Operator News
US – Penn up by seven per cent as ‘omnichannel strategy continues to drive growth’
By Phil - 7 November 2022
PENN Entertainment reported revenues of $1.6bn, an increase of 7.5 per cent year-over-year for the three ended September 30, 2022 with the company highlighting that its omnichannel strategy is continuing to ‘drive growth across the company.’
This gave net income of $123.2m and net income margin of 7.6 per cent, as compared to net income of $86.1m and net income margin of 5.7 per cent in the prior year.
Jay Snowden, Chief Executive Officer and President, announced: “We are pleased to report another solid quarter despite operating in an uncertain economic environment. PENN generated revenues of $1.6bn and Adjusted EBITDAR of $471.9m. Our strong retail results were highlighted by ongoing database growth and stable margin performance, which continued through October. Meanwhile, our successful sports betting launch in Kansas, from both a retail and online perspective, underscores the advantage of our leading omnichannel strategy. In Ontario, we are enjoying early success during our first football season while benefitting from theScore Bet’s seamless transition to our own fully-integrated, proprietary tech stack. Based on our third quarter results and our continued consistent performance, we are reiterating our 2022 revenue and Adjusted EBITDAR guidance range of $6.15bn to $6.55bn and $1.875 billion to $2bn, respectively.
“On October 10th, we announced exciting new plans to relocate our riverboat casino licenses in Aurora and Joliet, Illinois to new land-based facilities in better locations and to build a new hotel at Hollywood Columbus in Ohio and a second hotel tower at the M Resort in Henderson, Nevada,” continued Mr. Snowden. “With an overall estimated budget of approximately $850m, we expect these projects will generate strong free cash flow returns and create long-term value for our shareholders. We have the ability to access attractive financing from Gaming and Leisure Properties, Inc. (“GLPI”) (Nasdaq: GLPI) covering up to $575 million of the anticipated costs in addition to up to $50 million from the City of Aurora, which allows us the opportunity to pursue these high growth projects while preserving our cash position and leverage profile. In connection with these projects, we have entered into an agreement with GLPI to create a new master lease, with a fixed 1.5% escalator, that would include the two new facilities in Aurora and Joliet, in addition to Hollywood Columbus (OH), Hollywood Toledo (OH), the M Resort (NV), the Meadows (PA) and Hollywood Perryville (MD).
“Our omnichannel strategy continues to drive growth across the company,” commented Mr. Snowden. “We’re continuing to see strong growth in our mychoice database with year-over-year increases in rated theo across all demographic segments except for those aged 65 and over. Notably, more than half of our new mychoice members enrolled through our online offerings following the return of football season and the launch of our Kansas Sportsbook on September 1. Equally impressive is the more than 25% year-over-year increase of guests who engage with us across multiple channels. These guests demonstrate superior loyalty, play with us more frequently, and provide greater value compared to those who engage with us through a single channel. To further capture and retain this cohort, we continue to reimagine our properties with the latest gaming offerings, best in class technology, and new third-party restaurant concepts. During the third quarter, we completed our hotel remodel of all standard rooms at Hollywood Casino at Greektown, most of which were unavailable for approximately two years due to water damage and subsequent renovation. We also introduced our industry leading cashless, cardless and contactless technology in Kansas which represents our tenth property offering our 3C’s technology. Our guests that adopt the digital wallet come to our properties more often and generate greater volumes. Most recently, on October 21st, we celebrated the opening of the newest Barstool Sportsbook at L’Auberge Baton Rouge in Louisiana where we were joined by key Barstool talent, including Dave Portnoy and Dan “Big Cat” Katz.
“Our Interactive segment experienced strong year-over-year revenue and user growth in the quarter and was profitable in October. Results for the quarter included costs associated with the launch of Kansas, our first football season in Ontario and Louisiana, the $12.5m lobbying expense for the California sports betting initiative and a payment processing fee adjustment of $7.9m. Given our strong revenue growth and disciplined approach to marketing, we remain confident in our ability to deliver profitability in 2023.
“Our omnichannel approach to marketing enabled us to deliver one of our most successful sportsbook launches to date in Kansas. Our retail and online sportsbooks generated a company record of first-time deposits on a per capita basis, and over 45% of our online handle was driven by our existing mychoice database. We are also seeing tangible benefits of our integrated media ecosystem approach in Ontario, with media users contributing over 80% more gross gaming revenue on theScore Bet than non-media users. This success positions us to capture greater share in the U.S. as we completed the initial integration of the Barstool Sportsbook into theScore media app on October 19th. Furthermore, our transition in Ontario to our proprietary technology platform has exceeded our expectations by performing seamlessly with increased utilization, new betting markets, and other features. Ontario has already become our top market in North America for online sports betting and online casino. We remain on track to migrate the Barstool Sportsbook to this platform in mid-2023, after which we will begin to realize significant cost savings and improved marketing capabilities.
“We are also seeing continued iCasino momentum as we introduce additional content from third parties as well as from Penn Games Studios, which developed its first in-house multi-line slot game set to launch next month. We are particularly excited about our initial iCasino results and retention KPIs in Ontario, which highlights the advanced promotional capabilities of our player account management system that we will bring to the Barstool Casino next year.
“TheScore grew year-over-year engagement this quarter and bolstered its sports media content offering with the addition of NFL Insider Jordan Schultz. Meanwhile, Barstool Sports, Inc. continues to add new content and build its audience, including the launch of a new NBA focused podcast featuring Pat Beverley of the Los Angeles Lakers. Furthermore, the Barstool College Football Tour is breaking attendance records and creating an unrivaled pre-game environment on college campuses across the country focusing on states in which PENN has a presence. The tour recently visited Baton Rouge, home to L’Auberge Casino & Hotel Baton Rouge, in connection with the LSU-Ole Miss game, which highlights our ability to cross promote the Barstool audience to our retail offerings.
