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PENN(PENN) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported retail revenue of $1.4 billion and adjusted EBITDAR of $457 million, with adjusted EBITDAR margins at 33.1% [18] - The interactive segment had adjusted revenues of $162 million, with an adjusted EBITDA loss of $89 million, representing a $107 million year-over-year improvement [19][20] - The company ended the quarter with total liquidity of $1.5 billion, including $592 million in cash and cash equivalents [21] Business Line Data and Key Metrics Changes - The retail business experienced a revenue growth of 2% year-over-year across all properties, and 4% excluding those impacted by new supply [9] - The interactive segment faced a negative $10 million EBITDA impact due to customer-friendly sports betting outcomes during March Madness, but still generated record gaming revenue [14] - The standalone iCasino app saw 70% of its theoretical revenue coming from incremental sources, indicating minimal cannibalization from existing offerings [15][82] Market Data and Key Metrics Changes - The company reported significant year-over-year increases in retail theoretical play in Pennsylvania (21%) and Michigan (27%), with online theoretical play increasing by 165% in Pennsylvania and 242% in Michigan [13] - The company noted that it has been gaining market share in 14 of its 17 markets not impacted by new supply year-over-year in Q1 [10] Company Strategy and Development Direction - The company announced plans for a new land-based Hollywood Casino in Council Bluffs, Iowa, expected to enhance customer experience and competitive position [8] - The company is focused on operational execution to transform strategic investments into consistent long-term results and value for shareholders [29] - The company is committed to generating positive interactive EBITDA in 2026 and beyond, with a focus on cross-selling between retail and digital channels [28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the core retail business, noting solid employment numbers and low gas prices as positive indicators for regional gaming [27] - The company is mindful of the uncertain economic environment but remains confident in its ability to navigate potential challenges [18] - Management anticipates that each quarter of 2025 will show lower interactive EBITDA losses, culminating in positive EBITDA in the fourth quarter [23] Other Important Information - The company has made strategic investments in properties to enhance entertainment and hospitality amenities, improving guest experience through technology [10] - The company reported a $15 million pretax gain on a financing arrangement, which was resolved and resulted in cash received in 2021 and noncash interest accreted since then [20] Q&A Session Summary Question: What is the outlook for the digital segment? - Management indicated that assumptions for the year remain unchanged, with optimism for growth in both online sports betting and online gaming [33] Question: How far is the iGaming segment from being contribution positive? - Management expressed satisfaction with the standalone iCasino apps, noting that 70% of new customers are incremental and that there is still significant opportunity for cross-selling [34][35] Question: What are the operating expense pressures faced? - Management noted that labor costs are creeping up but are manageable, with effective procurement strategies in place to mitigate cost increases [66] Question: What is the potential impact of skill-based gaming? - Management views skill-based games as needing regulation and taxation similar to traditional gaming, and ongoing discussions are taking place at the legislative level [76] Question: What is the strategy regarding financing for new projects? - Management emphasized the importance of matching financing to project openings and maintaining optionality in financing structures [53][110]