PENN Entertainment, Inc. (“PENN” or the “Company”) (Nasdaq:
PENN) today reported financial results for the three months and
year ended December 31, 2023.
Jay Snowden, Chief Executive Officer and President, said: “PENN
delivered another quarter of solid property level performance while
continuing to invest in our high growth digital business, which we
believe will create significant long term shareholder value. Our
retail results reflect strong customer demand and well-executed
strategies across our portfolio. In our Interactive segment, ESPN
BET attracted significantly more first-time depositors (FTDs) than
we anticipated, which drove higher than expected promotional
expense. Our successful launch led to substantial expansion in key
performance indicators (KPIs) including monthly active users
(MAUs), handle, and cash handle. Importantly, strong early
retention and consistent user acquisition have led to steady
month-over-month increases in cash handle as our promotional
expense has started to normalize entering 2024. ESPN BET has also
attracted the mass market sports fan, highlighting the potential to
expand the appeal of sports betting and grow the overall market.
This foundation sets the stage for continued growth and market
share gains as we introduce further product enhancements and deeper
integrations into the ESPN media ecosystem.
Strong Customer Demand and Operational Excellence
Property level highlights1:
- Revenues of $1.37 billion;
- Adjusted EBITDAR of $476.4 million; and
- Adjusted EBITDAR margins of 34.7%.
_______________________________ 1 Property level consists of
retail operating segments which are composed of our Northeast,
South, West, and Midwest reportable segments.
“Property level performance this quarter benefitted from strong
customer demand trends, mild weather, and our focus on customer
experiences and operational excellence,” said Mr. Snowden.
“Notably, 10 properties spread across our portfolio achieved their
highest ever fourth quarter revenue, demonstrating the benefits of
our geographic diversity and unique omni-channel strategy. In the
quarter, we expanded our PENN Play™ database by 1.2 million
members, with 90% of this growth coming from our ESPN BET
customers. In addition, we will rebrand Greektown’s market-leading
sportsbook to ESPN BET this spring – in time for the Detroit NFL
draft – and we look forward to potential additional ESPN BET retail
launches at key properties as we continue to create meaningful
cross-sell opportunities.
Successful ESPN BET Launch
Interactive Segment highlights:
- Revenues of $31.5 million (including tax gross up of $107.0
million); and
- Adjusted EBITDA loss of $333.8 million.
“The November 14th launch of ESPN BET led to tremendous download
volumes, conversion to over 1 million FTDs, and record handle,
supported by our partners at ESPN and our proprietary technology.
Our comprehensive strategic alliance with ESPN is providing
exceptional value, leading to attractive customer acquisition costs
and marketing efficiencies. Additionally, our Hollywood-branded
iCasino product within the ESPN BET app has started to benefit from
cross-sell opportunities from ESPN BET, with solid revenue growth
and record MAUs over the last several months. Looking ahead, we are
excited to introduce ESPN BET in North Carolina (expected in March)
and New York (expected prior to football season), in each case
subject to regulatory approvals, which will take our addressable
online sports betting U.S. population from 37% to 46% and
significantly expand our reach and scale.
Liquidity and Financial Position
Total liquidity as of December 31, 2023 was $2.1 billion
inclusive of $1.1 billion in Cash and cash equivalents. Traditional
net debt as of the end of the quarter was $1.6 billion.
ESG – Caring for our People, our Communities and our
Planet
“We are proud of the strides we made last year on Corporate
Social Responsibility, including the expansion of our Diversity,
Equity and Inclusion initiatives. Newsweek named PENN one of
‘America’s Greatest Workplaces for Diversity’, and Forbes named us
one of ‘America’s Best Employers for Diversity 2023.’ We provided
more than $7 million in support to local charities and
veterans-focused organizations and over $17 million in economic
development grants. On the environmental side, we completed our
inaugural Scope 3 greenhouse gas inventory and established carbon
abatement targets for 2024 and beyond. You can read more about the
progress we’ve made in terms of caring for our people, our
communities and the planet in our upcoming 2023 CSR Report, which
will be filed in conjunction with our Proxy in April,” concluded
Mr. Snowden.
Additional information on PENN’s reported results, including a
reconciliation of the non-GAAP results to their most comparable
GAAP measures, is included in the financial tables below. The
Company does not provide a reconciliation of projected Adjusted
EBITDA and Adjusted EBITDAR because it is unable to predict with
reasonable accuracy the value of certain adjustments that may
significantly impact the Company’s results, including realized and
unrealized gains and losses on equity securities, re-measurement of
cash-settled stock-based awards, contingent purchase payments
associated with prior acquisitions, and income tax (benefit)
expense, which are dependent on future events that are out of the
Company’s control or that may not be reasonably predicted.
Summary of Fourth Quarter Results
For the three months ended
December 31,
(in millions,
except per share data, unaudited)
2023
2022
Revenues
$
1,395.4
$
1,585.6
Net income (loss)
$
(358.8
)
$
20.8
Adjusted EBITDA (1)
$
(39.6
)
$
438.3
Rent expense associated with triple net
operating leases (2)
152.1
30.0
Adjusted EBITDAR (1)
$
112.5
$
468.3
Payments to our REIT Landlords under
Triple Net Leases (3)
$
235.4
$
231.9
Diluted earnings (loss) per common
share
$
(2.37
)
$
0.13
(1)
For more information, definitions, and
reconciliations see the “Non-GAAP Financial Measures” section
below.
(2)
Consists of the operating lease components
contained within our triple net master lease dated November 1, 2013
with Gaming and Leisure Properties, Inc. (Nasdaq: GLPI) (“GLPI”)
that was amended and restated effective January 1, 2023 (referred
to as the AR PENN Master Lease and prior to January 1, 2023
referred to as the PENN Master Lease); our triple net master lease
effective January 1, 2023 entered in conjunction with and
coterminous to the AR PENN Master Lease (referred to as the 2023
Master Lease); our individual triple net lease with GLPI for the
real estate assets used in the operations of Hollywood Casino at
The Meadows prior to the effective date of the 2023 Master Lease
(referred to as the Meadows Lease); as well as our individual
triple net leases with VICI Properties Inc. (NYSE: VICI) (“VICI”)
for the real estate assets used in the operations of Margaritaville
Resort Casino (referred to as the Margaritaville Lease) and
Hollywood Casino at Greektown (referred to as the Greektown Lease)
and referred to collectively as our “triple net operating
leases.”
For the three months ended December 31,
2023, rent expense associated with triple net operating leases
pertains to (i) the AR PENN Master Lease; (ii) the 2023 Master
Lease; (iii) the Margaritaville Lease; and (iv) the Greektown
Lease.
For the three months ended December 31,
2022, rent expense associated with triple net operating leases
pertains to (i) the PENN Master Lease (specific to the land and
building components associated with the operations of Hollywood
Gaming at Dayton Raceway and Hollywood Gaming at Mahoning Valley
Race Course); (ii) the Meadows Lease; (iii) the Margaritaville
Lease; and (iv) the Greektown Lease.
(3)
Consists of payments made to GLPI and VICI
(referred to collectively as our “REIT Landlords”) under the AR
PENN Master Lease, the PENN Master Lease, the 2023 Master Lease,
the Pinnacle Master Lease, the Meadows Lease (prior to the
effective date of the 2023 Master Lease), the Perryville Lease
(prior to the effective date of the 2023 Master Lease), the
Margaritaville Lease, the Greektown Lease, and the Morgantown Lease
and collectively referred to as our “Triple Net Leases.”
Adjusted EPS
The following table reconciles diluted earnings (loss) per share
(“EPS”) to Adjusted EPS (approximate EPS impact shown, per share;
positive adjustments represent charges to income):
For the three months ended
December 31,
2023
2022
Diluted earnings (loss) per share
$
(2.37
)
$
0.13
Impairment losses
0.86
0.08
Business interruption insurance
proceeds
(0.05
)
(0.05
)
Loss on disposal of assets
—
0.01
Transaction related expenses
0.03
0.04
Non-operating items:
Loss (gain) related to debt and equity
investments
(0.01
)
0.02
Foreign currency transaction loss
—
0.01
Income tax impact on net income
adjustments (1)
(0.21
)
(0.02
)
Adjusted EPS
$
(1.75
)
$
0.22
(1)
The income tax impact includes current and
deferred income tax expense based upon the nature of the adjustment
and the jurisdiction in which it occurs.
PENN ENTERTAINMENT, INC. AND
SUBSIDIARIES Segment Information
The Company aggregates its operations into five reportable
segments: Northeast, South, West, Midwest, and Interactive.
For the three months ended
December 31,
For the year ended December
31,
(in millions,
unaudited)
2023
2022
2023
2022
Revenues:
Northeast segment (1)
$
662.9
$
667.1
$
2,738.4
$
2,695.9
South segment (2)
285.1
304.4
1,216.4
1,314.2
West segment (3)
133.7
130.7
528.5
581.9
Midwest segment (4)
290.6
282.0
1,172.6
1,159.6
Interactive (5)
31.5
208.0
718.8
663.1
Other (6)
3.7
3.9
20.2
21.3
Intersegment eliminations (7)
(12.1
)
(10.5
)
(32.0
)
(34.3
)
Total revenues
$
1,395.4
$
1,585.6
$
6,362.9
$
6,401.7
Adjusted EBITDAR:
Northeast segment (1)
$
192.5
$
205.0
$
831.0
$
842.5
South segment (2)
113.0
118.4
494.1
548.1
West segment (3)
50.8
48.7
204.2
220.1
Midwest segment (4)
120.1
115.0
496.6
501.2
Interactive (5)
(333.8
)
5.2
(402.5
)
(74.9
)
Other (6)
(30.1
)
(24.0
)
(110.8
)
(97.6
)
Total Adjusted EBITDAR (8)
$
112.5
$
468.3
$
1,512.6
$
1,939.4
(1)
The Northeast segment consists of the
following properties: Ameristar East Chicago, Hollywood Casino at
Greektown, Hollywood Casino Bangor, Hollywood Casino at Charles
Town Races, Hollywood Casino Columbus, Hollywood Casino
Lawrenceburg, Hollywood Casino Morgantown, Hollywood Casino at PENN
National Race Course, Hollywood Casino Perryville, Hollywood Casino
Toledo, Hollywood Casino York, Hollywood Gaming at Dayton Raceway,
Hollywood Gaming at Mahoning Valley Race Course, Marquee by PENN,
Hollywood Casino at The Meadows, and Plainridge Park Casino.
(2)
The South segment consists of the
following properties: 1st Jackpot Casino, Ameristar Vicksburg,
Boomtown Biloxi, Boomtown Bossier City, Boomtown New Orleans,
Hollywood Casino Gulf Coast, Hollywood Casino Tunica, L’Auberge
Baton Rouge, L’Auberge Lake Charles, and Margaritaville Resort
Casino.
(3)
The West segment consists of the following
properties: Ameristar Black Hawk, Cactus Petes and Horseshu, M
Resort, Tropicana Las Vegas Hotel and Casino (sold on September 26,
2022), and Zia Park Casino.
(4)
The Midwest segment consists of the
following properties: Ameristar Council Bluffs, Argosy Casino
Alton, Argosy Casino Riverside, Hollywood Casino Aurora, Hollywood
Casino Joliet, our 50% investment in Kansas Entertainment, LLC,
which owns Hollywood Casino at Kansas Speedway, Hollywood Casino
St. Louis, Prairie State Gaming, and River City Casino.
(5)
The Interactive segment includes all of
our online sports betting, online casino/iCasino and social gaming
operations, management of retail sports betting, media, and the
operating results of Barstool Sports, Inc. (“Barstool” or “Barstool
Sports”). We owned 36% of Barstool common stock prior to the
acquiring the remaining 64% of Barstool common stock on February
17, 2023. In connection with PENN’s decision to rebrand our online
sports betting business from Barstool Sportsbook to ESPN BET, PENN
entered into a stock purchase agreement with David Portnoy, and on
August 8, 2023 we sold 100% of the outstanding shares of Barstool.
Interactive revenues are inclusive of a tax gross-up of $107.0
million and $82.9 million for the three months ended December 31,
2023 and 2022, respectively, and $390.4 million and $251.6 million
for the year ended December 31, 2023 and 2022, respectively.
(6)
The Other category, included in the tables
to reconcile the segment information to the consolidated
information, consists of the Company’s stand-alone racing
operations, namely Sanford-Orlando Kennel Club, Sam Houston and
Valley Race Park, the Company’s JV interests in Freehold Raceway
and our management contract for Retama Park Racetrack. The Other
category also includes corporate overhead costs, which consist of
certain expenses, such as: payroll, professional fees, travel
expenses, and other general and administrative expenses that do not
directly relate to or have not otherwise been allocated. Corporate
overhead costs were $28.6 million and $23.6 million for the three
months ended December 31, 2023, and 2022, respectively, and $106.7
million and $98.5 million for the year ended December 31, 2023, and
2022, respectively.
(7)
Primarily represents the elimination of
intersegment revenues associated with our retail sportsbooks, which
are operated by PENN Interactive.
(8)
As noted within the “Non-GAAP Financial
Measures” section below, Adjusted EBITDAR is presented on a
consolidated basis outside the financial statements solely as a
valuation metric or for reconciliation purposes.
PENN ENTERTAINMENT, INC. AND
SUBSIDIARIES
Reconciliation of Comparable
GAAP Financial Measure to Adjusted EBITDA,
Adjusted EBITDAR, and Adjusted
EBITDAR Margin
For the three months ended
December 31,
For the year ended December
31,
(in millions,
unaudited)
2023
2022
2023
2022
Net income (loss)
$
(358.8
)
$
20.8
$
(491.4
)
$
221.7
Income tax (benefit) expense
(49.1
)
31.7
(8.2
)
(46.4
)
Interest expense, net
118.6
203.5
464.7
758.2
Interest income
(9.8
)
(11.3
)
(40.3
)
(18.3
)
Income from unconsolidated affiliates
(8.3
)
(6.6
)
(25.3
)
(23.7
)
Gain on Barstool Acquisition, net (1)
—
—
(83.4
)
—
Gain on REIT transactions, net (2)
—
—
(500.8
)
—
Loss on early extinguishment of debt
—
—
—
10.4
Other (income) expenses
(1.0
)
4.8
(5.5
)
72.1
Operating income (loss)
(308.4
)
242.9
(690.2
)
974.0
Loss on disposal of Barstool (3)
—
—
923.2
—
Stock-based compensation
14.5
13.0
85.9
58.1
Cash-settled stock-based awards variance
(4)
(1.8
)
0.7
(13.8
)
(15.5
)
Loss on disposal of assets
0.1
0.9
0.1
7.9
Contingent purchase price
0.1
0.3
1.9
(0.6
)
Pre-opening expenses
—
—
—
4.1
Depreciation and amortization
111.2
150.3
435.1
567.5
Impairment losses (5)
130.6
13.6
130.6
118.2
Insurance recoveries, net of deductible
charges
—
—
(13.9
)
(10.7
)
Income from unconsolidated affiliates
8.3
6.6
25.3
23.7
Non-operating items of equity method
investments (6)
1.0
3.2
7.4
7.9
Other expenses (7)
4.8
6.8
29.9
55.2
Adjusted EBITDA
(39.6
)
438.3
921.5
1,789.8
Rent expense associated with triple net
operating leases
152.1
30.0
591.1
149.6
Adjusted EBITDAR
$
112.5
$
468.3
$
1,512.6
$
1,939.4
Net income (loss) margin
(25.7
) %
1.3
%
(7.7
) %
3.5
%
Adjusted EBITDAR margin
8.1
%
29.5
%
23.8
%
30.3
%
(1)
Includes a gain of $66.5 million
associated with Barstool related to remeasurement of the equity
investment immediately prior to the acquisition date of February
17, 2023 and a gain of $16.9 million related to the acquisition of
the remaining 64% of Barstool common stock.
(2)
Upon the execution of the February 21,
2023 AR PENN Master Lease and the 2023 Master Lease, both effective
January 1, 2023, we recognized a gain of $500.8 million as a result
of the reclassification and remeasurement of lease components.
(3)
Relates to the loss incurred on the sale
of 100% of the outstanding shares of Barstool which was completed
on August 8, 2023.
(4)
Our cash-settled stock-based awards are
adjusted to fair value each reporting period based primarily on the
price of the Company’s common stock. As such, significant
fluctuations in the price of the Company’s common stock during any
reporting period could cause significant variances to budget on
cash-settled stock-based awards.
(5)
For the years ended December 31, 2023 and
2022, amounts relate to impairment charges in our Northeast segment
of $130.6 million and $116.4 million, respectively.
(6)
Consists principally of interest expense,
net, income taxes, depreciation and amortization, and stock-based
compensation expense associated with Barstool prior to us acquiring
the remaining 64% of Barstool common stock and our Kansas
Entertainment, LLC joint venture.
(7)
Consists of non-recurring acquisition and
transaction costs and finance transformation costs associated with
the implementation of our new Enterprise Resource Management
system.
PENN ENTERTAINMENT, INC. AND
SUBSIDIARIES
Consolidated Statements of
Operations
(Unaudited)
For the three months ended
December 31,
For the year ended December
31,
(in millions,
except per share data, unaudited)
2023
2022
2023
2022
Revenues
Gaming
$
1,036.3
$
1,267.4
$
4,905.8
$
5,201.7
Food, beverage, hotel, and other
359.1
318.2
1,457.1
1,200.0
Total revenues
1,395.4
1,585.6
6,362.9
6,401.7
Operating expenses
Gaming
840.3
706.3
2,989.4
2,864.4
Food, beverage, hotel, and other
237.9
209.3
1,011.4
767.2
General and administrative
383.8
263.2
1,563.4
1,110.4
Depreciation and amortization
111.2
150.3
435.1
567.5
Impairment losses
130.6
13.6
130.6
118.2
Loss on disposal of Barstool
—
—
923.2
—
Total operating expenses
1,703.8
1,342.7
7,053.1
5,427.7
Operating income (loss)
(308.4
)
242.9
(690.2
)
974.0
Other income (expenses)
Interest expense, net
(118.6
)
(203.5
)
(464.7
)
(758.2
)
Interest income
9.8
11.3
40.3
18.3
Income from unconsolidated affiliates
8.3
6.6
25.3
23.7
Gain on Barstool Acquisition, net
—
—
83.4
—
Gain on REIT transactions, net
—
—
500.8
—
Loss on early extinguishment of debt
—
—
—
(10.4
)
Other
1.0
(4.8
)
5.5
(72.1
)
Total other income (expenses)
(99.5
)
(190.4
)
190.6
(798.7
)
Income (loss) before income
taxes
(407.9
)
52.5
(499.6
)
175.3
Income tax benefit (expense)
49.1
(31.7
)
8.2
46.4
Net income (loss)
(358.8
)
20.8
(491.4
)
221.7
Less: Net loss attributable to
non-controlling interest
0.7
—
1.4
0.4
Net income (loss) attributable to PENN
Entertainment, Inc.
$
(358.1
)
$
20.8
$
(490.0
)
$
222.1
Earnings per share:
Basic earnings (loss) per share
$
(2.37
)
$
0.13
$
(3.22
)
$
1.37
Diluted earnings (loss) per share
$
(2.37
)
$
0.13
$
(3.22
)
$
1.29
Weighted-average common shares
outstanding—basic
151.3
154.2
152.1
161.2
Weighted-average common shares
outstanding—diluted
151.3
169.7
152.1
176.6
Selected Financial Information
and GAAP to Non-GAAP Reconciliations
(in millions,
unaudited)
December 31, 2023
December 31, 2022
Cash and cash equivalents
1,071.8
1,624.0
Total traditional debt
2,643.7
2,699.8
Less: Cash and cash equivalents
(1,071.8
)
(1,624.0
)
Traditional net debt (1)
$
1,571.9
$
1,075.8
Amended Revolving Credit Facility due
2027
$
—
$
—
Amended Term Loan A Facility due 2027
508.8
536.2
Amended Term Loan B Facility due 2029
985.0
995.0
5.625% Notes due 2027
400.0
400.0
4.125% Notes due 2029
400.0
400.0
2.75% Convertible Notes due 2026
330.5
330.5
Other long-term obligations (2)
19.4
38.1
Total traditional debt
2,643.7
2,699.8
Financing obligation (3)
154.1
118.0
Less: Debt discounts and debt issuance
costs
(32.2
)
(40.3
)
$
2,765.6
$
2,777.5
Total traditional debt
$
2,643.7
$
2,699.8
Less: Cash and cash equivalents
(1,071.8
)
(1,624.0
)
Plus: Cash rent payments to REIT landlords
for the trailing twelve months (4)
7,502.4
7,400.0
$
9,074.3
$
8,475.8
Adjusted EBITDAR for the trailing twelve
months
1,512.6
1,939.4
Lease-adjusted net leverage ratio (1)
6.0 x
4.4 x
Traditional net leverage (1)
2.7 x
1.1 x
(1)
See “Non-GAAP Financial Measures” section
below for more information as well as the definitions of
Traditional net debt, Lease-adjusted net leverage ratio, and
Traditional net leverage.
(2)
Other long-term obligations as of December
31, 2023 primarily includes $9.4 million related to relocation fees
due for both Hollywood Gaming at Dayton Raceway and Hollywood
Gaming at Mahoning Valley Race Course, and $10.0 million related to
our repayment obligation on a hotel and event center located near
Hollywood Casino Lawrenceburg.
(3)
Represents cash proceeds received and
non-cash interest on certain claims of which the principal
repayment is contingent and classified as a financing obligation
under Accounting Standards Codification Topic 470, “Debt.”
(4)
Amount equals 8 times the total cash rent
payments to REIT landlords for the trailing twelve months ended
December 31, 2023.
Cash Flow Data
The table below summarizes certain cash expenditures incurred by
the Company.
For the three months ended
December 31,
For the year ended December
31,
(in millions,
unaudited)
2023
2022
2023
2022
Cash payments to our REIT Landlords under
Triple Net Leases
$
235.4
$
231.9
$
937.8
$
925.0
Cash payments related to income taxes,
net
$
—
$
26.5
$
73.9
$
72.8
Cash paid for interest on traditional
debt
$
34.7
$
29.1
$
162.6
$
115.9
Capital expenditures
$
152.2
$
73.8
$
360.0
$
263.4
Non-GAAP Financial Measures
The Non-GAAP Financial Measures used in this press release
include Adjusted EBITDA, Adjusted EBITDAR, Adjusted EBITDAR margin,
Adjusted EPS, Traditional net debt, Traditional net leverage ratio,
and Lease-adjusted net leverage ratio. These non-GAAP financial
measures should not be considered a substitute for, nor superior
to, financial results and measures determined or calculated in
accordance with GAAP.
We define Adjusted EBITDA as earnings before interest expense,
net; interest income; income taxes; depreciation and amortization;
stock-based compensation; debt extinguishment charges; impairment
losses; insurance recoveries, net of deductible charges; changes in
the estimated fair value of our contingent purchase price
obligations; gain or loss on disposal of assets; the difference
between budget and actual expense for cash-settled stock-based
awards; pre-opening expenses; loss on disposal of a business;
non-cash gains/losses associated with REIT transactions; non-cash
gains/losses associated with partial and step acquisitions as
measured in accordance with ASC 805 “Business Combinations;” and
other. Adjusted EBITDA is inclusive of income or loss from
unconsolidated affiliates, with our share of non-operating items
(such as interest expense, net; income taxes; depreciation and
amortization; and stock-based compensation expense) added back for
Barstool (prior to our acquisition of Barstool on February 17,
2023) and our Kansas Entertainment, LLC joint venture. Adjusted
EBITDA is inclusive of rent expense associated with our triple net
operating leases with our REIT landlords. Although Adjusted EBITDA
includes rent expense associated with our triple net operating
leases, we believe Adjusted EBITDA is useful as a supplemental
measure in evaluating the performance of our consolidated results
of operations.
Adjusted EBITDA has economic substance because it is used by
management as a performance measure to analyze the performance of
our business, and is especially relevant in evaluating large,
long-lived casino-hotel projects because it provides a perspective
on the current effects of operating decisions separated from the
substantial non-operational depreciation charges and financing
costs of such projects. We present Adjusted EBITDA because it is
used by some investors and creditors as an indicator of the
strength and performance of ongoing business operations, including
our ability to service debt, and to fund capital expenditures,
acquisitions and operations. These calculations are commonly used
as a basis for investors, analysts and credit rating agencies to
evaluate and compare operating performance and value companies
within our industry. In order to view the operations of their
casinos on a more stand-alone basis, gaming companies, including
us, have historically excluded from their Adjusted EBITDA
calculations certain corporate expenses that do not relate to the
management of specific casino properties. However, Adjusted EBITDA
is not a measure of performance or liquidity calculated in
accordance with GAAP. Adjusted EBITDA information is presented as a
supplemental disclosure, as management believes that it is a
commonly used measure of performance in the gaming industry and
that it is considered by many to be a key indicator of the
Company’s operating results.
We define Adjusted EBITDAR as Adjusted EBITDA (as defined above)
plus rent expense associated with triple net operating leases
(which is a normal, recurring cash operating expense necessary to
operate our business). Adjusted EBITDAR is presented on a
consolidated basis outside the financial statements solely as a
valuation metric. Management believes that Adjusted EBITDAR is an
additional metric traditionally used by analysts in valuing gaming
companies subject to triple net leases since it eliminates the
effects of variability in leasing methods and capital structures.
This metric is included as a supplemental disclosure because (i) we
believe Adjusted EBITDAR is traditionally used by gaming operator
analysts and investors to determine the equity value of gaming
operators and (ii) Adjusted EBITDAR is one of the metrics used by
other financial analysts in valuing our business. We believe
Adjusted EBITDAR is useful for equity valuation purposes because
(i) its calculation isolates the effects of financing real estate;
and (ii) using a multiple of Adjusted EBITDAR to calculate
enterprise value allows for an adjustment to the balance sheet to
recognize estimated liabilities arising from operating leases
related to real estate. However, Adjusted EBITDAR when presented on
a consolidated basis is not a financial measure in accordance with
GAAP, and should not be viewed as a measure of overall operating
performance or considered in isolation or as an alternative to net
income because it excludes the rent expense associated with our
triple net operating leases and is provided for the limited
purposes referenced herein. Adjusted EBITDAR margin is defined as
Adjusted EBITDAR on a consolidated basis (as defined above) divided
by revenues on a consolidated basis. Adjusted EBITDAR margin is
presented on a consolidated basis outside the financial statements
solely as a valuation metric.
Adjusted EPS is diluted earnings or loss per share adjusted to
exclude loss on disposal of a business; non-cash gains/losses
associated with REIT transactions; non-cash gains/losses associated
with partial and step acquisitions as measured in accordance with
ASC 805 “Business Combinations;” impairment losses; pre-opening
expenses; debt extinguishment charges; gains or losses on disposal
of assets; foreign currency gains/losses; transaction related
expenses; business interruption insurance proceeds; and net
gains/losses related to equity investments.
Adjusted EPS is a non-GAAP measure and is presented solely as a
supplemental disclosure to reported GAAP measures because
management believes this measure is useful in providing
period-to-period comparisons of the results of the Company’s
operations to assist investors in reviewing the Company’s operating
performance over time. Management believes it is useful to exclude
certain items when comparing current performance to prior periods
because these items can vary significantly depending on specific
underlying transactions or events. Further, management believes
certain excluded items may not relate specifically to current
operating trends or be indicative of future results. Adjusted EPS
should not be construed as an alternative to GAAP earnings per
share as an indicator of the Company’s performance.
We calculate Traditional net debt as Total traditional debt,
which is the principal amount of debt outstanding (excludes the
financing obligation associated with cash proceeds received and
non-cash interest on certain claims of which the principal
repayment is contingent) less Cash and cash equivalents. Management
believes that Traditional net debt is an important measure to
monitor leverage and evaluate the balance sheet. With respect to
Traditional net debt, Cash and cash equivalents are subtracted from
the GAAP measure because they could be used to reduce the Company’s
debt obligations. A limitation associated with using Traditional
net debt is that it subtracts Cash and cash equivalents and
therefore may imply that there is less Company debt than the most
comparable GAAP measure indicates. Management believes that
investors may find it useful to monitor leverage and evaluate the
balance sheet.
The Company’s Traditional net leverage ratio is defined as
Traditional net debt (as defined above) divided by Adjusted EBITDAR
(as defined above) for the trailing twelve months less cash rent
payments to REIT landlords. Management believes this measure is
useful as a supplemental measure and provides an indication of the
results generated by the Company in relation to its level of
indebtedness with the cash generated from Company operations.
The Company’s Lease-adjusted net leverage ratio’s numerator is
calculated as cash rent payments to REIT landlords for the trailing
twelve months capitalized at 8 times plus Traditional net debt (as
defined above). The Company’s Lease-adjusted net leverage ratio’s
denominator is Adjusted EBITDAR (as defined above) for the trailing
twelve months. Management believes this measure is useful as a
supplemental measure and provides an indication of the results
generated by the Company in relation to its level of indebtedness
(including leases) with the cash generated from Company
operations.
Each of these non-GAAP financial measures is not calculated in
the same manner by all companies and, accordingly, may not be an
appropriate measure of comparing performance among different
companies. See the tables above, which present reconciliations of
these measures to the GAAP equivalent financial measures.
Management Presentation, Conference Call, Webcast and Replay
Details
PENN is hosting a conference call and simultaneous webcast at
9:00 am ET today, both of which are open to the general public.
During the call, management will review a presentation regarding
the quarter and recent developments that can be accessed at
http://investors.pennentertainment.com/events-and-presentations/presentations.
The conference call number is 312-281-2974; please call five
minutes in advance to ensure that you are connected prior to the
presentation. Interested parties may also access the live call at
www.pennentertainment.com; allow 15 minutes to register and
download and install any necessary software. Questions and answers
will be reserved for call-in analysts and investors. A replay of
the call can be accessed for thirty days at
http://www.pennentertainment.com/corp/investors.
This press release, which includes financial information to be
discussed by management during the conference call and disclosure
and reconciliation of non-GAAP financial measures, is available on
the Company’s web site,
http://www.pennentertainment.com/corp/investors (select link for
“Press Releases”).
About PENN Entertainment
PENN Entertainment, Inc., together with its subsidiaries
(“PENN,” the “Company,” “we,” “our,” or “us”), is North America’s
leading provider of integrated entertainment, sports content, and
casino gaming experiences. PENN operates 43 properties in 20
states, online sports betting in 18 jurisdictions and iCasino in
five jurisdictions, under a portfolio of well-recognized brands
including Hollywood Casino®, L’Auberge®, ESPN BET™ and theScore Bet
Sportsbook and Casino®. In August 2023, PENN entered into a
transformative, exclusive long-term strategic alliance with ESPN,
Inc. and ESPN Enterprises, Inc. (together, “ESPN”) relating to
online sports betting within the United States. PENN’s ability to
leverage the leading sports media brands in the United States
(ESPN) and Canada (theScore) will position us to significantly
expand our digital footprint and efficiently grow our customer
ecosystem. This highly differentiated strategy, which is focused on
organic cross-sell opportunities, is reinforced by our
market-leading retail casinos, sports media assets, and technology,
including a proprietary state-of-the-art, fully integrated digital
sports and iCasino betting platform and an in-house iCasino content
studio. PENN’s portfolio is further bolstered by our
industry-leading PENN Play™ customer loyalty program, which offers
our over 29 million members a unique set of rewards and experiences
across business channels.
Forward Looking Statements
This press release contains “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995. These statements can be identified by the use of
forward-looking terminology such as “expects,” “believes,”
“estimates,” “projects,” “intends,” “plans,” “goal,” “seeks,”
“may,” “will,” “should,” or “anticipates” or the negative or other
variations of these or similar words, or by discussions of future
events, strategies or risks and uncertainties. Specifically,
forward-looking statements include, but are not limited to,
statements regarding: future revenue and Adjusted EBITDAR; the
Company’s expectations of future results of operations and
financial conditions, the assumptions provided regarding the
guidance, including the scale and timing of the Company’s product
and technology investments; the Company’s expectations regarding
results, and the impact of competition, in retail/mobile/online
sportsbooks, iCasino, social gaming, and retail operations; the
Company’s development and launch of its Interactive segment’s
products in new jurisdictions and enhancements to existing
Interactive segment products, including the content for the ESPN
BET and theScore Bet; the benefits of the Sportsbook Agreement
between the Company and ESPN; the Company’s expectations regarding
its Sportsbook Agreement with ESPN and the future success of its
products; the Company’s expectations with respect to the
integration and synergies related to the Company’s integration of
theScore and the continued growth and monetization of the Company’s
media business; the Company’s expectations with respect to the
ongoing introduction and the potential benefits of the cashless,
cardless and contactless (3C’s) technology; the Company’s
development projects, including the prospective development
projects; our ability to obtain financing for our development
projects on attractive terms; the timing, cost and expected impact
of planned capital expenditures on the Company’s results of
operations; and the actions of regulatory, legislative, executive,
or judicial decisions at the federal, state, provincial, or local
level with regard to our business and the impact of any such
actions.
Such statements are all subject to risks, uncertainties and
changes in circumstances that could significantly affect the
Company’s future financial results and business. Accordingly the
Company cautions that forward looking statements contained herein
are qualified by important factors that could cause actual results
to differ materially from those reflected by such statements. Such
factors include: the effects of economic and market conditions that
could reduce discretionary spending; our ability to effectively
compete in the global entertainment, sports content, and gaming
industries; our ability to successfully acquire and integrate new
properties and operations; our ability to maintain our gaming
licenses and concessions and comply with applicable gaming law; win
rates; changes in laws, including increased tax rates, regulations,
or accounting standards; third-party relations and approvals; risks
associated with the collection and retention of data about our
customers, employees, suppliers and business partners, and
additional risks and uncertainties described in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2022,
subsequent Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K, each as filed with the U.S. Securities and Exchange
Commission. The Company does not intend to update publicly any
forward-looking statements except as required by law. Considering
these risks, uncertainties and assumptions, the forward-looking
events discussed in this press release may not occur.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240215432437/en/
Mike Nieves SVP, Finance & Treasurer PENN Entertainment
610-373-2400
Joseph N. Jaffoni, Richard Land JCIR 212-835-8500 or
penn@jcir.com
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