In the final quarter of 2019, regional casino operator Penn National Gaming (PNG) lost almost $93m; however, sports betting and online gambling are making up for it.
PNG reported on Thursday, that in the final three months of 2019, it generated revenue of $1.34b, up 16% from the final quarter of 2018.
However, adjusted earnings fell 5% to $304m and the company recorded a net loss of $92.9m as opposed to a $42m net loss the year earlier.
PNG blamed the net loss on $34m in extra rent payments to its real estate investment trust (REIT) landlords and $173.1m in damage charges due to accounting changes in financing obligations of PNG’s leasing arrangements. So it appears there is really a price to pay in selling off the family silver and/or real estate for a short-term cash increase.
PNG’s geographical casino segments, all four of them, reported year-on-year revenue increases, with the leading Northeast segment posting the biggest improvement, up 18% to $621.3m, owing to the addition of the Greektown Casino in Detroit in May 2019. The South segment recorded the biggest percentage gain, increasing almost 29% to $268.2m owing to contributions from Louisiana’s Margaritaville Resort Casino.
As reported by calvinayre.com, for 2019 overall, PNG’s revenue plunged almost 48% to $5.3b – reflecting the effect of the Pinnacle Entertainment purchase, which was completed in late-2018 – while earnings grew almost one-fifth to $1.24b but net income dropped 54% to $43.1m. PNG’s rent expenses for 2019 equaled $366.4m.
Evaluating PNG’s land-based sports betting operations – currently five sportsbooks throughout Indiana, Iowa and Pennsylvania – from 2018 to 2019, Jay Snowden, CEO of PNG, said existing guests are coming to PNG casinos more often and adding to “meaningfully higher revenues” year-on-year, not only in the books but also at the gaming tables and via higher food & beverage sales.
Snowden alluded to PNG’s Hollywood Casino Lawrenceburg in Indiana as generating 10% of its Q4 earnings “due to sports – the retail sports book. That’s powerful.”
Snowden said PNG and Kambi, its tech partner are at present, developing a new personalized betting app which will launch in August. Snowden informed the successful launch would be “absolutely critical to us” even though he expects the advantages of its app will be “more visible in 2021 and 2022.” Snowden added PNG aimed at becoming “a top-three revenue market share leader for sports betting, retail and online.”
Speaking of PNG’s budding iGaming operations in Pennsylvania, Snowden said they’d turned “a small profit’ in Q4 in spite of the state’s “onerous 54% tax on slot revenues,” mainly because PNG was “literally spending zero marketing dollars … outside of marketing to our database.” Even better, Snowden said the online gambling had been “incremental to the brick and mortar business.”
Snowden added he expects that the expansion of legal iGaming to more US states is ‘really where we believe we’re going to stand out.” Snowden said PNG expects to be “higher than top three” in any intrastate online casino market and “number one in profitability.”
Snowden elucidated this bold profitability forecast based on PNG’s regional footprint, which is so large “we don’t have the friction costs associated … with having to go in with a skin partner and pay 5% to 15% of net gaming revenue just for access.”
Snowden added that the scope of PNG’s reach meant that even after making a bout of ‘skin’ access deals with four different partners, “we still have enough second and third skins in a number of our markets that we can do some bartering, some trading to get into other states maybe in return to give them access into states that we’re in.”
Much of PNG’s iGaming and sports betting goals are based on last month’s blockbuster contract to buy 36% of online media platform Barstool Sports. Snowden informed PNG is taking a “long-term perspective” on the advantages of the $163m contract, believing it will result in “meaningful reductions in customer acquisition and promotional costs.”
Snowden observed that other companies had to spend “hundreds of millions of dollars to create the brand that they have today and to build a database.” Snowden said PNG found that there was “a more efficient path to profitability for us.”
Early this year, PNG intends to rebrand the betting zone at its Hollywood Casino at Charles Town in West Virginia as the first Barstool Sportsbook. A Barstool-branded online casino will possibly make its launch sometime early in 2021.