claims – SigmaPlay
Overall financial picture
Penn Entertainment’s consolidated figures for Q1 2025 showed total revenues of $1.67 billion, an increase from $1.61 billion in Q1 2024. The company reported a net income of $111.5 million, or $0.68 per diluted share, a significant turnaround from the net loss of $114.9 million, or $0.76 per diluted share, in the first quarter of 2024. However, one source indicated total revenues of $1.61 billion for Q1 2025, slightly down from $1.67 billion in Q1 2024, and a net loss of $114.6 million for Q1 2025. Given that the other sources align on $1.67 billion revenue and $111.5 million net income for Q1 2025, those figures are used here. Adjusted EBITDA for Q1 2025 was $173.3 million.
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Investor lawsuit intensifies boardroom battle
While the interactive division celebrated growth, activist investor HG Vora Capital Management escalated its campaign for influence by filing a lawsuit against Penn Entertainment and its Board of Directors. The legal action, lodged in the Court of Common Pleas of Berks County, Pennsylvania, directly challenges Penn’s recent decision to reduce the number of director seats available for election at its 2025 Annual Meeting from three to two—a move HG Vora has dubbed the “Board Reduction Scheme”.
HG Vora, which has been vocal about its concerns regarding Penn’s strategic direction, capital allocation (with a particular focus on the interactive division), and what it describes as prolonged underperformance in shareholder returns, outlined several allegations in its lawsuit:
- Alleged violation of state law: HG Vora claims Penn’s reduction of elective board seats contravenes Pennsylvania’s Business Corporation Law.
- Alleged breach of fiduciary duties: The complaint asserts that Penn’s Board breached its fiduciary duties to the company’s shareholders.
- Alleged federal securities law violations: HG Vora contends Penn violated federal securities laws by failing to adhere to universal proxy rules and by disseminating what it terms materially false and misleading statements and omissions in its proxy materials filed with the Securities and Exchange Commission (SEC).
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HG Vora seeks invalidation and corrected proxies
The activist investor is seeking declaratory and injunctive relief from the court. Its demands include the invalidation of the board reduction, an order for Penn to issue corrected proxy statements, and measures to ensure shareholders can elect all three of its independent director nominees: William J. Clifford, Johnny Hartnett, and Carlos Ruisanchez. HG Vora characterised the board seat reduction as a “self-serving action with no legitimate corporate purpose,” particularly as the Board faced the prospect of losing three seats in a contested election.
Commenting on the Q1 results, Penn Entertainment’s CEO and President, Jay Snowden, stated, “PENN’s properties demonstrated strong resilience in the quarter following severe weather challenges earlier in the year, as gaming volumes rebounded in March and remained consistent through April and early May.” He added, “In our Interactive segment we generated record gaming revenue and significant year-over-year improvements in both revenue and adjusted EBITDA despite industry-wide unfavourable sports betting hold.” Snowden also mentioned ongoing investments in the company’s retail operations and strong engagement with VIP and mid-worth customer segments, bolstered by PENN Play™ and investments in hospitality and entertainment.
Shareholder pressure
Penn projects second-quarter Interactive revenue of $280 million to $320 million and expects the division to lose $50 million to $70 million in adjusted EBITDA for the full year 2025, which would mark a year-over-year improvement of around $43 million. The company anticipates its online sports betting and iGaming operations to be EBITDA-positive by the final quarter of 2025 and into 2026.
The lawsuit from HG Vora amplifies the pressure on Penn’s leadership to enhance shareholder value. The activist firm has filed a preliminary proxy statement with the SEC in relation to Penn’s Annual Meeting, which is scheduled for 17 June 2025, and is urging shareholders to review its materials. The developments in this legal dispute and the results of the upcoming board elections will be critical junctures for Penn Entertainment as it continues to execute its strategic transformation, especially within the highly competitive online gaming and sports betting markets. The company is also continuing its share repurchase program, buying back $25 million of shares during Q1 at an average price of $17.67 per share, and is committed to repurchasing at least $350 million of shares in 2025.
The shares of Nasdaq-listed Penn Entertainment closed 2.3 percent higher at $15.64 apiece on Friday, 9 May 2025.
