- Highly Successful Launch of Barstool
Sportsbook App Creates New Growth Channel -
Penn National Gaming, Inc. (NASDAQ: PENN) (“Penn National” or
the “Company”) today reported financial results for the three and
nine months ended September 30, 2020.
Jay Snowden, President and Chief Executive Officer, commented:
“I am pleased to report that our property, interactive, and
corporate management teams generated strong third quarter revenues,
as well as all time quarterly record Adjusted EBITDAR and Adjusted
EBITDAR margins, despite the continuation of social distancing and
capacity constraints at all of our reopened properties.
“The current operating environment has demonstrated the
resilience of our teams and operations as we’ve made significant
modifications to our business model to respond to the new volumes,
offerings, and ongoing restrictions. In addition to the record
results of our brick and mortar operations, one of the highlights
of the quarter was the launch of our much-anticipated Barstool
Sportsbook app in Pennsylvania, which has been well received. As we
look ahead, we continue to see solid results across the portfolio
in October, which is being driven not only by our margin
improvement, but also our sustained revenue performance as we have
continued to manage the ongoing COVID-19 restrictions. In sum, we
believe we can close out the year with positive momentum.”
A link to a presentation that summarizes third-quarter
highlights and accomplishments can be found here.
Q3 Financial Results Summary
For the third quarter ended September 30, 2020, Penn National
generated revenues of $1,129.7 million and Adjusted EBITDAR of
$452.6 million. These results were achieved despite the impact of
Hurricane Laura on L’Auberge Lake Charles, the late-quarter
reopening of Tropicana Las Vegas, and the ongoing temporary closure
of Zia Park in New Mexico. Our Ohio and Indiana properties led the
way for the Northeast segment and each property in the South
region, save L’Auberge Lake Charles, delivered double-digit
Adjusted EBITDAR growth in the period. Several properties in the
Midwest segment have been operating under significant capacity
restrictions and despite this, the region still achieved
year-over-year Adjusted EBITDAR growth. These results are a
testament to the ability of our property teams to challenge and
re-set operational norms. The property performance, combined with
gross proceeds of $982 million from our September capital raise,
increased our cash balance to $1.9 billion at quarter end, even
after paying down our $670 million revolver balance in full. In
turn, our net traditional debt declined to approximately $693
million at September 30, bringing our lease-adjusted net leverage
to approximately 4.9x based on 2019 Adjusted EBITDAR.
Record Breaking Launch of the Barstool Sportsbook
“On September 18th, we officially launched the Barstool
Sportsbook app in Pennsylvania, which broke records for the most
downloads ever for the launch of a new mobile sportsbook,”
commented Mr. Snowden. “This app launch was a significant milestone
for the Company, and I would like to acknowledge and thank our Penn
Interactive team and our partners at Barstool Sports for their hard
work and dedication over the last several months. As of October
24th, nearly 48,000 people have registered through the app in
Pennsylvania alone and, over the course of the first 37 days of
operation, the app generated total handle of $78 million across
30,000 first-time depositors. These results were achieved with very
limited external marketing spend, highlighting the ability of
Barstool Sports to convert its growing audience to our sports
betting product. In addition, we have seen high user engagement on
the app, with over 39% of our customers placing wagers on bets
promoted by the Barstool personalities. Our early experience in
Pennsylvania has reinforced our view that we are well-positioned to
achieve meaningful and profitable market share in the high-growth
sports betting and iCasino space.”
Acceleration of Our Omni-Channel Strategy
Mr. Snowden continued, “Our September equity offering fortified
and de-risked our balance sheet, while providing us with additional
flexibility to invest in high growth opportunities. Over the coming
months, we look forward to introducing the Barstool Sportsbook app
to additional states, including Michigan, which is expected to
launch later this year. We are very pleased with initial customer
feedback on the app, which has received a 4.8 average rating in the
Apple app store, and we will continue to introduce new and
innovative features to the app over the coming months, including a
brand-new iCasino product.
“On the land-based side of our business, we believe there is
real momentum in moving towards cashless technology that should not
only improve efficiency and customer service, but also result in
incremental revenue as we appeal to a younger demographic that
expects a cashless transaction experience in their daily life. We
intend to introduce this offering at the outset in our new Category
4 casino development projects in Pennsylvania, which we now
anticipate will open in the second half of 2021. In addition, we
are excited about introducing Barstool branded retail sportsbooks
at our casinos, with anticipated openings later this year at
Greektown, Ameristar East Chicago, and Ameristar Black Hawk as well
as Hollywood Lawrenceburg in early 2021.
“We remain actively engaged across the country in advocating for
the passage of sports betting in those states where it is not yet
approved, such as Louisiana, which will feature a question on the
November ballot that would authorize sports betting at our five
casinos in the state. In addition, Maryland voters will also have
an opportunity to decide whether to allow sports betting in their
upcoming elections. We intend to exercise our option to acquire the
operating assets of Hollywood Casino Perryville in Maryland later
this year, which will provide us with market access to an
industry-leading 20 states in 2021. Finally, we are supporting a
statewide ballot question in Colorado that will allow local voters
in the casino towns of Black Hawk, Cripple Creek and Central City
to increase bet limits and add new games, such as baccarat.
Continued Momentum of Barstool Sports
“We remain very pleased with the growing financial performance
of Barstool Sports,” noted Mr. Snowden. “Despite the temporary loss
of live sports and a general slowdown in advertising spend,
Barstool continues to have its strongest year in its history and
has seen profitable revenue growth through a diversified revenue
mix of advertising, brand licensing, and merchandising. More
importantly, Barstool continues to grow its audience, particularly
across social media, with more than 50 million followers on
Instagram, 26 million followers on Twitter and 22 million followers
on TikTok. In fact, despite only recently launching, the social
media accounts for the Barstool Sportsbook have already reached
more than 700,000 total followers across Twitter and Instagram. To
capitalize on the excitement around Barstool Sports, we are working
with Barstool to launch standalone Barstool-branded entertainment
destinations in key markets. These locations will serve as virtual
sportsbooks in large metropolitan areas in states with approved
online sports betting, which we believe will further expand the
reach of the Barstool brand and help us acquire new customers at
attractive economics.
“With Barstool actively promoting our retail and online sports
betting offerings to their massive and growing audience, we believe
we can retain and cross sell these customers to visit our
land-based casinos and play our iCasino products. We also have a
database of over 20 million gaming customers in our mychoice
loyalty program to cross promote our sports betting and iCasino
products, an approach that has already proven successful in
Pennsylvania. When combined, we believe these two channels will
provide us with significant organic customer acquisition in our new
business lines at a fraction of the cost of the traditional
marketing efforts relied upon by many of our competitors, leading
to enhanced profitability for the Company. In addition, our
experience to-date has shown that customers who play with us
through multiple channels (including land-based casinos, retail
sportsbooks and iCasino) are over 12x more valuable than customers
who play only at one of our casinos, which illustrates the power of
our omni-channel strategy.
Hurricane Relief
“Our Company’s collective resolve was again apparent over the
past few weeks, as Hurricanes Laura and Delta left the community of
Lake Charles decimated, with many of our L’Auberge team members
personally impacted. I am proud of the way our sister properties
have come together to support their fellow team members in the wake
of the storms. Volunteers from Boomtown Biloxi, Boomtown New
Orleans, Hollywood Gulf Coast and L’Auberge Baton Rouge have been
helping with the clean-up and recovery efforts and are providing
temporary housing for displaced team members. To date, we have
contributed more than $2.5 million to assist L’Auberge Lake Charles
and the community in its time of need, which includes covering full
wages and benefits for our Lake Charles team members during the
property closure. In addition, our partners at Barstool Sports are
generously donating all net proceeds from the sale of special 'Lake
Charles Strong' merchandise to our Hurricane Laura Relief
Fund.”
Looking Ahead to a Bright Future
Mr. Snowden concluded, “It certainly has been a challenging year
and we have had to make very difficult business decisions over the
last several months in response to the restrictions in place and
the evolving customer visitation and volume trends. Nevertheless,
we believe the operational improvements we have made, together with
our unique omni-channel strategy powered by Barstool Sports and our
diversified portfolio of properties, position us for significant
growth over the coming years. We look forward to an exciting finish
to the year as we introduce Barstool-branded retail sportsbooks
across our portfolio and, subject to final regulatory approval, the
launch of our Barstool Sportsbook app in Michigan.”
Summary of Third Quarter Results
For the three months ended
September 30,
(in millions,
except per share data, unaudited)
2020
2019
Revenues
$
1,129.7
$
1,354.5
Net income
$
141.2
$
43.7
Adjusted EBITDA (1)
$
343.6
$
311.6
Rent expense associated with triple net
operating leases (2)
109.0
96.3
Adjusted EBITDAR (1)
$
452.6
$
407.9
Payments to our REIT Landlords under
Triple Net Leases, inclusive of rent credits utilized (3)
$
228.1
$
222.6
Diluted earnings per common
share
$
0.93
$
0.38
(1)
See the “Non-GAAP Financial Measures”
section below for more information as well as the definitions of
Adjusted EBITDA and Adjusted EBITDAR. Additionally, see below for
reconciliations of these Non-GAAP financial measures to their GAAP
equivalent financial measure.
(2)
Consists of the operating lease components
contained within the Penn Master Lease and the Pinnacle Master
Lease (referred to collectively as our “Master Leases”) (primarily
land), the Meadows Lease, the Margaritaville Lease, the Greektown
Lease, and beginning on April 16, 2020, the Tropicana Lease
(referred to collectively as our “triple net operating leases”).
During the three months ended September 30, 2020, we recorded rent
expense associated with the Tropicana Lease of $7.7 million which
was noncash. The finance lease components contained within our
Master Leases (primarily buildings) are recorded to interest
expense (as opposed to rent expense) in accordance with Accounting
Standards Codification Topic 842, “Leases.”
(3)
Consists of payments made to Gaming and
Leisure Properties, Inc. (NASDAQ: GLPI) and VICI Properties Inc.
(NYSE: VICI) (referred to collectively as our “REIT Landlords”)
under the Master Leases, the Meadows Lease, the Margaritaville
Lease, and the Greektown Lease, inclusive of rent credits utilized,
which were generated from the sale of the real estate assets
associated with Tropicana Las Vegas to GLPI on April 16, 2020.
Although we collectively refer to the Master Leases, the Meadows
Lease, the Margaritaville Lease, the Greektown Lease, and the
Tropicana Lease, as our “Triple Net Leases,” the rent under the
Tropicana Lease is nominal. During the three months ended September
30, 2020, we utilized rent credits totaling $141.7 million to pay
rent under the Penn Master Lease, Pinnacle Master Lease and Meadows
Lease.
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
Segment Information
The Company aggregates its properties into four reportable
segments: Northeast, South, West and Midwest.
For the three months ended
September 30,
For the nine months ended
September 30,
(in millions, unaudited)
2020
2019
2020
2019
Revenues:
Northeast segment (1)
$
545.1
$
628.9
$
1,168.5
$
1,778.6
South segment (2)
255.6
276.6
600.4
850.7
West segment (3)
78.7
161.5
223.0
484.4
Midwest segment (4)
229.1
275.8
493.2
815.3
Other (5)
23.7
12.4
71.6
31.9
Intersegment eliminations (6)
(2.5
)
(0.7
)
(5.4
)
(0.7
)
Total revenues
$
1,129.7
$
1,354.5
$
2,551.3
$
3,960.2
Adjusted EBITDAR:
Northeast segment (1)
$
204.8
$
189.1
$
325.7
$
540.1
South segment (2)
120.3
89.0
217.3
279.6
West segment (3)
33.6
50.6
55.2
151.0
Midwest segment (4)
108.5
104.3
173.4
301.3
Other (5)
(14.6
)
(25.0
)
(42.2
)
(66.1
)
Intersegment eliminations (6)
—
(0.1
)
—
(0.1
)
Total Adjusted EBITDAR (7)
$
452.6
$
407.9
$
729.4
$
1,205.8
(1)
The Northeast segment consists of the
following properties: Ameristar East Chicago, Greektown
Casino-Hotel (acquired May 23, 2019), Hollywood Casino Bangor,
Hollywood Casino at Charles Town Races, Hollywood Casino Columbus,
Hollywood Casino Lawrenceburg, Hollywood Casino at Penn National
Race Course, Hollywood Casino Toledo, Hollywood Gaming at Dayton
Raceway, Hollywood Gaming at Mahoning Valley Race Course, Marquee
by Penn, Meadows Racetrack and Casino, and Plainridge Park
Casino.
(2)
The South segment consists of the
following properties: 1st Jackpot Casino, Ameristar Vicksburg,
Boomtown Biloxi, Boomtown Bossier City, Boomtown New Orleans,
Hollywood Casino Gulf Coast, Hollywood Casino Tunica, L’Auberge
Baton Rouge, L’Auberge Lake Charles, and Margaritaville Resort
Casino. Prior to its closure on June 30, 2019, Resorts Casino
Tunica was also included in the South segment.
(3)
The West segment consists of the following
properties: Ameristar Black Hawk, Cactus Petes and Horseshu, M
Resort, Tropicana Las Vegas, and Zia Park Casino.
(4)
The Midwest segment consists of the
following properties: Ameristar Council Bluffs; Argosy Casino
Alton; Argosy Casino Riverside; Hollywood Casino Aurora; Hollywood
Casino Joliet; our 50% investment in Kansas Entertainment, which
owns Hollywood Casino at Kansas Speedway; Hollywood Casino St.
Louis; Prairie State Gaming; and River City Casino.
(5)
The Other category consists of the
Company’s stand-alone racing operations, namely Sanford-Orlando
Kennel Club, and the Company’s joint venture interests in Sam
Houston Race Park, Valley Race Park, and Freehold Raceway. The
Other category also includes Penn Interactive, which operates our
social gaming, internally-branded retail sportsbooks, iGaming and
our Barstool Sports online sports betting app; our management
contract for Retama Park Racetrack; and our live and televised
poker tournament series that operates under the trade name,
Heartland Poker Tour (“HPT”). Expenses incurred for corporate and
shared services activities that are directly attributable to a
property or are otherwise incurred to support a property are
allocated to each property. The Other category also includes
corporate overhead costs, which consists of certain expenses, such
as: payroll, professional fees, travel expenses and other general
and administrative expenses that do not directly relate to or have
otherwise not been allocated to a property. For the three and nine
months ended September 30, 2020, corporate overhead costs were
$20.1 million and $61.0 million, respectively, compared to $27.5
million and $74.2 million, respectively, for the three and nine
months ended September 30, 2019. In addition, Adjusted EBITDAR of
the Other category includes our proportionate share of the net
income or loss of Barstool Sports after adding back our share of
non-operating items (such as interest expense, net; income taxes;
depreciation and amortization; and stock-based compensation
expense).
(6)
Represents the elimination of intersegment
revenues, associated with Penn Interactive and HPT.
(7)
As noted within the “Non-GAAP Financial
Measures” section below, Adjusted EBITDAR is presented on a
consolidated basis outside the financial statements solely as a
valuation metric or for reconciliation purposes.
PENN NATIONAL GAMING, INC. AND
SUBSIDIARIES
Reconciliation of Comparable
GAAP Financial Measure to Adjusted EBITDA,
Adjusted EBITDAR, and Adjusted
EBITDAR Margin
For the three months ended
September 30,
For the nine months ended
September 30,
(in millions,
unaudited)
2020
2019
2020
2019
Net income (loss)
$
141.2
$
43.7
$
(681.8
)
$
136.0
Income tax expense (benefit)
(14.3
)
19.6
(172.2
)
53.0
Income from unconsolidated affiliates
(5.0
)
(9.8
)
(7.4
)
(21.7
)
Interest expense, net
142.3
133.5
407.1
400.5
Other income
(68.0
)
(7.2
)
(75.5
)
(7.2
)
Operating income (loss)
196.2
179.8
(529.8
)
560.6
Stock-based compensation
2.8
3.7
11.7
10.4
Cash-settled stock-based awards
variance
39.5
(3.4
)
46.7
(6.4
)
(Gain) loss on disposal of assets
(6.0
)
7.4
(33.9
)
8.3
Contingent purchase price
—
1.2
(1.4
)
7.0
Pre-opening and acquisition costs
4.8
7.4
11.5
15.5
Depreciation and amortization
87.7
106.3
275.3
316.4
Impairment losses
—
—
616.1
—
Insurance recoveries, net of deductible
charges
—
(1.5
)
(0.1
)
(1.5
)
Income from unconsolidated affiliates
5.0
9.8
7.4
21.7
Non-operating items of equity method
investments (1)
1.2
0.9
3.2
2.8
Other expenses (2)
12.4
—
12.4
—
Adjusted EBITDA
343.6
311.6
419.1
934.8
Rent expense associated with triple net
operating leases
109.0
96.3
310.3
271.0
Adjusted EBITDAR
$
452.6
$
407.9
$
729.4
$
1,205.8
Net income (loss) margin
12.5
%
3.2
%
(26.7
)%
3.4
%
Adjusted EBITDAR margin
40.1
%
30.1
%
28.6
%
30.4
%
(1)
Consists principally of interest expense,
net; income taxes; depreciation and amortization; and stock-based
compensation expense associated with Barstool Sports and our Kansas
Entertainment joint venture. We record our portion of Barstool
Sports’ net income or loss, including adjustments to arrive at
Adjusted EBITDAR, one quarter in arrears.
(2)
Consists of non-recurring restructuring
charges (primarily severance) associated with a company-wide
initiative, triggered by the COVID-19 pandemic, designed to (i)
improve the operational effectiveness across our property
portfolio; and (ii) improve the effectiveness and efficiency of our
Corporate functional support areas.
PENN NATIONAL GAMING, INC. AND
SUBSIDIARIES
Condensed Consolidated
Statements of Operations
For the three months ended
September 30,
For the nine months ended
September 30,
(in millions, except per share data,
unaudited)
2020
2019
2020
2019
Revenues
Gaming
$
993.6
$
1,088.5
$
2,155.7
$
3,185.2
Food, beverage, hotel and other
136.1
266.0
395.6
775.0
Total revenues
1,129.7
1,354.5
2,551.3
3,960.2
Operating expenses
Gaming
458.1
587.5
1,101.0
1,699.1
Food, beverage, hotel and other
70.1
171.2
260.0
500.5
General and administrative
317.6
309.7
828.7
883.6
Depreciation and amortization
87.7
106.3
275.3
316.4
Impairment losses
—
—
616.1
—
Total operating expenses
933.5
1,174.7
3,081.1
3,399.6
Operating income (loss)
196.2
179.8
(529.8
)
560.6
Other income (expenses)
Interest expense, net
(142.3
)
(133.5
)
(407.1
)
(400.5
)
Income from unconsolidated affiliates
5.0
9.8
7.4
21.7
Other
68.0
7.2
75.5
7.2
Total other expenses
(69.3
)
(116.5
)
(324.2
)
(371.6
)
Income (loss) before income
taxes
126.9
63.3
(854.0
)
189.0
Income tax benefit (expense)
14.3
(19.6
)
172.2
(53.0
)
Net income (loss)
141.2
43.7
(681.8
)
136.0
Less: Net loss attributable to
non-controlling interest
0.7
0.2
1.2
0.4
Net income (loss) attributable to Penn
National
$
141.9
$
43.9
$
(680.6
)
$
136.4
Earnings (loss) per share:
Basic earnings (loss) per share
$
1.02
$
0.38
$
(5.36
)
$
1.18
Diluted earnings (loss) per share
$
0.93
$
0.38
$
(5.36
)
$
1.16
Weighted-average common shares outstanding
- basic
138.2
115.2
126.9
115.8
Weighted-average common shares outstanding
- diluted
155.5
116.7
126.9
117.7
Selected Financial Information
Balance Sheet Data
(in millions,
unaudited)
September 30, 2020
December 31,
2019
Cash and cash equivalents
$
1,873.1
$
437.4
Bank debt
$
1,754.8
$
1,929.8
Notes (1)
730.5
400.0
Other long-term obligations (2)
80.8
89.2
Total traditional debt
2,566.1
2,419.0
Less: Debt discounts and debt issuance
costs
(125.6
)
(33.9
)
$
2,440.5
$
2,385.1
Traditional net debt (3)
$
693.0
$
1,981.6
(1)
Inclusive of our 5.625% Notes due 2027 and
our 2.75% Convertible Notes due 2026, issued in May 2020.
(2)
Other long-term obligations as of
September 30, 2020 primarily include $68.8 million for the present
value of the relocation fees due for both Hollywood Gaming at
Dayton Raceway and Hollywood Gaming at Mahoning Valley Race Course,
and $12.0 million related to our repayment obligation on a hotel
and event center located near Hollywood Casino Lawrenceburg.
(3)
Traditional net debt in the table above is
calculated as “Total traditional debt,” which is the principal
amount of debt outstanding, less “Cash and cash equivalents.”
Kansas Entertainment Distributions
The Company’s definitions of Adjusted EBITDA and Adjusted
EBITDAR add back our share of the impact of non-operating items
(such as depreciation and amortization) at our Kansas Entertainment
joint venture. Kansas Entertainment does not currently have, nor
has it ever had, any indebtedness. The table below presents cash
flow distributions we have received from our Kansas Entertainment
investment.
For the three months ended
September 30,
For the nine months ended
September 30,
(in millions,
unaudited)
2020
2019
2020
2019
Cash flow distributions
$
6.8
$
8.5
$
15.5
$
22.0
Cash Flow Data
The table below summarizes certain cash expenditures incurred by
the Company.
For the three months ended
September 30,
For the nine months ended
September 30,
(in millions,
unaudited)
2020
2019
2020
2019
Cash payments to our REIT Landlords under
Triple Net Leases (1)
$
86.4
$
222.6
$
396.0
$
645.4
Cash (refunds) payments related to income
taxes, net
$
(4.8
)
$
16.4
$
(6.0
)
$
20.9
Cash paid for interest on traditional
debt
$
33.0
$
38.0
$
87.3
$
100.5
Maintenance capital expenditures
$
21.5
$
35.5
$
65.7
$
118.5
(1)
Consists of payments made under the Master
Leases, the Meadows Lease, the Margaritaville Lease, and the
Greektown Lease, in cash. As previously noted, the rent under the
Tropicana Lease is nominal. Amounts for the three and nine months
ended September 30, 2020 exclude the utilization of rent credits,
which totaled $141.7 million and $272.5 million, respectively.
Non-GAAP Financial Measures
The Non-GAAP Financial Measures used in this press release
include Adjusted EBITDA, Adjusted EBITDAR, and Adjusted EBITDAR
margin. These non-GAAP financial measures should not be considered
a substitute for, nor superior to, financial results and measures
determined or calculated in accordance with GAAP.
We define Adjusted EBITDA as earnings before interest expense,
net; income taxes; depreciation and amortization; stock-based
compensation; debt extinguishment and financing charges; impairment
losses; insurance recoveries and deductible charges; changes in the
estimated fair value of our contingent purchase price obligations;
gain or loss on disposal of assets; the difference between budget
and actual expense for cash-settled stock-based awards; pre-opening
and acquisition costs; and other income or expenses. Adjusted
EBITDA is inclusive of income or loss from unconsolidated
affiliates, with our share of non-operating items (such as interest
expense, net; income taxes; depreciation and amortization; and
stock-based compensation expense) added back for Barstool Sports
and our Kansas Entertainment joint venture. Adjusted EBITDA is
inclusive of rent expense associated with our triple net operating
leases (the operating lease components contained within the Penn
Master Lease and Pinnacle Master Lease (primarily land), the
Meadows Lease, the Margaritaville Lease, the Greektown Lease, and
the Tropicana Lease). Although Adjusted EBITDA includes rent
expense associated with our triple net operating leases, we believe
Adjusted EBITDA is useful as a supplemental measure in evaluating
the performance of our consolidated results of operations.
Adjusted EBITDA has economic substance because it is used by
management as a performance measure to analyze the performance of
our business, and is especially relevant in evaluating large,
long-lived casino-hotel projects because it provides a perspective
on the current effects of operating decisions separated from the
substantial non-operational depreciation charges and financing
costs of such projects. We present Adjusted EBITDA because it is
used by some investors and creditors as an indicator of the
strength and performance of ongoing business operations, including
our ability to service debt, and to fund capital expenditures,
acquisitions and operations. These calculations are commonly used
as a basis for investors, analysts and credit rating agencies to
evaluate and compare operating performance and value companies
within our industry. In order to view the operations of their
casinos on a more stand-alone basis, gaming companies, including
us, have historically excluded from their Adjusted EBITDA
calculations certain corporate expenses that do not relate to the
management of specific casino properties. However, Adjusted EBITDA
is not a measure of performance or liquidity calculated in
accordance with GAAP. Adjusted EBITDA information is presented as a
supplemental disclosure, as management believes that it is a
commonly used measure of performance in the gaming industry and
that it is considered by many to be a key indicator of the
Company’s operating results.
We define Adjusted EBITDAR as Adjusted EBITDA (as defined above)
plus rent expense associated with triple net operating leases
(which is a normal, recurring cash operating expense necessary to
operate our business). Adjusted EBITDAR is presented on a
consolidated basis outside the financial statements solely as a
valuation metric. Management believes that Adjusted EBITDAR is an
additional metric traditionally used by analysts in valuing gaming
companies subject to triple net leases since it eliminates the
effects of variability in leasing methods and capital structures.
This metric is included as supplemental disclosure because (i) we
believe Adjusted EBITDAR is traditionally used by gaming operator
analysts and investors to determine the equity value of gaming
operators and (ii) Adjusted EBITDAR is one of the metrics used by
other financial analysts in valuing our business. We believe
Adjusted EBITDAR is useful for equity valuation purposes because
(i) its calculation isolates the effects of financing real estate;
and (ii) using a multiple of Adjusted EBITDAR to calculate
enterprise value allows for an adjustment to the balance sheet to
recognize estimated liabilities arising from operating leases
related to real estate. However, Adjusted EBITDAR when presented on
a consolidated basis is not a financial measure in accordance with
GAAP, and should not be viewed as a measure of overall operating
performance or considered in isolation or as an alternative to net
income because it excludes the rent expense associated with our
triple net operating leases and is provided for the limited
purposes referenced herein. Adjusted EBITDAR margin is defined as
Adjusted EBITDAR on a consolidated basis (as defined above) divided
by revenues on a consolidated basis. Adjusted EBITDAR margin is
presented on a consolidated basis outside the financial statements
solely as a valuation metric.
Each of these non-GAAP financial measures is not calculated in
the same manner by all companies and, accordingly, may not be an
appropriate measure of comparing performance among different
companies. See the table above, which presents reconciliations of
these measures to the GAAP equivalent financial measures.
Management Presentation, Conference Call, Webcast and Replay
Details
Penn National is hosting a conference call and simultaneous
webcast at 9:00 am ET today, both of which are open to the general
public. During the call, management will review an earnings
presentation that can be accessed here. The conference call number
is 212-231-2905. Please call five minutes in advance to ensure that
you are connected prior to the presentation. Questions will be
reserved for call-in analysts and investors. Interested parties may
also access the live call on the Internet at www.pngaming.com.
Please allow 15 minutes to register and download and install any
necessary software. A replay of the call can be accessed for thirty
days on the Internet at www.pngaming.com.
This press release, which includes financial information to be
discussed by management during the conference call and disclosure
and reconciliation of non-GAAP financial measures, is available on
the Company’s web site, www.pngaming.com, in the “Investors”
section (select link for “Press Releases”).
About Penn National Gaming
With the nation's largest and most diversified regional gaming
footprint, including 41 properties across 19 states, Penn National
continues to evolve into a highly innovative omni-channel provider
of retail and online gaming, live racing and sports betting
entertainment. The Company's properties feature approximately
50,000 gaming machines, 1,300 table games and 8,800 hotel rooms,
and operate under various well-known brands, including Hollywood,
Ameristar, and L'Auberge. Our wholly-owned interactive division,
Penn Interactive, operates retail sports betting across the
Company's portfolio, as well online social casino, bingo, and
iCasino products. In February 2020, Penn National entered into a
strategic partnership with Barstool Sports, whereby Barstool will
exclusively promote the Company's land-based and online casinos and
sports betting products, including the Barstool Sportsbook mobile
app, to its national audience. The Company's omni-channel approach
is bolstered by the mychoice loyalty program, which rewards
and recognizes its over 20 million members for their loyalty to
both retail and online gaming and sports betting products with the
most dynamic set of offers, experiences, and service levels in the
industry.
Forward Looking Statements
This press release contains “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995. These statements can be identified by the use of
forward-looking terminology such as “expects,” “believes,”
“estimates,” “projects,” “intends,” “plans,” “goal,” “seeks,”
“may,” “will,” “should,” or “anticipates” or the negative or other
variations of these or similar words, or by discussions of future
events, strategies or risks and uncertainties. Specifically,
forward looking statements include, but are not limited to,
statements regarding: COVID-19; the length of time the Company’s
gaming property (Zia Park) will remain closed, the expected opening
date, and the impact of this closure on the Company and its
stakeholders; demand for gaming once this gaming property reopens
as well as the impact of post-opening restrictions; continued
demand for the gaming properties that have opened and the
possibility that our gaming properties may be required to close
again in the future due to COVID-19; the impact of COVID-19 on
general economic conditions, capital markets, unemployment, and the
Company’s liquidity, operations, supply chain and personnel; the
potential benefits and expected timing of the Perryville
transaction with Gaming and Leisure Properties, Inc.; the Company’s
estimated cash burn and future liquidity, future revenue and
Adjusted EBITDAR, including from our iCasino business in
Pennsylvania; the continued success of Barstool Sports in
Pennsylvania and in additional states in the future; the expected
benefits and potential challenges of the investment in Barstool
Sports, including the anticipated benefits for the Company’s online
and retail sports betting, iCasino and social casino products; the
expected financial returns from the transaction with Barstool
Sports; the expected launch of the Barstool-branded mobile sports
betting product and its future revenue and profit contributions;
the impact of shortened or cancelled sports seasons on our results;
our expectations of future results of operations and financial
condition, including margins; our expectations for our properties,
our development projects or our iGaming initiatives; the timing,
cost and expected impact of planned capital expenditures on our
results of operations; our expectations with regard to the impact
of competition; the anticipated opening dates of our retail
sportsbooks in future states and our proposed Pennsylvania Category
4 casinos in York and Berks counties; our expectations with regard
to acquisitions, potential divestitures and development
opportunities, as well as the integration of and synergies related
to any companies we have acquired or may acquire; the outcome and
financial impact of the litigation in which we are or will be
periodically involved; the actions of regulatory, legislative,
executive or judicial decisions at the federal, state or local
level with regard to our business and the impact of any such
actions; our ability to maintain regulatory approvals for our
existing businesses and to receive regulatory approvals for our new
business partners; our expectations with regard to the impact of
competition in online sports betting, iGaming and retail/mobile
sportsbooks as well as the potential impact of this business line
on our existing businesses; the performance of our partners in
online sports betting, iGaming and retail/mobile sportsbooks,
including the risks associated with any new business, the actions
of regulatory, legislative, executive or judicial decisions at the
federal, state or local level with regard to online sports betting,
iGaming and retail/mobile sportsbooks and the impact of any such
actions; and our expectations regarding economic and consumer
conditions. Such statements are all subject to risks, uncertainties
and changes in circumstances that could significantly affect the
Company’s future financial results and business.
Accordingly, the Company cautions that the forward-looking
statements contained herein are qualified by important factors that
could cause actual results to differ materially from those
reflected by such statements. Such factors include, but are not
limited to: (a) the magnitude and duration of the impact of the
COVID-19 pandemic on general economic conditions, capital markets,
unemployment, consumer spending and the Company’s liquidity,
financial condition, supply chain, operations and personnel; (b)
industry, market, economic, political, regulatory and health
conditions; (c) disruptions in operations from data protection
breaches, cyberattacks, extreme weather conditions, medical
epidemics or pandemics such as the COVID-19 (and reoccurrences),
and other natural or man-made disasters or catastrophic events; (d)
the reopening of the Company’s gaming property (Zia Park) is
subject to various conditions, including numerous regulatory
approvals and potential delays and operational restrictions; (e)
our ability to access additional capital on favorable terms or at
all; (f) our ability to remain in compliance with the financial
covenants of our debt obligations; (g) the consummation of the
Perryville transaction with GLPI is subject to various conditions,
including third-party agreements and approvals, and accordingly may
be delayed or may not occur at all; (h) actions to reduce costs and
improve efficiencies to mitigate losses as a result of the COVID-19
pandemic that could negatively impact guest loyalty and our ability
to attract and retain employees; (i) the outcome of any legal
proceedings that may be instituted against the Company or its
directors, officers or employees; (j) the impact of new or changes
in current laws, regulations, rules or other industry standards;
(k) the ability of our operating teams to drive revenue and
margins; (l) the impact of significant competition from other
gaming and entertainment operations (including from Native American
casinos, historic racing machines, state sponsored i-lottery
products and VGTs in or adjacent to states in which we operate);
(m) our ability to obtain timely regulatory approvals required to
own, develop and/or operate our properties, or other delays,
approvals or impediments to completing our planned acquisitions or
projects, construction factors, including delays, and increased
costs; (n) the passage of state, federal or local legislation
(including referenda) that would expand, restrict, further tax,
prevent or negatively impact operations in or adjacent to the
jurisdictions in which we do or seek to do business (such as a
smoking ban at any of our properties or the award of additional
gaming licenses proximate to our properties, as recently occurred
with legislation in Illinois and Pennsylvania); (o) the effects of
local and national economic, credit, capital market, housing, and
energy conditions on the economy in general and on the gaming and
lodging industries in particular; (p) the activities of our
competitors (commercial and tribal) and the rapid emergence of new
competitors (traditional, internet, social, sweepstakes based and
VGTs in bars and truck stops); (q) increases in the effective rate
of taxation for any of our operations or at the corporate level;
(r) our ability to identify attractive acquisition and development
opportunities (especially in new business lines) and to agree to
terms with, and maintain good relationships with partners and
municipalities for such transactions; (s) the costs and risks
involved in the pursuit of such opportunities and our ability to
complete the acquisition or development of, and achieve the
expected returns from, such opportunities; (t) the impact of
weather, including flooding, hurricanes and tornadoes; (u) changes
in accounting standards; (v) the risk of failing to maintain the
integrity of our information technology infrastructure and
safeguard our business, employee and customer data (particularly as
our iGaming division grows); (w) with respect to our iGaming and
sports betting endeavors, the impact of significant competition
from other companies for online sports betting, iGaming and
sportsbooks, our ability to achieve the expected financial returns
related to our investment in Barstool Sports, our ability to retain
key talent, our ability to obtain timely regulatory approvals
required to own, develop and/or operate sportsbooks may be delayed
and there may be impediments and increased costs to launching the
online betting, iGaming and sportsbooks, including delays, and
increased costs, intellectual property and legal and regulatory
challenges, as well as our ability to successfully develop
innovative products that attract and retain a significant number of
players in order to grow our revenues and earnings, our ability to
establish key partnerships, our ability to generate meaningful
returns and the risks inherent in any new business; (x) with
respect to our proposed Pennsylvania Category 4 casinos in York and
Berks counties, risks relating to construction, and our ability to
achieve our expected budgets, timelines and investment returns,
including the ultimate location of other gaming properties in the
Commonwealth of Pennsylvania; and (y) other factors as discussed in
the Company’s Annual Report on Form 10-K for the year ended
December 31, 2019, subsequent Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, each as filed with the U.S. Securities
and Exchange Commission. The Company does not intend to update
publicly any forward-looking statements except as required by law.
In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this press release may not
occur.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201029005245/en/
David Williams Chief Financial Officer 610-373-2400
Joseph N. Jaffoni, Richard Land JCIR 212-835-8500 or
penn@jcir.com
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