- PENN Generated First Quarter Net Income
Margin of 7% and Record First Quarter Adjusted EBITDAR Margin of
35%, Benefiting from Strong Demand at Land-Based Casinos and More
Efficient Cost Structure -
- Focus Remains on Driving Profitable Online
Gaming Revenue with Q1 Launches in Michigan and Illinois -
Penn National Gaming, Inc. (NASDAQ: PENN) (“Penn National” or
the “Company”) today reported financial results for the three
months ended March 31, 2021.
Jay Snowden, President and Chief Executive Officer, commented:
“Penn National kicked off the year with record results in Q1 2021
from our land-based business and the launch of our online Barstool
Sportsbook in Michigan and Illinois. In addition, we fully
integrated our mychoice player loyalty program across all
our retail and digital offerings, which bolsters Penn National’s
ecosystem and further expands our competitive advantage. Equally
exciting was our inclusion in the S&P 500 in March, which
underscores the investment community’s confidence in our digital
transformation and our position as the nation’s largest regional
gaming operator. This milestone is a testament to the hard work,
determination and commitment of all our team members at the
property and corporate levels as well as our valued partners at
Barstool Sports.
“Last month we filed our proxy statement which included an
in-depth ESG report on our ongoing efforts to care for our people,
our communities and our planet. Highlights include the launch of a
new Diversity Scholarship program in March, which reflects our
commitment to equity in post-secondary education opportunities for
the children of our team members. With an annual commitment of $1
million, we plan to extend up to 65 scholarships this year. In
addition, we implemented a supplier diversity initiative with the
goal of developing new opportunities for minority-owned businesses.
Last month, we hosted companywide ‘Days of Listening’ to gather
feedback from team members on all matters of diversity and
inclusion. Finally, on May 15, we will launch a new initiative to
honor our active-duty military, veterans and first responders. The
‘myheroes’ program is an exclusive, fully integrated
extension of Penn National’s industry leading mychoice
rewards loyalty program, which will provide our nation’s heroes
access to exclusive discounts and offers at Penn National’s 41
properties in 19 states.”
For further information, we have posted a presentation to our
website regarding the first quarter highlights and accomplishments,
which can be found here.
Core Business Firing on All Cylinders
For the first quarter ended March 31, 2021, Penn National
generated revenues of $1,274.9 million and Adjusted EBITDAR of
$447.0 million. Revenues declined 6% compared to Q1 2019 pro forma
results while Adjusted EBITDAR was up 7% and Adjusted EBITDAR
margins increased 434 basis points based on the pro forma
comparison. The strong results were driven by contributions from
the online Barstool Sportsbook and our iCasino platforms, and
land-based gaming properties despite COVID-19 related closures in
Pennsylvania and Illinois for parts of January, and Zia Park in New
Mexico not reopening until early March. Further, when adjusting for
the days our casinos were mandated to close and excluding the
contribution from Penn Interactive, revenues declined 9% and
Adjusted EBITDAR increased 12%, which equates to margin improvement
of more than 700 basis points compared to pro forma Q1 2019.
Mr. Snowden continued: “Despite COVID-related restrictions and
closures in January and harsh winter weather in the South segment
in February, visitation and length of play continue to improve
across all age segments of our player database. Moreover, we saw
volumes in the month of March that we have not seen since 2019.
Recall, when we reopened our properties in the summer of 2020, we
saw very high spend-per-visit, but visitation was well below
pre-COVID levels. Today, we’re still seeing spend-per-visit that is
much higher than it was pre-COVID, and visitation is at or near
2019 levels in most of our markets, which is a great combination.
Importantly, the younger demographic continues to choose gaming as
a viable entertainment option while the 55+ age group has been
returning to our casinos as vaccines continue to roll out. Unrated
play continues to show strength that mirrors what we have seen from
our rated guests. This top-line demand coupled with the structural
changes we put in place at the start of the pandemic has resulted
in remarkable and sustainable margin improvement. Meanwhile, the
South segment outperformed with margin improvement of greater than
1,100 basis points compared to the same period in 2019 given the
less restrictive COVID protocols in the region, the removal of
loss-leading or lower margin amenities, more efficient labor
management and a very rational marketing and promotional
environment. The Midwest also reported impressive margin gains of
nearly 900 basis points despite an uneven playing field related to
COVID restrictions in certain key markets.
“At quarter end, our cash balance stood at $2.1 billion,
traditional net debt was approximately $353 million and
lease-adjusted net leverage was 4.5x based on 2019 Adjusted
EBITDAR.”
Continued Expansion of our Sportsbook Footprint and Media
Strategy
Mr. Snowden continued, “We remain focused on garnering top-three
gaming revenue market share for the Barstool Sportsbook and driving
best in class profitability. Since launching our product just over
seven months ago, we have registered more than 400,000 customers
and generated over $660 million and $61 million in handle and
gaming revenue, respectively. We plan for the online Barstool
Sportsbook to be live in eight states by football season and in at
least 10 states before the end of the year.
“As previously disclosed, on March 11, we successfully launched
the Barstool Sportsbook in Illinois, ahead of the 2021 NCAA
Basketball Tournament. The initial results for the first 30 days of
operations exceeded our expectations, with better first-time
deposit conversions relative to what we had generated in
Pennsylvania or Michigan. During this period, we registered over
54,700 new customers and generated total handle and gaming revenue
of $67.7 million and $6.5 million, respectively. We also
experienced high engagement, with 54% of our Illinois customers
wagering on Barstool-exclusive bets.
“Our ability to deliver unique and engaging content through
Barstool Sports sets us apart from our peers. Barstool’s social
media reach, creative promotions, custom parlays, and exclusive
bets have been key drivers of customer acquisition for the online
sportsbook and have led to enhanced engagement and retention,
particularly among more casual bettors. In addition, Barstool’s
promotion of Penn National’s retail sportsbooks has driven
significant awareness and visitation to our land-based properties,
highlighting the unique benefits of our fully integrated media and
omnichannel strategy. Overall, we have seen very strong results at
our properties that have opened Barstool-branded retail
sportsbooks, and we plan to open/rebrand six more retail
sportsbooks by the end of 2021.
“The power of our mychoice customer base combined with
the fierce loyalty of Barstool’s audience allows us to successfully
cross-sell our online offerings. In Michigan, for instance, despite
limited game selection, over 50% of our online sports betting MUPs
placed a wager on our iCasino product during the month of March,
which was above our initial expectations. We are excited to
translate this success to our Barstool iCasino in Pennsylvania,
which launched yesterday and will provide another great option
combined with our HollywoodCasino.com offering in the state, which
has resonated well with our mychoice players. We expect to
add significantly more third-party content to our Barstool-branded
iCasino product later this year. Further, our recently announced
acquisition of HitPoint Studios will be the centerpiece of our
newly formed Penn Game Studios allowing us to create customized
Barstool-themed and casino branded content that we believe will
lead to even greater cross-sell opportunities.
“Barstool Sports, the media company, has maintained its
incredible momentum from 2020 into the new year, with strong
financial performance and audience growth. Today, Barstool’s
sports, entertainment and lifestyle content drives a loyal base of
21 to 40-year old customers to our sportsbook. As Barstool
continues to broaden its reach with relevant influencers and other
media and sports personalities, we have seen this audience expand.
Further, the continued growth and diversification of the brand’s
advertising, licensing and merchandise revenue streams has enhanced
the value of the media asset, which we believe is currently
underappreciated.
Executing on Our Growth Initiatives
“We are continuing to execute on our exciting growth
opportunities, which will drive prospective revenue and EBITDAR
growth. We view investments in technology as imperative to
enhancing the customer experience, delivering unique content, and
gaining mindshare. Our mychoice mobile app, which we
launched last quarter, has had over 333,000 downloads with
approximately 115,000 monthly active users. Our app allows us to
engage with our guests more effectively, provide targeted
promotions, and drive revenue growth. Similarly, we believe the
implementation of our cashless, cardless, and contactless (“3Cs”)
technology will resonate well with our guests, especially the
younger demographic. We have seen continued momentum in
mychoice app downloads in all our markets across all age
groups. Ultimately, these technology investments will further
increase our communication effectiveness with our guests. In
addition, this will improve our efficiencies and benefit revenue
flow-through as expenses are further reduced.
“We will be launching the 3Cs experience throughout the
remainder of 2021 at our four casinos in Pennsylvania with the
first launch near the end of Q2 2021, pending regulatory approval.
Included in the list of our four Pennsylvania casinos is Hollywood
Casino York, set to open in August and Hollywood Casino Morgantown,
which we expect to open later this year. In Maryland, we remain on
track to close the Hollywood Casino Perryville acquisition in early
Q3 2021, which will provide us market access to our 20th state.
Each of these properties will feature a Barstool Sportsbook, which
combined with our mychoice player affinity program,
highlights our expanding omni-channel presence.
Serving as a Disruptor to the Gaming Industry in 2021 and
Beyond
“With a very strong start to 2021, our goal is to continue to
disrupt the gaming industry and position Penn National for ongoing
growth through unconventional and fresh approaches. The broader
acceptance of sports betting and the greater consumer adoption of
technology, which was accelerated by the ongoing pandemic, have
been some of the key drivers behind our strategic initiatives.
Looking ahead, I am confident that Penn National will look
significantly different in the next three to five years than it
does today as we remain committed to breaking from the conventional
wisdom in terms of how we operate and engage our customers.
However, what will not change is our long-term focus on profitable
growth and our dedication to creating shareholder value by
maintaining a long-term view. I remain excited for the future at
Penn National Gaming.”
Summary of First Quarter
Results
For the three months ended
March 31,
(in millions,
except per share data, unaudited)
2021
2020
2019
Revenues
$
1,274.9
$
1,116.1
$
1,282.6
Net income (loss)
90.9
(608.6)
41.0
Adjusted EBITDA (1)
$
336.6
$
154.8
$
306.7
Rent expense associated with triple net
operating leases (2)
110.4
97.5
84.7
Adjusted EBITDAR (1)
$
447.0
$
252.3
$
391.4
Payments to our REIT Landlords under
Triple Net Leases (3)
$
226.0
$
223.8
$
207.9
Diluted earnings (loss) per common
share
$
0.55
$
(5.26)
$
0.35
- 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.
- 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 beginning on
May 23, 2019, and the Tropicana Lease beginning on April 16, 2020
(referred to collectively as our “triple net operating leases”).
During the three months ended March 31, 2021, we recorded noncash
rent expense associated with the Tropicana Lease of $7.7 million.
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.”
- 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, the Greektown Lease
and the Morgantown Lease. Although we collectively refer to the
Master Leases, the Meadows Lease, the Margaritaville Lease, the
Greektown Lease, the Morgantown Lease and the Tropicana Lease as
our “Triple Net Leases,” the rent under the Tropicana Lease is
nominal.
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
March 31,
(in millions, unaudited)
2021
2020
2019
Revenues:
Northeast segment (1)
$
570.9
$
520.7
$
550.6
South segment (2)
295.9
223.3
292.0
West segment (3)
96.6
126.6
158.6
Midwest segment (4)
234.7
228.1
271.2
Other (5)
87.9
20.3
10.2
Intersegment eliminations (6)
(11.1)
(2.9)
—
Total revenues
$
1,274.9
$
1,116.1
$
1,282.6
Adjusted EBITDAR:
Northeast segment (1)
$
193.2
$
124.5
$
164.8
South segment (2)
133.9
52.6
97.8
West segment (3)
35.2
24.6
49.9
Midwest segment (4)
106.0
69.5
99.2
Other (5)
(21.3)
(18.9)
(20.3)
Total Adjusted EBITDAR (7)
$
447.0
$
252.3
$
391.4
- 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.
- 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.
- The West segment consists of the following properties:
Ameristar Black Hawk, Cactus Petes and Horseshu, M Resort,
Tropicana Las Vegas, and Zia Park Casino.
- 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.
- 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; 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"). 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. 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 consist of certain
expenses, such as: payroll, professional fees, travel expenses and
other general and administrative expenses that do not directly
relate to or have not otherwise been allocated to a property.For
the three ended March 31, 2021, 2020 and 2019 corporate overhead
costs were $24.0 million, $24.2 million and $23.1 million,
respectively. 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).
- Primarily represents the elimination of intersegment revenues
associated with our internally-branded retail sportsbooks, which
are operated by Penn Interactive.
- 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 Supplemental Information
Given the COVID-19 pandemic and the resulting temporary closure
of all of the Company’s gaming and racing properties in the first
quarter ended March 31, 2020, the Company believes presenting
information regarding the Company’s financial results for the
quarterly period ended March 31, 2019 is useful to investors to
evaluate the Company’s performance for the quarterly period ended
March 31, 2021.
Although the Company did not own Greektown for the quarterly
period ended March 31, 2019, the Company believes the following
supplemental information is useful to investors to assess the value
this transaction brings to the Company and its shareholders.
Revenues and Adjusted EBITDAR earned by Greektown for the three
months ended March 31, 2019 were $83.7 million and $26.7 million,
respectively. The operating results of Greektown were derived from
historical financial information. Greektown operating results were
adjusted to conform to the Company’s methodology of allocating
certain corporate expenses to properties. Revenues and Adjusted
EBITDAR earned by Greektown do not reflect any cost savings or
revenue synergies from potential operating efficiencies or
associated costs to achieve such savings or synergies that are
expected to result from the transaction.
The Company ceased operations of Resorts Casino Tunica on June
30, 2019. Revenues and Adjusted EBITDAR earned by Resorts Casino
Tunica for the three months ended March 31, 2019 were $5.8 million
and $0.2 million, respectively.
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
March 31,
(in millions,
unaudited)
2021
2020
2019
Net income (loss)
$
90.9
$
(608.6)
$
41.0
Income tax expense (benefit)
20.6
(99.5)
14.8
Income from unconsolidated affiliates
(9.6)
(4.1)
(5.7)
Interest expense, net
135.7
129.8
132.3
Other (income) expense
(21.1)
21.8
—
Operating income (loss)
216.5
(560.6)
182.4
Stock-based compensation
4.2
6.0
3.4
Cash-settled stock-based awards
variance
21.5
(8.9)
0.4
(Gain) loss on disposal of assets
(0.1)
0.6
0.5
Contingent purchase price
0.1
(2.2)
4.7
Pre-opening and acquisition costs
1.6
3.2
4.4
Depreciation and amortization
81.3
95.7
104.1
Impairment losses
—
616.1
—
Insurance recoveries, net of deductible
charges
—
(0.1)
—
Income from unconsolidated affiliates
9.6
4.1
5.7
Non-operating items of equity method
investments (1)
1.6
0.9
1.1
Other expenses (2)
0.3
—
—
Adjusted EBITDA
336.6
154.8
306.7
Rent expense associated with triple net
operating leases
110.4
97.5
84.7
Adjusted EBITDAR
$
447.0
$
252.3
$
391.4
Net income (loss) margin
7.1
%
(54.5)
%
3.2
%
Adjusted EBITDAR margin
35.1
%
22.6
%
30.5
%
(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
Consolidated Statements of
Operations and Comprehensive Income (Loss)
For the three months ended
March 31,
(in millions, except per share data,
unaudited)
2021
2020
2019
Revenues
Gaming
$
1,082.0
$
902.9
$
1,034.5
Food, beverage, hotel and other
192.9
213.2
248.1
Total revenues
1,274.9
1,116.1
1,282.6
Operating expenses
Gaming
527.8
500.9
547.4
Food, beverage, hotel and other
123.1
157.0
161.8
General and administrative
326.2
307.0
286.9
Depreciation and amortization
81.3
95.7
104.1
Impairment losses
—
616.1
—
Total operating expenses
1,058.4
1,676.7
1,100.2
Operating income (loss)
216.5
(560.6)
182.4
Other income (expenses)
Interest expense, net
(135.7)
(129.8)
(132.3)
Income from unconsolidated affiliates
9.6
4.1
5.7
Other
21.1
(21.8)
—
Total other expenses
(105.0)
(147.5)
(126.6)
Income (loss) before income
taxes
111.5
(708.1)
55.8
Income tax benefit (expense)
(20.6)
99.5
(14.8)
Net income (loss)
90.9
(608.6)
41.0
Less: Net (income) loss attributable to
non-controlling interest
0.1
—
—
Net income (loss) attributable to Penn
National
$
91.0
$
(608.6)
$
41.0
Earnings (loss) per share:
Basic earnings (loss) per share
$
0.58
$
(5.26)
$
0.35
Diluted earnings (loss) per share
$
0.55
$
(5.26)
$
0.35
Weighted-average common shares outstanding
- basic
155.7
115.7
116.3
Weighted-average common shares outstanding
- diluted
172.8
115.7
118.6
Selected Financial Information
Balance Sheet Data
(in millions,
unaudited)
March 31, 2021
December 31, 2020
Cash and cash equivalents
$
2,062.2
$
1,853.8
Bank debt
$
1,612.0
$
1,628.1
Notes (1)
730.5
730.5
Other long-term obligations (2)
72.3
73.0
Total traditional debt
2,414.8
2,431.6
Financing obligation (3)
74.0
—
Less: Debt discounts and debt issuance
costs
(113.5)
(119.0)
$
2,375.3
$
2,312.6
Traditional net debt (4)
$
352.6
$
577.8
- Inclusive of our 5.625% Notes due 2027 and our 2.75%
Convertible Notes due 2026.
- Other long-term obligations as of March 31, 2021 primarily
includes $60.9 million related to relocation fees due for both
Hollywood Gaming at Dayton Raceway and Hollywood Gaming at Mahoning
Valley Race Course, and $11.4 million related to our repayment
obligation on a hotel and event center located near Hollywood
Casino Lawrenceburg.
- Represents cash proceeds received on certain claims of which
the principal repayment is contingent and classified as a financing
obligation under Accounting Standards Codification Topic 470,
“Debt.”
- Traditional net debt in the table above is calculated as “Total
traditional debt,” which is the principal amount of debt
outstanding (excludes the financing obligation associated with cash
proceeds received on certain claims of which the principal
repayment is contingent), and 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
March 31,
(in millions,
unaudited)
2021
2020
2019
Cash flow distributions
$
5.5
$
8.7
$
6.5
Cash Flow Data
The table below summarizes certain cash expenditures incurred by
the Company.
For the three months ended
March 31,
(in millions,
unaudited)
2021
2020
2019
Cash payments to our REIT Landlords under
Triple Net Leases (1)
$
226.0
$
223.8
$
207.9
Cash refunds related to income taxes,
net
$
(8.8)
$
(1.1)
$
(1.7)
Cash paid for interest on traditional
debt
$
25.8
$
33.8
$
38.5
Maintenance capital expenditures
$
14.8
$
29.7
$
36.2
- Consists of payments made under the Master Leases, the Meadows
Lease, the Margaritaville Lease, the Greektown Lease, and the
Morgantown Leases, in cash. As previously noted, the cash rent
under the Tropicana Lease is nominal.
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, net of 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 212-231-2932. 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 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 as 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 offerings, 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; continued demand for the gaming
properties that have opened and the possibility that the Company’s
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 potential benefits and expected
timing of the Hitpoint transaction; the Company’s estimated cash
burn and future liquidity, future revenue and Adjusted EBITDAR,
including from the Company’s iGaming business in Pennsylvania and
Michigan; the continued success of Barstool Sports in Pennsylvania,
Michigan, Illinois 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 in future states and
its future revenue and profit contributions; the Company’s
expectations of future results of operations and financial
condition, including margins; the Company’s expectations for its
properties and the potential benefits of the cashless, cardless and
contactless (“3Cs”) technology; the Company’s development projects
or its iGaming initiatives; the timing, cost and expected impact of
planned capital expenditures on the Company’s results of
operations; the Company’s expectations with regard to the impact of
competition; the anticipated opening dates of the Company’s retail
sportsbooks in future states and its proposed Pennsylvania Category
4 casinos in York and Berks counties; the Company’s expectations
with regard to acquisitions, potential divestitures and development
opportunities, as well as the integration of and synergies related
to any companies the Company have acquired or may acquire; the
outcome and financial impact of the litigation in which the Company
is 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; the Company’s ability to maintain regulatory
approvals for its existing businesses and to receive regulatory
approvals for its new business partners; the Company’s 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 the Company’s existing businesses;
the performance of the Company’s 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
the Company’s 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 Company’s ability to access additional capital on favorable
terms or at all; (e) the Company’s ability to remain in compliance
with the financial covenants of its debt obligations; (f) 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; (g) the
consummation of the Hitpoint transaction is subject to various
conditions, including shareholder approvals, and 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 the
Company’s 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 the Company’s 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) the Company’s ability to obtain
timely regulatory approvals required to own, develop and/or operate
its properties, or other delays, approvals or impediments to
completing its 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 the Company
does or seek to do business (such as a smoking ban at any of its
properties or the award of additional gaming licenses proximate to
its 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, the Company’s ability to
achieve the expected financial returns related to its investment in
Barstool Sports, the Company’s ability to retain key talent, its
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 the Company’s ability to successfully develop innovative
products that attract and retain a significant number of players in
order to grow its revenues and earnings, its ability to establish
key partnerships, its ability to generate meaningful returns and
the risks inherent in any new business; (x) with respect to the
Company’s proposed Pennsylvania Category 4 casinos in York and
Berks counties, risks relating to construction, and its ability to
achieve its 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, 2020, 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/20210506005446/en/
Justin Sebastiano Senior VP, Finance & Treasurer
610-373-2400 Joseph N. Jaffoni, Richard Land JCIR 212-835-8500 or
penn@jcir.com
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