Additional casinos boost Penn National revenues; company continuing its ‘transformational’ efforts

February 6, 2020 5:55 PM
  • Howard Stutz, CDC Gaming Reports
February 6, 2020 5:55 PM
  • Howard Stutz, CDC Gaming Reports

Penn National Gaming, coming off a week-long high after receiving investment community praise for its $163 million deal with Barstool Sports, said Thursday it will continue the companywide transitioning efforts that began last year.

The regional casino giant said Monday in reporting fourth quarter results it will open two additional casinos in Pennsylvania in late 2020 – the company currently operates 41 gaming properties in 19 states – and roll out its sports betting initiatives with Barstool.

“We see meaningful cross-selling opportunities and would expect recently enacted sports betting legislation in states such as Colorado and Michigan to positively impact our brick and mortar business,” Penn National CEO Jay Snowden said in a statement. “We anticipate being live with sports betting in these markets as soon as we receive all necessary regulatory approvals.”

In the quarter that ended Dec. 31, Penn National its revenues of $1.3 billion were relatively flat compared to a year ago. The company said it had net revenues for the year of $5.3 billion, a roughly 47 percent increase due primarily to the addition last year of 12 casinos formerly owned by Pinnacle Entertainment and the acquisitions of Margaritaville Bossier City in Louisiana and Greektown in Detroit.

“This past year has been transformational for Penn National,” Snowden said.

On a conference call with analysts, Snowden said the company is still looking to sell the Tropicana Las Vegas, which Penn acquired in 2015. The company also owns the off-Strip M Resort, which is located at the far south end of the Las Vegas Valley in Henderson.

In the quarter, cash flow grew 6.9% to $399.4 million, but the company reported a net loss of $92.0 million due to impairment losses. Penn paid total lease payments in the quarter for its properties of $224.4 million to the real estate investment trusts that own the bulk of the company’s casinos. For the year, Penn paid $869.8 million in rent.

Snowden, who took over as CEO Jan. 1 from the retired Tim Wilmott, focused his remarks on the company’s future endeavors. He said sports betting, which includes both retail sportsbooks and online, will fuel increase business throughout the company’s properties.  Penn currently operates 14 sportsbooks in six states and will launch this year in four additional states.

“The company sees meaningful cross-selling opportunities and anticipates having an in-house team at Penn Interactive manage all retail sports books by the end of the first quarter,” Macquarie Securities gaming analyst Chad Beynon told investors.

Snowden said a company analysis showed sports betting guests visited the company’s properties more frequently and contributed to higher revenues in 2019 than they did in 2018.

“At Hollywood Casino Lawrenceburg (Indiana), for instance, we saw a significant increase in gross gaming revenues, particularly driven by the table games segment,” Snowden said. “Likewise, our food and beverage business benefited substantially from the introduction of sports betting at this property.”

Following the Barstool announcement, Penn’s stock price reached 52-week highs. The company’s shares closed Thursday at $34.90 on the Nasdaq, up $2.63 or 8.15%.

Deutsche Bank gaming analyst Carlo Santarelli told investors they may be betting ahead of themselves in evaluating Penn’s sports betting deal.

“While the market seemingly fixates on a sports betting business that appears a long way from generating meaningful cash flow, it appears either the market is confident Penn has put forth a very conservative 2020 outlook or core fundamentals have taken a backseat to the story around sports betting and Barstool,” Santarelli said.

Snowden said the company expects to open its casino projects in its home state late this year, the $111 million Hollywood Casino Morgantown and the $120 million Hollywood Casino York.

In a statement, Snowden said Penn National will focus reducing its long-term debt of $2.385 billion.

“We continue to view Penn as a best-in-class regional gaming operator and believe a commitment to further deleveraging the balance sheet in the near term should directly accrue to the benefit of the underlying share price,” Stifel gaming analyst Steve Wieczynski told investors.

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.