Penn Entertainment delivers disappointing results | Business News
WYOMISSING, Pa. – It doesn’t pay to disappoint Wall Street.
Case in point: Penn Entertainment, the Wyomissing-based operator of racetracks, casinos and interactive betting systems, announced fourth-quarter results today, and it wasn’t what the stock market was expecting. Earnings of $0.33 per share were expected, according to Zacks Investment Research. Instead, earnings came in at $0.13 per share.
That’s a big blunder on a percentage basis and has sent Penn Entertainment shares down over 4% in early morning trade.
Revenue for the fourth quarter and full year was right in line with expectations, which means expenses exceeded guidance. This was driven by interest expense, which rose $60 million for the quarter and $195.4 million for the year as the Federal Reserve raised interest rates several times to tame inflation.
Although most financial metrics were down, management had a more positive outlook. In a statement, Jay Snowden, Chief Executive Officer and President, commented, “2022 was a solid year for PENN, despite ongoing macroeconomic headwinds. I am proud of PENN’s many financial and operational achievements over the past year, as well as our continued progress on the ESG front. We remained focused on executing our leading omni-channel strategy, driving database growth and continued engagement with our growing cohort of 21-44 year olds.”
According to Penn Entertainment, fourth-quarter revenue of $1.6 billion and adjusted EBITDAR (earnings before interest, taxes, depreciation, amortization and rent) of $468.3 million were impacted by severe weather in certain parts of the year Land affected in December. The company also achieved profitability in its interactive segment despite an unfavorable sports betting result in the World Series.
The quarter ended with strong performance across the portfolio between Christmas and New Year’s, according to Penn Entertainment, which continued into January.
On December 6, 2022, the Company’s board of directors approved a new $750 million stock repurchase program, expiring on December 31, 2025, in addition to the Company’s existing $750 million stock repurchase program, which began in February approved in 2022. During the fourth quarter of 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. For the year ended December 31, 2022, the Company repurchased 1,008,744 common shares at an average price of $31.20 per share for a total consideration of $31.5 million.
Omni-channel, tech-forward engagement
In the fourth quarter of 2022, the omni-channel business segment reported revenue of $1.4 billion; Adjusted EBITDAR of $487.1 million; and adjusted EBITDAR margins of 35.2%.
Snowden noted, “Our focused marketing strategy, diverse product offering and technology improvements have generated approximately 1.3 million new reviewed customers to our mychoice database over the past year. Approximately 300,000 of those guests signed up in Q4, a 15% increase year over year.”
Over 50% of the quarter’s database growth came from online properties, and the company saw a 25% increase in guests engaging with them across multiple channels. Penn Entertainment also saw positive momentum in its mychoice app downloads and rollout of cashless, cardless and contactless technology, which is now deployed at twenty-one hotels and accounts for approximately 70% of retail EBITDA.
Penn Entertainment reported interactive segment revenues of $208.0 million (including gross tax of $82.9 million); and Adjusted EBITDA of $5.2 million.
Snowden commented, “Our Interactive segment generated positive Adjusted EBITDA for the quarter, including costs related to the launch of online sportsbooks in Maryland and Ohio and an unfavorable hold due to VVIP gaming. Following our successful Playbook in Kansas and Maryland, our omnichannel marketing approach in Ohio resulted in one of our strongest Barstool Sportsbook launches to date.”
In Ontario, the company said theScore Bet continued to experience strong momentum, delivering record gaming revenue in December for both sportsbook and iCasino. According to Penn, the transition to its proprietary technology platform over the past summer has resulted in increased customer retention and a noticeable increase in retention rates, which is the percentage the company makes from betting.
“Looking ahead,” said Snowden, “we remain on track to migrate Barstool Sportsbook and Casino to our proprietary technology solution this summer. In addition to the expected cost synergies, our success in Ontario suggests there is significant revenue potential post-migration once we are able to leverage our advanced commerce and promotional tools.”
In digital media, Penn said the media businesses of theScore and Barstool Sports continue to produce impressive revenue and engagement results, driven by compelling content and an exceptional product experience. theScore’s mobile media audience is more engaged than ever, with both quarterly and annual growth in user sessions.
Additionally, in October the company completed the initial integration of the Barstool Sportsbook into theScore media app, demonstrating what the company sees as benefits of its own media strategy. The company intends to acquire the remainder of Barstool Sports, which is expected to close on February 17th.
Barstool generated record revenue in 2022, Penn said, while investing in and expanding into new industries, including coverage of live sporting events like the Barstool Invitational college basketball tournament on Nov. 11 and the Arizona Bowl on Dec. 30. Penn expects the combination of Barstool Audience with theScore’s fully integrated media and betting platform will provide him with competitive advantages and organic cross-selling opportunities.
“In 2023, we have numerous near-term growth opportunities,” noted Snowden, “including transitioning the Barstool Sportsbook to our own proprietary technology platform in the US this summer. For 2023, we are projecting 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 and increased supply in some of our markets.”
PENN Entertainment, Inc. (Nasdaq: PENN) is a provider of integrated entertainment, sports content and casino gaming experiences. PENN operates 44 properties in 20 states, online sportsbook in 13 jurisdictions and iCasino in five under a portfolio of well-known brands including Hollywood Casino®, L’Auberge®, Barstool Sportsbook® and theScore Bet®.