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PENN Entertainment Reports Third Quarter Results
PENN Entertainment, Inc. 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 |
|
||||||
Circa Sports has expanded its operations into Kentucky with the launch of its popular mobile betting app. Debuting via a licensing agreement with ECL Corbin LLC at its Cumberland Run harness track, the brand will take the highest betting limits in the industry along with offering tight money line splits, transparent odds, exceptional customer service, and more.
Marking the fifth state for Circa Sports, the app is now available for download through partnership with the Cumberland Run property in Corbin, Kentucky. The Circa Sports Kentucky app can be downloaded and funded remotely from anywhere. Bettors will have access to transparent and fair limits, made possible with a business model of providing betting lines and odds that are more favorable for the customer.
“We are thrilled to launch Circa Sports in the great state of Kentucky. We’ve always had our sights set here as we know it is a major hub for college sports, horse racing and more. We are looking forward to providing Kentucky bettors with some of the best odds and expertise out there,” Derek Stevens, CEO of Circa Sports, said.
The Circa Sports Kentucky app was designed by players, for players. Available to patrons ages 18 and over, highlights include high betting limits, tight money line splits, transparent odds, exceptional customer service, option to browse the complete menu and live odds from anywhere at any time, and aggressive, higher-than-most betting limits for everyone – even winners.
The Circa app also includes future bets in parlays, two-sided Yes/No future betting, remote registration that can be done from anywhere on a mobile device and deposits and withdrawals that can be done through the app from anywhere.
Marc Falcone, co-owner of the ECL Corbin LLC properties, said: “We’re delighted to welcome Circa Sports to the Commonwealth as a sports-betting partner. They allow us to offer another amenity to complement our existing gaming.”
Industry News
The Mirage Hotel & Casino to Begin Transformation into Hard Rock Las Vegas on July 17, 2024
Hard Rock International (HRI) announced its plans to cease operations of The Mirage Hotel & Casino as of July 17, 2024, to begin the transformation of the property into the highly anticipated Hard Rock Hotel & Casino and Guitar Hotel Las Vegas (HRHCLV).
Hard Rock will develop a new integrated resort featuring a nearly 700 ft. guitar-shaped hotel towering prominently in the center of the famous Las Vegas Strip.
“We’d like to thank the Las Vegas community and team members for warmly welcoming Hard Rock after enjoying 34 years at The Mirage. We’d also like to thank the Unions, community leaders, local and state government organizations and the Gaming Commission for their support and fair negotiations over the past year. Also, we are grateful to MGM for assisting with our transition,” Jim Allen, Chairman of Hard Rock International, said.
“While we pause for the incredible transformation of this iconic property, I’d like to thank all team members at The Mirage for their incredible commitment and helping us provide memorable experiences for our guests. We are planning to host collaborative hiring events with other employers in the Las Vegas community over the coming months. Connecting the thousands of talented Mirage team members who provide outstanding service with new employment opportunities is a top priority,” Joe Lupo, President of The Mirage, said.
HRHCLV is expected to double the current number of jobs at The Mirage for the Las Vegas community, while the renovation of the property will generate over 2500 construction jobs. Hard Rock will pay approximately $80 million in severance packages for eligible union and non-union employees remaining with the property through cessation of operations.
Gambling.com Group Limited (Nasdaq: GAMB) (“Gambling.com Group” or the “Company”), a fast-growing provider of digital marketing services for the global online gambling industry, today reported financial results for the first quarter ended March 31, 2024. The Company also updated its 2024 revenue and Adjusted EBITDA guidance as detailed below.
“We are off to a great start to the year furthering our confidence in our ability to generate strong Adjusted EBITDA and Free Cash Flow growth this year and for years to come,” commented Charles Gillespie, Chief Executive Officer and Co-Founder of Gambling.com Group. “The investments we have made for years in our proprietary technology, website portfolio, and accretive acquisitions are driving consistent growth. As we continue to expand our industry leadership and influence across global online gambling markets and leverage the many growth drivers we have, we see a clear road ahead to generate substantially higher Adjusted EBITDA and Free Cash Flow.”
Elias Mark, Chief Financial Officer of Gambling.com Group added, “By growing year on year in every one of our geographic reporting markets, we delivered record Q1 revenue with top line growth of 9% despite the comparable period benefiting from significantly more new state launch activity.”
First Quarter 2024 and Recent Business Highlights
Delivered more than 107,000 new depositing customers (“NDCs”)
Strong initial contribution from North Carolina following launch on March 11th
Secured new $50 million credit facility with Wells Fargo Bank, National Association
Repurchased 329,490 shares for an average price of $9.10
Completed highly accretive acquisition of Freebets.com and related assets on April 1st
Board of Directors approved an additional $10 million for the Company’s ordinary shares repurchase program in May
First Quarter 2024 Results Compared to First Quarter 2023
Revenues rose 9% year-over-year to a first quarter record $29.2 million, reflecting growth across all geographic reporting markets. The Company delivered more than 107,000 NDCs to customers, an increase of 22%.
Gross profit increased 5% to $27.0 million, including a $1.2 million increase in cost of sales related to the Gannett and Independent partnerships.
Total operating expenses increased 9% to $19.1 million, reflecting increases in sales and marketing, technology and general and administrative expenses.
Net income attributable to shareholders and net income per share rose 11% to $7.3 million and $0.19, respectively. Adjusted net income of $7.6 million and adjusted net income per share of $0.20 were flat, reflecting fair value movement related to acquisitions in the comparative period.
Adjusted EBITDA for the first quarter of 2024 was $10.2 million, reflecting an Adjusted EBITDA margin of 35% as compared to Adjusted EBITDA of $10.7 million and Adjusted EBITDA margin of 40%, in the year-ago period. The Q1 2024 Adjusted EBITDA margin reflects higher costs of sales related to media partnerships.
Operating cash flow increased 24% to $8.8 million. Free Cash Flow increased 32% to $8.2 million reflecting positive working capital movements within operating cash flow and lower capital expenditures. The Company converted 28% of revenues and 81% of Adjusted EBITDA to Free Cash Flow in the first quarter of 2024.
2024 Outlook
Reflecting changes made in early May to how Google treats commercial content on high authority websites that, at present, diminishes the effectiveness of the Company’s media partnerships, Gambling.com Group today updated its 2024 full-year revenue and Adjusted EBITDA guidance. The Company now expects full year revenue of $118 to $122 million and Adjusted EBITDA of $40 million to $44 million. This compares to the initial guidance provided on March 21, 2024, for revenue of $129 million to $133 million and Adjusted EBITDA of $44 million to $48 million. The midpoint of the updated Adjusted EBITDA outlook of $42 million reflects expected year-over-year growth of 14%.
Charles Gillespie commented, “Even with these shifts in the digital landscape, the strength and resilience of our business will enable us to deliver strong year over year Adjusted EBITDA and Free Cash Flow growth. With less competition in the search engine results pages, our owned and operated assets are better positioned for the long term than ever before.”
The Company’s guidance assumes:
Following the launch of sports betting in North Carolina on March 11th, no additional North American markets come online over the balance of 2024
Apart from the acquisition of Freebets.com and related assets, no impact from any additional acquisitions in 2024
Full year cost of sales of approximately $4.8 million, of which $2.2 million was incurred in Q1
An average EUR/USD exchange rate of 1.09 throughout 2024
To access, please dial in approximately 10 minutes before the start of the call. An archived webcast of the conference call will also be available in the News & Events section of the Company’s website at gambling.com/corporate/investors/news-events. Information contained on the Company’s website is not incorporated into this press release.
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