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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 |
|
||||||
Wow, time flies! Can’t believe it’s been ten years since stepping into the exhilarating world of online gambling – a field that initially seemed like a short-term stint quickly turned into a new-found passion.
Moving to Malta, and eventually finding a home in Tallinn, I’ve had the privilege to watch the highs and lows as well as the many progressions and transformations. Today, I am proud to form part of the Mr. Gamble team that is ambitiously expanding into new markets, and pushing the boundaries.
From Customer Support to CMO
My journey in iGaming kicked off in Customer Support at Betsson – a leap from my telecom sales management role back in Finland. While this move puzzled my family and friends alike, it was a necessary step. Over the months and years, I worked my way up through various roles including Affiliate Coordinator, Affiliate Manager and Head of Affiliates, learning the various intricate parts of the industry, while at the same time adapting to new technological changes.
One thing is for sure, the iGaming industry is a fast-paced one, and each role has helped me to thrive and adapt to the various changes. Flexibility is key when working in this industry.
Venturing into Entrepreneurship: My Own Affiliate Business
Following many years of corporate experience, I took the leap to start up my own affiliate business with the aim of creating my own business from scratch. Handling everything from SEO and content strategy to fostering brand partnerships and growth strategies gave me an overall view of the affiliate industry’s many complexities. This entrepreneurial journey instilled insight and resilience, especially in terms of the value of the diverse skill sets found within a team.
By 2023, I joined Mr. Gamble as CMO, bringing my own entrepreneurial experience into this company’s growth strategy. Drawing on my background in SEO, content management and brand development and alongside a knowledgeable team, we have successfully strengthened Mr. Gamble’s presence in established markets, while also setting our sites on new markets.
New Markets and New Possibilities
Since the online gambling industry is continually evolving and expanding, it also brings with it a surge in growth when it comes to new and emerging markets. While we have made huge strides in launching Mr. Gambe USA, we are also eyeing promising regions in Asia, Latin America and Africa, where digital adoption and regulations are evolving creating new opportunities.
As we continue to solidify our presence in the US, these emerging markets represent the next frontier.
An Ever-Changing and Evolving Gambling Industry
Over the past decade, the online gambling industry has quickly evolved from a somewhat fragmented field to a high-powered professional space. Conferences and expos, once informal gatherings have become hubs for talent.
Events such as SiGMA, SBC, iGB, NEXT.io and Hiphter Events today celebrate the progression of iGaming, while highlighting the various advances in technology and market inclusivity.
The shift toward hybrid work in recent years has also paved the way for industry shakeups. While digital operations are convenient, the importance of face-to-face meetings and connections remains. In an industry highly reliant and built on personal relationships, meeting in person strengthens partnerships and opens doors to new opportunities.
A Bright Future for Mr. Gamble
As CMO of Mr. Gamble, I along with the team are committed to expanding our brand’s influence, not only in traditional markets, but also in new and emerging ones. iGaming is constantly evolving and our strategies must evolve too, adapting and driving on the windy road to success. This entails adapting to changes in technology, user behaviour and experience, and most importantly navigating regulatory landscapes.
Of course, Google’s frequent algorithm updates keep us our our toes, pushing us to refine our approach to stay competitive and ever more relent.
Reflecting on the last 10 years, I am energised and optimistic for the future. With a talented team and untapped markets in tow, Mr. Gamble is well-prepared for substantial growth and impact. Here is to the journey ahead and to everyone – mentors, peers, and friends who have been part of this rewarding path. The next decade holds great potential, and I look more than forward to what is yet to come.
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MAJOR LEAGUE BASEBALL SELECTS SPORTRADAR TO TRANSFORM PLAYER TALENT SCOUTING FOR ALL 30 CLUBS
Sportradar today announced a multiyear agreement with Major League Baseball (MLB) to offer unparalleled sports performance analysis of amateur baseball prospects, through its Synergy Coaching and Scouting solution, to the league and its 30 Clubs. This new partnership will revolutionize player talent scouting through Sportradar’s advanced, proprietary technology and highlights Sportradar’s commitment to delivering innovative and game-changing solutions to the league.
Under the agreement, MLB and its 30 Clubs will gain access to an unprecedented depth of player analysis and insights with event coverage expanding significantly, from 3,300 to more than 20,000 games – an over 600% increase. This includes college, international, professional partner leagues and leading amateur leagues, such as the MLB Draft League, the Appalachian League and MLB Develops events, and, for the first time, top high school events.
The Synergy Coaching and Scouting solution is uniquely positioned to address the player evaluation needs of MLB as it leverages Sportradar’s expertise ingesting and transforming millions of data points from video into detailed metrics, actionable insights and dynamic visualizations. This, combined with Sportradar’s AI-powered sports performance technology, enables Synergy to provide unparalleled, in-depth analysis of every player, play and game situation, and equips MLB and Club scouts with the information and insights they need to streamline the evaluation process, guide draft decisions and support the development of future MLB players.
“Sportradar’s cutting-edge technology, alongside our reputation as a trusted partner to leading US sports leagues, is driving the transformation of sports performance analysis,” said Eduard Blonk, Chief Commercial Officer, Sportradar. “Through Synergy we are pleased that we are expanding our relationship with MLB, equipping them with the deep data and insights they need to identify the next generation of players. We are eager to continue bringing innovative solutions to MLB.”
“We are excited to expand our relationship with Sportradar and ensure equal access to the Synergy video and data services for all 30 MLB Clubs. This platform has become a key resource for Clubs in the domestic and international scouting process and we look forward to continuing our work with Sportradar in the coming years,” said John D’Angelo, MLB’s Sr. Vice President of Amateur and Medical Operations.
Financial reports
Commercial Gaming Revenue Growth Continues in Q3 2024, Driving Industry’s 15th Consecutive Quarter of Growth
U.S. commercial gaming revenue reached $17.71 billion in Q3 2024, the industry’s highest-grossing Q3 on record, according to the American Gaming Association’s (AGA) Commercial Gaming Revenue Tracker. This makes Q3 2024 the industry’s 15th consecutive quarter of annual revenue growth, with September marking the 43rd straight month of rising year-over-year commercial gaming revenue.
Through the first nine months of the year, nationwide commercial gaming revenue stands at $53.24 billion, pacing 8.0 percent ahead of 2023 and putting the industry on track for a fourth straight record revenue year.
In Q3 2024, 29 of the 35 commercial gaming jurisdictions operational last year saw increased year-over-year revenue. This growth resulted in an 8.9 percent year-over-year increase in state and local taxes tied directly to gaming revenue, with commercial gaming operators contributing $3.79 billion in taxes across the quarter.
Quarterly revenue from land-based gaming – encompassing casino slots, table games and retail sports betting – totaled $12.56 billion, 0.62 percent lower than Q3 2023. Meanwhile, combined revenue from online sports betting and iGaming totaled $5.14 billion in Q3 2024 as online gaming made up 29.0 percent of commercial gaming revenue, a significantly higher share than in Q3 2023.
Looking at each sector in Q3 2024:
- Traditional Gaming: Traditional brick-and-mortar casino gaming generated quarterly revenue of $12.38 billion, a contraction of 0.9 percent year-over-year.
- Legal Sports Betting: Americans legally wagered $30.3 billion on sports, generating $3.24 billion in quarterly revenue (+42.4% YoY). Recent market launches in Kentucky, Maine, North Carolina and Vermont contributed to this growth.
- iGaming: iGaming generated $2.08 billion in revenue, marking a 30.3 percent year-over-year increase.
“Q3 2024 continued gaming’s momentum from the first half of the year, with online casino and sports betting driving strong growth. At the same time, new brick-and-mortar casino openings bolstered traditional gaming, which still accounts for the bulk of industry revenue,” said AGA Vice President of Research David Forman. “More than a quarter of commercial revenue now regularly comes from online sources, raising the importance of continued sustainable growth with consumers in those states.”
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