Penn National Gaming told the investment community Thursday to ignore second-quarter financial results.
The regional casino giant is seeing positive signs from its nationwide customer base despite continued capacity restrictions and health, safety, cleaning, and social distancing protocols in wake of the coronavirus pandemic.
Penn CEO Jay Snowden said the company, which operates 41 properties in 19 states, saw a “pent-up” demand from casino customers when properties first reopened in May and June. There were encouraging trends, Snowden said, during July.
“We continue to make fundamental changes to improve our offerings and efficiencies across our organization,” Snowden said in a statement. “For example, we are working closely with regulators in several jurisdictions to introduce cashless, cardless, and contactless technology to our casinos, which we believe will increase safety and provide improved service while delivering additional efficiencies and accountability.”
Snowden also touted Penn’s interactive gaming efforts, including the rollout of a Barstool Sports mobile wagering app that the company expects to launch in Pennsylvania in September, followed by additional states through the end of the year and into 2021.
“Management expects to leverage Barstool’s strong brand recognition with day one integration of certain Barstool personalities,” Truist Securities gaming analyst Barry Jonas said in a research note. “While upside here remains difficult to quantify, it is clear we are entering uncharted territory with a diversified casino operator expanding into digital media to drive down the cost of customer acquisition and raise overall brand awareness across their offering set.”
Penn has reopened all but two of its properties – Zia Park racetrack in New Mexico and the Tropicana Las Vegas. In Las Vegas, the Tropicana has been accepting hotel room reservations starting Sept. 1, but Snowden, on a conference call Thursday, said that is “fluid.” Penn sold the Strip resort to Gaming and Leisure Properties in March for $337.5 million in rent credits but will continue to operate the resort under a lease agreement.
“As of right now, September feels right, but we have several more weeks to nail down an exact date, and if it’s not right, then we’ll wait a little bit longer to reopen,” Snowden said.
In the quarter that ended June 30, Penn’s net revenues declined 76.9% to $305.5 million, compared to $1.32 billion a year ago. Cash flow of $24.5 million was a 94% decline. Penn reported a net loss of $214.4 million, compared to net income of $51.4 million in the 2019 second quarter.
Snowden said that Penn’s “geographic diversification,” with no more than 15% of all revenues coming from a single state, has “proven to be a significant benefit.”
Penn also saw revenues from online gaming in Pennsylvania increase 108% and the company has picked up 10% of the “highly competitive Pennsylvania market.”
Analysts said Penn’s second-quarter operating results were better than expected.
“Importantly, the trends appear to have carried over into the current quarter,” said Stifel Financial gaming analyst Steven Wieczynski.
In a statement, Penn said had committed to extending medical benefits to its furloughed employees through the end of August and, to continue its employee assistance fund and committed to spending $1 million annually on diversity and inclusion initiatives, including a scholarship program and higher recruitment efforts from historically black universities.
Shares of Penn closed at $43.86 on the Nasdaq Thursday, up $5.47 or 14.25%, following the company’s earnings announcement.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
