PENN Entertainment, Inc. (“PENN” or the “Company”) (Nasdaq:
PENN) today reported financial results for the three and six months
ended June 30, 2022.
2022 Second Quarter Highlights:
- Database Growth Highlights the Value of Omni-Channel
Strategy
- Successful Migration to Our Proprietary Tech Stack in
Ontario
- Reiterating 2022 Full Year Revenue and Adjusted EBITDAR
Guidance
- Repurchased $167.0 million of Common Stock at an Average
Price of $30.16 Under Share Repurchase Authorization
- Revenues of $1.6 billion, an increase of 5.2%
year-over-year;
- Net income of $26.1 million and net income margin of
1.6%, as compared to net income of $198.7 million and net income
margin of 12.9% in the prior year;
- Adjusted EBITDAR of $504.5 million, a decrease of 14.0%
year-over-year;
- Adjusted EBITDA of $476.5 million, an increase of 1.4%
year-over-year; and
- Adjusted EBITDAR margins of 31.0%, a decline of 694bps
year-over-year.
For further information, the Company has posted a presentation
to its website regarding the second quarter highlights and
accomplishments, which can be found here.
Jay Snowden, Chief Executive Officer and President, announced:
“Today is an exciting day for us as we become PENN Entertainment,
Inc. Over the past few years, PENN has transformed our business
through a highly differentiated strategy focused on organic
cross-sell opportunities, which is reinforced by our investments in
market-leading retail casinos, sports media assets, owned
technology, including a state-of-the-art, fully integrated digital
sports and online casino betting platform, and an in-house iCasino
content studio. Our new name maintains ties to our legacy while
better reflecting our evolution into North America’s leading
provider of integrated entertainment, sports content and casino
gaming experiences.”
Mr. Snowden further commented: “We are pleased with our second
quarter results. PENN generated revenues of $1.6 billion and
Adjusted EBITDAR of $504.5 million. Despite economic headwinds, we
delivered consistent performance across our retail portfolio in the
quarter and into July. In addition, last month, we successfully
transitioned theScore Bet in Ontario to our own fully-integrated,
proprietary tech stack – reflecting a key achievement in our
strategic roadmap. Our strong operating performance and balance
sheet enabled us to opportunistically repurchase $167.0 million of
stock in the quarter under our $750.0 million share repurchase
authorization. Based on our second quarter performance and our
outlook for the remainder of the year, we are reiterating our 2022
revenue and Adjusted EBITDAR guidance range of $6.15 billion to
$6.55 billion and $1.875 billion to $2.00 billion,
respectively.
Database Growth Highlighted by Strong Engagement from High
Worth Segments and Ongoing Growth Among the Younger
Demographic
Property level highlights1:
- Revenues of $1.5 billion;
- Adjusted EBITDAR of $548.7 million; and
- Adjusted EBITDAR margins of 37.2%
“Our mychoice® database has increased by over 1.2 million
registrations over the last four quarters, driven by both our
retail properties and new interactive offerings, providing
significant opportunities for future growth. We continue to enhance
the guest experience at our properties with new hospitality
offerings including hotel remodels, new restaurant concepts, and
Barstool branded sportsbooks which have especially benefited our
destination properties. We are encouraged by the ongoing visitation
and engagement of our high worth segment as well as continued
growth from all but our oldest demographic. Our unrated segment
trends reflect strong conversion of non-rated players into our
mychoice loyalty program. Our industry leading cashless,
cardless and contactless technology (“3C’s”) enables omni-channel
engagement and remains a growth driver. 3C’s is now live at nine
properties in three states. We expect to roll the technology out to
twelve additional properties by the end of 2022, pending regulatory
approvals.
Focus Remains on Migration of Barstool Sportsbook to In-House
Managed Risk and Trading Platform and Tech Stack
Interactive Segment highlights:
- Revenues of $154.9 million (including tax gross up);
- Adjusted EBITDA loss of $20.8 million; and
- theScore Bet in Ontario now operates on our vertically
integrated proprietary tech stack, including the risk and trading
platform, player account management system and promotion
engine
“Our Interactive Segment further expanded its reach with the
launch of theScore Bet mobile app in Ontario on April 4th. In July,
we successfully deployed our proprietary in-house risk and trading
platform in Ontario, which significantly enhances theScore Bet’s
online betting capabilities, mobile product offerings and overall
integrated media and betting ecosystem. This fall, we will
introduce our new Parlay+ feature on theScore Bet for all major
league sports. Following the successful transition to our player
account management and risk and trading platforms in Canada, we
remain confident in our ability to migrate the Barstool Sportsbook
in the U.S. onto our new tech stack in Q3 2023, and we are working
with our existing providers to ensure a smooth transition process.
Post-migration, we will begin to realize the full benefits of our
in-house technology stack, including meaningful cost synergies and
improved marketing and promotional capabilities.
________________________ 1 Property level consists of retail
operating segments which are composed of the operating results of
our Northeast, South, West, and Midwest reportable segments.
“PENN Game Studios continues to develop engaging Barstool
branded content for our Barstool iCasino app. In Q2 2022, we also
introduced 97 new slot and table game offerings across our iCasino
platforms. Our pipeline of future customized and third-party
iCasino content for both Barstool and theScore Bet remains
robust.
“Our Barstool branded retail sportsbooks resonate with the
younger demographics and create meaningful cross-sell
opportunities. Our recently converted Barstool sportsbook in Lake
Charles, Louisiana, set a new standard for retail sportsbook
experiences, and we are seeing encouraging results in visitation
and spend. We are on track to convert our existing temporary
sportsbook to a Barstool sportsbook at L’Auberge Baton Rouge this
fall where we expect to have a similar positive impact. Based on
our ongoing success in Louisiana, we are optimistic about our
upcoming Barstool branded retail sportsbook launches in Kansas and
Ohio where we operate similar market-leading properties bolstered
by large casino databases that should augment our omni-channel
strategy. Additionally, with the passage of sports betting in
Massachusetts earlier this week – the birthplace of Barstool Sports
and home to our Plainridge Park Casino – we are excited to add yet
another possible retail launch by the end of this year while mobile
wagering is anticipated in 2023.
Growing Media Businesses
“Our media businesses delivered strong growth this quarter
relative to the first quarter of 2022, with theScore’s media
revenue growing 11% year-over-year and monthly sessions increasing
20%. Meanwhile, Barstool Sports, Inc. has further expanded its
reach across social media platforms by delivering highly engaging
and relevant content. We believe we are positioned to achieve even
greater upside going forward as we grow our audience, maximize
cross-sell and explore new monetization opportunities.
ESG – Continuing to Care for our People, our Communities and
our Planet
“PENN was again active on the ESG front this quarter,
particularly with our Diversity, Equity and Inclusion (“DE&I”)
efforts. We recently came in 4th out of 40 gaming companies in the
All-In Diversity Project’s benchmark DE&I survey. In addition,
Forbes magazine rated us 139th out of 500 of “America’s Best
Employers for Diversity,” which is the highest ranking of any
publicly traded gaming company. In June, we launched a
comprehensive companywide diversity training initiative, and
continued to roll out our Emerging Leaders Program, a career
development initiative at PENN which provides an additional path
for diversity in leadership roles. We expect to have our entire
property portfolio participating in this program by year end.
We also proudly celebrated Juneteenth and Pride Month in June;
Asian American Pacific Islander Heritage Month in May; and Earth
Day in April. Our properties volunteered at events surrounding
these special occasions, provided back of house education and
awareness programming, and supported local non-profits and civic
organizations on the front lines of these social causes.”
Share Repurchase Authorization Update
During the three months ended June 30, 2022, the Company
repurchased 5,539,177 shares of its common stock in open market
transactions for $167.0 million at an average price of $30.16 per
share. During the six months ended June 30, 2022, the Company
repurchased 9,341,585 shares of its common stock in open market
transactions for $342.1 million at an average price of $36.62 per
share.
Subsequent to the quarter ended June 30, 2022, the Company
repurchased 3,019,790 million shares of its common stock at an
average price of $31.46 per share for an aggregate amount of $95.0
million. The remaining availability under our $750.0 million
authorization was $313.1 million as of August 3, 2022.
Liquidity Remains Strong
Total liquidity as of June 30, 2022 was $2.7 billion inclusive
of $1.7 billion in cash and cash equivalents. Traditional net debt
as of the end of the quarter was $1.0 billion, an increase of
$132.8 million from December 31, 2021 due to a lower cash balance
as we executed on our share repurchase program. Lease-adjusted net
leverage as of June 30, 2022 was 4.27x compared to 4.10x as of
December 31, 2021.
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 expense
(benefit), which are dependent on future events that are out of the
Company’s control or that may not be reasonably predicted.
Summary of Second Quarter Results
For the three months
ended June 30,
(in millions,
except per share data, unaudited)
2022
2021
Revenues
$
1,626.9
$
1,545.8
Net income
$
26.1
$
198.7
Adjusted EBITDA (1)
$
476.5
$
470.1
Rent expense associated with triple net
operating leases (2)
28.0
116.5
Adjusted EBITDAR (1)
$
504.5
$
586.6
Payments to our REIT Landlords under
Triple Net Leases (3)
$
231.8
$
229.1
Diluted earnings per common
share
$
0.15
$
1.17
(1)
See the “Non-GAAP Financial
Measures” section below for more information as well as the
definitions of Adjusted EBITDA and Adjusted EBITDAR. Additionally,
see below for reconciliations of these Non-GAAP financial measures
to their GAAP equivalent financial measure.
(2)
Consists of the operating lease
components contained within our triple net master lease dated
November 1, 2013 with Gaming and Leisure Properties, Inc. (Nasdaq:
GLPI) ("GLPI") and the triple net master lease assumed in
connection with our acquisition of Pinnacle Entertainment, Inc.
(individually referred to as the PENN Master Lease and Pinnacle
Master Lease, respectively, and are collectively referred to as our
“Master Leases”), as well as our individual triple net leases with
GLPI for the real estate assets used in the operation of Tropicana
Las Vegas Hotel and Casino, Inc. and Hollywood Casino at Meadows
Racetrack, and our individual triple net leases with VICI
Properties Inc. (NYSE: VICI) ("VICI") for the real estate assets
used in the operations of Margaritaville Casino Resort and
Hollywood Casino at Greektown (referred to collectively as our
“triple net operating leases”).
On January 14, 2022, the Company
and GLPI amended certain terms of the Master Leases which were
concluded to be lease modifications under Accounting Standards
Codification Topic 842, “Leases.” As a result of the lease
modification events, only the land and building components
associated with the operations of Hollywood Gaming at Dayton
Raceway and Hollywood Gaming at Mahoning Valley Race Course are
classified as operating leases which are recorded to rent expense,
as compared to prior to the lease modification events, whereby the
land components of substantially all of the Master Lease properties
were classified as operating leases and recorded to rent expense.
Subsequent to the lease modification events, the land components
associated with the Master Lease properties are primarily
classified as finance leases.
(3)
Consists of payments made to GLPI
and VICI (referred to collectively as our “REIT Landlords”) under
the Master Leases, the Perryville Lease (effective July 1, 2021),
the Meadows Lease, the Margaritaville Lease, the Greektown Lease
and the Morgantown Lease. Although we collectively refer to the
Master Leases, the Perryville Lease, the Meadows Lease, the
Margaritaville Lease, the Greektown Lease, the Morgantown Lease and
the Tropicana Lease as our “Triple Net Leases,” the rent under the
Tropicana Lease is nominal.
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
June 30,
For the six months
ended
June 30,
(in millions,
unaudited)
2022
2021
2022
2021
Revenues:
Northeast segment (1)
$
684.9
$
652.5
$
1,343.4
$
1,223.4
South segment (2)
338.6
368.2
680.0
664.1
West segment (3)
153.8
140.4
294.7
237.0
Midwest segment (4)
296.3
294.8
579.2
529.5
Interactive (5)
154.9
96.0
296.4
182.3
Other (6)
5.9
1.7
13.2
3.3
Intersegment eliminations (7)
(7.5
)
(7.8
)
(15.8
)
(18.9
)
Total revenues
$
1,626.9
$
1,545.8
$
3,191.1
$
2,820.7
Adjusted EBITDAR:
Northeast segment (1)
$
214.4
$
231.6
$
419.6
$
424.8
South segment (2)
143.3
177.1
289.8
311.0
West segment (3)
59.7
61.4
110.9
96.6
Midwest segment (4)
131.3
142.2
256.8
248.2
Interactive (5)
(20.8
)
1.2
(30.8
)
2.5
Other (6)
(23.4
)
(26.9
)
(47.1
)
(49.5
)
Total Adjusted EBITDAR (8)
$
504.5
$
586.6
$
999.2
$
1,033.6
(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 (opened December 22,
2021), Hollywood Casino at PENN National Race Course, Hollywood
Casino Perryville (acquired July 1, 2021), Hollywood Casino Toledo,
Hollywood Casino York (opened August 12, 2021), Hollywood Gaming at
Dayton Raceway, Hollywood Gaming at Mahoning Valley Race Course,
Marquee by PENN, Hollywood Casino at Meadows Racetrack, and
Plainridge Park Casino.
(2)
The South segment consists of the
following properties: 1st Jackpot Casino, Ameristar Vicksburg,
Boomtown Biloxi, Boomtown Bossier City, Boomtown New Orleans,
Hollywood Casino Gulf Coast, Hollywood Casino Tunica, L’Auberge
Baton Rouge, L’Auberge Lake Charles, and Margaritaville Resort
Casino.
(3)
The West segment consists of the
following properties: Ameristar Black Hawk, Cactus Petes and
Horseshu, M Resort, Tropicana Las Vegas Hotel and Casino, and Zia
Park Casino.
(4)
The Midwest segment consists of
the following properties: Ameristar Council Bluffs, Argosy Casino
Alton, Argosy Casino Riverside, Hollywood Casino Aurora, Hollywood
Casino Joliet, our 50% investment in Kansas Entertainment, 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 iCasino and online sports betting operations, management
of retail sports betting, media, and our proportionate share of
earnings attributable to our equity method investment in Barstool
Sports, Inc. (“Barstool Sports”). Interactive revenues are
inclusive of a tax gross-up of $55.4 million and $105.7 million for
the three and six months ended June 30, 2022, respectively, as
compared to $46.0 million and $85.5 million for the three and six
months ended June 30, 2021, 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 Parks (the remaining 50% was acquired by PENN on August
1, 2021), the Company’s JV interests in Freehold Raceway and our
management contract for Retama Park Racetrack. Expenses incurred
for corporate and shared services activities that are directly
attributable to a property or are otherwise incurred to support a
property are allocated to each property. The Other category also
includes corporate overhead costs, which consist of certain
expenses, such as: payroll, professional fees, travel expenses and
other general and administrative expenses that do not directly
relate to or have not otherwise been allocated to a property.
(7)
Primarily represents the
elimination of intersegment revenues associated with our
internally-branded retail sportsbooks, which are operated by PENN
Interactive.
(8)
As noted within the “Non-GAAP
Financial Measures” section below, Adjusted EBITDAR is presented on
a consolidated basis outside the financial statements solely as a
valuation metric or for reconciliation purposes.
PENN ENTERTAINMENT, INC. AND
SUBSIDIARIES
Reconciliation of Comparable
GAAP Financial Measure to Adjusted EBITDA,
Adjusted EBITDAR, and Adjusted
EBITDAR Margin
For the three months
ended
June 30,
For the six months
ended
June 30,
(in millions,
unaudited)
2022
2021
2022
2021
Net income
$
26.1
$
198.7
$
77.7
$
289.6
Income tax expense
56.3
53.1
103.9
73.7
Income from unconsolidated affiliates
(1.8
)
(9.1
)
(10.5
)
(18.7
)
Interest expense, net
193.6
138.0
354.4
273.7
Other (income) expenses
28.2
(2.8
)
68.9
(23.9
)
Operating income
302.4
377.9
594.4
594.4
Stock-based compensation
14.5
9.2
31.5
13.4
Cash-settled stock-based awards
variance
(9.5
)
(12.4
)
(12.4
)
9.1
Loss (gain) on disposal of assets
7.3
(0.1
)
7.2
(0.2
)
Contingent purchase price
(0.9
)
1.2
(1.0
)
1.3
Pre-opening expenses (1)
2.1
(0.4
)
3.6
1.2
Depreciation and amortization
150.3
81.9
268.5
163.2
Insurance recoveries, net of deductible
charges
—
—
(8.8
)
—
Income from unconsolidated affiliates
1.8
9.1
10.5
18.7
Non-operating items of equity method
investments (2)
0.3
1.4
2.1
3.0
Other expenses (1) (3)
8.2
2.3
15.5
2.6
Adjusted EBITDA
476.5
470.1
911.1
806.7
Rent expense associated with triple net
operating leases
28.0
116.5
88.1
226.9
Adjusted EBITDAR
$
504.5
$
586.6
$
999.2
$
1,033.6
Net income margin
1.6
%
12.9
%
2.4
%
10.3
%
Adjusted EBITDAR margin
31.0
%
37.9
%
31.3
%
36.6
%
(1)
During the first quarter of 2021,
acquisition costs were included within pre-opening and acquisition
costs. Beginning with the quarter ended June 30, 2021, acquisition
costs are presented as part of other expenses.
(2)
Consists principally of interest
expense, net, income taxes, depreciation and amortization, and
stock-based compensation expense associated with Barstool Sports
and our Kansas Entertainment, LLC joint venture. We record our
portion of Barstool Sports’ net income or loss, including
adjustments to arrive at Adjusted EBITDAR, one quarter in
arrears.
(3)
Consists of non-recurring
acquisition and transaction costs, and finance transformation costs
associated with the implementation of our new Enterprise Resource
Management system.
PENN ENTERTAINMENT, INC. AND
SUBSIDIARIES
Consolidated Statements of
Operations
For the three months
ended
June 30,
For the six months
ended
June 30,
(in millions,
except per share data, unaudited)
2022
2021
2022
2021
Revenues
Gaming
$
1,325.6
$
1,305.5
$
2,616.8
$
2,387.5
Food, beverage, hotel and other
301.3
240.3
574.3
433.2
Total revenues
1,626.9
1,545.8
3,191.1
2,820.7
Operating expenses
Gaming
713.6
620.9
1,400.2
1,148.7
Food, beverage, hotel and other
186.8
148.6
358.7
271.7
General and administrative
273.8
316.5
569.3
642.7
Depreciation and amortization
150.3
81.9
268.5
163.2
Total operating expenses
1,324.5
1,167.9
2,596.7
2,226.3
Operating income
302.4
377.9
594.4
594.4
Other income (expenses)
Interest expense, net
(193.6
)
(138.0
)
(354.4
)
(273.7
)
Income from unconsolidated affiliates
1.8
9.1
10.5
18.7
Other
(28.2
)
2.8
(68.9
)
23.9
Total other expenses
(220.0
)
(126.1
)
(412.8
)
(231.1
)
Income before income taxes
82.4
251.8
181.6
363.3
Income tax expense
(56.3
)
(53.1
)
(103.9
)
(73.7
)
Net income
26.1
198.7
77.7
289.6
Less: Net loss attributable to
non-controlling interest
—
—
0.1
0.1
Net income attributable to PENN
Entertainment
$
26.1
$
198.7
$
77.8
$
289.7
Earnings per share:
Basic earnings per share
$
0.16
$
1.27
$
0.47
$
1.85
Diluted earnings per share
$
0.15
$
1.17
$
0.45
$
1.72
Weighted-average common shares
outstanding—basic
164.8
156.0
166.5
155.8
Weighted-average common shares
outstanding—diluted
180.2
172.7
182.3
172.8
Selected Financial
Information
Balance Sheet Data
(in millions,
unaudited)
June 30, 2022
December 31, 2021
Cash and cash equivalents
$
1,708.3
$
1,863.9
Bank debt
$
1,550.0
$
1,563.7
Notes (1)
1,130.5
1,130.5
Other long-term obligations (2)
46.8
55.9
Total traditional debt
2,727.3
2,750.1
Financing obligation (3)
103.3
90.4
Less: Debt discounts and debt issuance
costs (4)
(44.4
)
(103.7
)
$
2,786.2
$
2,736.8
Total traditional debt
$
2,727.3
$
2,750.1
Less: Cash and cash equivalents
(1,708.3
)
(1,863.9
)
Traditional net debt (5)
$
1,019.0
$
886.2
(1)
Inclusive of our 5.625% Notes due
2027, 4.125% Notes due 2029 and our 2.75% Convertible Notes due
2026.
(2)
Other long-term obligations as of
June 30, 2022 primarily includes $36.1 million related to
relocation fees due for both Hollywood Gaming at Dayton Raceway and
Hollywood Gaming at Mahoning Valley Race Course, and $10.7 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)
On January 1, 2022, the Company
adopted ASU 2020-06, which resulted in a net $71.7 million
reclassification of the equity component originally recognized as a
debt discount under the previously bifurcated cash conversion
feature of the 2.75% convertible senior notes due May 2026. Under
ASU 2020-06, bifurcation for a cash conversion feature is no longer
permitted. Additionally, we incurred debt discounts and debt
issuance costs due to the May 2022 refinancing of our Senior
Secured Credit Facilities.
(5)
Traditional net debt in the table
above is calculated as “Total traditional debt,” which is the
principal amount of debt outstanding (excludes the financing
obligation associated with cash proceeds received and non-cash
interest on certain claims of which the principal repayment is
contingent) less “Cash and cash equivalents.” 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.
Cash Flow Data
The table below summarizes certain cash expenditures incurred by
the Company.
For the three months
ended June 30,
For the six months
ended June 30,
(in millions,
unaudited)
2022
2021
2022
2021
Cash payments to our REIT Landlords under
Triple Net Leases
$
231.8
$
229.1
$
461.1
$
455.1
Cash payments related to income taxes,
net
$
44.5
$
36.5
$
45.5
$
27.7
Cash paid for interest on traditional
debt
$
17.5
$
17.5
$
48.3
$
43.3
Capital expenditures
$
60.0
$
24.2
$
125.6
$
39.0
Non-GAAP Financial Measures
The Non-GAAP Financial Measures used in this press release
include Adjusted EBITDA, Adjusted EBITDAR, and Adjusted EBITDAR
margin. These non-GAAP financial measures should not be considered
a substitute for, nor superior to, financial results and measures
determined or calculated in accordance with GAAP.
We define Adjusted EBITDA as earnings before interest expense,
net; income taxes; depreciation and amortization; stock-based
compensation; debt extinguishment and financing charges (which are
included in “other (income) expenses”); impairment losses;
insurance recoveries, net of deductible charges; changes in the
estimated fair value of our contingent purchase price obligations;
gain or loss on disposal of assets; the difference between budget
and actual expense for cash-settled stock-based awards; pre-opening
expenses; and other. Adjusted EBITDA is inclusive of income or loss
from unconsolidated affiliates, with our share of non-operating
items (such as interest expense, net; income taxes; depreciation
and amortization; and stock-based compensation expense) added back
for Barstool Sports, Inc. (“Barstool Sports”) and our Kansas
Entertainment, LLC joint venture. Adjusted EBITDA is inclusive of
rent expense associated with our triple net operating leases (the
operating lease components contained within our triple net master
lease dated November 1, 2013 with Gaming and Leisure Properties,
Inc. (Nasdaq: GLPI) (“GLPI”) and the triple net master lease
assumed in connection with our acquisition of Pinnacle
Entertainment, Inc., our individual triple net leases with GLPI for
the real estate assets used in the operations of Tropicana Las
Vegas Hotel and Casino, Inc. and Hollywood Casino at Meadows
Racetrack, and our individual triple net leases with VICI
Properties Inc. (NYSE: VICI) (“VICI”) for the real estate assets
used in the operations of Margaritaville Casino Resort and
Hollywood Casino at Greektown). Although Adjusted EBITDA includes
rent expense associated with our triple net operating leases, we
believe Adjusted EBITDA is useful as a supplemental measure in
evaluating the performance of our consolidated results of
operations.
Adjusted EBITDA has economic substance because it is used by
management as a performance measure to analyze the performance of
our business, and is especially relevant in evaluating large,
long-lived casino-hotel projects because it provides a perspective
on the current effects of operating decisions separated from the
substantial non-operational depreciation charges and financing
costs of such projects. We present Adjusted EBITDA because it is
used by some investors and creditors as an indicator of the
strength and performance of ongoing business operations, including
our ability to service debt, and to fund capital expenditures,
acquisitions and operations. These calculations are commonly used
as a basis for investors, analysts and credit rating agencies to
evaluate and compare operating performance and value companies
within our industry. In order to view the operations of their
casinos on a more stand-alone basis, gaming companies, including
us, have historically excluded from their Adjusted EBITDA
calculations of certain corporate expenses that do not relate to
the management of specific casino properties. However, Adjusted
EBITDA is not a measure of performance or liquidity calculated in
accordance with GAAP. Adjusted EBITDA information is presented as a
supplemental disclosure, as management believes that it is a
commonly used measure of performance in the gaming industry and
that it is considered by many to be a key indicator of the
Company’s operating results.
We define Adjusted EBITDAR as Adjusted EBITDA (as defined above)
plus rent expense associated with triple net operating leases
(which is a normal, recurring cash operating expense necessary to
operate our business). Adjusted EBITDAR is presented on a
consolidated basis outside the financial statements solely as a
valuation metric. Management believes that Adjusted EBITDAR is an
additional metric traditionally used by analysts in valuing gaming
companies subject to triple net leases since it eliminates the
effects of variability in leasing methods and capital structures.
This metric is included as supplemental disclosure because (i) we
believe Adjusted EBITDAR is traditionally used by gaming operator
analysts and investors to determine the equity value of gaming
operators and (ii) Adjusted EBITDAR is one of the metrics used by
other financial analysts in valuing our business. We believe
Adjusted EBITDAR is useful for equity valuation purposes because
(i) its calculation isolates the effects of financing real estate;
and (ii) using a multiple of Adjusted EBITDAR to calculate
enterprise value allows for an adjustment to the balance sheet to
recognize estimated liabilities arising from operating leases
related to real estate. However, Adjusted EBITDAR when presented on
a consolidated basis is not a financial measure in accordance with
GAAP, and should not be viewed as a measure of overall operating
performance or considered in isolation or as an alternative to net
income because it excludes the rent expense associated with our
triple net operating leases and is provided for the limited
purposes referenced herein. Adjusted EBITDAR margin is defined as
Adjusted EBITDAR on a consolidated basis (as defined above) divided
by revenues on a consolidated basis. Adjusted EBITDAR margin is
presented on a consolidated basis outside the financial statements
solely as a valuation metric.
Each of these non-GAAP financial measures is not calculated in
the same manner by all companies and, accordingly, may not be an
appropriate measure of comparing performance among different
companies. See the table above, which presents reconciliations of
these measures to the GAAP equivalent financial measures.
Management Presentation, Conference Call, Webcast and Replay
Details
PENN is hosting a conference call and simultaneous webcast at
9:00 am ET today, both of which are open to the general public.
During the call, management will review an earnings presentation
that can be accessed at
https://pennnationalgaming.gcs-web.com/events-and-presentations/presentations.
The conference call number is 415-226-5361; please call five
minutes in advance to ensure that you are connected prior to the
presentation. Interested parties may also access the live call at
www.pngaming.com; allow 15 minutes to register and download and
install any necessary software. Questions and answers will be
reserved for call-in analysts and investors. A replay of the call
can be accessed for thirty days at www.pngaming.com.
This press release, which includes financial information to be
discussed by management during the conference call and disclosure
and reconciliation of non-GAAP financial measures, is available on
the Company’s web site, www.pngaming.com, in the “Investors”
section (select link for “Press Releases”).
About PENN Entertainment
PENN Entertainment, Inc. (Nasdaq: PENN) is North America’s
leading provider of integrated entertainment, sports content and
casino gaming experiences. A member of the S&P 500®, PENN
operates 44 properties in 20 states, online sports betting in 13
jurisdictions and iCasino in five under a portfolio of
well-recognized brands including Hollywood Casino®, L’Auberge®,
Barstool Sportsbook® and theScore Bet®. PENN’s highly
differentiated strategy, which is focused on organic cross-sell
opportunities, is reinforced by its investments in owned
technology, including a state-of-the-art media and betting platform
and an in-house iCasino content studio. The Company’s portfolio is
further bolstered by its industry-leading mychoice customer
loyalty program, which offers its over 26 million members a unique
set of rewards and experiences across business channels. PENN is
deeply committed to fostering a culture that welcomes a diverse set
of customers and dedicated team members. The Company has been
consistently ranked in the top two as “Employer of First Choice”
over the last nine years in the Bristol Associates-Spectrum
Gaming’s Executive Satisfaction Survey. In addition, as a
long-standing good corporate citizen, PENN is also committed to
being a trusted and valued member of its communities and a
responsible steward of our finite natural resources.
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 using 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: the
Company’s expectations of, and guidance regarding, future results
of operations and financial condition, including with respect to
its 2022 revenue and Adjusted EBITDAR guidance ranges; the
assumptions provided regarding the guidance, including the scale
and timing of the Company’s product and technology investments; the
Company’s anticipated share repurchases; the Company’s expectations
regarding results, and the impact of competition, in online sports
betting, iGaming and retail/mobile sportsbooks; the Company’s
development and launch of its Interactive segment's products in new
jurisdictions and enhancements to existing Interactive segment
products, including content for the Barstool iCasino app and the
migration of the Barstool Sportsbook into both theScore’s player
account management system and risk and trading platform; the
Company's expectations regarding its future investments in Barstool
Sports and the future success of its products; the Company's
expectations with respect to the integration and synergies related
to the Company’s integration of Barstool Sports; 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
upcoming Barstool branded sportsbook launches; and the timing, cost
and expected impact of planned capital expenditures on the
Company's results of operations.
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
conditions 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; and additional risks and
uncertainties described in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2021, 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220804005347/en/
Felicia Hendrix Chief Financial Officer PENN Entertainment
610-373-2400
Joseph N. Jaffoni, Richard Land JCIR 212-835-8500 or
penn@jcir.com
PENN Entertainment (NASDAQ:PENN)
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