Penn National Gaming issued its first quarter financial results, painting a clear picture of how the health crisis that started in mid-March, due to the wide implementation of the social distancing measures across the states, had taken the wind out of its sails revenue-wise.
The Pennsylvania-based gaming operator with strong presence across all gambling verticals reported a decrease of $166.5 million year-on-year, to $1.12 billion, and a net loss of $608.6 million for the first three months ending March 31.
March Pulled the Handbrake
Seeing the first two months of 2020 off to a flying start, mainly driven by the introduction of retail sports betting at several of its properties, which in turn served as a catalyst for growth in revenue from gaming and non-gaming activities, Penn National saw its momentum halted in March, as all of its 41 land-based gaming properties were forced to close doors for customers.
In April, the company issued a stakeholder letter to investors, informing them what measures had been undertaken to significantly cut the cash burn rate during the casinos closure, as well as to expand on available cash, without having to compromise on its long-term objectives to become the best-in-class omni-channel provider of retail and online gaming and sports betting entertainment.
Aggressive Cost Mitigation Measures
Following the temporary closures of its brick-and-mortar venues, Penn National undertook a series of aggressive cost-cutting measures to strengthen its balance sheet and boost liquidity.
Through the sale of its Tropicana Las Vegas property, credit amendments with its principal lenders, as well as company-wide furloughs of employees and decrease in the compensation for the Board of Directors and executive members, the casino operator managed to finish March with $730.7 million of cash on its balance sheet, and achieve a cash burn rate of $83 million per month.
“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… While the last several weeks have been challenging for the Company, our team members and the entire industry, we remain firmly convinced of the long-term potential of our highly differentiated omni-channel approach.”Jay Snowden, President and CEO, Penn National Gaming
Despite that its casinos are still closed and there is no clear timetable as to when and how each one of them will re-open, only that it will happen on a sequential base, Penn’s management is convinced the company is well positioned to weather the storm.
Its Penn Interactive division posted strong first quarter results, beating budget projections in terms of revenue and EBITDA, despite the almost non-existent during March sports book revenue. Penn’s momentum in the vertical was carried into the second quarter, witnessing significant growth in both social and real money gaming, and especially in its Pennsylvania iCasino product.
Despite the limited marketing approach, iCasino reached 40,000 registered users, almost two-thirds of them being younger than the traditional land-based casino player, assuring Penn there was no cannibalization between its retail and online gaming products.
The company is convinced that its casino operating prowess and database would be a significant competitive advantage over the coming years as more states start authorizing online gambling.