PENN Entertainment, Inc. (“PENN” or the “Company”) (Nasdaq:
PENN) today reported financial results for the three and nine
months ended September 30, 2023.
Jay Snowden, Chief Executive Officer and President, said: “Our
property level performance was stable in the third quarter
reflecting solid results from our rated traditional core customer.
We continued to see relative strength in several locations,
including our casinos in Ohio, Kansas, Massachusetts, and Missouri,
which highlights the benefits of our geographically diversified
portfolio of premier regional gaming assets and the addition of
retail sports betting offerings at many of our properties. Third
quarter Interactive segment results reflect curtailed marketing in
the U.S. as we prepared to transition our online sportsbook to the
ESPN BET brand. Finally, we are excited to announce that we plan to
simultaneously launch ESPN BET on November 14 across the 17 states
in which we operate online sports betting, subject to final
approvals. This strategic alliance is expected to further expand
our digital ecosystem and drive re-engagement with the millions of
customers in our digital and retail databases, leading to
compelling cross-sell opportunities.
Stable Retail Performance
Property level highlights1:
- Revenues of $1.42 billion;
- Adjusted EBITDAR of $523.4 million; and
- Adjusted EBITDAR margins of 36.8%.
“Retail performance this quarter was supported by a slight
uptick in volumes from our rated customers, offsetting softness in
our unrated segment in the South region, the continued return of
our 65+ demographic, and moderate growth in our spend per visit
trends,” said Mr. Snowden. “Additionally, our portfolio benefited
from new and sustained engagement driven by our market leading
retail sportsbook concepts. With the recent launch of our enhanced
customer loyalty program, PENN Play™, we have continued to drive
database growth and customer engagement. Our database now has over
27 million members, with approximately 40% of our growth for the
quarter coming from our online offerings. Our continued investments
in technology to improve the customer journey has led to 2.2
million app downloads, and we are seeing a double-digit premium in
retail theoretical from guests that engage with us through the PENN
Play app versus non app users. Finally, the adoption of our
industry leading cashless, cardless and contactless technology
(“3C’s”), which is now deployed at twenty-one properties, with more
on the way, has resulted in approximately $225 million in deposits
into the PENN Wallet.
“We are also pleased to announce that we expect to break ground
on our four growth projects throughout November and December of
this year. These investments in the aggregate will create long-term
shareholder value driven by their attractive return profiles and
also contribute to our strong free cash flow generation upon
opening in late 2025 and early 2026.
ESPN BET Planned Launch on November 142
Interactive Segment highlights:
- Revenues of $196.3 million (including tax gross up of $102.6
million); and
- Adjusted EBITDA loss of $50.2 million.
“We are extremely excited to announce the planned launch of ESPN
BET prior to the active Thanksgiving week sports calendar that
includes the NCAA college football rivalry week and the Super Bowl
rematch of the Kansas City Chiefs and the Philadelphia Eagles
televised on ESPN’s Monday Night Football. ESPN BET will be powered
by our proprietary and proven technology platform, which continues
to drive impressive performance in Ontario under theScore Bet brand
for both online sports betting and iCasino. Our ESPN BET product
will include a wide array of popular betting options, including
featured bets, quick bets (micro-markets), player props, same game
parlays and more. In connection with the launch, ESPN will be
implementing an initial wave of exclusive integrations targeting
their 200 million loyal fans across their linear and digital
platforms, including an advertising campaign headlined by
SportsCenter anchors Scott Van Pelt and Elle Duncan. Looking ahead,
we will be introducing even deeper platform and media integrations
with ESPN over the upcoming months, providing an unmatched and
seamless media/betting experience that will appeal to sports fans
across the country.
ESG – Caring for our People, our Communities and our
Planet
“Reflective of the continued strides we have made to date on the
ESG front, Forbes Magazine once again named PENN as one of
‘America’s Best Employers for Diversity 2023’ and ‘America’s Best
Large Employers for 2023.’ In addition, Newsweek added PENN to
their list of ‘Greatest Workplaces for 2023’ and Time Magazine
named PENN one of the ‘World’s Best Companies.’ Finally, on October
4, our Company was once again honored by the Women’s Forum as a
2023 Champion of Board Diversity. During the quarter we updated our
Scope 1 and 2 greenhouse gas emissions inventory for 2022 and are
finalizing our 2022 Scope 3 inventory, the results of which will be
included in our Corporate Social Responsibility Report in April
2024. In addition to alignment with the Casino and Gaming industry
standard of the SASB reporting framework, we are working toward
alignment with the Task Force on Climate-Related Financial
Disclosures (“TCFD”). We also recently submitted our inaugural CDP
climate-change disclosure.”
Liquidity Remains Strong
Total liquidity as of September 30, 2023 was $2.3 billion
inclusive of $1.3 billion in cash and cash equivalents. Traditional
net debt as of the end of the quarter was $1.3 billion and the
lease-adjusted net leverage ratio was 4.7x.
Additional information on PENN’s reported results, including a
reconciliation of the non-GAAP results to their most comparable
GAAP measures, is included in the financial tables below. The
Company does not provide a reconciliation of projected Adjusted
EBITDA and Adjusted EBITDAR because it is unable to predict with
reasonable accuracy the value of certain adjustments that may
significantly impact the Company’s results, including realized and
unrealized gains and losses on equity securities, re-measurement of
cash-settled stock-based awards, contingent purchase payments
associated with prior acquisitions, and income tax (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 Third Quarter Results
For the three months ended
September 30,
(in millions,
except per share data, unaudited)
2023
2022
Revenues
$
1,619.4
$
1,625.0
Net income (loss)
$
(725.1
)
$
123.2
Adjusted EBITDA (1)
$
298.5
$
440.4
Rent expense associated with triple net
operating leases (2)
146.6
31.5
Adjusted EBITDAR (1)
$
445.1
$
471.9
Payments to our REIT Landlords under
Triple Net Leases (3)
$
235.0
$
232.0
Diluted earnings (loss) per common
share
$
(4.80
)
$
0.72
(1)
For more information, definitions, and
reconciliations see the “Non-GAAP Financial Measures” section
below.
(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”)
that was amended and restated effective January 1, 2023 (referred
to as the AR PENN Master Lease and prior to January 1, 2023
referred to as the PENN Master Lease); our triple net master lease
effective January 1, 2023 entered in conjunction with and
coterminous to the AR PENN Master Lease (referred to as the 2023
Master Lease); our individual triple net lease with GLPI for the
real estate assets used in the operations of Hollywood Casino at
The Meadows prior to the effective date of the 2023 Master Lease
(referred to as the Meadows Lease); our individual triple net lease
with GLPI for the real estate assets used in the operations of
Tropicana Las Vegas which terminated on September 26, 2022
(referred to as the Tropicana Lease); as well as our individual
triple net leases with VICI Properties Inc. (NYSE: VICI) (“VICI”)
for the real estate assets used in the operations of Margaritaville
Resort Casino (referred to as the Margaritaville Lease) and
Hollywood Casino at Greektown (referred to as the Greektown Lease)
and referred to collectively as our “triple net operating
leases.”
For the three months ended September 30,
2023, rent expense associated with triple net operating leases
pertains to (i) the AR PENN Master Lease; (ii) the 2023 Master
Lease; (iii) the Margaritaville Lease; and (iv) the Greektown
Lease.
For the three months ended September 30,
2022, rent expense associated with triple net operating leases
pertains to (i) the PENN Master Lease (specific to the land and
building components associated with the operations of Hollywood
Gaming at Dayton Raceway and Hollywood Gaming at Mahoning Valley
Race Course); (ii) the Meadows Lease; (iii) the Margaritaville
Lease; (iv) the Greektown Lease; and (v) the Tropicana Lease which
terminated on September 26, 2022.
(3)
Consists of payments made to GLPI and VICI
(referred to collectively as our “REIT Landlords”) under the AR
PENN Master Lease, the PENN Master Lease, the 2023 Master Lease,
the Pinnacle Master Lease, the Meadows Lease (prior to the
effective date of the 2023 Master Lease), the Perryville Lease
(prior to the effective date of the 2023 Master Lease), the
Margaritaville Lease, the Greektown Lease, the Morgantown Lease,
and the Tropicana Lease and collectively referred to as our “Triple
Net Leases.” The rent under the Tropicana Lease was nominal prior
to lease termination.
Adjusted EPS
The following table reconciles diluted earnings (loss) per share
(“EPS”) to Adjusted EPS (approximate EPS impact shown, per share;
positive adjustments represent charges to income):
For the three months ended
September 30,
2023
2022
Diluted earnings (loss) per share
$
(4.80
)
$
0.72
Impairment losses
—
0.60
Business interruption insurance
proceeds
(0.09
)
—
Transaction related expenses
0.10
0.26
Non-operating items:
Loss on disposal of Barstool
6.12
—
Loss related to debt and equity
investments
—
0.06
Foreign currency transaction gain
—
(0.01
)
Income tax impact on net income
adjustments (1)
(0.12
)
(0.23
)
Adjusted EPS
$
1.21
$
1.40
(1)
The income tax impact includes current and
deferred income tax expense based upon the classification of the
adjustment. The income tax impact related to the loss on disposal
of Barstool excludes the capital loss recognized, which can only be
offset against capital gains.
PENN ENTERTAINMENT, INC. AND
SUBSIDIARIES Segment Information
The Company aggregates its operations into five reportable
segments: Northeast, South, West, Midwest, and Interactive.
For the three months ended
September 30,
For the nine months ended
September 30,
(in millions, unaudited)
2023
2022
2023
2022
Revenues:
Northeast segment (1)
$
687.0
$
685.4
$
2,075.5
$
2,028.8
South segment (2)
308.2
329.8
931.3
1,009.8
West segment (3)
135.1
156.5
394.8
451.2
Midwest segment (4)
293.4
298.4
882.0
877.6
Interactive (5)
196.3
158.7
687.3
455.1
Other (6)
4.5
4.2
16.5
17.4
Intersegment eliminations (7)
(5.1
)
(8.0
)
(19.9
)
(23.8
)
Total revenues
$
1,619.4
$
1,625.0
$
4,967.5
$
4,816.1
Adjusted EBITDAR:
Northeast segment (1)
$
208.3
$
217.9
$
638.5
$
637.5
South segment (2)
136.6
139.9
381.1
429.7
West segment (3)
54.7
60.5
153.4
171.4
Midwest segment (4)
123.8
129.4
376.5
386.2
Interactive (5)
(50.2
)
(49.3
)
(68.7
)
(80.1
)
Other (6)
(28.1
)
(26.5
)
(80.7
)
(73.6
)
Total Adjusted EBITDAR (8)
$
445.1
$
471.9
$
1,400.1
$
1,471.1
(1)
The Northeast segment consists of the
following properties: Ameristar East Chicago, Hollywood Casino at
Greektown, Hollywood Casino Bangor, Hollywood Casino at Charles
Town Races, Hollywood Casino Columbus, Hollywood Casino
Lawrenceburg, Hollywood Casino Morgantown, Hollywood Casino at PENN
National Race Course, Hollywood Casino Perryville, Hollywood Casino
Toledo, Hollywood Casino York, Hollywood Gaming at Dayton Raceway,
Hollywood Gaming at Mahoning Valley Race Course, Marquee by PENN,
Hollywood Casino at The Meadows, 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.
(3)
The West segment consists of the following
properties: Ameristar Black Hawk, Cactus Petes and Horseshu, M
Resort, Tropicana Las Vegas Hotel and Casino (sold on September 26,
2022), 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, LLC,
which owns Hollywood Casino at Kansas Speedway, Hollywood Casino
St. Louis, Prairie State Gaming, and River City Casino.
(5)
The Interactive segment includes all of
our online sports betting, iCasino and social gaming operations,
management of retail sports betting, media, and the operating
results of Barstool Sports, Inc. (“Barstool” or “Barstool Sports”).
We owned 36% of Barstool common stock prior to the acquiring the
remaining 64% of Barstool common stock on February 17, 2023. In
connection with PENN’s decision to rebrand our online sports
betting business from Barstool Sportsbook to ESPN BET, PENN entered
into a stock purchase agreement with David Portnoy, and on August
8, 2023 we sold 100% of the outstanding shares of Barstool.
Interactive revenues are inclusive of a tax gross-up of $102.6
million and $63.0 million for the three months ended September 30,
2023, and 2022, respectively, and $283.4 million and $168.7 million
for the nine months ended September 30, 2023, and 2022,
respectively.
(6)
The Other category, included in the tables
to reconcile the segment information to the consolidated
information, consists of the Company’s stand-alone racing
operations, namely Sanford-Orlando Kennel Club, Sam Houston and
Valley Race Park, the Company’s JV interests in Freehold Raceway
and our management contract for Retama Park Racetrack. 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. Corporate
overhead costs were $27.0 million and $26.5 million for the three
months ended September 30, 2023, and 2022, respectively, and $78.1
million and $74.9 million for the nine months ended September 30,
2023, and 2022, respectively.
(7)
Primarily represents the elimination of
intersegment revenues associated with our 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 ENTERTAINMENT, INC. AND
SUBSIDIARIES
Reconciliation of Comparable
GAAP Financial Measure to Adjusted EBITDA,
Adjusted EBITDAR, and Adjusted
EBITDAR Margin
For the three months ended
September 30,
For the nine months ended
September 30,
(in millions,
unaudited)
2023
2022
2023
2022
Net income (loss)
$
(725.1
)
$
123.2
$
(132.6
)
$
200.9
Income tax (benefit) expense
(161.7
)
(182.0
)
40.9
(78.1
)
Interest expense, net
117.5
198.5
346.1
554.7
Interest income
(10.2
)
(5.2
)
(30.5
)
(7.0
)
Income from unconsolidated affiliates
(7.2
)
(6.6
)
(17.0
)
(17.1
)
Gain on Barstool Acquisition, net (1)
—
—
(83.4
)
—
Gain on REIT transactions, net (2)
—
—
(500.8
)
—
Loss on early extinguishment of debt
—
—
—
10.4
Other (income) expenses
0.3
8.8
(4.5
)
67.3
Operating income (loss)
(786.4
)
136.7
(381.8
)
731.1
Loss on disposal of Barstool (3)
923.2
—
923.2
—
Stock-based compensation
35.2
13.6
71.4
45.1
Cash-settled stock-based awards variance
(4)
(2.9
)
(3.8
)
(12.0
)
(16.2
)
Loss (gain) on disposal of assets
—
(0.2
)
—
7.0
Contingent purchase price
1.3
0.1
1.8
(0.9
)
Pre-opening expenses
—
0.5
—
4.1
Depreciation and amortization
105.8
148.7
323.9
417.2
Impairment losses
—
104.6
—
104.6
Insurance recoveries, net of deductible
charges
(0.3
)
(1.9
)
(13.9
)
(10.7
)
Income from unconsolidated affiliates
7.2
6.6
17.0
17.1
Non-operating items of equity method
investments (5)
1.0
2.6
6.4
4.7
Other expenses
14.4
32.9
25.1
48.4
Adjusted EBITDA
298.5
440.4
961.1
1,351.5
Rent expense associated with triple net
operating leases
146.6
31.5
439.0
119.6
Adjusted EBITDAR
$
445.1
$
471.9
$
1,400.1
$
1,471.1
Net income (loss) margin
(44.8
)%
7.6
%
(2.7
)%
4.2
%
Adjusted EBITDAR margin
27.5
%
29.0
%
28.2
%
30.5
%
(1)
Includes a gain of $66.5 million
associated with Barstool related to remeasurement of the equity
investment immediately prior to the acquisition date of February
17, 2023 and a gain of $16.9 million related to the acquisition of
the remaining 64% of Barstool common stock.
(2)
Upon the execution of the February 21,
2023 AR PENN Master Lease and the 2023 Master Lease, both effective
January 1, 2023, we recognized a gain of $500.8 million as a result
of the reclassification and remeasurement of lease components.
(3)
Relates to the loss incurred on the sale
of 100% of the outstanding shares of Barstool which was completed
on August 8, 2023.
(4)
Our cash-settled stock-based awards are
adjusted to fair value each reporting period based primarily on the
price of the Company’s common stock. As such, significant
fluctuations in the price of the Company’s common stock during any
reporting period could cause significant variances to budget on
cash-settled stock-based awards.
(5)
Consists principally of interest expense,
net, income taxes, depreciation and amortization, and stock-based
compensation expense associated with Barstool prior to us acquiring
the remaining 64% of Barstool common stock and our Kansas
Entertainment, LLC joint venture.
PENN ENTERTAINMENT, INC. AND
SUBSIDIARIES
Consolidated Statements of
Operations
(Unaudited)
For the three months ended
September 30,
For the nine months ended
September 30,
(in millions, except per share data,
unaudited)
2023
2022
2023
2022
Revenues
Gaming
$
1,252.1
$
1,317.5
$
3,869.5
$
3,934.3
Food, beverage, hotel, and other
367.3
307.5
1,098.0
881.8
Total revenues
1,619.4
1,625.0
4,967.5
4,816.1
Operating expenses
Gaming
709.0
757.9
2,149.1
2,158.1
Food, beverage, hotel, and other
261.4
199.2
773.5
557.9
General and administrative
406.4
277.9
1,179.6
847.2
Depreciation and amortization
105.8
148.7
323.9
417.2
Impairment losses
—
104.6
—
104.6
Loss on disposal of Barstool
923.2
—
923.2
—
Total operating expenses
2,405.8
1,488.3
5,349.3
4,085.0
Operating income (loss)
(786.4
)
136.7
(381.8
)
731.1
Other income (expenses)
Interest expense, net
(117.5
)
(198.5
)
(346.1
)
(554.7
)
Interest income
10.2
5.2
30.5
7.0
Income from unconsolidated affiliates
7.2
6.6
17.0
17.1
Gain on Barstool Acquisition, net
—
—
83.4
—
Gain on REIT transactions, net
—
—
500.8
—
Loss on early extinguishment of debt
—
—
—
(10.4
)
Other
(0.3
)
(8.8
)
4.5
(67.3
)
Total other expenses
(100.4
)
(195.5
)
290.1
(608.3
)
Income (loss) before income
taxes
(886.8
)
(58.8
)
(91.7
)
122.8
Income tax benefit (expense)
161.7
182.0
(40.9
)
78.1
Net income (loss)
(725.1
)
123.2
(132.6
)
200.9
Less: Net loss attributable to
non-controlling interest
0.3
0.3
0.7
0.4
Net income (loss) attributable to PENN
Entertainment
$
(724.8
)
$
123.5
$
(131.9
)
$
201.3
Earnings per share:
Basic earnings (loss) per share
$
(4.80
)
$
0.78
$
(0.87
)
$
1.23
Diluted earnings (loss) per share
$
(4.80
)
$
0.72
$
(0.87
)
$
1.15
Weighted-average common shares
outstanding—basic
150.9
157.6
152.3
163.5
Weighted-average common shares
outstanding—diluted
150.9
173.0
152.3
179.0
Selected Financial Information and GAAP to NON-GAAP
Reconciliations
(in millions,
unaudited)
September 30, 2023
December 31, 2022
Cash and cash equivalents
$
1,317.9
$
1,624.0
Total traditional debt
$
2,662.0
$
2,699.8
Less: Cash and cash equivalents
(1,317.9
)
(1,624.0
)
Traditional net debt (1)
$
1,344.1
$
1,075.8
Amended Revolving Credit Facility due
2027
$
—
$
—
Amended Term Loan A Facility due 2027
515.6
536.2
Amended Term Loan B Facility due 2029
987.5
995.0
5.625% Notes due 2027
400.0
400.0
4.125% Notes due 2029
400.0
400.0
2.75% Convertible Notes due 2026
330.5
330.5
Other long-term obligations (2)
28.4
38.1
Total traditional debt
2,662.0
2,699.8
Financing obligation (3)
144.2
118.0
Less: Debt discounts and debt issuance
costs
(34.1
)
(40.3
)
$
2,772.1
$
2,777.5
Total traditional debt
$
2,662.0
$
2,699.8
Less: Cash and cash equivalents
(1,317.9
)
(1,624.0
)
Plus: Cash rent payments to REIT landlords
for the trailing twelve months (4)
7,474.4
7,400.0
$
8,818.5
$
8,475.8
Adjusted EBITDAR for the trailing twelve
months
$
1,868.4
$
1,939.4
Lease-adjusted net leverage ratio (1)
4.7x
4.4x
(1)
See “Non-GAAP Financial Measures” section
below for more information as well as the definitions of
Traditional net debt and Lease-adjusted net leverage ratio.
(2)
Other long-term obligations as of
September 30, 2023 primarily includes $18.5 million related to
relocation fees due for both Hollywood Gaming at Dayton Raceway and
Hollywood Gaming at Mahoning Valley Race Course, and $9.9 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)
Amount equals 8 times the total cash rent
payments to REIT landlords for the trailing twelve months ended
September 30, 2023.
Cash Flow Data
The table below summarizes certain cash expenditures incurred by
the Company.
For the three months ended
September 30,
For the nine months ended
September 30,
(in millions,
unaudited)
2023
2022
2023
2022
Cash payments to our REIT Landlords under
Triple Net Leases
$
235.0
$
232.0
$
702.4
$
693.1
Cash payments related to income taxes,
net
$
7.9
$
0.8
$
73.9
$
46.3
Cash paid for interest on traditional
debt
$
49.1
$
38.5
$
127.9
$
86.8
Capital expenditures
$
75.0
$
64.0
$
207.8
$
189.6
Non-GAAP Financial Measures
The Non-GAAP Financial Measures used in this press release
include Adjusted EBITDA, Adjusted EBITDAR, Adjusted EBITDAR margin,
Adjusted EPS, traditional net debt, and lease-adjusted net leverage
ratio. 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; interest income; income taxes; depreciation and amortization;
stock-based compensation; debt extinguishment 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; loss on disposal of a business;
non-cash gains/losses associated with REIT transactions; non-cash
gains/losses associated with partial and step acquisitions as
measured in accordance with ASC 805 “Business Combinations”; 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 (prior to our acquisition of Barstool on February 17,
2023) and our Kansas Entertainment, LLC joint venture. Adjusted
EBITDA is inclusive of rent expense associated with our triple net
operating leases with our REIT landlords. 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 a 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.
Adjusted EPS is diluted earnings or loss per share adjusted to
exclude loss on disposal of a business; non-cash gains/losses
associated with REIT transactions; non-cash gains/losses associated
with partial and step acquisitions as measured in accordance with
ASC 805 “Business Combinations,” impairment losses, pre-opening
expenses, debt extinguishment charges, gains or losses on disposal
of assets, foreign currency gains/losses, transaction related
expenses, business interruption insurance proceeds, and net
gains/losses related to equity investments.
Adjusted EPS is a non-GAAP measure and is presented solely as a
supplemental disclosure to reported GAAP measures because
management believes this measure is useful in providing
period-to-period comparisons of the results of the Company's
operations to assist investors in reviewing the Company's operating
performance over time. Management believes it is useful to exclude
certain items when comparing current performance to prior periods
because these items can vary significantly depending on specific
underlying transactions or events. Also, management believes
certain excluded items may not relate specifically to current
operating trends or be indicative of future results. Adjusted EPS
should not be construed as an alternative to GAAP earnings per
share as an indicator of the Company's performance.
We calculate Traditional net debt 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.”
Management believes that Traditional net debt is an important
measure to monitor leverage and evaluate the balance sheet. With
respect to Traditional net debt, Cash and cash equivalents are
subtracted from the GAAP measure because they could be used to
reduce the Company’s debt obligations. A limitation associated with
using traditional net debt is that it subtracts Cash and cash
equivalents and therefore may imply that there is less Company debt
than the most comparable GAAP measure indicates. Management
believes that investors may find it useful to monitor leverage and
evaluate the balance sheet.
The Company’s Lease-adjusted net leverage ratio’s numerator is
calculated as cash rent payments to REIT landlords for the trailing
twelve months capitalized at 8 times plus Total traditional debt
(as defined above), less Cash and cash equivalents. The Company’s
Lease-adjusted net leverage ratio’s denominator is Adjusted EBITDAR
(as defined above) for the trailing twelve months. Management
believes this measure is useful as a supplemental measure and
provides an indication of the results generated by the Company in
relation to its level of indebtedness (including leases) with the
cash generated from Company operations.
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 tables above, which present reconciliations of
these measures to the GAAP equivalent financial measures.
Management Presentation, Conference Call, Webcast and Replay
Details
PENN is hosting a conference call and simultaneous webcast at
9:00 am ET today, both of which are open to the general public.
The conference call number is 212-231-2912; 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.pennentertainment.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.pennentertainment.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.pennentertainment.com, in the
“Investors” section (select link for “Press Releases”).
About PENN Entertainment
PENN Entertainment, Inc., together with its subsidiaries
(“PENN,” the “Company,” “we,” “our,” or “us”), is North America’s
leading provider of integrated entertainment, sports content, and
casino gaming experiences. PENN operates 43 properties in 20
states, online sports betting in 18 jurisdictions and iCasino in
five jurisdictions, under a portfolio of well-recognized brands
including Hollywood Casino®, L’Auberge®, Barstool Sportsbook® and
theScore Bet Sportsbook and Casino®. In August 2023, PENN entered
into a transformative, exclusive long-term strategic alliance with
ESPN, Inc. and ESPN Enterprises, Inc. (together, “ESPN”) relating
to online sports betting within the United States. In November
2023, the existing Barstool Sportsbook will be rebranded across all
online platforms in the United States as ESPN BET, and our online
product will include a Hollywood-branded integrated iCasino where
permitted. PENN’s ability to leverage the leading sports media
brands in the United States (ESPN) and Canada (theScore) will
position us to significantly expand our digital footprint and
efficiently grow our customer ecosystem. This highly differentiated
strategy, which is focused on organic cross-sell opportunities, is
reinforced by our investment in market-leading retail casinos,
sports media assets and technology, including a proprietary
state-of-the-art, fully integrated digital sports and iCasino
betting platform and an in-house iCasino content studio. PENN’s
portfolio is further bolstered by our industry-leading PENN Play™
customer loyalty program, which offers our over 27 million members
a unique set of rewards and experiences across business
channels.
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: future revenue and Adjusted EBITDAR; the
Company’s expectations of future results of operations and
financial condition, the assumptions provided regarding the
guidance, including the scale and timing of the Company’s product
and technology investments; the Company’s expectations regarding
results, and the impact of competition, in retail/mobile/online
sportsbooks, iCasino, social gaming, and retail operations; the
Company’s development and launch of its Interactive segment’s
products in new jurisdictions and enhancements to existing
Interactive segment products, including the content for the ESPN
BET and theScore Bet Sportsbook and Casino apps and the expected
timing of the rebrand of the Barstool Sportsbook as ESPN BET on our
proprietary player account management system and risk and trading
platforms; the Company’s expectations regarding its Sportsbook
Agreement with ESPN 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 the
continued growth and monetization of the Company’s media business;
the Company’s expectations with respect to the ongoing introduction
and the potential benefits of the cashless, cardless and
contactless (3C’s) technology; the Company’s development projects,
including the prospective development projects at Hollywood Casinos
Aurora, Joliet, Columbus, and the M Resort Spa Casino; our ability
to obtain financing for our development projects on attractive
terms; 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, provincial 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: the effects of economic and
market conditions in the markets in which the Company operates;
competition with other entertainment, sports content, and casino
gaming experiences; the timing, cost and expected impact of product
and technology investments; risks relating to international
operations, permits, licenses, financings, approvals and other
contingencies in connection with growth in new or existing
jurisdictions; collective bargaining activity and strikes; and
additional risks and uncertainties described in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2022,
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. Considering
these risks, uncertainties and assumptions, the forward-looking
events discussed in this press release may not occur.
_______________________ 1 Property level consists of retail
operating segments which are composed of our Northeast, South,
West, and Midwest reportable segments. 2 Pending final
approvals
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231102680746/en/
Mike Nieves SVP, Finance & Treasurer PENN Entertainment
610-373-2400
Joseph N. Jaffoni, Richard Land JCIR 212-835-8500 or
penn@jcir.com
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