Penn National: Strip property not a priority, Q3 results below expectations

Having a Strip property is not a priority for Penn National Gaming’s growth strategy, Penn President, CEO and Director Jay Snowden revealed on Thursday.

“Generally speaking, I don’t think it’s imperative that we have a Las Vegas Strip asset given the approach we have around (developing an omnichannel operation),” Snowden said to investors, according to Las Vegas Review-Journal. “I think having representation across states throughout the U.S. is absolutely a strategic imperative for us and we’ve largely accomplished that goal.”

But while the Strip isn’t among Penn’s priorities, the CEO admitted that if the company were to find the right asset at the right location and price, it would be interested in pursuing the opportunity. The discussion surged after an analyst asked about the announcement MGM made that it intends to sell The Mirage.

“It would be great to have an asset that we could create some retention value when (customers are) in Vegas,” Snowden added. “But we don’t think that such a strategic imperative that we would chase an asset or overpay.” The CEO said the gaming operator will have a “disciplined” approach to assessing Vegas opportunities.

Penn already operates a Strip property: the Tropicana, owned by real estate investment trust partner Gaming & Leisure Properties. Earlier this year, in April, Bally’s Corp. agreed to buy it from Gaming & Leisure for $308 million. Penn also operates the M Resort in Henderson.

“There are a lot of variables that you have to look at asset by asset as they become available — if they become available,” Snowden explained, reports Review-Journal. “But you should assume that we are not going to be chasing anything that we don’t believe we can get a good return on.”

The company’s top executive discussed Penn’s strategy during a third-quarter earnings call with investors. Throughout the period, the company posted revenues of $1.5 billion, up 33% from 2020. However, net income saw a noticeable decrease: $86.1 million, versus $141.2 million in the prior year, a 39% drop.

Also during the quarter, adjusted EBITDA saw a $20.7 million increase from last year to $365.3 million. According to analysts, the period was a mixed one for Penn: while more revenue was generated than in 2020, the gaming business failed to meet cash flow expectations amidst one-time expenses. These included expenses resulting from Hurricane Ida, regional flare-ups of the delta COVID-19 variant, and $7.5 million in start-up costs for sportsbook partner Barstool Sports.

Dave Portnoy, Barstool Sports founder.

Penn shares, traded on the Nasdaq exchange, plummeted by double-digit percentages on Thursday, falling 21%. This occurred amidst sexual misconduct allegations against Barstool Sports founder Dave Portnoy, published by Insider. Following the release of the report, stock continued to decline, closing out the day at $57.40. This is the lowest it's been in over a year.

Snowden also discussed funding lobbying efforts in California which seek to push for a sport-betting initiative. Penn is one of seven companies backing the initiative, with $12.5 million. The CEO said that the initiative was constructed to seek the best interest of both state and casinos.

“We’re going to be pretty deep in signature gathering mode in the coming weeks and months and there’s been a little bit of opposition so we’re trying to understand that,” he explained. “We actually want to do this in a way that was completely complementary to the ballot initiative that the tribes already had out there before we announced the ballot initiative and the language of the ballot initiative.”