Penn National Gaming
The top line
Revenue down 6% compared with Q119 at $1.27bn, adjusted EBITDAR up 7% on Q119 at $447m. Adjusted EBITDAR margins up by 434bps.
Northeast segment up 3.7% on Q119 to $570.9m, south segment was up 1.3% on Q119 to $295.9m, west segment was down 39% to $96.6m, midwest was $234.7m, down 13.5% and other – including interactive – rose more than eightfold on Q119 to $87.9m.
Although top-line revenues were still affected by Covid restrictions all the way through to the present, EBITDA was up despite the loss-making interactive segment.
Penn the disruptor: When asked about Penn’s boast of being a “disruptor” in the gaming space, CEO Jay Snowden said the use of the word was deliberate. “It is the way we look at the space.” “We were first mover in a lot of areas. The first REIT, first into social gaming, when we acquired Barstool that raised eyebrows. So what we are saying is we’ve been disruptive and we will continue to be disruptive. We like when it’s chaotic.”
Scale up: Much of the focus on the call was on Barstool and what Penn clearly sees as its advantages when it comes to sports-betting. While extolling what Snowden said were market-leading CPAs of “well under $100 right now”, he went on to suggest the company would, after all, be spending more on marketing come the next football season. “We’re going to be a lot more aggressive in terms of spending to acquire customers, because we now have scale.”
From dusk till dawn: When quizzed, Snowden said Penn would continue with a “less traditional” and “unorthodox” marketing strategy. He said that might mean “new talent at Barstool” and further media partnerships including working with influencers and affiliates. An illustration of what that might involve came in the presentation where Penn spoke about the social media campaign it ran in the last few 36 hours before Illinois cut off in-person registration. That brought in 20k registrations, 13k FTDs, 10k users who opted for a $100 promotion and the number one ranking in the app store over that period.
Non-stop disco party: Snowden hoped to differentiate Barstool by avoiding linear TV and radio advertising being employed by others in the market.
Noting the “all day, every day” sportsbook ads when he was recently in Pennsylvania (see comments from Lachlan Murdoch from Fox Corporation below), he said the levels of advertising were “overwhelming.” “I’m a big believer that it creates zero loyalty,” Snowden added.
“LTV is something that is thrown around a lot. This is not like switching iPhones. I think what will happen over time is the winner with a loyal audience, whether a DFS database or casino database, those are the ones that will have bulletproof market share and this aggressive commercial spend will not be the business that sticks around.”
A bigger moat: Asked about using Penn’s balance sheet to finance M&A, Snowden said any acquisitions would have to “make that moat we have built a little deeper and a little wider.” That might include once again braving the Las Vegas Strip (after the failure at the Tropicana). Macquarie said Penn “management could be ‘eyeing’ more strategic acquisitions, which would make us more positive on the company’s ability to become a top 3 US player.”
