Our new name maintains ties to our legacy while better reflecting our evolution into North America’s leading provider of integrated entertainment, sports content, and casino gaming experiences. After 50 years of being known as Penn National Gaming (PNG), the company announced that it has rebranded as Penn Entertainment to better reflect its expansion into other gaming areas over the years.
The Wyomissing, PA-based company has come a long way since operating a single racetrack, Penn National Race Course, in 1972. It currently operates 44 casinos and racetracks across 20 US states.
Penn has online casino operations in five jurisdictions and online sports betting in 13. It also plans to launch sportsbooks in four more states — Kansas, Maryland, Massachusetts, and Ohio — by 1H 2023.
During an earnings call last week to discuss Q2 2022, CEO Jay Snowden said the company was “proud of our heritage” and eager to continue growing into new markets.
“Over the past few years, Penn has transformed our business through a highly differentiated strategy focused on organic cross-sell opportunities,” Snowden said to lead off the call on August 4.
“Our new name maintains ties to our legacy while better reflecting our evolution into North America’s leading provider of integrated entertainment, sports content, and casino gaming experiences.”
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Successful Integration of Proprietary Tech Stack for theScore Bet
The company successfully launched theScore Bet in Ontario when the market opened in April. One month later, it was one of the most popular Ontario sports betting apps downloaded in the province.
Penn successfully integrated its proprietary tech stack before launching theScore Bet in Ontario during the quarter. The stack includes a risk and trading platform, a player account management system, and a promotion engine. Penn plans to migrate its Barstool Sportsbook from a system built by Kambi to its proprietary tech stack in Q3 2023.
“The benefits of a vertically-integrated online betting operation are numerous,” Snowden said. He cited increased event props and in-game wagering options, improved capabilities for personalization and media and betting integration, and valuable savings from not relying on third-party platforms. The CEO also noted that the new platform is faster and more reliable.
“We are working with our existing providers here in the US to ensure a smooth transition process,” continued Snowden. “Post-migration, we’ll begin to realize the full benefits of our in-house technology stack, including meaningful cost synergies and improved marketing and promotional capabilities.”
Net Income Dented by Higher Gaming Operating Expenses
Revenue from gaming totaled $1.3 billion in Q2 2022, up 1.5% year-over-year. Overall revenue was $1.6 billion in the quarter, which marked a 5.2% increase ($1.5 billion).
An increase in operating expenses for gaming took a bite out of net income. Gaming cost $713.6 million in Q2 2022, up 14.9% from the same quarter the previous year ($620.9 million). Net income consequently collapsed nearly 87% to $26.1 million, down from $198.7 million.
Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) totaled $476.5 million in Q2 2022, up 1.4% year-over-year ($470.1 million). Meanwhile, EBITDAR (earnings before interest, taxes, depreciation, amortization, and rental or restructuring costs) slipped to $504.5 million, marking a 14% decline ($586.6 million).
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Recession Plans Ready, But Profitability Still Expected in Q4 2022
Snowden said the company was prepared if the US entered a recession. That could potentially include laying off employees.
“If we do start to see revenues decline in a meaningful way, we are prepared to offset approximately 45% of the impact through aggressive cost mitigation measures, including adjusting our offerings, labor management, marketing spend, and pricing strategies to help keep costs in line.”
Penn expects to incur approximately $50 million in EBIDTA losses by year’s end — most of which will occur in Q3 2022 to reflect the company’s contribution to getting an industry-backed sports betting initiative passed in California. High costs in Ontario and Kansas that coincide with the start of the NFL season are also expected.
The CEO said Penn remains on track for profitability starting in Q4 2022. He said the company is also sticking to plans to acquire the remaining 64% stake in Barstool Sportsbook in Q1 2023.