It appears Penn National Gaming’s long-range strategies are paying dividends.
The gaming operator took chances when it acquired a stake in the digital media company Barstool Sports and acquired theScore, the prominent Canadian sports app and technology company.
But Thursday’s investors’ call indicates Penn National’s gambits are paying dividends, as it reported record revenue of $1.56 billion and net income of $51.6 million for the first quarter of 2022.
“Disciplined organic marketing, omnichannel cross-sell, great products and owning our media strategy with our friends at Barstool Sports and theScore have led to growth in our net gaming revenue market share results in the first quarter,” said Penn National CEO and President Jay Snowden during the call. “We believe our differentiated approach will benefit us going forward.”
Wall Street analysts reacted with cautious optimism to Penn National’s results.
“The better-than-expected results should be modestly positive for the shares, given the recent strength in advance of the quarter,” said David Katz of Jeffries & Co. in an analyst’s statement. “Penn presents a range of dynamics, between the presently strong land-based business, the early-stage digital business, and the perhaps less clearly defined media opportunities. Defining the opportunity set for the latter two remains the pivotal matter for the shares.”
In a statement, J. P. Morgan analyst Joe Greff cited the growth of Penn National’s database across all tiers by 14%, aided by “recent online and retail sportsbook offerings and the recently opened Hollywood Casino York and Morgantown casinos in Pennsylvania. We don’t think Penn is seeing any softening in the lower end of its database (the hot topic of late).”
Greff also cited regional revenue upside at Penn National properties in the Midwest (13% above), West (12% above), and South (4% above), while Northeast was 2% below, as meeting or slightly exceeding analysts’ consensus projections.
“Revenues of $1.56 billion, EBITDAR of $494.7 million, and margins of 31.6% compare favorably to consensus’ $1.52 billion, $467 million, and 31%, and our $1.5 billion, $470 million, and 31.4% estimates, respectively,” Greff wrote in the statement.
Penn National Executive Vice President-Operations Todd George noted that the company is starting to see more growth at its regional properties as the spring and summer months approach.
“We’re seeing different growth patterns than what some of the industry has seen,” George said. “But really, we couldn’t be happier with what we’ve seen right up to into May.”
Revenue for Penn National’s interactive segments was $141.5 million with an adjusted EBITDA loss of $10 million, with more losses expected due to anticipated investments in its interactive segments. Snowden said Penn National expects to make a second $12.5 million installment later this month in support of sports betting initiatives being considered in California.
“While not originally contemplated in our interactive statement guidance for 2022, we remain on track, however, to generate an EBITDA loss of approximately $50 million from this segment in 2022 as we continue to scale operations and infrastructure,” Snowden said. “Following our first-quarter results, we anticipate the most significant losses will occur in the second and third quarters as we continue to ramp in our new markets and prepare our product and tech stack for the football season. The fourth quarter will likely be closer to breaking even.”
Snowden did put to rest any rumors about Penn National’s interest in properties reportedly available on the Las Vegas Strip.
“There’s not much interest,” Snowden said. “We’re not kicking the tires on anything right now.”