ESPN Bet
PENN Entertainment Reports Third Quarter Results
PENN Entertainment, Inc. reported financial results for the three and nine months ended September 30, 2023.
Jay Snowden, Chief Executive Officer and President, said: “Our property level performance was stable in the third quarter reflecting solid results from our rated traditional core customer. We continued to see relative strength in several locations, including our casinos in Ohio, Kansas, Massachusetts, and Missouri, which highlights the benefits of our geographically diversified portfolio of premier regional gaming assets and the addition of retail sports betting offerings at many of our properties. Third quarter Interactive segment results reflect curtailed marketing in the U.S. as we prepared to transition our online sportsbook to the ESPN BET brand. Finally, we are excited to announce that we plan to simultaneously launch ESPN BET on November 14 across the 17 states in which we operate online sports betting, subject to final approvals. This strategic alliance is expected to further expand our digital ecosystem and drive re-engagement with the millions of customers in our digital and retail databases, leading to compelling cross-sell opportunities.
Stable Retail Performance
Property level highlights1:
- Revenues of $1.42 billion;
- Adjusted EBITDAR of $523.4 million; and
- Adjusted EBITDAR margins of 36.8%.
“Retail performance this quarter was supported by a slight uptick in volumes from our rated customers, offsetting softness in our unrated segment in the South region, the continued return of our 65+ demographic, and moderate growth in our spend per visit trends,” said Mr. Snowden. “Additionally, our portfolio benefited from new and sustained engagement driven by our market leading retail sportsbook concepts. With the recent launch of our enhanced customer loyalty program, PENN Play, we have continued to drive database growth and customer engagement. Our database now has over 27 million members, with approximately 40% of our growth for the quarter coming from our online offerings. Our continued investments in technology to improve the customer journey has led to 2.2 million app downloads, and we are seeing a double-digit premium in retail theoretical from guests that engage with us through the PENN Play app versus non app users. Finally, the adoption of our industry leading cashless, cardless and contactless technology (“3C’s”), which is now deployed at twenty-one properties, with more on the way, has resulted in approximately $225 million in deposits into the PENN Wallet.
“We are also pleased to announce that we expect to break ground on our four growth projects throughout November and December of this year. These investments in the aggregate will create long-term shareholder value driven by their attractive return profiles and also contribute to our strong free cash flow generation upon opening in late 2025 and early 2026.
ESPN BET Planned Launch on November 142
Interactive Segment highlights:
- Revenues of $196.3 million (including tax gross up of $102.6 million); and
- Adjusted EBITDA loss of $50.2 million.
“We are extremely excited to announce the planned launch of ESPN BET prior to the active Thanksgiving week sports calendar that includes the NCAA college football rivalry week and the Super Bowl rematch of the Kansas City Chiefs and the Philadelphia Eagles televised on ESPN’s Monday Night Football. ESPN BET will be powered by our proprietary and proven technology platform, which continues to drive impressive performance in Ontario under theScore Bet brand for both online sports betting and iCasino. Our ESPN BET product will include a wide array of popular betting options, including featured bets, quick bets (micro-markets), player props, same game parlays and more. In connection with the launch, ESPN will be implementing an initial wave of exclusive integrations targeting their 200 million loyal fans across their linear and digital platforms, including an advertising campaign headlined by SportsCenter anchors Scott Van Pelt and Elle Duncan. Looking ahead, we will be introducing even deeper platform and media integrations with ESPN over the upcoming months, providing an unmatched and seamless media/betting experience that will appeal to sports fans across the country.
ESG – Caring for our People, our Communities and our Planet
“Reflective of the continued strides we have made to date on the ESG front, Forbes Magazine once again named PENN as one of ‘America’s Best Employers for Diversity 2023’ and ‘America’s Best Large Employers for 2023.’ In addition, Newsweek added PENN to their list of ‘Greatest Workplaces for 2023’ and Time Magazine named PENN one of the ‘World’s Best Companies.’ Finally, on October 4, our Company was once again honored by the Women’s Forum as a 2023 Champion of Board Diversity. During the quarter we updated our Scope 1 and 2 greenhouse gas emissions inventory for 2022 and are finalizing our 2022 Scope 3 inventory, the results of which will be included in our Corporate Social Responsibility Report in April 2024. In addition to alignment with the Casino and Gaming industry standard of the SASB reporting framework, we are working toward alignment with the Task Force on Climate-Related Financial Disclosures (“TCFD”). We also recently submitted our inaugural CDP climate-change disclosure.”
Liquidity Remains Strong
Total liquidity as of September 30, 2023 was $2.3 billion inclusive of $1.3 billion in cash and cash equivalents. Traditional net debt as of the end of the quarter was $1.3 billion and the lease-adjusted net leverage ratio was 4.7x.
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 Third Quarter Results
|
For the three months ended September 30, |
|||||
(in millions, except per share data, unaudited) |
|
2023 |
|
|
|
2022 |
Revenues |
$ |
1,619.4 |
|
|
$ |
1,625.0 |
Net income (loss) |
$ |
(725.1 |
) |
|
$ |
123.2 |
|
|
|
|
|||
Adjusted EBITDA (1) |
$ |
298.5 |
|
|
$ |
440.4 |
Rent expense associated with triple net operating leases (2) |
|
146.6 |
|
|
|
31.5 |
Adjusted EBITDAR (1) |
$ |
445.1 |
|
|
$ |
471.9 |
Payments to our REIT Landlords under Triple Net Leases (3) |
$ |
235.0 |
|
|
$ |
232.0 |
|
|
|
|
|||
Diluted earnings (loss) per common share |
$ |
(4.80 |
) |
|
$ |
0.72 |
(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); our individual triple net lease with GLPI for the real estate assets used in the operations of Tropicana Las Vegas which terminated on September 26, 2022 (referred to as the Tropicana 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 September 30, 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 September 30, 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; (iv) the Greektown Lease; and (v) the Tropicana Lease which terminated on September 26, 2022. |
(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, the Morgantown Lease, and the Tropicana Lease and collectively referred to as our “Triple Net Leases.” The rent under the Tropicana Lease was nominal prior to lease termination. |
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 September 30, |
||||||
|
|
2023 |
|
|
|
2022 |
|
Diluted earnings (loss) per share |
$ |
(4.80 |
) |
|
$ |
0.72 |
|
Impairment losses |
|
— |
|
|
|
0.60 |
|
Business interruption insurance proceeds |
|
(0.09 |
) |
|
|
— |
|
Transaction related expenses |
|
0.10 |
|
|
|
0.26 |
|
Non-operating items: |
|
|
|
||||
Loss on disposal of Barstool |
|
6.12 |
|
|
|
— |
|
Loss related to debt and equity investments |
|
— |
|
|
|
0.06 |
|
Foreign currency transaction gain |
|
ESPN Bet
Kansas November Sports Betting Surpasses $290M in Handle
Kansas reported record-breaking sports betting figures for November, the third month of bets on the 2024-25 NFL regular season. Sunflower State bettors wagered $291 million, a 5.5% increase from the previous record in October. Last month, the handle came to $275.9 million. The handle total also marks an 11.5% year-on-year increase from $260.9 million in November 2023.
Kansas’ six online sportsbooks contributed the most. They drew in a $279 million handle, making up almost 96.0% of the monthly total, and close to $24.7 million in revenue.
The state is also home to four retail sports betting locations, including ESPN BET at Hollywood Casino, the FanDuel Sportsbook in Kansas Star Casino, DraftKings at Boot Hill Casino & Resort, and Kansas Crossing’s Caesars Sportsbook. In November, these venues contributed $873,172 to the revenue total from a $12 million handle.
While the Kansas City Chiefs are based in neighboring Missouri, they’re also the most popular NFL team in Kansas. So far this season, the Chiefs won all but one of their 13 games.
The loss actually came in mid-November, with quarterback Josh Allen sealing the Buffalo Bills’ 30-21 win. With Kansas bettors likely backing the Chiefs during the game, this loss could have contributed to extra revenue for the state’s books to keep during the month.
The Chiefs are among the favorites to win Super Bowl LIX. The NFL is a particularly popular time of year for sports betting operators, with the American Gaming Association predicting bettors will wager around $35 billion on this season’s games. Like many states, Kansas reported a surge in betting activity from September onwards every year since it launched legal sports betting.
Aaron LaBerge
ESPN & ESPN BET Account Linking Now Available
PENN Entertainment and ESPN announced that account linking between ESPN BET and ESPN is now available for customers, creating an even more deeply integrated media and betting experience. By linking accounts, fans now have the ability to seamlessly track upcoming, live and settled bets within the ESPN app and on ESPN.com.
With this product enhancement, ESPN BET will soon bring fans more personalized bets and timely promotions based on their favorite sports, teams, players, and fantasy rosters. Account linking can be accessed either via a prompt within the ESPN BET app or by visiting settings within the latest versions of the ESPN BET or ESPN apps or ESPN.com.
“Bringing this new feature to market is an important step as we work to create a fully interconnected media and betting ecosystem between ESPN and ESPN BET. Account linking allows us to better serve and engage our users by unlocking key personalization and promotional capabilities. This feature is just the beginning of deeper integrations that will further differentiate the ESPN BET experience,” said Aaron LaBerge, Chief Technology Officer at PENN Entertainment.
Mike Morrison, Vice President of ESPN BET and ESPN Fantasy, said: “Linking ESPN and ESPN BET accounts is part of the seamless, integrated betting experience we envisioned from the start. No other company in the betting space can offer the level of personalization or interconnected experience that ESPN BET provides.”
ESPN Bet
ESPN BET Retail Sportsbook Unveiled at L’Auberge Casino Resort Lake Charles
ESPN BET unveiled a newly-branded retail sportsbook at L’Auberge Casino Resort Lake Charles on Friday, Sept. 20. The refreshed sportsbook with ESPN BET branding continues to provide customers with the ultimate sports viewing and betting experience. The opening of the ESPN BET Sportsbook furthers brand connectivity between PENN Entertainment’s (PENN) retail casino and online sports betting platform.
The ESPN BET sportsbook, located next to the hotel tower elevators, offers a gourmet tailgate-inspired menu and over 20 beers on tap which can be enjoyed while surrounded by 36 televisions and a massive 24-foot video wall. ESPN BET features 3 over-the-counter sports betting terminals, 15 sports betting kiosks, 4 slot machines, 6 video poker machines, plus both electronic and traditional table games.
“We are thrilled to bring the ESPN BET brand to L’Auberge Lake Charles, offering our customers a great new way to engage with our vast entertainment options. Leveraging the ESPN BET brand allows us to deliver the high-quality experience that both seasoned and novice bettors anticipate from our resort. We invite guests from Louisiana, Texas, and beyond to enjoy the premier sportsbook experience in the Southwest Louisiana,” said Harold Rowland, Vice President and General Manager at L’Auberge Lake Charles.
ESPN BET, which launched in November 2023, is the official sportsbook of ESPN. ESPN BET combines ESPN’s industry-leading brand and multiplatform reach with PENN’s proprietary in-house technology and deep sportsbook operational expertise. ESPN BET is currently available for online sports betting in 18 jurisdictions, including Louisiana. The ESPN BET sportsbook at L’Auberge Casino Resort Lake Charles is one of several branded retail locations scheduled to open across PENN properties this fall.
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