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PENN Entertainment reports Q4 results

2 Feb 2023

(PRESS RELEASE) -- PENN Entertainment, Inc. today reported financial results for the three months and year ended 31 December 2022.

2022 Fourth Quarter Highlights:
  • Revenues of $1.6 billion, an increase of 0.8% year-over-year
  • Net income of $20.8 million and net income margin of 1.3%, as compared to net income of $44.8 million and net income margin of 2.8% in the prior year
  • Adjusted EBITDAR of $468.3 million, a decrease of 2.5% year-over-year
  • Adjusted EBITDA of $438.3 million an increase of 18.8% year-over-year
  • Adjusted EBITDAR margins of 29.5%, a decline of 110bps year-over-year
  • Omni-Channel, Tech-Forward Engagement Delivering Tangible Benefits
  • Strong Conclusion to Fourth Quarter Retail Operations; Momentum Continues Into January
  • Interactive Segment Achieves Profitable Quarter
  • Repurchased $91.0 million of Common Stock at an Average Price of $31.69 Under the February 2022 Share Repurchase Authorization
  • Initiates 2023 Guidance – Full Year Revenue Range of $6.15 billion to $6.58 billion and Adjusted EBITDAR Range of $1.875 billion to $2.0 billion

For further information, the Company has posted a presentation to its website regarding the fourth quarter highlights and accomplishments.

“2022 was a solid year for PENN despite ongoing macroeconomic headwinds,” said Jay Snowden, Chief Executive Officer and President. “I’m proud of PENN’s numerous financial and operational achievements in the past year as well as our continued progress on the ESG front. We remained focused on executing our leading omni-channel strategy, which drove database growth and further engagement with our expanding 21-44 year old cohort. Fourth quarter revenues of $1.6 billion and Adjusted EBITDAR of $468.3 million were impacted by severe weather in certain parts of the country in December. Importantly, we also achieved profitability in our Interactive segment notwithstanding an unfavorable sports betting outcome in the World Series. The quarter ended on a high note with strong performance between Christmas and New Year’s across the portfolio, which has continued through January. In 2023, we have numerous near-term growth opportunities, including the transition of the Barstool Sportsbook to our own proprietary technology platform in the U.S. this summer. For 2023, we are guiding to a revenue range of $6.15 billion to $6.58 billion and an Adjusted EBITDAR range of $1.875 billion to $2.0 billion. This outlook reflects our momentum in both our Retail and Interactive segments and the potential for further economic headwinds as well as increased supply in a few of our markets.

Omni-Channel, Tech-Forward Engagement Delivering Tangible Benefits

Property level highlights:
  • Revenues of $1.4 billion
  • Adjusted EBITDAR of $487.1 million
  • Adjusted EBITDAR margins of 35.2%

“Our focused marketing strategy, diverse product offerings and technology enhancements generated approximately 1.3 million new rated customers last year in our mychoice database,” said Snowden. “Approximately 300,000 of these guests signed up in the fourth quarter, representing a 15% year-over-year increase. Over 50% of the database growth this quarter came from our online offerings, and our emphasis on delivering high-quality customer experiences has led to a 25% increase in guests who engage with us across multiple channels. In addition, our 21-44 year-old demographic has steadily grown their share of total retail theoretical to 18.5% by year end. We also saw positive momentum in our mychoice app downloads and the adoption of our industry leading cashless, cardless and contactless technology (“3C’s”), which is now deployed at twenty-one properties representing approximately 70% of our retail EBITDAR. Our guests who use the digital wallet enjoy a better guest experience and demonstrate superior loyalty through increased visitation, time on device, and total theoretical.

Interactive Segment Achieves Profitable Quarter

Interactive Segment highlights:
  • Revenues of $208.0 million (including tax gross up of $82.9 million)
  • Adjusted EBITDA of $5.2 million

“Our Interactive segment generated positive Adjusted EBITDA for the quarter inclusive of expenses related to online sports betting launches in Maryland and Ohio and unfavorable hold driven by VVIP play,” said Snowden. “Following our successful playbook in Kansas and Maryland, our omni-channel marketing approach in Ohio led to one of our strongest launches to date of our Barstool Sportsbook. Our deep customer database, retail footprint, and powerful Barstool Sports marketing engine contributed to a record number of first-time depositors at launch this January despite minimal external marketing expense. Meanwhile, in Ontario, theScore Bet continues to experience strong momentum, achieving record gaming revenue in December for both sports betting and iCasino. The transition to our proprietary technology platform last summer has resulted in higher customer engagement and a noticeable increase in hold rates. Greater control over our product offering and advanced promotional capabilities is contributing to encouraging retention metrics and cross-sell rates to iCasino. Looking ahead, we remain on-track to migrate the Barstool Sportsbook and Casino to our proprietary technology solution this summer. In addition to expected cost synergies, our Ontario success suggests that there is meaningful revenue potential post-migration once we are able to leverage our advanced trading and promotional tools. Finally, we are excited about our recent launch of the Barstool Sportsbook in Massachusetts at Plainridge Park Casino and are looking forward to our launch of online sports betting in March.

Compelling Media Content With New Verticals

“Despite well-known headwinds in the digital media space, theScore’s media business and Barstool Sports continue to produce impressive revenue and engagement results, driven by compelling content and an exceptional product experience,” said Snowden. “theScore’s mobile media audience is more engaged than ever with both quarterly and annual user session growth. In addition, we completed the initial integration of the Barstool Sportsbook into theScore media app in October, highlighting the benefits of our owned media strategy. We are also excited about the upcoming acquisition of the remainder of Barstool Sports, which we expect will close 17 February. Barstool achieved record revenue in 2022 while investing in and expanding into new verticals, including coverage of live sporting events such as the Barstool Invitational college basketball tournament on 11 November and the Arizona Bowl on 30 December. The combination of Barstool’s vast, loyal audience with theScore’s fully integrated media and betting platform will provide us with compelling competitive advantages and organic cross-selling opportunities.

ESG – Caring for our People, our Communities and our Planet

“During the fourth quarter, we finalized our Scope 1 and 2 greenhouse gas emissions assessment, which along with our inaugural Sustainability Accounting Standards Board (“SASB”) disclosure, will be released in April in conjunction with our upcoming FY2022 Corporate Social Responsibility Report,” said Snowden. “In addition, we completed our companywide diversity, equity, and inclusion training and will soon begin a second phase of training focused on our leadership teams. Finally, we are proud to report that PENN Interactive received ‘RG Check iGaming Accreditation’ from the Responsible Gambling Council for its online gaming operations. PENN Interactive is the first U.S. operator to undergo this accreditation process, which is widely regarded as one of the most comprehensive responsible gambling accreditation programs in the world.”

Share Repurchase Authorization Update

On 6 December 2022, the Company’s Board of Directors authorized a new $750 million share repurchase program which expires on 31 December 2025 and is incremental to the Company’s existing $750 million share repurchase program authorized in February 2022.

During the three months ended 31 December 2022, the Company repurchased 2,870,894 shares of its common stock in open market transactions for $91.0 million at an average price of $31.69 per share.

Subsequent to the year ended 31 December 2022, the Company repurchased 1,008,744 shares of its common stock at an average price of $31.20 per share for an aggregate amount of $31.5 million. The remaining availability under our February 2022 authorization was $117.8 million and $750.0 million under our December 2022 authorization as of 1 February 2023.

Liquidity Remains Strong

Total liquidity as of 31 December 2022 was $2.6 billion inclusive of $1.6 billion in cash and cash equivalents. Traditional net debt as of the end of the quarter was $1.1 billion, an increase of $189.6 million from 31 December 2021 due to a lower cash balance reflecting recent activity under our share repurchase program. Lease-adjusted net leverage as of December 31, 2022 was 4.4x compared to 4.1x as of 31 December 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 (benefit) expense, which are dependent on future events that are out of the Company’s control or that may not be reasonably predicted.
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