Penn National Gaming rebrands to PENN Entertainment

5 August 2022
(PRESS RELEASE) -- PENN Entertainment, Inc. today reported financial results for the three and six months ended 30 June 2022.

2022 Second Quarter Highlights:

- Database Growth Highlights the Value of Omni-Channel Strategy
- Successful Migration to Our Proprietary Tech Stack in Ontario
- Reiterating 2022 Full Year Revenue and Adjusted EBITDAR Guidance
- Repurchased $167.0 million of Common Stock at an Average Price of $30.16 Under Share Repurchase Authorization

- Revenues of $1.6 billion, an increase of 5.2% year-over-year;
- Net income of $26.1 million and net income margin of 1.6%, as compared to net income of $198.7 million and net income margin of 12.9% in the prior year;
- Adjusted EBITDAR of $504.5 million, a decrease of 14.0% year-over-year;
- Adjusted EBITDA of $476.5 million, an increase of 1.4% year-over-year; and
- Adjusted EBITDAR margins of 31.0%, a decline of 694bps year-over-year.

For further information, the Company has posted a presentation to its website regarding the second quarter highlights and accomplishments, which can be found here.

Jay Snowden, Chief Executive Officer and President, announced: “Today is an exciting day for us as we become PENN Entertainment, Inc. Over the past few years, PENN has transformed our business through a highly differentiated strategy focused on organic cross-sell opportunities, which is reinforced by our investments in market-leading retail casinos, sports media assets, owned technology, including a state-of-the-art, fully integrated digital sports and online casino betting platform, and an in-house iCasino content studio. Our new name maintains ties to our legacy while better reflecting our evolution into North America’s leading provider of integrated entertainment, sports content and casino gaming experiences.”

Mr. Snowden further commented: “We are pleased with our second quarter results. PENN generated revenues of $1.6 billion and Adjusted EBITDAR of $504.5 million. Despite economic headwinds, we delivered consistent performance across our retail portfolio in the quarter and into July. In addition, last month, we successfully transitioned theScore Bet in Ontario to our own fully-integrated, proprietary tech stack – reflecting a key achievement in our strategic roadmap. Our strong operating performance and balance sheet enabled us to opportunistically repurchase $167.0 million of stock in the quarter under our $750.0 million share repurchase authorization. Based on our second quarter performance and our outlook for the remainder of the year, we are reiterating our 2022 revenue and Adjusted EBITDAR guidance range of $6.15 billion to $6.55 billion and $1.875 billion to $2.00 billion, respectively.

Database Growth Highlighted by Strong Engagement from High Worth Segments and Ongoing Growth Among the Younger Demographic

Property level highlights:

- Revenues of $1.5 billion;
- Adjusted EBITDAR of $548.7 million; and
- Adjusted EBITDAR margins of 37.2%

“Our mychoice® database has increased by over 1.2 million registrations over the last four quarters, driven by both our retail properties and new interactive offerings, providing significant opportunities for future growth. We continue to enhance the guest experience at our properties with new hospitality offerings including hotel remodels, new restaurant concepts, and Barstool branded sportsbooks which have especially benefited our destination properties. We are encouraged by the ongoing visitation and engagement of our high worth segment as well as continued growth from all but our oldest demographic. Our unrated segment trends reflect strong conversion of non-rated players into our mychoice loyalty program. Our industry leading cashless, cardless and contactless technology (“3C’s”) enables omni-channel engagement and remains a growth driver. 3C’s is now live at nine properties in three states. We expect to roll the technology out to twelve additional properties by the end of 2022, pending regulatory approvals.

Focus Remains on Migration of Barstool Sportsbook to In-House Managed Risk and Trading Platform and Tech Stack

Interactive Segment highlights:

- Revenues of $154.9 million (including tax gross up);
- Adjusted EBITDA loss of $20.8 million; and
- theScore Bet in Ontario now operates on our vertically integrated proprietary tech stack, including the risk and trading platform, player account management system and promotion engine

“Our Interactive Segment further expanded its reach with the launch of theScore Bet mobile app in Ontario on April 4th. In July, we successfully deployed our proprietary in-house risk and trading platform in Ontario, which significantly enhances theScore Bet’s online betting capabilities, mobile product offerings and overall integrated media and betting ecosystem. This fall, we will introduce our new Parlay+ feature on theScore Bet for all major league sports. Following the successful transition to our player account management and risk and trading platforms in Canada, we remain confident in our ability to migrate the Barstool Sportsbook in the U.S. onto our new tech stack in Q3 2023, and we are working with our existing providers to ensure a smooth transition process. Post-migration, we will begin to realize the full benefits of our in-house technology stack, including meaningful cost synergies and improved marketing and promotional capabilities.

“PENN Game Studios continues to develop engaging Barstool branded content for our Barstool iCasino app. In Q2 2022, we also introduced 97 new slot and table game offerings across our iCasino platforms. Our pipeline of future customized and third-party iCasino content for both Barstool and theScore Bet remains robust.

“Our Barstool branded retail sportsbooks resonate with the younger demographics and create meaningful cross-sell opportunities. Our recently converted Barstool sportsbook in Lake Charles, Louisiana, set a new standard for retail sportsbook experiences, and we are seeing encouraging results in visitation and spend. We are on track to convert our existing temporary sportsbook to a Barstool sportsbook at L’Auberge Baton Rouge this fall where we expect to have a similar positive impact. Based on our ongoing success in Louisiana, we are optimistic about our upcoming Barstool branded retail sportsbook launches in Kansas and Ohio where we operate similar market-leading properties bolstered by large casino databases that should augment our omni-channel strategy. Additionally, with the passage of sports betting in Massachusetts earlier this week – the birthplace of Barstool Sports and home to our Plainridge Park Casino – we are excited to add yet another possible retail launch by the end of this year while mobile wagering is anticipated in 2023.

Growing Media Businesses

“Our media businesses delivered strong growth this quarter relative to the first quarter of 2022, with theScore’s media revenue growing 11% year-over-year and monthly sessions increasing 20%. Meanwhile, Barstool Sports, Inc. has further expanded its reach across social media platforms by delivering highly engaging and relevant content. We believe we are positioned to achieve even greater upside going forward as we grow our audience, maximize cross-sell and explore new monetization opportunities.

ESG – Continuing to Care for our People, our Communities and our Planet

“PENN was again active on the ESG front this quarter, particularly with our Diversity, Equity and Inclusion (“DE&I”) efforts. We recently came in 4th out of 40 gaming companies in the All-In Diversity Project’s benchmark DE&I survey. In addition, Forbes magazine rated us 139th out of 500 of “America’s Best Employers for Diversity,” which is the highest ranking of any publicly traded gaming company. In June, we launched a comprehensive companywide diversity training initiative, and continued to roll out our Emerging Leaders Program, a career development initiative at PENN which provides an additional path for diversity in leadership roles. We expect to have our entire property portfolio participating in this program by year end.

We also proudly celebrated Juneteenth and Pride Month in June; Asian American Pacific Islander Heritage Month in May; and Earth Day in April. Our properties volunteered at events surrounding these special occasions, provided back of house education and awareness programming, and supported local non-profits and civic organizations on the front lines of these social causes.”

Share Repurchase Authorization Update

During the three months ended June 30, 2022, the Company repurchased 5,539,177 shares of its common stock in open market transactions for $167.0 million at an average price of $30.16 per share. During the six months ended June 30, 2022, the Company repurchased 9,341,585 shares of its common stock in open market transactions for $342.1 million at an average price of $36.62 per share.

Subsequent to the quarter ended June 30, 2022, the Company repurchased 3,019,790 million shares of its common stock at an average price of $31.46 per share for an aggregate amount of $95.0 million. The remaining availability under our $750.0 million authorization was $313.1 million as of August 3, 2022.

Liquidity Remains Strong

Total liquidity as of 30 June 2022 was $2.7 billion inclusive of $1.7 billion in cash and cash equivalents. Traditional net debt as of the end of the quarter was $1.0 billion, an increase of $132.8 million from December 31, 2021 due to a lower cash balance as we executed on our share repurchase program. Lease-adjusted net leverage as of June 30, 2022 was 4.27x compared to 4.10x as of 31 December 2021.

Additional information on PENN’s reported results, including a reconciliation of the non-GAAP results to their most comparable GAAP measures, is included in the financial tables below. The Company does not provide a reconciliation of projected Adjusted EBITDA and Adjusted EBITDAR because it is unable to predict with reasonable accuracy the value of certain adjustments that may significantly impact the Company’s results, including realized and unrealized gains and losses on equity securities, re-measurement of cash-settled stock-based awards, contingent purchase payments associated with prior acquisitions, and income tax expense (benefit), which are dependent on future events that are out of the Company’s control or that may not be reasonably predicted.