Penn Records Q1 Losses But Prepared For Post-COVID Recovery

Penn National Gaming Inc.’s Q1 financial results for the three months ended March 31, 2020 have been released. The company posted year-on-year Q1 sales of $1,116 m versus $1,282 m, and a net loss of $608.6 m compared to sales of $41 m in Q1 2019. The Adjusted EBITDA was $154 million, down from $306 million.

Penn National had witnessed a “phenomenal” start to 2020, with strong performance in January and February, according to President and CEO Jay Snowden. He said: “Our company was performing well ahead of guidance in every segment, driven in large part by the introduction of retail sports betting at several properties, which has served as a catalyst for both gaming and non-gaming revenue.

“We also saw a strong positive reaction, including our stock price hitting an all-time high, following the announcement of our strategic investment in Barstool Sports, which reflects our strategy to become the best-in-class omni-channel provider of retail and online gaming and sports betting entertainment.”

Turning his attention on the effects of the health crisis, Snowden continued: “That momentum was cut short in mid-March by the COVID-19 pandemic, which required the temporary closure of all 41 of our properties. As a result, our first quarter revenues decreased $166.5m year-over-year, to $1.12bn, and we incurred a net loss of $608.6m due to $616.1m of impairment losses.

“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. We sincerely thank the first responders, health care workers and essential personnel around the world who are keeping us safe through this challenging time, and we hope and pray for a swift end to this unprecedented crisis.”

In the report, Penn National also told investors that, in the days following the temporary closures of its facilities, several aggressive mitigation steps had been taken to solidify the balance sheet and boost liquidity.

As a result, the company ended March with $730.7 m of cash on the balance sheet, and its annual cash burn (assuming full closure of all properties) was reduced from April through the end of the year to around $83 m per month. “The company is confident these measures will allow it to weather the temporary suspension of operations without sacrificing any of its long-term objectives,” it advised.

Snowden commented: “Upon the reopening of our casinos, we believe Penn National is very well-positioned to resume its positive momentum. Our geographic diversification across 19 states – with no more than 15% of our revenues being derived from any single state – should be a significant benefit as states begin to open casinos on a sequential basis. We expect our regional gaming markets to rebound sooner than destination markets by virtue of our casinos being located in suburban areas that are more easily accessible by car from key population centers.”