- Launched Barstool Sportsbook Mobile App in
Michigan to Strong Demand and Introduced New Fully Integrated
Barstool iCasino Product -
- Opened Retail Barstool Sportsbooks at
Ameristar Casino Black Hawk, Greektown Casino Hotel, Hollywood
Casino Lawrenceburg, and Ameristar East Chicago -
- Preparing to Enter Our 20th State Via
Pending Acquisition of Hollywood Casino Perryville in Maryland
-
Penn National Gaming, Inc. (NASDAQ: PENN) (“Penn National” or
the “Company”) today reported financial results for the three
months and year ended December 31, 2020.
Jay Snowden, President and Chief Executive Officer, commented:
“As we reflect on 2020, I couldn’t be prouder of the resiliency and
determination shown by our corporate and property team members
during what was undoubtedly one of the most challenging years for
any of us from a personal and professional standpoint. We have
endured unprecedented changes to our business, created and
implemented enhanced safety protocols for our team members and
guests, and withstood natural disasters that brought damage to
several of our southern properties and left many of our team
members displaced in the midst of a global pandemic. Yet, despite
these challenges, the Company has continued to execute on its
long-term strategy by re-evaluating and re-imagining our
operational norms and product offerings while accelerating our
digital transformation.
“Our investment in Barstool Sports provides us with a fully
integrated media platform to support our evolution from the
nation’s largest regional gaming operator to the best-in-class
omnichannel provider of retail and online gaming and sports betting
entertainment. In addition to the successful launches of our
Barstool Sportsbook app in Pennsylvania and Michigan, we have now
fully implemented our industry leading mychoice reward
program across all our properties and online channels. This program
of over 20 million members connects our land-based casinos to our
sports betting and iCasino products, offering players a wide-range
of compelling incentives to consolidate play across our various
platforms. More recently, we announced a strategic partnership with
Choice Hotels which allows the more than 47 million members of
Choice’s award-winning loyalty program, Choice Privileges, to book
stays at Penn National properties directly through the Choice
reservation system. Additionally, our operations and IT teams have
laid the groundwork for implementing a new generation of cashless,
cardless, and contactless technology at our casinos, which we refer
to as the 3Cs, that will improve efficiency and guest service,
while also driving incremental revenue as we remove transactional
friction and offer experiences in line with other industries
frequented by younger demographics. We intend to launch this
technology initially at our Pennsylvania casinos in the first half
of 2021, subject to regulatory approval, and plan to continue
rolling it out to other regions in 2021.
“In addition to executing on our operational strategy, I am
proud of the way our Company rose to the occasion to support our
team members and host communities in these times of unprecedented
need and heightened social justice awareness. Through the Penn
National Gaming Foundation, we created a separate COVID-19
Emergency Relief Fund for the benefit of affected team members,
with contributions of over $3.7 million from our Board of
Directors, CEO, senior management team and the Penn National Gaming
Foundation. In addition, we provided $13 million in one-time
holiday cash bonuses in the fourth quarter to our non-executive
team members companywide to help with the financial impact to their
families from the pandemic. We also created the Hurricane Laura
Relief Fund with an initial contribution of $2.5 million to help
our community and team members impacted by the storm, in addition
to providing more than $6 million in full wages and benefits to our
team members during the property closure. Most recently, we have
joined the efforts of Barstool Sports and its founder Dave Portnoy
to help save and sustain small businesses across the country that
have been impacted by COVID-19, initially through an online
fundraising campaign to save Philadelphia’s historic Reading
Terminal Market, and now through our contributions of approximately
$4.6 million, and counting, to the Barstool Fund, which was created
by Mr. Portnoy precisely for this purpose. Finally, on the social
justice front, our Diversity Committee announced a new scholarship
program for disadvantaged team members that will be funded with a
$1 million annual commitment from our Company, and we launched a
series of new inclusion-related initiatives.
“Having been battle tested throughout 2020, we look forward to
the year ahead with great optimism and are confident the
foundations we built over the last twelve months have positioned us
to generate significant long-term shareholder value and stronger
communities.”
For further information, we have posted a presentation to our
website regarding the fourth quarter highlights and
accomplishments, which can be found here.
Q4 Financial Results Summary
For the fourth quarter ended December 31, 2020, Penn National
generated revenues of $1,027.4 million and Adjusted EBITDAR of
$365.4 million. Revenues and Adjusted EBITDAR were trending ahead
of forecast before COVID-19 related closures in Illinois, Michigan,
and Pennsylvania and increased restrictions in Ohio and
Massachusetts (among other states) began in mid-November. While
revenues contracted 23% year-over-year, Adjusted EBITDAR declined
by only 9% for the same period, reflecting structural changes that
were put in place with the onset of the pandemic. These changes
helped to expand Adjusted EBITDAR margins by 580 basis points
relative to Q4 2019 results, which equates to an improvement of 720
basis points when excluding properties that were closed during the
quarter. The South segment, which had fewer restrictions than other
regions, but was still impacted by Hurricane Laura, generated
Adjusted EBITDAR growth of 13% and Adjusted EBITDAR margin
improvement of 720 basis points year-over-year, despite a decline
of 7% in net revenues. However, when excluding the
hurricane-impacted days, Adjusted EBITDAR margins in the South
segment increased 890 basis points year-over-year.
Mr. Snowden commented: “Trends in January thus far are
encouraging. Visitation and length of play have improved, several
of the properties that were forced to close in November and
December have reopened, and our retail sports books continue to
positively impact both gaming and non-gaming revenues. We are
continuing to see encouraging growth in the younger demographic
tiers of our database, and we believe the roll-out of vaccinations
will encourage more guests in all age segments of our database to
return to our land-based facilities soon. Given the service
enhancements and operational changes we have implemented, we stand
to achieve meaningful EBITDAR growth as our volumes continue to
approach previous levels.
“Our cash balance stood at $1.9 billion at quarter end, even
after paying down $115 million of our term loan B. In turn, our net
traditional debt decreased to approximately $578 million at
December 31, 2020, bringing our lease-adjusted net leverage to 4.7x
based on 2019 Adjusted EBITDAR.
Penn Interactive: Pursuing Transformational Growth
Mr. Snowden continued, “Our interactive division experienced
tremendous growth during 2020, with impressive revenues and EBITDA
margins for our Hollywood Casino iCasino product in Pennsylvania,
strong performance at our 16 retail sportsbooks, and the
introduction of our highly-anticipated Barstool Sportsbook mobile
app. Since launching in Pennsylvania last September, the Barstool
Sportsbook app has registered over 72,000 customers in the state
and has generated total handle of nearly $300 million, despite very
limited external marketing spend.
“On January 22, 2021, we successfully launched the Barstool
Sportsbook app in Michigan and saw encouraging initial results, as
we registered over 48,000 new customers and generated total handle
of $27.5 million during the first 10 days of operation. We also
experienced very high engagement, with nearly 50% of our Michigan
customers betting on Barstool-exclusive bets. We anticipate being
live in at least 10 states by the end of 2021 and remain very
confident in our ability to win sizable share in new markets based
on the power of the Barstool brand and media assets. In addition,
we are excited to have launched our Barstool-branded iCasino in
Michigan on February 1st, which allows us to begin to leverage the
meaningful cross-sell opportunities from the Barstool Sportsbook
and our mychoice audiences. Furthermore, we have integrated
the mychoice Rewards Program into the Barstool Sportsbook
and iCasino experience, providing players the opportunity to redeem
their loyalty points for unique experiences and offers both at Penn
National casinos and with Barstool Sports.
Barstool Branded Retail Sportsbooks Exceeding
Expectations
“We have seen very strong results at our properties since the
Barstool rebranding of our retail sportsbooks at Ameristar Casino
Black Hawk, Greektown Casino Hotel, Hollywood Casino Lawrenceburg,
and Ameristar East Chicago. Our Indiana retail sportsbooks
generated record handle, revenue and EBITDAR during the fourth
quarter, which has only accelerated following the rebranding. For
example, sports betting handle at our Ameristar East Chicago
property increased by 35% following the rebranding versus the prior
six-week period, while table games and slot volumes in the adjacent
Barstool-themed gaming area increased by 27% and 26%, respectively,
during the same period. We believe this demonstrates the ability of
our Barstool-branded retail sportsbooks to attract younger guests
to our casinos, which can help drive significant growth in gaming
and non-gaming revenues from new demographics. We expect this
momentum to gain speed when COVID restrictions are lifted and we
are able to host more Barstool events and personalities at our
properties. Our plans for 2021 include rebranding several
additional retail sportsbooks in our portfolio, beginning with the
Pennsylvania properties in the first half of the year.
Barstool Media Reach Growing
“The value of Barstool Sports as a media company is an
overlooked part of our story,” said Mr. Snowden. “Our valued
partners at Barstool experienced an incredible year in 2020, as
they continued to produce highly-engaging and relevant content for
their growing audience of loyal fans despite the partial shutdown
of live sports. Barstool Sports now has over 26 million followers
on TikTok, close to 27 million followers on Twitter, and more than
52 million followers on Instagram, just to highlight a few social
media platforms. In 2020, Barstool saw very impressive
year-over-year growth, recording its strongest revenue and EBITDA
since its inception, and we expect Barstool to continue to grow
profitably over the upcoming years through a diversified mix of
advertising, brand licensing, and merchandise sales. We view
Barstool Sports not only as a fantastic channel to promote our
offerings, but also an undervalued media asset that has evolved
from primarily a sports brand into a highly relevant sports and
life-style brand. We are excited about the opportunity to unlock
additional value in Barstool Sports as they continue their strong
growth trajectory.”
Investing in Growth and Technology
“The strength of our balance sheet provides us with the
financial flexibility to invest in high-growth opportunities. We
exercised our option to acquire the operating assets of Hollywood
Casino Perryville in Maryland and remain on track to close the
acquisition following regulatory approval. This transaction
provides us the opportunity to expand our unique omnichannel
platform into an industry leading 20th state, and we hope to
introduce a Barstool-branded retail sportsbook and mobile app to
the valuable Maryland gaming market later this year. Meanwhile, the
construction of our Category 4 casinos in both York and Morgantown,
Pennsylvania, has resumed and we expect to open both properties in
late 2021. We have utilized this additional time to reimagine our
offerings at these properties to incorporate a new Barstool
Sportsbook as well as the technology for cashless, cardless, and
contactless features, pending regulatory approval.
“Implementation of the 3Cs and other technology investments,
such as the travelling wallet and enhancing how we engage with a
younger demographic, remains a top priority. In addition, we have
recently launched our mychoice mobile app. As of December
31, the app generated over 140,000 downloads with 91,000 monthly
active users. The app will provide us with an environmentally
friendly and more efficient way to communicate, interact, and
engage with our guests. The 35 to 54 age group is currently the
most engaged audience with the app, which is very encouraging as
this group represents a growing segment of our different business
channels.
Building on the Momentum as We Forge Ahead
“We have already begun to see the positive impact of our
structural advantages in the sports betting and iCasino sector,
including our industry leading geographic footprint, which provides
us with frictionless access to key sports betting and iCasino
states as well as valuable recurring revenue and equity value from
our third-party skin partners. Finally, the Barstool brand and
marketing engine, as well as our database of 20 million
mychoice customers, provide a path to very efficient
customer acquisition. We anticipate these advantages will allow us
to benefit from the continuing proliferation of sports betting and
iCasino legislation over the next several years. With a strong
balance sheet and portfolio of best-in-class regional gaming
facilities and digital assets, we are looking forward to building
upon our momentum to create additional shareholder value.”
Summary of Fourth Quarter Results
For the three months ended
December 31,
(in millions,
except per share data, unaudited)
2020
2019
Revenues
$
1,027.4
$
1,341.2
Net income (loss)
$
12.7
$
(92.9
)
Adjusted EBITDA (1)
$
255.9
$
304.0
Rent expense associated with triple net
operating leases (2)
109.5
95.4
Adjusted EBITDAR (1)
$
365.4
$
399.4
Payments to our REIT Landlords under
Triple Net Leases, inclusive of rent credits utilized (3)
$
222.6
$
224.4
Diluted earnings (loss) per common
share
$
0.07
$
(0.80
)
(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 December 31, 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, the Greektown Lease and the Morgantown Lease (which is a
land lease we entered into on October 1, 2020 with GLPI), inclusive
of rent credits utilized, which were generated from (i) the sale of
the real estate assets associated with Tropicana Las Vegas to GLPI
on April 16, 2020 and (ii) the sale of land associated with our
future Morgantown facility to GLPI on October 1, 2020. 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. During the three months ended December
31, 2020, we utilized the remaining rent credits available to us
totaling $65.0 million to pay rent under the Penn Master Lease,
Pinnacle Master Lease, Meadows Lease and Morgantown 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
December 31,
For the year ended
December 31,
(in millions,
unaudited)
2020
2019
2020
2019
Revenues:
Northeast segment (1)
$
470.8
$
621.3
$
1,639.3
$
2,399.9
South segment (2)
249.2
268.2
849.6
1,118.9
West segment (3)
79.5
158.1
302.5
642.5
Midwest segment (4)
188.2
279.2
681.4
1,094.5
Other (5)
53.4
15.6
125.0
47.5
Intersegment eliminations (6)
(13.7
)
(1.2
)
(19.1
)
(1.9
)
Total revenues
$
1,027.4
$
1,341.2
$
3,578.7
$
5,301.4
Adjusted EBITDAR:
Northeast segment (1)
$
153.2
$
180.7
$
478.9
$
720.8
South segment (2)
101.6
90.2
318.9
369.8
West segment (3)
27.0
47.8
82.2
198.8
Midwest segment (4)
84.9
102.3
258.3
403.6
Other (5)
(1.3
)
(21.7
)
(43.5
)
(87.8
)
Intersegment eliminations (6)
—
0.1
—
—
Total Adjusted EBITDAR (7)
$
365.4
$
399.4
$
1,094.8
$
1,605.2
(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. Included
in the Other category are 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 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 months and year ended December 31, 2020, corporate
overhead costs were $17.8 million and $78.8 million, respectively,
compared to $25.1 million and $99.3 million, respectively, for the
three months and year ended December 31, 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
December 31,
For the year ended
December 31,
(in millions,
unaudited)
2020
2019
2020
2019
Net income (loss)
$
12.7
$
(92.9
)
$
(669.1
)
$
43.1
Income tax expense (benefit)
7.1
(10.0
)
(165.1
)
43.0
Loss on early extinguishment of debt
1.2
—
1.2
—
Income from unconsolidated affiliates
(6.4
)
(6.7
)
(13.8
)
(28.4
)
Interest expense, net
136.1
133.7
543.2
534.2
Other income
(31.1
)
(12.8
)
(106.6
)
(20.0
)
Operating income (loss)
119.6
11.3
(410.2
)
571.9
Stock-based compensation
2.8
4.5
14.5
14.9
Cash-settled stock-based awards
variance
20.5
7.2
67.2
0.8
(Gain) loss on disposal of assets
4.7
(2.8
)
(29.2
)
5.5
Contingent purchase price
0.3
—
(1.1
)
7.0
Pre-opening and acquisition costs
0.3
6.8
11.8
22.3
Depreciation and amortization
91.4
97.8
366.7
414.2
Impairment losses
7.3
173.1
623.4
173.1
Insurance recoveries, net of deductible
charges
—
(1.5
)
(0.1
)
(3.0
)
Income from unconsolidated affiliates
6.4
6.7
13.8
28.4
Non-operating items of equity method
investments (1)
1.5
0.9
4.7
3.7
Other expenses (2)
1.1
—
13.5
—
Adjusted EBITDA
255.9
304.0
675.0
1,238.8
Rent expense associated with triple net
operating leases
109.5
95.4
419.8
366.4
Adjusted EBITDAR
$
365.4
$
399.4
$
1,094.8
$
1,605.2
Net income (loss) margin
1.2
%
(6.9
)%
(18.7
)%
0.8
%
Adjusted EBITDAR margin
35.6
%
29.8
%
30.6
%
30.3
%
(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
December 31,
For the year ended
December 31,
(in millions,
except per share data, unaudited)
2020
2019
2020
2019
Revenues
Gaming
$
895.4
$
1,083.5
$
3,051.1
$
4,268.7
Food, beverage, hotel and other
132.0
257.7
527.6
1,032.7
Total revenues
1,027.4
1,341.2
3,578.7
5,301.4
Operating expenses
Gaming
429.3
582.7
1,530.3
2,281.8
Food, beverage, hotel and other
77.7
172.2
337.7
672.7
General and administrative
302.1
304.1
1,130.8
1,187.7
Depreciation and amortization
91.4
97.8
366.7
414.2
Impairment losses
7.3
173.1
623.4
173.1
Total operating expenses
907.8
1,329.9
3,988.9
4,729.5
Operating income (loss)
119.6
11.3
(410.2
)
571.9
Other income (expenses)
Interest expense, net
(136.1
)
(133.7
)
(543.2
)
(534.2
)
Income from unconsolidated affiliates
6.4
6.7
13.8
28.4
Loss on early extinguishment of debt
(1.2
)
—
(1.2
)
—
Other
31.1
12.8
106.6
20.0
Total other expenses
(99.8
)
(114.2
)
(424.0
)
(485.8
)
Income (loss) before income
taxes
19.8
(102.9
)
(834.2
)
86.1
Income tax benefit (expense)
(7.1
)
10.0
165.1
(43.0
)
Net income (loss)
12.7
(92.9
)
(669.1
)
43.1
Less: Net (income) loss attributable to
non-controlling interest
(1.6
)
0.4
(0.4
)
0.8
Net income (loss) attributable to Penn
National
$
11.1
$
(92.5
)
$
(669.5
)
$
43.9
Earnings (loss) per share:
Basic earnings (loss) per share
$
0.07
$
(0.80
)
$
(5.00
)
$
0.38
Diluted earnings (loss) per share
$
0.07
$
(0.80
)
$
(5.00
)
$
0.37
Weighted-average common shares outstanding
- basic
155.0
115.2
134.0
115.7
Weighted-average common shares outstanding
- diluted
158.1
115.2
134.0
117.8
Selected Financial Information
Balance Sheet Data
(in millions,
unaudited)
December 31, 2020
December 31,
2019
Cash and cash equivalents
$
1,853.8
$
437.4
Bank debt
$
1,628.1
$
1,929.8
Notes (1)
730.5
400.0
Other long-term obligations (2)
73.0
89.2
Total traditional debt
2,431.6
2,419.0
Less: Debt discounts and debt issuance
costs
(119.0
)
(33.9
)
$
2,312.6
$
2,385.1
Traditional net debt (3)
$
577.8
$
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
December 31, 2020 primarily include $60.9 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
December 31,
For the year ended
December 31,
(in millions,
unaudited)
2020
2019
2020
2019
Cash flow distributions
$
4.5
$
7.0
$
20.0
$
29.0
Cash Flow Data
The table below summarizes certain cash expenditures incurred by
the Company.
For the three months ended
December 31,
For the year ended
December 31,
(in millions,
unaudited)
2020
2019
2020
2019
Cash payments to our REIT Landlords under
Triple Net Leases (1)
$
157.6
$
224.4
$
553.6
$
869.8
Cash (refunds) payments related to income
taxes, net
$
(9.2
)
$
0.9
$
(15.2
)
$
21.8
Cash paid for interest on traditional
debt
$
20.9
$
20.2
$
108.2
$
120.7
Maintenance capital expenditures
$
44.5
$
47.0
$
110.2
$
165.5
(1)
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 rent under the Tropicana Lease is nominal. Amounts for
the three months and year ended December 31, 2020 exclude the
utilization of rent credits, which totaled $65.0 million and $337.5
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 212-231-2907. 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; the expected benefits of the
agreement with Choice Hotels, the ability of the Company to
implement cashless, cardless and contactless technology at the
Company’s casinos, the expected results of operations for the first
quarter of 2021, 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, Michigan, 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 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/20210204005375/en/
Justin Sebastiano Senior Vice President, Finance & Treasurer
610-373-2400
Joseph N. Jaffoni, Richard Land JCIR 212-835-8500 or
penn@jcir.com
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