Penn National Posts Loss in Q1

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Penn National gets the honor, or dishonor, depending on how you look at it, to be the first sports betting provider out with a quarter report that includes the month of March, when the whole sports world went silent thanks to COVID-19. A huge loss has been reported but shock and disappointment were nowhere to be seen with the cancellation of March Madness and the shuttering of all 41 Penn National locations in 19 states across the US in mid-March.

Penn National was able to register record high revenues during January and February but thanks to the coronavirus pandemic, an inevitable overall loss was the result. “Penn National saw a phenomenal start to 2020, with record results in January and February,” said CEO Jay Snowden. But nothing kills momentum like a global pandemic!

 

Q1

As mentioned, Penn National had been in the midst of a record-setting quarter before the world went dark. “That momentum was cut short in mid-March by the COVID-19 pandemic, which required the temporary closure of all 41 of our properties,” said Jay Snowden, president and chief executive officer of Penn National Gaming. “As a result, our first quarter revenues decreased $166.5 million year-over-year, to $1.12 billion [13%], and we incurred a net loss of $608.6 million due to $616.1 million of impairment losses.”

Adjusted earnings before interest, taxes, depreciation, amortization and rent costs was $252.3 million, compared to $391.4 million in the same period of 2019.

Share prices for Penn National were expectedly affected by the downturn. COVID-19 was directly responsible for a $5.26 loss per share in Q1 which is a huge jump from the 36-cent loss the Company posted over the same period last year. All together Penn National Gaming shares have decreased 38% since the beginning of the year and 19% in the last 12 months.

 

A bright future ahead

Penn National has done well to build up their brand in the US and develop a strong mobile betting presence in each state. When all is said and done, it may be their mobile apps and a new toy that will be discussed later that keep them afloat, especially if lockdown persists across the United States.

“Penn National is the only operator in the U.S. with a large, geographically diversified land-based gaming footprint, a well-known sports brand, a fully aligned marketing partner and a wholly-owned sports betting and iCasino subsidiary,” said Snowden about his Company’s ability to climb out of the coronavirus hole.

He went on to add that: “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”.

As far as the future of Penn National stock, it seems to be rebounding as well. The stock finished Thursday 15% higher, and is up an eye-opening 385% from its March lows. Even with that, the stock is viewed as an underperformer.

 

Flush with cash

Penn National has put itself in an unenviable position of having cash that will help them ride out the betting shutdown, even if it lingers into the fall and beyond. The company has reported $730.7 million of cash on its balance sheet. With an estimated burn rate of $83 million per month (assuming all properties remain shut down), Penn National could last without any revenue or a return to "normal" until the end of the year.

It's a luxury most casino operators don’t have and a nice perk for the Company going forward.

 

The Barstool effect

The Penn National decision-makers must have been staring into a crystal ball when they acquired 36% of Barstool Sports for $163 million. A new and unique mobile app being developed by Penn National and Barstool is near completion and should be ready for launch in the third quarter. Barstool has shown some impressive growth even during this unprecedented time and is proving already to be a tremendous asset for Penn National.

Barstool gives Penn National a whole new audience, one that is vast and will be crucial in giving the Company a media presence that is lacking for other sports betting providers. “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,” said Snowden.

During a time of no live sporting events, Barstool's blog traffic increased 20% and video views grew by 50% in one month. There were recently new 40,000 customers that registered for the Company's services in Pennsylvania alone.

 

Setting themselves apart

Penn National seems as though they covered all of the bases even before COVID-19 arrived on the scene and took over. Because of that, the Company looks as though it is a better position than the lions share of sports betting providers out there.

Call it luck or call it good management but Penn National looks poised to be in the betting operator Heavyweight Title picture for a while.

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