Penn Entertainment has undergone numerous changes in the past few months, notably the termination of an agreement with ESPN in November. In December, its interactive and OSB was rebranded as ScoreBet. January saw two executives step down. Recently, three new independent board members were added, and a cooperation agreement with HG Vora Capital Management was entered into.
Despite the rather chaotic past few months, Penn Entertainment CEO Jay Snowden painted a bright outlook for the operator going forward.
“We’ve done an excellent job over the past six years of upgrading our casinos, refreshing our slot floors, and investing in non-gaming amenities, like updated hotel rooms, new retail sports books, new restaurants and entertainment venues,” Snowden said during Thursday morning’s earnings call for the fourth quarter. “In addition, our dockside to land-based growth projects are expected to meaningfully reduce our maintenance CapEx costs. Going forward with the improvements we have made to our properties, we feel comfortable with bringing our recurring maintenance CapEx levels down by $20 million and returning to near pre-COVID-level spending.”
Penn Entertainment on Thursday reported revenue of $1.4 billion for the fourth quarter. Adjusted EBITDAR was $456.4 million and segment Adjusted EBITDAR margins were 32.3%.
Snowden said Penn’s interactive segment was seeing “really, really strong” retention prior to the rebranding to ScoreBet, and that igaming, via its Hollywood standalone app, remains strong.
“Primarily driven by igaming growth, we also expect to see NGR (net gaming revenue) growth on the sports betting side, despite lower handle,” Snowden noted. “As you can imagine, we’ve taken a really, I would say, refreshed look at our entire database on the interactive side. If you look at it from a retention perspective, across the worth cohorts and the interactive database, we sort of break it down into eight different worth categories, and the top four are virtually unchanged from a retention perspective, both before the rebrand and after the rebrand, on a month-over-month basis.”
Aaron LaBerge, Penn’s Chief Technology Officer, added that “icasino is currently growing faster than 20% right now, which we’re happy about. Obviously, OSB is going to continue to go down, but … we’re going to moderate that with lower promotional expenses to improve flow through.”
Snowden mentioned that there were initial shocks to increased competition in markets and customer shifts, particularly in the Baton Rouge, New Orleans and Bossier City markets in Louisiana, and Council Bluffs in Iowa.
But Snowden said that as competitors settle in, Penn has adjusted and will compete at previous levels. He also noted that Penn’s growth projects, notably in Aurora, Illinois (Hollywood Casino Aurora) and the hotel opening at Hollywood Casino Columbus in Ohio are going to be net positives for the company.
Entering the Alberta, Canada, market also will be good for Penn.
“We expect Alberta to be a good market, reasonable tax rate, similar to Ontario, both online sports betting and online casino,” Snowden said. “There’ll be some investment that goes into that market, similar to when we launched Ontario (about $15 million, he estimated) but we would expect to have similar market share results in that market as well. The Score brand really does carry across (Canada). It’s not just specific to the province of Ontario.”
Snowden also reiterated the opposition he voiced in the third-quarter investors call to prediction markets. He noted that from a legal perspective, prediction markets are “as clear as mud.”
“You’ve got regulators and attorneys general that are suing prediction markets, and then you have the prediction markets that are suing regulators and trying to beat them to the punch,” Snowden said. “It’s obvious to anybody who’s ever been in the gambling business, and even those who aren’t, that sports betting is gambling. I don’t know how you can defend it that it’s not, and I know regulators have taken that view.
“It really puts the Penns and the MGMs and the Caesars of the world in a very awkward position. We have our land-based businesses that generate tremendous cash flow. We employ thousands and thousands of team members across the country. We’re big contributors to our communities. And those gaming licenses are the most valuable assets we have. We’re not going to put those at risk. So, when regulators say this is illegal gambling, we don’t do it.”
