Retail Operations Deliver Strong Results
Through Sustainable Margin Improvement, Technology Upgrades and
Growing Database
Interactive Segment Exceeded
Expectations
Board of Directors Authorizes $750 Million
Share Repurchase Program
Company Initiates 2022 Full Year
Guidance
Penn National Gaming, Inc. (NASDAQ: PENN) (“Penn National” or
the “Company”) today reported financial results for the three
months and year ended December 31, 2021.
2021 Fourth Quarter Financial Highlights:
- Revenues of $1.6 billion, an increase of $545.1 million
year-over-year and $231.3 million versus 2019;
- Net income of $44.8 million and net income margin of
2.8%, as compared to net income of $12.7 million and net income
margin of 1.2% in the prior year and net loss of $92.9 million and
net loss margin of 6.9% in 2019;
- Adjusted EBITDAR of $480.5 million, an increase of
$115.1 million year-over-year and $81.1 million versus 2019;
- Adjusted EBITDA of $369.0 million, an increase of $113.1
million year-over-year and $65.0 million versus 2019; and
- Adjusted EBITDAR margins of 30.6%, as compared to 35.6%
in the prior year and 29.8% in 2019.
For further information, the Company has posted a presentation
to its website regarding the fourth quarter highlights and
accomplishments, which can be found here.
Jay Snowden, President and Chief Executive Officer, commented:
“I am pleased to report a strong finish to another transformative
year for Penn National. Our fourth quarter revenues of $1.6 billion
and Adjusted EBITDAR of $480.5 million exceeded both 2020 and 2019
levels as our best-in-class operating teams continue to deliver
impressive results despite the ongoing pandemic. In addition, we
accomplished several strategic objectives this quarter that have
laid the foundation for future growth, including the completion of
our acquisition of Score Media and Gaming Inc. (“theScore”), the
continued expansion of Penn Interactive operations, the opening of
our fourth casino in Pennsylvania and the roll-out of new
technology at many of our casinos. Given our confidence and
improved visibility regarding both our retail and interactive
segments, as well as our strong financial position, we are pleased
to announce that our Board of Directors has authorized a $750
million, three-year share repurchase program, and we are
re-initiating guidance. For 2022, we are guiding to a net revenue
range of $6.07 billion to $6.39 billion and an Adjusted EBITDAR
range of $1.85 billion to $1.95 billion,” said Mr. Snowden.
“Our disciplined marketing approach and increased scale at Penn
Interactive set us apart from the competition as we generated a
lower-than-expected EBITDA loss in our Interactive segment in the
fourth quarter despite launching sports betting operations in two
new states (Iowa and West Virginia), iCasino in West Virginia and
integrating theScore,” continued Mr. Snowden. “These results were
also achieved despite a frenzied competitive environment. With the
launch of online sports betting in Louisiana on January 28, Penn
National now operates sports betting in 12 states and iCasino in
four and looks forward to gaining additional scale in 2022 with
anticipated launches in Ontario, Ohio and Maryland. As we expand,
we will continue to focus on sustainable growth, organic customer
acquisition and targeted marketing and promotional spend. For 2022,
we expect the segment to generate lower losses than our previous
outlook; we now anticipate an EBITDA loss of approximately $50
million within our Interactive segment this year as we continue to
scale our operations and infrastructure in anticipation of bringing
our technology in-house and launching in new jurisdictions. Looking
ahead, our differentiated sports betting strategy, along with the
integration of the Barstool Sportsbook into theScore media app in
the U.S. and continued improvements within our iCasino offerings
will enable us to generate meaningful EBITDA in 2023 within the
Interactive segment especially as we transition to our wholly owned
tech stack,” said Mr. Snowden.
“As I think about the future of Penn National, I am immensely
excited about our growth trajectory as we continue to execute on
our omni-channel and media strategy and realize the benefits of
several noteworthy accomplishments,” continued Mr. Snowden. “In the
near term, the acquisition of theScore fortifies our position as a
leading North American digital sports content, gaming and
technology company by widening our customer acquisition funnel and
providing a path to full control of our product and technology
roadmap. In early 2023, we look towards acquiring the remainder of
Barstool Sports, Inc., which will highly complement theScore’s
strong media presence, sports brand and loyal audience,
accelerating our transformation into a major media and
entertainment company. Longer term, our leadership position in
traditional gaming, digital and media will create material
synergies and cross promotion benefits, and more importantly,
provide us with numerous opportunities to be nimble in a rapidly
evolving marketplace.”
Retail Operations Benefiting from Expanded Reach and New
Demographics
The Company saw strong property level performance across all
segments for most of the quarter, with some softness in late
December due to Omicron, which abated in late January. Overall, the
Company continues to benefit from a rational and stable marketing
and promotional environment in the majority of its markets as its
company-wide reinvestment rates were lower both sequentially in Q4
2021 and year-over-year compared to 2020 and 2019. Given a variety
of structural cost improvements across its portfolio, combined with
revenue-enhancing investments in technology, the Company believes
the EBITDAR flow-through achieved in the second half of 2021 is
sustainable assuming stable revenue levels and a rational
competitive environment.
On December 22, Penn National celebrated the opening of
Hollywood Casino Morgantown, its fourth casino in the Commonwealth
of Pennsylvania and 44th property in North America. Like its sister
property in York, this $111 million state-of-the-art casino,
located less than an hour outside of Philadelphia, is built for the
future with a number of new technologies and customer conveniences,
including the “3Cs” cardless, cashless, contactless
‘mywallet’ experience. This new technology removes friction
from transactions, reduces wait times and lines, and relieves some
of the burden created by the challenging labor market. It also
positions Penn National’s properties for the future by aligning
with the expectations of younger consumers who are accustomed to
cashless options in all aspects of their day-to-day lives. The
property features the latest evolution of the Barstool Sportsbook,
Tony Luke’s famous cheesesteaks and additional F&B and
entertainment amenities. “We are encouraged with the early results
as we were able to reach into a new market with approximately 80%
of our rated business being driven by new members to our active
mychoice database,” said Mr. Snowden.
Penn National’s investment in technology is digitally
transforming its retail operations and enhancing the customer
experience. The Company is improving its marketing capabilities
through its mychoice app, which allows the Company to
communicate with its customers more efficiently, as downloads
increased 23% year-over-year in Q4 2021. In addition, the 3Cs are
now live at all eight of Penn National’s properties in Pennsylvania
and Ohio, and the Company will continue to introduce this
technology across all of its regions throughout 2022 pending
regulatory approval.
“We remain encouraged by the ongoing visitation from younger
demographics and are focused on reimagining our properties and
offerings to enhance the entertainment appeal to this steadily
growing segment of consumers,” said Mr. Snowden. In November, the
Company launched live sports betting at temporary locations in its
five Louisiana properties while it builds out its market leading
Barstool sportsbook concept at its signature properties in Lake
Charles, Baton Rouge and Bossier City. Additionally, Penn
National’s omni-channel approach drove overall database growth over
7% in 2021, with contributions from both its online and traditional
properties, leading to enhanced marketing opportunities and 23.5%
year-over-year growth in our VIP segment compared to Q4 2019.
Barstool Sportsbook and Casino Continued Momentum and Future
Growth
The Barstool Sportsbook mobile app experienced sizable growth in
the fourth quarter while maintaining a disciplined approach to
marketing spend. “We saw increased traction across the board during
football season and quickly became one of the leading operators in
the crowded New Jersey market despite launching years after most of
our peers. Our growth has been fueled by organic customer
acquisition from both the Barstool Sports audience and
mychoice database, leading to what we believe are the lowest
customer acquisition costs and best return on investment timelines
in the industry. In addition, our casino footprint has provided us
with direct market access in several key states as well as a source
of recurring and meaningful third-party skin revenue,” said Mr.
Snowden.
The Company continues to see sizable contributions from its
Barstool-branded retail sportsbooks as they are a powerful example
of its omni-channel strength. The recent launches of temporary
sportsbooks at Penn National’s Louisiana properties led to a
combined market share of 58% in handle and 53% in gross gaming
revenues in December 2021, and the Company estimates that its total
national share of the retail sports betting market outside of
Nevada is approximately 12%. “Penn Interactive is the leading
operator of retail sportsbooks in West Virginia, Indiana, Iowa,
Michigan, Colorado, and Louisiana, and we believe we are similarly
well positioned for success in Ohio, where we operate a portfolio
of market leading properties, providing a significant competitive
advantage for both our retail and interactive operations,” said Mr.
Snowden.
“Our iCasino product received a number of upgrades during the
fourth quarter, including the introduction of our first in-house
developed games,” continued Mr. Snowden. “These improvements drove
steady month-over-month growth this past fall in both handle and
gross gaming revenue for the Barstool Casino. We are particularly
pleased with the performance of our in-house games, which have
contributed over 20% of our handle in New Jersey since their
launch. Our ability to leverage Penn Game Studios in developing
titles such as Barstool Blackjack and Barstool Slots allows us to
introduce bespoke on-line casino entertainment to the loyal
Barstool audience who engages with us in our online sports betting
offerings, while also reducing third party content fees,” said Mr.
Snowden.
“Looking ahead, we anticipate achieving a number of milestones
in 2022, including mobile launches in several new jurisdictions:
Louisiana (which launched January 28th), Ontario, where theScore is
the number one app for sports content, Maryland and Ohio, where we
have a large database of mychoice customers. Further, the
integration of the Barstool Sportsbook into theScore media app,
which is anticipated to occur in the second half of 2022, will
provide us with another organic customer acquisition funnel in
addition to the tools to offer real time, highly customized bets to
our customers,” said Mr. Snowden.
On December 20, theScore became one of the first mobile gaming
operators to secure certification from Gaming Laboratories
International (“GLI”) for the launch of theScore Bet sports betting
and iGaming app in the Province of Ontario, an important
prerequisite for theScore Bet to begin operations in the province,
on April 4. “We expect this market will be a sizable opportunity
for us given the strong brand awareness and audience reach of
theScore and Barstool Sports. From a technology standpoint, we
anticipate theScore Bet will migrate to its own proprietary trading
platform in Ontario in Q3 2022, pending regulatory approvals, and
we expect the Barstool Sportsbook app to complete migration in Q3
2023. Following this migration, we will begin to realize the
immense benefits of a wholly owned and integrated technology stack
as we roll off our current third-party platforms, in addition to
capital expense reductions as our technology spending rationalizes
post-migration,” said Mr. Snowden.
theScore Media Growth
During the fourth quarter, theScore generated record revenue,
which increased 32% year-over-year as reported, reflecting the
tremendous value of its broad and active audience. Overall,
theScore grew media revenue 76% for the year compared to 2020 as
reported. In addition, theScore experienced continued user growth
and engagement, with the average monthly active users on the media
app growing 7% year-over-year. “We see opportunities to further
increase the value of our media business in 2022, including
cross-promotion and collaboration between theScore and Barstool
Sports as well as promoting theScore Bet app to our 25 million
mychoice members,” said Mr. Snowden.
Barstool Sports Continues to Grow its Audience
Barstool Sports, Inc. experienced another record year from both
an audience and financial standpoint as it continues to redefine
the digital media landscape. Barstool’s social media reach across
all accounts and platforms (including Twitter, Instagram, TikTok,
Facebook and YouTube) now exceeds 144 million, representing a
year-over-year increase of 25%. Meanwhile, Barstool Sports, Inc.
continues to drive strong revenue growth across all categories,
including new verticals such as the One Bite frozen pizza and
“Would” line of men’s grooming products. In addition, the first
Barstool-branded sports bar opened in the River North area of
Chicago this January to strong initial demand. “We look forward to
supplementing our omni-channel strategy with additional Barstool
Sports bars in the future, including the upcoming opening of a
second location in Philadelphia. Both locations will provide us
with an opportunity to grow our database outside of the traditional
channels,” said Mr. Snowden.
Continuing to Care for our People, our Communities and the
Planet
Mr. Snowden continued, “Regarding Penn National’s ongoing ESG
initiatives, during the fourth quarter, we proudly launched a new
Science, Technology, Engineering and Mathematics (“STEM”)
Scholarship Program in partnership with Historically Black Colleges
and Universities (“HBCUs”) in states in which we operate. Through
this initiative, Penn National is dedicating more than $4 million
over five years to fund STEM scholarships and internship
opportunities. The initial participating HBCUs include Norfolk
State University in Norfolk, Virginia, Bowie State University in
Bowie, Maryland, and Wilberforce University in Wilberforce,
Ohio.
“Penn National’s commitment to fund STEM scholarships is an
extension of our company’s established partnerships with 33 HBCUs
across the country,” continued Mr. Snowden. “The ongoing
collaboration with HBCUs facilitates career opportunities at Penn
National’s properties while increasing participation in our
Leadership Excellence at Penn National Gaming (“LEAP”) Program,
which provides hands-on training, mentoring, and real-world
experience to new or recent college graduates who are interested in
building a long-term career in the gaming and entertainment
industry.
“In December, our Diversity Committee launched an Emerging
Leaders Development Program which focuses on hourly and early
career team members who want to grow into leadership positions at
our company. The program will be rolled out companywide by the end
of the year. In addition, we kicked off our annual $1 Million
Diversity Scholarship Program for the children of team members and
are currently reviewing applications for the upcoming school year.
In our inaugural year, we awarded $1,050,000 in scholarships to 58
students.
“Meanwhile our support for our nation’s heroes continues. We are
approaching 100,000 customers enrolled in our myheroes
loyalty program, which provides special benefits for veterans,
active duty and first responders. In conjunction with this year’s
Army vs. Navy college football game, Barstool Sportsbook ran a
special 'Viva La Troops' promotion, matching certain first-time
deposits, raising $200,000 to support the Fisher House Foundation
and Semper Fi & America’s Fund veterans organizations.”
Mr. Snowden added, “Finally, we are continuing to expand upon
our ongoing sustainability efforts. Last year we reduced annual Kwh
consumption at our properties by 10%, equaling 42,000 tons of
greenhouse gas elimination. We have also been prioritizing
sustainable food production and supply chains through fair trade,
hormone-free and reduced-antibiotic F&B procurement, and we
have installed EV charging stations at a quarter of our properties,
with an additional one-third scheduled for roll-out later this
year.”
Share Repurchase Authorization
On February 1, 2022, the Company’s Board of Directors authorized
a new $750 million share repurchase program which matures on
January 31, 2025. The program reflects our confidence in our
long-term prospects and enables us to make both opportunistic share
repurchases and offset dilution from stock-based compensation and
other equity grants.
Strong Balance Sheet, Liquidity, and Record Low
Leverage
The Company ended 2021 with the strongest balance sheet in our
history. Total liquidity of $2.5 billion, inclusive of $1.9 billion
in cash, positions us well to be opportunistic in an extremely
dynamic marketplace. Traditional net debt as of year-end was $886.2
million, an increase of $841.0 million compared to $45.2 million as
of September 30, 2021, principally due to a cash payment of
approximately $922.8 million for the acquisition of theScore.
Traditional net debt as of December 31, 2020 was $577.8 million.
Our lease adjusted net leverage as of December 31, 2021 was at a
record low of 4.1x compared to 7.0x as of December 31, 2020 and
5.5x as of December 31, 2019.
Additional information on Penn National’s reported results,
including a reconciliation of the non-GAAP results to their most
comparable GAAP measures, is included in the financial tables
below. The Company does not provide a reconciliation of projected
Adjusted EBITDA and Adjusted EBITDAR because it is unable to
predict with reasonable accuracy the value of certain adjustments
that may significantly impact the Company’s results, including
adjustments that can be impacted by rent expense and interest
expense associated with our triple net leases, re-measurement of
cash-settled stock-based awards, and income tax benefit (expense),
which are dependent on future events that are out of the Company’s
control or that may not be reasonably predicted.
Summary of Fourth Quarter Results
For the three months ended
December 31,
(in millions,
except per share data, unaudited)
2021
2020
2019
Revenues
$
1,572.5
$
1,027.4
$
1,341.2
Net income (loss)
$
44.8
$
12.7
$
(92.9
)
Adjusted EBITDA (1)
$
369.0
$
255.9
$
304.0
Rent expense associated with triple net
operating leases (2)
111.5
109.5
95.4
Adjusted EBITDAR (1)
$
480.5
$
365.4
$
399.4
Payments to our REIT Landlords under
Triple Net Leases, inclusive of rent credits utilized (3)
$
228.8
$
222.6
$
224.4
Diluted earnings per common
share
$
0.26
$
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 our triple net master lease dated November 1, 2013
with Gaming and Leisure Properties, Inc. (NASDAQ: GLPI) ("GLPI")
and the triple net master lease assumed in connection with our
acquisition of Pinnacle Entertainment, Inc.(individually referred
to as the Penn Master Lease and Pinnacle Master Lease,
respectively, and are collectively referred to as our “Master
Leases”), which is primarily land, our individual triple net leases
with GLPI for the real estate assets used in the operation of
Tropicana Las Vegas Hotel and Casino, Inc. and Hollywood Casino at
Meadows Racetrack, and our individual triple net leases with VICI
Properties Inc. (NYSE: VICI) ("VICI") for the real estate assets
used in the operations of Margaritaville Casino Resort and
Greektown Casino-Hotel (referred to collectively as our “triple net
operating leases”). During the three months ended December 31, 2021
and 2020, we recorded noncash rent expense associated with the
Tropicana Lease of $6.4 million and $7.7 million, respectively. The
finance lease components contained within our Master Leases
(primarily buildings), the Perryville Lease determined to be a
finance lease, and the financing obligation associated with the
Morgantown Lease result in interest expense or interest expense and
depreciation expense (as opposed to rent expense) in accordance
with Accounting Standards Codification Topic 842, “Leases.”
(3)
Consists of payments made to GLPI and VICI
(referred to collectively as our “REIT Landlords”) under the Master
Leases, the Perryville Lease (effective July 1, 2021), the Meadows
Lease, the Margaritaville Lease, the Greektown Lease and the
Morgantown Lease. Although we collectively refer to the Master
Leases, the Perryville Lease, 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 rent credits totaling $65.0 million to pay rent under
the Penn Master Lease, Pinnacle Master Lease and Meadows Lease.
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
Segment Information
During the fourth quarter of 2021, the Company evaluated its
reportable segments and changed them to: Northeast, South, West,
Midwest, and Interactive. This change reflects management’s belief
that the operating results of our Interactive segment represent a
strategic and high growth component of our overall operations. The
Interactive segment, which was previously reported within Other,
includes the operating results of theScore, Penn Interactive, and
the Company’s proportionate share of earnings attributable to its
equity method investment in Barstool Sports, Inc. Corporate expense
will continue to be reported in Other in addition to stand-alone
racing operations, other joint ventures, management contracts, and
the Heartland Poker Tour.
As a result of the change in reportable segments described
above, the Company has recast previously reported segment
information to conform to the current management view for all prior
periods. The changes to the reportable segments had no impact to
the Company's consolidated financial statements.
For the three months ended
December 31,
For the year ended December
31,
(in millions, unaudited)
2021
2020
2019
2021
2020
2019
Revenues:
Northeast segment (1)
$
656.6
$
470.8
$
621.3
$
2,552.4
$
1,639.3
$
2,399.9
South segment (2)
339.9
249.2
268.2
1,322.2
849.6
1,118.9
West segment (3)
138.7
79.5
158.1
521.4
302.5
642.5
Midwest segment (4)
287.5
188.2
279.2
1,102.7
681.4
1,094.5
Interactive (5)
157.6
52.6
13.5
432.9
121.1
38.3
Other (6)
3.8
0.8
2.1
10.6
3.9
9.2
Intersegment eliminations (7)
(11.6
)
(13.7
)
(1.2
)
(37.2
)
(19.1
)
(1.9
)
Total revenues
$
1,572.5
$
1,027.4
$
1,341.2
$
5,905.0
$
3,578.7
$
5,301.4
Adjusted EBITDAR:
Northeast segment (1)
$
202.5
$
153.2
$
180.7
$
848.4
$
478.9
$
720.8
South segment (2)
139.0
101.6
90.2
587.0
318.9
369.8
West segment (3)
43.9
27.0
47.8
195.0
82.2
198.8
Midwest segment (4)
126.1
84.9
102.3
500.1
258.3
403.6
Interactive (5)
(5.9
)
16.2
4.0
(35.4
)
37.2
11.6
Other (6)
(25.1
)
(17.5
)
(25.7
)
(100.7
)
(80.7
)
(99.4
)
Intersegment eliminations (7)
—
—
0.1
—
—
—
Total Adjusted EBITDAR (8)
$
480.5
$
365.4
$
399.4
$
1,994.4
$
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 Morgantown (opened
December 22, 2021), Hollywood Casino at Penn National Race Course,
Hollywood Casino Perryville (acquired July 1, 2021), Hollywood
Casino Toledo, Hollywood Casino York (opened August 12, 2021),
Hollywood Gaming at Dayton Raceway, Hollywood Gaming at Mahoning
Valley Race Course, Marquee by Penn, Hollywood Casino at Meadows
Racetrack, 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 Hotel and Casino, 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 Interactive segment includes Penn
Interactive, which operates social gaming, our internally-branded
retail sportsbooks, iGaming and our Barstool Sportsbook mobile app,
as well as the operating results of theScore, which was acquired on
October 19, 2021. In addition, Adjusted EBITDAR of the Interactive
segment includes our proportionate share of the net income or loss
of Barstool Sports, Inc. 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)
The Other category consists of the
Company’s stand-alone racing operations, namely Sanford-Orlando
Kennel Club, Sam Houston and Valley Race Parks (the remaining 50%
was acquired by Penn National on August 1, 2021), the Company’s JV
interests in 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").
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.
(7)
Primarily represents the elimination of
intersegment revenues associated with our internally-branded retail
sportsbooks, which are operated by Penn Interactive.
(8)
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)
2021
2020
2019
2021
2020
2019
Net income (loss)
$
44.8
$
12.7
$
(92.9
)
$
420.5
$
(669.1
)
$
43.1
Income tax expense (benefit)
8.5
7.1
(10.0
)
118.6
(165.1
)
43.0
Loss on early extinguishment of debt
—
1.2
—
—
1.2
—
Income from unconsolidated affiliates
(10.9
)
(6.4
)
(6.7
)
(38.7
)
(13.8
)
(28.4
)
Interest expense, net
143.1
136.1
133.7
561.7
543.2
534.2
Other expenses (income)
40.6
(31.1
)
(12.8
)
(2.5
)
(106.6
)
(20.0
)
Operating income (loss)
226.1
119.6
11.3
1,059.6
(410.2
)
571.9
Stock-based compensation
13.2
2.8
4.5
35.1
14.5
14.9
Cash-settled stock-based awards
variance
(13.1
)
20.5
7.2
1.2
67.2
0.8
Loss (gain) on disposal of assets
1.0
4.7
(2.8
)
1.1
(29.2
)
5.5
Contingent purchase price
—
0.3
—
1.9
(1.1
)
7.0
Pre-opening expenses (1)
2.6
0.3
6.8
5.4
11.8
22.3
Depreciation and amortization
97.6
91.4
97.8
344.5
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
10.9
6.4
6.7
38.7
13.8
28.4
Non-operating items of equity method
investments (2)
1.7
1.5
0.9
7.7
4.7
3.7
Other expenses (1) (3)
29.0
1.1
—
44.8
13.5
—
Adjusted EBITDA
369.0
255.9
304.0
1,540.0
675.0
1,238.8
Rent expense associated with triple net
operating leases
111.5
109.5
95.4
454.4
419.8
366.4
Adjusted EBITDAR
$
480.5
$
365.4
$
399.4
$
1,994.4
$
1,094.8
$
1,605.2
Net income (loss) margin
2.8
%
1.2
%
(6.9
) %
7.1
%
(18.7
) %
0.8
%
Adjusted EBITDAR margin
30.6
%
35.6
%
29.8
%
33.8
%
30.6
%
30.3
(1)
During 2019, 2020 and during the first
quarter of 2021, acquisition costs were included within pre-opening
and acquisition costs. Beginning with the quarter ended June 30,
2021, acquisition costs are presented as part of other
expenses.
(2)
Consists principally of interest expense,
net; income taxes; depreciation and amortization; and stock-based
compensation expense associated with Barstool Sports, Inc. and our
Kansas Entertainment, LLC joint venture. We record our portion of
Barstool Sports, Inc.'s net income or loss, including adjustments
to arrive at Adjusted EBITDAR, one quarter in arrears.
(3)
Consists of non-recurring acquisition and
transaction costs, finance transformation costs associated with the
implementation of our new Enterprise Resource Management system and
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; (ii) improve the
effectiveness and efficiency of our Corporate functional support
area.
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the three months ended
December 31,
For the year ended December
31,
(in millions, except per share
data)
2021
2020
2019
2021
2020
2019
Revenues
Gaming
$
1,301.6
$
895.4
$
1,083.5
$
4,945.3
$
3,051.1
$
4,268.7
Food, beverage, hotel and other
270.9
132.0
257.7
959.7
527.6
1,032.7
Total revenues
1,572.5
1,027.4
1,341.2
5,905.0
3,578.7
5,301.4
Operating expenses
Gaming
739.6
429.3
582.7
2,540.7
1,530.3
2,281.8
Food, beverage, hotel and other
175.5
77.7
172.2
607.3
337.7
672.7
General and administrative
333.7
302.1
304.1
1,352.9
1,130.8
1,187.7
Depreciation and amortization
97.6
91.4
97.8
344.5
366.7
414.2
Impairment losses
—
7.3
173.1
—
623.4
173.1
Total operating expenses
1,346.4
907.8
1,329.9
4,845.4
3,988.9
4,729.5
Operating income (loss)
226.1
119.6
11.3
1,059.6
(410.2
)
571.9
Other income (expenses)
Interest expense, net
(143.1
)
(136.1
)
(133.7
)
(561.7
)
(543.2
)
(534.2
)
Income from unconsolidated affiliates
10.9
6.4
6.7
38.7
13.8
28.4
Loss on early extinguishment of debt
—
(1.2
)
—
—
(1.2
)
—
Other
(40.6
)
31.1
12.8
2.5
106.6
20.0
Total other expenses
(172.8
)
(99.8
)
(114.2
)
(520.5
)
(424.0
)
(485.8
)
Income (loss) before income
taxes
53.3
19.8
(102.9
)
539.1
(834.2
)
86.1
Income tax benefit (expense)
(8.5
)
(7.1
)
10.0
(118.6
)
165.1
(43.0
)
Net income (loss)
44.8
12.7
(92.9
)
420.5
(669.1
)
43.1
Less: Net (income) loss attributable to
non-controlling interest
0.2
(1.6
)
0.4
0.3
(0.4
)
0.8
Net income (loss) attributable to Penn
National
$
45.0
$
11.1
$
(92.5
)
$
420.8
$
(669.5
)
$
43.9
Earnings (loss) per share:
Basic earnings (loss) per share
$
0.27
$
0.07
$
(0.80
)
$
2.64
$
(5.00
)
$
0.38
Diluted earnings (loss) per share
$
0.26
$
0.07
$
(0.80
)
$
2.48
$
(5.00
)
$
0.37
Weighted-average common shares
outstanding—basic
166.9
155.0
115.2
158.7
134.0
115.7
Weighted-average common shares
outstanding—diluted
169.2
158.1
115.2
175.5
134.0
117.8
Selected Financial Information
Balance Sheet Data
(in millions,
unaudited)
December 31, 2021
December 31, 2020
Cash and cash equivalents
$
1,863.9
$
1,853.8
Bank debt
$
1,563.7
$
1,628.1
Notes (1)
$
1,130.5
$
730.5
Other long-term obligations (2)
55.9
73.0
Total traditional debt
2,750.1
2,431.6
Financing obligation (3)
$
90.4
$
—
Less: Debt discounts and debt issuance
costs
(103.7
)
(119.0
)
$
2,736.8
$
2,312.6
Traditional net debt (4)
$
886.2
$
577.8
(1)
Inclusive of our 5.625% Notes due 2027,
4.125% Notes due 2029 and our 2.75% Convertible Notes due 2026.
(2)
Other long-term obligations as of December
31, 2021 primarily includes $44.5 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.
(3)
Represents cash proceeds received and
non-cash interest on certain claims of which the principal
repayment is contingent and classified as a financing obligation
under Accounting Standards Codification Topic 470, “Debt.”
(4)
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 and non-cash interest on
certain claims of which the principal repayment is contingent) less
“Cash and cash equivalents.”
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)
2021
2020
2019
2021
2020
2019
Cash payments to our REIT Landlords under
Triple Net Leases (1)
$
228.8
$
157.6
$
224.4
$
912.4
$
553.6
$
869.8
Cash payments (refunds) related to income
taxes, net
$
32.7
$
(9.2
)
$
0.9
$
108.3
$
(15.2
)
$
21.8
Cash paid for interest on traditional
debt
$
14.8
$
20.9
$
20.2
$
79.8
$
108.2
$
120.7
Maintenance capital expenditures
$
55.3
$
44.5
$
47.0
$
146.6
$
110.2
$
165.5
(1)
Consists of payments made under the Master
Leases, the Perryville Lease (effective July 1, 2021), 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. 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, 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 expenses; and other. 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, Inc.
(“Barstool Sports”) and our Kansas Entertainment, LLC joint
venture. Adjusted EBITDA is inclusive of rent expense associated
with our triple net operating leases (the operating lease
components contained within our triple net master lease dated
November 1, 2013 with Gaming and Leisure Properties, Inc. (“GLPI”)
and the triple net master lease assumed in connection with our
acquisition of Pinnacle Entertainment, Inc. (primarily land), our
individual triple net leases with GLPI for the real estate assets
used in the Operation of Tropicana Las Vegas Hotel and Casino, Inc.
and Hollywood Casino at Meadows Racetrack, and our individual
triple net leases with VICI Properties Inc. (“VICI”) for the real
estate assets used in the operations of Margaritaville Casino
Resort and Greektown Casino-Hotel). 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 of 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 212-231-2938; please call five
minutes in advance to ensure that you are connected prior to the
presentation. Interested parties may also access the live call at
www.pngaming.com; allow 15 minutes to register and download and
install any necessary software. Questions and answers will be
reserved for call-in analysts and investors. A replay of the call
can be accessed for thirty days 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 44 properties across 20 states, Penn National
is a highly innovative omni-channel provider of retail and online
gaming, live racing and sports betting entertainment. 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 is exclusively promoting the
Company’s land-based and online casinos and sports betting
products, including the Barstool Sportsbook mobile app, to its
national audience. In addition, in October 2021, Penn National
acquired Score Media and Gaming, Inc. (“theScore”). Combined with
the power of Barstool Sports and theScore, Penn National has become
North America’s leading digital, entertainment, sports content,
gaming and technology company. The Company's omni-channel approach
is further bolstered by its mychoice loyalty program, which
rewards and recognizes its over 25 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: 2022 net revenues and Adjusted EBITDAR
guidance ranges and the assumptions provided regarding the
guidance, including the scale and timing of investments in
technology; the Company’s anticipated share repurchases; the
Company’s expectations of future results of operations and
financial condition, including the anticipated strategic plan,
growth and profitability of the Interactive segment and the
benefits gained by executing on the Company’s omni-channel and
media strategy; the Company’s expectations with regard to the
impact of competition in online sports betting, iGaming and
retail/mobile sportsbooks; the Company’s launch of its Interactive
segment’s products in new jurisdictions and enhancements to
existing Interactive segment products, including the transition to
the Score’s proprietary risk and trading platform in Ontario, the
integration of the Barstool Sportsbook into theScore mobile app in
the U.S. and the migration of the Barstool Sportsbook to theScore’s
player account management trading platforms; the Company’s
expectations with regard to its future investments in Barstool
Sports and the future success of its products; the Company’s
expectations with respect to the integration and synergies related
to the Company’s integration of theScore and Barstool Sports; the
Company’s expectations for its properties and the potential
benefits of the cashless, cardless and contactless (“3Cs”)
technology; the Company’s development projects; and the timing,
cost and expected impact of planned capital expenditures on the
Company’s results of operations; 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. 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 ongoing 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 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
availability of capital for the payment of debt service obligations
or the repurchase of shares; (f) the Company’s ability to remain in
compliance with the financial covenants of its debt obligations;
(g) the outcome of any legal proceedings that may be instituted
against the Company or its directors, officers or employees; (h)
the impact of new or changes in current laws, regulations, rules or
other industry standards; (i) the ability of the Company’s
operating teams to drive revenue and margins; (j) the impact of
significant competition from other gaming and entertainment
operations; (k) 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; (l) the passage of state, federal or local
legislation 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; (m) the effects of
local and national economic, credit, capital market, housing,
inflationary, and energy conditions on the economy in general and
on the gaming, entertainment and lodging industries in particular;
(n) 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; (o) 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; (p) the risk of failing
to maintain the integrity of our information technology
infrastructure and safeguard our business, employee and customer
data (particularly as our Interactive segment grows); (q) with
respect to new casinos, risks relating to its ability to achieve
its expected budgets, timelines and investment returns; (r) the
Company may not be able to achieve the anticipated financial
returns from the acquisition of “theScore”, including due to fees,
costs and taxes in connection with the integration of theScore and
expansion of its betting and content platform; (s) there is
significant competition in the interactive gaming market; (t)
potential adverse reactions or changes to business or regulatory
relationships resulting from the acquisition of theScore or the
investment in Barstool; (u) the ability of the Company to retain
and hire key personnel; and (v) other factors as discussed in the
Company’s Annual Report on Form10-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/20220203005354/en/
Felicia Hendrix Chief Financial Officer 610-373-2400 Joseph N.
Jaffoni, Richard Land JCIR 212-835-8500 or penn@jcir.com
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