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US – Penn National highlights ‘pent-up’ demand and internet growth

By - 7 August 2020

Penn National Gaming CEO Jay Snowden pointed to ‘encouraging trends’ in recent weeks for the company, which operates 41 properties in 19 states, highlighting ‘pent –up’ demand in May and June and growth in the company’s online gaming offering.

Jay Snowden, President and Chief Executive Officer, commented: “Working tirelessly alongside our regulators and public health officials, have successfully reopened all but two of our casino properties as of today (Zia Park and Tropicana Las Vegas). The tremendous resilience of our team, along with the steps we’ve taken to strengthen our financial position and achieve ongoing operational efficiencies, have helped ensure that Penn National remains well-positioned for near- and long-term success.

“Despite starting the second quarter with our entire property portfolio closed due to the COVID-19 pandemic, we ended the quarter in a significantly improved financial position as a result of continued mitigation efforts that contributed to significant margin improvement, a successful capital raise, and very strong financial performance at our properties since reopening,” he added. “The outstanding results to date at our reopened properties highlight our unique strategic position as a best in class operator of market leading regional properties, which have rebounded more quickly than casinos in destination markets. In addition, our geographic diversification across 19 states — with no more than 15 per cent of our revenues being derived from any single state — has proven to be a significant benefit as states have reopened casinos on a staggered basis. Although visitation has yet to return to pre-COVID levels, in large part due to state mandated capacity restrictions and limited amenities, spend per visit has been notably strong, resulting in better than expected revenues.”

For the second quarter ended June 30, 2020, Penn National generated revenues of $305.5m and Adjusted EBITDAR of $24.5m. Revenues for reopened properties from the applicable date of reopening through June 30th decreased six per cent compared to the prior year period, while adjusted property EBITDAR at reopened properties increased 33 per cent and adjusted property EBITDAR margins expanded by over 1,300 basis points from the comparable prior year period. Reflecting this strong performance and our recent capital raise, we ended the quarter with over $1.2bn of cash.

“While May and June results may have benefited in part from pent-up demand, we continue to be highly encouraged by revenue and EBITDAR trends in July and early August, despite the continuation of safety protocols, including capacity restrictions and social distancing mandates,” added Mr. Snowden. “We anticipate that a meaningful portion of the margin improvements realized since our properties reopened will be recurring as we continue to make fundamental changes to improve our offerings and efficiencies across our organization. For example, we are working closely with regulators in several jurisdictions to introduce cashless, cardless, and contactless technology to our casinos, which we believe will increase safety and provide improved service while delivering additional efficiencies and accountability. Our cashless and contactless initiatives will also bring our property technology in line with other industries, while helping to attract a younger customer to our properties. We look forward to reopening the remainder of our properties and to the easing of restrictions at our reopened properties when it is safe to do so. We also anticipate resuming construction later this year on both of our Category 4 projects in Pennsylvania, which we expect will open in the second half of 2021.”

Mr. Snowden continued: “Over the last few months we have made significant progress on the development of the Barstool Sportsbook mobile app and remain on schedule to launch what we believe will be a best-in-class sports betting product in September. We currently anticipate launching the app in Pennsylvania with additional states to follow throughout Q4-20 and Q1-21. We have already seen very high levels of interest in the Barstool Sportsbook app from the Barstool audience as well as on a wide range of social media platforms, and we are extremely excited about Barstool’s plans to introduce the app to their growing and loyal audience. Underscoring the strength of its brand and following, Barstool has continued its positive momentum through the second quarter, recording the highest number of podcast downloads in the company’s history in June, making Barstool one of the top 4 largest podcast networks in the country, despite the lack of live sports. In addition, we are very pleased to report that we now have official data access agreements in place with the NFL, MLB and the NBA, which will allow us to provide an exciting variety of in-game betting opportunities for our sports betting customers.

“Our Hollywood Casino branded real-money iCasino product in Pennsylvania continues to grow rapidly, with quarterly sequential revenue growth of 108 per cent in the second quarter. By leveraging our deep, proprietary casino database, our iCasino product has achieved over 10 per cent share of the highly competitive Pennsylvania market while delivering strong EBITDA margins. Our demonstrated ability to convert our casino database, together with our powerful partnership with Barstool Sports, should provide significant organic customer acquisition and cross-sell opportunities. As a result, we believe the Company is poised to capture an outsized share of the high growth US sports betting and online casino markets and achieve market-leading profitability.

“Finally, we are excited about the third-quarter launch of our all new mychoice social casino product, which we believe will serve as an exciting interactive gaming experience for our guests, as well as an important customer acquisition tool in states where we have not yet launched iCasino.”

Mr. Snowden concluded: “While we recognise that it may be several months or longer before we’re able to resume full operations at our properties, we are confident that our team of best-in-class operators will continue to find creative ways to maximise property performance. Our goal is to come out of this pandemic as a stronger company, and we believe the operational changes we have implemented, together with our strengthened balance sheet and unique omni-channel strategy supercharged by Barstool Sports, position us to achieve this goal and drive enhanced shareholder returns.”

Caption: Penn’s Tropicana Las Vegas remains shut

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