WYOMISSING, Pa. – Less than two months ago, business looked pretty good for Penn National Gaming. Then, March came, and the company was dealt a bad hand.
In a statement, Jay Snowden, the Berks County-based company's president and CEO, said this about Penn National's first-quarter 2020 results:
"Penn National saw a phenomenal start to 2020, with record results in January and February. Our company was performing well ahead of guidance in every segment, driven in large part by the introduction of retail sports betting at several properties, which has served as a catalyst for both gaming and non-gaming revenue.
"We also saw a strong positive reaction, including our stock price hitting an all-time high, following the announcement of our strategic investment in Barstool Sports, which reflects our strategy to become the best-in-class omni-channel provider of retail and online gaming and sports betting entertainment," he said.
"That momentum was cut short in mid-March by the COVID-19 pandemic, which required the temporary closure of all 41 of our properties. As a result, our first quarter revenues decreased $166.5 million year-over-year, to $1.12 billion, and we incurred a net loss of $608.6 million due to $616.1 million of impairment losses."
Like many companies in these unpredictable times, Penn National has withdrawn its 2020 financial guidance.
"Our business was profoundly affected," Snowden said in speaking to analysts. "Tragically, we lost three team members, but I'm amazed every day by the performance of our people."
Snowden noted that the company has donated 45 tons of perishable food items and has opened two floors of its Greektown hotel/casino in Detroit for use by first responders.
COVID-19 mitigation efforts, resumption of operations
Cash is king, especially when you barely have any cash coming in, but Penn National said it believes it has enough on hand to keep the company running.
Penn National undertook several mitigation measures in the days following the temporary closures of its facilities to solidify the balance sheet and improve liquidity. As a result, the company finished March with $730.7 million of cash on the balance sheet, and claims its average cash burn (assuming complete closure of all properties) will be reduced to approximately $83 million per month from April through the end of the year.
The company is confident these measures will allow it to weather the temporary suspension of operations without sacrificing any of its long-term objectives.
"While we have faced unprecedented challenges in recent weeks, we are confident that the company's long-term growth strategy remains intact, supported by our differentiated omni-channel approach," Snowden said.
"Upon the reopening of our casinos, we believe Penn National is very well-positioned to resume its positive momentum," he continued. "Our geographic diversification across 19 states - with no more than 15% of our revenues being derived from any single state - should be a significant benefit as states begin to open casinos on a sequential basis. We expect our regional gaming markets to rebound sooner than destination markets by virtue of our casinos being located in suburban areas that are more easily accessible by car from key population centers."
Long-term growth strategy remains on course
Snowden said that during the mandated closures of its properties, the management team has undertaken a comprehensive reevaluation of corporate and property operating structures to improve efficiencies. Penn National is in the process of making upgrades to expand the reach of the mychoice loyalty program and expects the mychoice program to be a powerful tool for the omni-channel strategy.
Also, Snowden said the company is taking steps to connect the land-based casinos to the sports betting and iCasino products to offer customers an incentive to consolidate play across the various platforms. Snowden believes this omni-channel approach will be bolstered by the broad appeal of Barstool Sports, and he looks forward to attracting Barstool fans to Penn National's casinos through special events and talent appearances once the virus has subsided.
Snowden said the interactive team has been hard at work, laying the foundation for future growth online. The company has been able to continue the development of its Barstool Sportsbook app and remain on schedule for launch in the third quarter of 2020.
"Our team of engineers is creating a best-in-class sports betting product," Snowden commented, "and the Barstool brand, loyal audience and marketing engine will help drive meaningful market share as the product is introduced across our database of 20 million casino customers and Barstool's audience of over 66 million fans.
"Despite the lack of live sporting events, Barstool has continued to create highly entertaining content in recent weeks, with blog traffic increasing over 20% in April, video views up over 50% and social media accounts seeing meaningful growth. In addition, Barstool has shown continued success in utilizing emerging platforms to expand its reach, including explosive growth on TikTok and the introduction of live video game streaming on Twitch."
While Penn National's overall first quarter results failed to meet expectations, Penn Interactive had a strong first quarter, beating budgeted revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) despite the loss of retail sportsbook revenue for most of March. That momentum has carried into the second quarter, with Penn Interactive experiencing significant growth in users and revenue for both its social and real money gaming products.
Penn National Gaming Inc. (NASDAQ: PENN) owns, operates or has ownership interests in gaming and racing facilities and video gaming terminal operations with a focus on slot machine entertainment. The company operates 41 facilities in 19 jurisdictions. In total, Penn National Gaming's facilities feature approximately 50,500 gaming machines, 1,300 table games and 8,800 hotel rooms. The company also offers social online gaming through its Penn Interactive Ventures division and has a leading customer loyalty program with over five million active customers.
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Penn National Gaming suffers heavy loss in 1st quarter - 69News WFMZ-TV
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