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Wyomissing, Pa. – Penn Entertainment, the Wyomissing, Berks County-based operator of racetracks, casinos and interactive wagering systems, reported first-quarter earnings that again missed analysts’ expectations. . Earnings, on the other hand, beat the Zacks Consensus Estimate again.
That hasn’t been good enough for Wall Street, with shares of Penn Entertainment up about 1.4 percent since the start of the year, compared with a 6.5 percent gain for the S&P, according to Yahoo Finance.
The company issued a top-line view saying that strong performance in its Northeast segment offset weaker year-over-year performance in its Southern segment, while margins were hit by about 100 basis points and to a lesser extent by revenue shifts to higher tax jurisdictions to resolve certain litigation matters.
On the financial front, revenue for the quarter was $1.673 billion, an increase of 7.0% from the first quarter 2022 revenue of $1.564 billion. Net income was $514 million, an 897% increase from $52 million in the first quarter of 2022. Adjusted EBITDAR (earnings before interest, taxes, depreciation, amortization, and rental) in 2023 is $478 million, down from $498 in 2022.
Penn defines Adjusted EBITDAR as Adjusted EBITDA plus rental expense associated with triple net operating leases, which are normal, recurring cash operating expenses necessary to operate its business. Adjusted EBITDA has economic substance, the company said, because it is used by management as a performance metric to analyze its business performance, and is especially important when evaluating large, long-term casino-hotel projects because it provides perspective on current operating decisions. The impact is separate from the substantial non-operating depreciation charge and financing costs of such projects.
Commenting on the results, CEO and President Jay Snowden declared, “We are pleased to report that Penn delivered another solid quarter amidst a still uncertain macroeconomic environment.
As previously announced, we completed the acquisition of the remainder of Barstool Sports Inc. on February 17th. As a result, we are raising our previous 2023 revenue guidance range to $6.37 billion to $6.81 billion to reflect the Barstool acquisition, which is neutral to adjusted EBITDAR.
“Additionally, our proprietary sportsbook and iCasino technology platforms in Ontario continue to drive compelling results and market share. As a result, our previous 2023 Adjusted EBITDAR guidance range of $1.875 billion to $2.0 billion remains unchanged .”
segment results
Over the years, Penn Entertainment has grown into a broad multi-brand company. To simplify reporting and provide clarity, companies report results in two segments: Retail and Engagement.
retail
The retail performance was driven by growth in the older population, the company said. VIP business remained strong at its properties, driven by increased guest numbers and frequency of visits. Penn’s database added more than 350,000 members in the first quarter, a 13% year-over-year increase, with 63% of the database growth coming from its online offering. Highlights for the first quarter were revenue of $1.44 billion; adjusted EBITDAR of $511.2 million and an adjusted EBITDAR margin of 35.5%.
interactive
During the first quarter, Penn Entertainment launched online sportsbooks in Ohio and Massachusetts. The company said its proprietary technology platform continues to drive results in Ontario. Segment highlights included revenue of $233.5 million (including total taxes of $92.3 million) and an adjusted EBITDA loss of $5.7 million.
According to Snowden, “Revenue in the Interactive segment was up year-over-year in the quarter due in part to our acquisition of Barstool Sports, while our EBITDA results reflected our January and February releases and low holdings in both states. invest.
“Our mobile launch in Ohio on January 1 and in Massachusetts on March 10 highlights the strength of our organic omni-channel customer acquisition strategy as we leverage our PENN Play database and Barstool Sports audience to drive online and the incremental revenue characteristics of retail.”
Additionally, as the customer experience improves, the company hopes to be better positioned to drive higher loyalty and retention while providing seamless cross-play across its omnichannel ecosystem. Since its initial investment in February 2020, Barstool has more than doubled its annual revenue by delivering relevant and entertaining content to a loyal and growing audience, Penn said.
Looking ahead, Snowden said, “As we refine our cross-sell strategy and pursue new growth channels, we expect to unlock greater value from the Barstool audience. Likewise, theScore’s media business achieved positive results in both revenue and engagement metrics.” delivered strong results, with total user sessions up 22% year-over-year.”
Liquidity remains strong
Penn claimed to have $2.3 billion in total liquidity as of March 31, 2023, including $1.3 billion in cash and cash equivalents. Legacy net debt at quarter end of $1.4 billion, an increase of $302.6 million from December 31, 2022 due to a lower cash balance reflecting approximately $315.3 million of net cash paid for the acquisition of Barstool and its recent activities stock repurchase program.
Environmental, Social and Governance
Penn Entertainment claims to have achieved a number of environmental, social and governance (“ESG”) priorities over the past year. The company celebrated Black History Month with numerous events in February to drive open and meaningful conversations around diversity, equity and inclusion. It also celebrated the achievements of women in March, including hosting an International Women’s Day virtual panel discussion for team members with Jane Scaccetti and Marla Kaplowitz, two of PENN’s female board members.
Additionally, in the wake of a devastating tornado in the Rolling Fork, Mississippi area, the University of Pennsylvania reported that its Ameristar Casino Vicksburg and Hollywood Casino Tunica teams donated water, food and essentials to those in need, in addition to providing temporary housing for displaced team members.
PENN Entertainment, Inc. (Nasdaq: PENN ) is a provider of integrated entertainment, sports content and casino gaming experiences. PENN operates 44 hotels in 20 states, online sports betting in 13 jurisdictions, and iCasino under a portfolio of five well-known brands, including Hollywood Casino®, L’Auberge®, Barstool Sportsbook® and theScore Bet®.
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