Penn National Gaming Reports Fourth Quarter Revenues of $1.03 Billion, Net Income of $12.7 Million, Adjusted EBITDAR of $365.4 Million, and Adjusted EBITDA of $255.9 Million
– Launched Barstool Sportsbook Mobile App in Michigan to Strong Demand and Introduced New Fully Integrated Barstool iCasino Product –
– Opened Retail Barstool Sportsbooks at Ameristar Casino Black Hawk, Greektown Casino Hotel, Hollywood Casino Lawrenceburg, and Ameristar East Chicago –
– Preparing to Enter Our 20th State Via Pending Acquisition of Hollywood Casino Perryville in Maryland –
WYOMISSING, Pa.–(BUSINESS WIRE)–Penn National Gaming, Inc. (NASDAQ: PENN) (“Penn National” or the “Company”) today reported financial results for the three months and year ended December 31, 2020.
Jay Snowden, President and Chief Executive Officer, commented: “As we reflect on 2020, I couldn’t be prouder of the resiliency and determination shown by our corporate and property team members during what was undoubtedly one of the most challenging years for any of us from a personal and professional standpoint. We have endured unprecedented changes to our business, created and implemented enhanced safety protocols for our team members and guests, and withstood natural disasters that brought damage to several of our southern properties and left many of our team members displaced in the midst of a global pandemic. Yet, despite these challenges, the Company has continued to execute on its long-term strategy by re-evaluating and re-imagining our operational norms and product offerings while accelerating our digital transformation.
“Our investment in Barstool Sports provides us with a fully integrated media platform to support our evolution from the nation’s largest regional gaming operator to the best-in-class omnichannel provider of retail and online gaming and sports betting entertainment. In addition to the successful launches of our Barstool Sportsbook app in Pennsylvania and Michigan, we have now fully implemented our industry leading mychoice reward program across all our properties and online channels. This program of over 20 million members connects our land-based casinos to our sports betting and iCasino products, offering players a wide-range of compelling incentives to consolidate play across our various platforms. More recently, we announced a strategic partnership with Choice Hotels which allows the more than 47 million members of Choice’s award-winning loyalty program, Choice Privileges, to book stays at Penn National properties directly through the Choice reservation system. Additionally, our operations and IT teams have laid the groundwork for implementing a new generation of cashless, cardless, and contactless technology at our casinos, which we refer to as the 3Cs, that will improve efficiency and guest service, while also driving incremental revenue as we remove transactional friction and offer experiences in line with other industries frequented by younger demographics. We intend to launch this technology initially at our Pennsylvania casinos in the first half of 2021, subject to regulatory approval, and plan to continue rolling it out to other regions in 2021.
“In addition to executing on our operational strategy, I am proud of the way our Company rose to the occasion to support our team members and host communities in these times of unprecedented need and heightened social justice awareness. Through the Penn National Gaming Foundation, we created a separate COVID-19 Emergency Relief Fund for the benefit of affected team members, with contributions of over $3.7 million from our Board of Directors, CEO, senior management team and the Penn National Gaming Foundation. In addition, we provided $13 million in one-time holiday cash bonuses in the fourth quarter to our non-executive team members companywide to help with the financial impact to their families from the pandemic. We also created the Hurricane Laura Relief Fund with an initial contribution of $2.5 million to help our community and team members impacted by the storm, in addition to providing more than $6 million in full wages and benefits to our team members during the property closure. Most recently, we have joined the efforts of Barstool Sports and its founder Dave Portnoy to help save and sustain small businesses across the country that have been impacted by COVID-19, initially through an online fundraising campaign to save Philadelphia’s historic Reading Terminal Market, and now through our contributions of approximately $4.6 million, and counting, to the Barstool Fund, which was created by Mr. Portnoy precisely for this purpose. Finally, on the social justice front, our Diversity Committee announced a new scholarship program for disadvantaged team members that will be funded with a $1 million annual commitment from our Company, and we launched a series of new inclusion-related initiatives.
“Having been battle tested throughout 2020, we look forward to the year ahead with great optimism and are confident the foundations we built over the last twelve months have positioned us to generate significant long-term shareholder value and stronger communities.”
For further information, we have posted a presentation to our website regarding the fourth quarter highlights and accomplishments, which can be found here.
Q4 Financial Results Summary
For the fourth quarter ended December 31, 2020, Penn National generated revenues of $1,027.4 million and Adjusted EBITDAR of $365.4 million. Revenues and Adjusted EBITDAR were trending ahead of forecast before COVID-19 related closures in Illinois, Michigan, and Pennsylvania and increased restrictions in Ohio and Massachusetts (among other states) began in mid-November. While revenues contracted 23% year-over-year, Adjusted EBITDAR declined by only 9% for the same period, reflecting structural changes that were put in place with the onset of the pandemic. These changes helped to expand Adjusted EBITDAR margins by 580 basis points relative to Q4 2019 results, which equates to an improvement of 720 basis points when excluding properties that were closed during the quarter. The South segment, which had fewer restrictions than other regions, but was still impacted by Hurricane Laura, generated Adjusted EBITDAR growth of 13% and Adjusted EBITDAR margin improvement of 720 basis points year-over-year, despite a decline of 7% in net revenues. However, when excluding the hurricane-impacted days, Adjusted EBITDAR margins in the South segment increased 890 basis points year-over-year.
Mr. Snowden commented: “Trends in January thus far are encouraging. Visitation and length of play have improved, several of the properties that were forced to close in November and December have reopened, and our retail sports books continue to positively impact both gaming and non-gaming revenues. We are continuing to see encouraging growth in the younger demographic tiers of our database, and we believe the roll-out of vaccinations will encourage more guests in all age segments of our database to return to our land-based facilities soon. Given the service enhancements and operational changes we have implemented, we stand to achieve meaningful EBITDAR growth as our volumes continue to approach previous levels.
“Our cash balance stood at $1.9 billion at quarter end, even after paying down $115 million of our term loan B. In turn, our net traditional debt decreased to approximately $578 million at December 31, 2020, bringing our lease-adjusted net leverage to 4.7x based on 2019 Adjusted EBITDAR.
Penn Interactive: Pursuing Transformational Growth
Mr. Snowden continued, “Our interactive division experienced tremendous growth during 2020, with impressive revenues and EBITDA margins for our Hollywood Casino iCasino product in Pennsylvania, strong performance at our 16 retail sportsbooks, and the introduction of our highly-anticipated Barstool Sportsbook mobile app. Since launching in Pennsylvania last September, the Barstool Sportsbook app has registered over 72,000 customers in the state and has generated total handle of nearly $300 million, despite very limited external marketing spend.
“On January 22, 2021, we successfully launched the Barstool Sportsbook app in Michigan and saw encouraging initial results, as we registered over 48,000 new customers and generated total handle of $27.5 million during the first 10 days of operation. We also experienced very high engagement, with nearly 50% of our Michigan customers betting on Barstool-exclusive bets. We anticipate being live in at least 10 states by the end of 2021 and remain very confident in our ability to win sizable share in new markets based on the power of the Barstool brand and media assets. In addition, we are excited to have launched our Barstool-branded iCasino in Michigan on February 1st, which allows us to begin to leverage the meaningful cross-sell opportunities from the Barstool Sportsbook and our mychoice audiences. Furthermore, we have integrated the mychoice Rewards Program into the Barstool Sportsbook and iCasino experience, providing players the opportunity to redeem their loyalty points for unique experiences and offers both at Penn National casinos and with Barstool Sports.
Barstool Branded Retail Sportsbooks Exceeding Expectations
“We have seen very strong results at our properties since the Barstool rebranding of our retail sportsbooks at Ameristar Casino Black Hawk, Greektown Casino Hotel, Hollywood Casino Lawrenceburg, and Ameristar East Chicago. Our Indiana retail sportsbooks generated record handle, revenue and EBITDAR during the fourth quarter, which has only accelerated following the rebranding. For example, sports betting handle at our Ameristar East Chicago property increased by 35% following the rebranding versus the prior six-week period, while table games and slot volumes in the adjacent Barstool-themed gaming area increased by 27% and 26%, respectively, during the same period. We believe this demonstrates the ability of our Barstool-branded retail sportsbooks to attract younger guests to our casinos, which can help drive significant growth in gaming and non-gaming revenues from new demographics. We expect this momentum to gain speed when COVID restrictions are lifted and we are able to host more Barstool events and personalities at our properties. Our plans for 2021 include rebranding several additional retail sportsbooks in our portfolio, beginning with the Pennsylvania properties in the first half of the year.
Barstool Media Reach Growing
“The value of Barstool Sports as a media company is an overlooked part of our story,” said Mr. Snowden. “Our valued partners at Barstool experienced an incredible year in 2020, as they continued to produce highly-engaging and relevant content for their growing audience of loyal fans despite the partial shutdown of live sports. Barstool Sports now has over 26 million followers on TikTok, close to 27 million followers on Twitter, and more than 52 million followers on Instagram, just to highlight a few social media platforms. In 2020, Barstool saw very impressive year-over-year growth, recording its strongest revenue and EBITDA since its inception, and we expect Barstool to continue to grow profitably over the upcoming years through a diversified mix of advertising, brand licensing, and merchandise sales. We view Barstool Sports not only as a fantastic channel to promote our offerings, but also an undervalued media asset that has evolved from primarily a sports brand into a highly relevant sports and life-style brand. We are excited about the opportunity to unlock additional value in Barstool Sports as they continue their strong growth trajectory.”
Investing in Growth and Technology
“The strength of our balance sheet provides us with the financial flexibility to invest in high-growth opportunities. We exercised our option to acquire the operating assets of Hollywood Casino Perryville in Maryland and remain on track to close the acquisition following regulatory approval. This transaction provides us the opportunity to expand our unique omnichannel platform into an industry leading 20th state, and we hope to introduce a Barstool-branded retail sportsbook and mobile app to the valuable Maryland gaming market later this year. Meanwhile, the construction of our Category 4 casinos in both York and Morgantown, Pennsylvania, has resumed and we expect to open both properties in late 2021. We have utilized this additional time to reimagine our offerings at these properties to incorporate a new Barstool Sportsbook as well as the technology for cashless, cardless, and contactless features, pending regulatory approval.
“Implementation of the 3Cs and other technology investments, such as the travelling wallet and enhancing how we engage with a younger demographic, remains a top priority. In addition, we have recently launched our mychoice mobile app. As of December 31, the app generated over 140,000 downloads with 91,000 monthly active users. The app will provide us with an environmentally friendly and more efficient way to communicate, interact, and engage with our guests. The 35 to 54 age group is currently the most engaged audience with the app, which is very encouraging as this group represents a growing segment of our different business channels.
Building on the Momentum as We Forge Ahead
“We have already begun to see the positive impact of our structural advantages in the sports betting and iCasino sector, including our industry leading geographic footprint, which provides us with frictionless access to key sports betting and iCasino states as well as valuable recurring revenue and equity value from our third-party skin partners. Finally, the Barstool brand and marketing engine, as well as our database of 20 million mychoice customers, provide a path to very efficient customer acquisition. We anticipate these advantages will allow us to benefit from the continuing proliferation of sports betting and iCasino legislation over the next several years. With a strong balance sheet and portfolio of best-in-class regional gaming facilities and digital assets, we are looking forward to building upon our momentum to create additional shareholder value.”
Summary of Fourth Quarter Results
|
|
For the three months ended |
|||||||
|
(in millions, except per share data, unaudited) |
2020 |
|
2019 |
|||||
|
Revenues |
$ |
1,027.4 |
|
$ |
1,341.2 |
|
||
|
Net income (loss) |
$ |
12.7 |
|
$ |
(92.9 |
) |
||
|
|
|
|
|
|||||
|
Adjusted EBITDA (1) |
$ |
255.9 |
|
$ |
304.0 |
|
||
|
Rent expense associated with triple net operating leases (2) |
109.5 |
|
95.4 |
|
||||
|
Adjusted EBITDAR (1) |
$ |
365.4 |
|
$ |
399.4 |
|
||
|
Payments to our REIT Landlords under Triple Net Leases, inclusive of rent credits utilized (3) |
$ |
222.6 |
|
$ |
224.4 |
|
||
|
|
|
|
|
|||||
|
Diluted earnings (loss) per common share |
$ |
0.07 |
|
$ |
(0.80 |
) |
||
| (1) |
See the “Non-GAAP Financial Measures” section below for more information as well as the definitions of Adjusted EBITDA and Adjusted EBITDAR. Additionally, see below for reconciliations of these Non-GAAP financial measures to their GAAP equivalent financial measure. |
||
| (2) |
Consists of the operating lease components contained within the Penn Master Lease and the Pinnacle Master Lease (referred to collectively as our “Master Leases”) (primarily land), the Meadows Lease, the Margaritaville Lease, the Greektown Lease, and beginning on April 16, 2020, the Tropicana Lease (referred to collectively as our “triple net operating leases”). During the three months ended December 31, 2020, we recorded rent expense associated with the Tropicana Lease of $7.7 million which was noncash. The finance lease components contained within our Master Leases (primarily buildings) are recorded to interest expense (as opposed to rent expense) in accordance with Accounting Standards Codification Topic 842, “Leases.” |
||
| (3) |
Consists of payments made to Gaming and Leisure Properties, Inc. (NASDAQ: GLPI) and VICI Properties Inc. (NYSE: VICI) (referred to collectively as our “REIT Landlords”) under the Master Leases, the Meadows Lease, the Margaritaville Lease, the Greektown Lease and the Morgantown Lease (which is a land lease we entered into on October 1, 2020 with GLPI), inclusive of rent credits utilized, which were generated from (i) the sale of the real estate assets associated with Tropicana Las Vegas to GLPI on April 16, 2020 and (ii) the sale of land associated with our future Morgantown facility to GLPI on October 1, 2020. Although we collectively refer to the Master Leases, the Meadows Lease, the Margaritaville Lease, the Greektown Lease, the Morgantown Lease and the Tropicana Lease as our “Triple Net Leases,” the rent under the Tropicana Lease is nominal. During the three months ended December 31, 2020, we utilized the remaining rent credits available to us totaling $65.0 million to pay rent under the Penn Master Lease, Pinnacle Master Lease, Meadows Lease and Morgantown Lease. |
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
Segment Information
The Company aggregates its properties into four reportable segments: Northeast, South, West and Midwest.
|
|
For the three months ended |
|
For the year ended |
|||||||||||||
|
(in millions, unaudited) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|||||||||
|
Revenues: |
|
|
|
|
|
|
|
|||||||||
|
Northeast segment (1) |
$ |
470.8 |
|
|
$ |
621.3 |
|
|
$ |
1,639.3 |
|
|
$ |
2,399.9 |
|
|
|
South segment (2) |
249.2 |
|
|
268.2 |
|
|
849.6 |
|
|
1,118.9 |
|
|||||
|
West segment (3) |
79.5 |
|
|
158.1 |
|
|
302.5 |
|
|
642.5 |
|
|||||
|
Midwest segment (4) |
188.2 |
|
|
279.2 |
|
|
681.4 |
|
|
1,094.5 |
|
|||||
|
Other (5) |
53.4 |
|
|
15.6 |
|
|
125.0 |
|
|
47.5 |
|
|||||
|
Intersegment eliminations (6) |
(13.7 |
) |
|
(1.2 |
) |
|
(19.1 |
) |
|
(1.9 |
) |
|||||
|
Total revenues |
$ |
1,027.4 |
|
|
$ |
1,341.2 |
|
|
$ |
3,578.7 |
|
|
$ |
5,301.4 |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Adjusted EBITDAR: |
|
|
|
|
|
|
|
|||||||||
|
Northeast segment (1) |
$ |
153.2 |
|
|
$ |
180.7 |
|
|
$ |
478.9 |
|
|
$ |
720.8 |
|
|
|
South segment (2) |
101.6 |
|
|
90.2 |
|
|
318.9 |
|
|
369.8 |
|
|||||
|
West segment (3) |
27.0 |
|
|
47.8 |
|
|
82.2 |
|
|
198.8 |
|
|||||
|
Midwest segment (4) |
84.9 |
|
|
102.3 |
|
|
258.3 |
|
|
403.6 |
|
|||||
|
Other (5) |
(1.3 |
) |
|
(21.7 |
) |
|
(43.5 |
) |
|
(87.8 |
) |
|||||
|
Intersegment eliminations (6) |
— |
|
|
0.1 |
|
|
— |
|
|
— |
|
|||||
|
Total Adjusted EBITDAR (7) |
$ |
365.4 |
|
|
$ |
399.4 |
|
|
$ |
1,094.8 |
|
|
$ |
1,605.2 |
|
|
|
(1) |
The Northeast segment consists of the following properties: Ameristar East Chicago, Greektown Casino-Hotel (acquired May 23, 2019), Hollywood Casino Bangor, Hollywood Casino at Charles Town Races, Hollywood Casino Columbus, Hollywood Casino Lawrenceburg, Hollywood Casino at Penn National Race Course, Hollywood Casino Toledo, Hollywood Gaming at Dayton Raceway, Hollywood Gaming at Mahoning Valley Race Course, Marquee by Penn, Meadows Racetrack and Casino, and Plainridge Park Casino. |
||
|
(2) |
The South segment consists of the following properties: 1st Jackpot Casino, Ameristar Vicksburg, Boomtown Biloxi, Boomtown Bossier City, Boomtown New Orleans, Hollywood Casino Gulf Coast, Hollywood Casino Tunica, L’Auberge Baton Rouge, L’Auberge Lake Charles, and Margaritaville Resort Casino. Prior to its closure on June 30, 2019, Resorts Casino Tunica was also included in the South segment. |
||
|
(3) |
The West segment consists of the following properties: Ameristar Black Hawk, Cactus Petes and Horseshu, M Resort, Tropicana Las Vegas, and Zia Park Casino. |
||
|
(4) |
The Midwest segment consists of the following properties: Ameristar Council Bluffs; Argosy Casino Alton; Argosy Casino Riverside; Hollywood Casino Aurora; Hollywood Casino Joliet; our 50% investment in Kansas Entertainment, which owns Hollywood Casino at Kansas Speedway; Hollywood Casino St. Louis; Prairie State Gaming; and River City Casino. |
||
|
(5) |
The Other category consists of the Company’s stand-alone racing operations, namely Sanford-Orlando Kennel Club, and the Company’s joint venture interests in Sam Houston Race Park, Valley Race Park, and Freehold Raceway. Included in the Other category are our management contract for Retama Park Racetrack and our live and televised poker tournament series that operates under the trade name, Heartland Poker Tour (“HPT”). The Other category also includes Penn Interactive, which operates our social gaming, internally-branded retail sportsbooks, iGaming and our Barstool Sports online sports betting app. Expenses incurred for corporate and shared services activities that are directly attributable to a property or are otherwise incurred to support a property are allocated to each property. The Other category also includes corporate overhead costs, which consists of certain expenses, such as: payroll, professional fees, travel expenses and other general and administrative expenses that do not directly relate to or have otherwise not been allocated to a property. For the three months and year ended December 31, 2020, corporate overhead costs were $17.8 million and $78.8 million, respectively, compared to $25.1 million and $99.3 million, respectively, for the three months and year ended December 31, 2019. In addition, Adjusted EBITDAR of the Other category includes our proportionate share of the net income or loss of Barstool Sports after adding back our share of non-operating items (such as interest expense, net; income taxes; depreciation and amortization; and stock-based compensation expense). |
||
|
(6) |
Represents the elimination of intersegment revenues, associated with Penn Interactive and HPT. |
||
|
(7) |
As noted within the “Non-GAAP Financial Measures” section below, Adjusted EBITDAR is presented on a consolidated basis outside the financial statements solely as a valuation metric or for reconciliation purposes. |
|
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES |
||||||||||||||||
|
Reconciliation of Comparable GAAP Financial Measure to Adjusted EBITDA, |
||||||||||||||||
|
Adjusted EBITDAR, and Adjusted EBITDAR Margin |
||||||||||||||||
|
|
For the three months ended |
|
For the year ended |
|||||||||||||
|
(in millions, unaudited) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|||||||||
|
Net income (loss) |
$ |
12.7 |
|
|
$ |
(92.9 |
) |
|
$ |
(669.1 |
) |
|
$ |
43.1 |
|
|
|
Income tax expense (benefit) |
7.1 |
|
|
(10.0 |
) |
|
(165.1 |
) |
|
43.0 |
|
|||||
|
Loss on early extinguishment of debt |
1.2 |
|
|
— |
|
|
1.2 |
|
|
— |
|
|||||
|
Income from unconsolidated affiliates |
(6.4 |
) |
|
(6.7 |
) |
|
(13.8 |
) |
|
(28.4 |
) |
|||||
|
Interest expense, net |
136.1 |
|
|
133.7 |
|
|
543.2 |
|
|
534.2 |
|
|||||
|
Other income |
(31.1 |
) |
|
(12.8 |
) |
|
(106.6 |
) |
|
(20.0 |
) |
|||||
|
Operating income (loss) |
119.6 |
|
|
11.3 |
|
|
(410.2 |
) |
|
571.9 |
|
|||||
|
Stock-based compensation |
2.8 |
|
|
4.5 |
|
|
14.5 |
|
|
14.9 |
|
|||||
|
Cash-settled stock-based awards variance |
20.5 |
|
|
7.2 |
|
|
67.2 |
|
|
0.8 |
|
|||||
|
(Gain) loss on disposal of assets |
4.7 |
|
|
(2.8 |
) |
|
(29.2 |
) |
|
5.5 |
|
|||||
|
Contingent purchase price |
0.3 |
|
|
— |
|
|
(1.1 |
) |
|
7.0 |
|
|||||
|
Pre-opening and acquisition costs |
0.3 |
|
|
6.8 |
|
|
11.8 |
|
|
22.3 |
|
|||||
|
Depreciation and amortization |
91.4 |
|
|
97.8 |
|
|
366.7 |
|
|
414.2 |
|
|||||
|
Impairment losses |
7.3 |
|
|
173.1 |
|
|
623.4 |
|
|
173.1 |
|
|||||
|
Insurance recoveries, net of deductible charges |
— |
|
|
(1.5 |
) |
|
(0.1 |
) |
|
(3.0 |
) |
|||||
|
Income from unconsolidated affiliates |
6.4 |
|
|
6.7 |
|
|
13.8 |
|
|
28.4 |
|
|||||
|
Non-operating items of equity method investments (1) |
1.5 |
|
|
0.9 |
|
|
4.7 |
|
|
3.7 |
|
|||||
|
Other expenses (2) |
1.1 |
|
|
— |
|
|
13.5 |
|
|
— |
|
|||||
|
Adjusted EBITDA |
255.9 |
|
|
304.0 |
|
|
675.0 |
|
|
1,238.8 |
|
|||||
|
Rent expense associated with triple net operating leases |
109.5 |
|
|
95.4 |
|
|
419.8 |
|
|
366.4 |
|
|||||
|
Adjusted EBITDAR |
$ |
365.4 |
|
|
$ |
399.4 |
|
|
$ |
1,094.8 |
|
|
$ |
1,605.2 |
|
|
|
Net income (loss) margin |
1.2 |
% |
|
(6.9 |
)% |
|
(18.7 |
)% |
|
0.8 |
% |
|||||
|
Adjusted EBITDAR margin |
35.6 |
% |
|
29.8 |
% |
|
30.6 |
% |
|
30.3 |
% |
|||||
|
(1) |
Consists principally of interest expense, net; income taxes; depreciation and amortization; and stock-based compensation expense associated with Barstool Sports and our Kansas Entertainment joint venture. We record our portion of Barstool Sports’ net income or loss, including adjustments to arrive at Adjusted EBITDAR, one quarter in arrears. |
||
|
(2) |
Consists of non-recurring restructuring charges (primarily severance) associated with a company-wide initiative, triggered by the COVID-19 pandemic, designed to (i) improve the operational effectiveness across our property portfolio; and (ii) improve the effectiveness and efficiency of our Corporate functional support areas. |
Contacts
Justin Sebastiano
Senior Vice President, Finance & Treasurer
610-373-2400
Joseph N. Jaffoni, Richard Land
JCIR
212-835-8500 or penn@jcir.com