Aug 4: Earnings extra: Penn takes an entertaining turn

Penn Entertainment and Bally Corporation publish their respective Q2s

Earnings+More

Aug 04, 2022

Good afternoon. Welcome to our earnings extra this afternoon featuring:

Penn National announces a name change to Penn Entertainment.
Bally Corporation updates forecasts to reflect adverse trends.

Two lovers kissing amongst the scream of midnight.

Penn Entertainment Q2

Revenues up 5.2% to $1.63bn, adj. EBITDAR down 14% to $504.5m.
Online revenues up 61.4% to $154.9m.
Online segment EBITDA losses trimmed to $20.8m from $30.8m.

What’s in a name? The new moniker “better reflected” the company’s interests in casinos, sports media, and in-house sports-betting and igaming capabilities. CEO Jay Snowden noted that in the past few years the business had been “transformed” though he said the new name also references the company’s origin story of being built from one racetrack in Pennsylvania.

That’s entertainment: Asked about the signs of recession, Snowden suggested Penn was seeing “healthy trends” with inflationary pressures yet to affect its customers in any dramatic way.

Jay Snowden “We’re seeing a healthy consumer. We’re seeing a consumer that wants to get out and have fun.”

Mixed messaging: Jefferies noted the regional picture was mixed with strength in the northeast offset by weakness in the southern markets.

What’s the score? Those hoping for more color on how theScore performed in Ontario were to be disappointed. Snowden said the company was limited in what it could say, suggesting only that the business had seen some success in converting theScore media users to sports-betting.

Double-digit: He said he believed theScore would be a “double-digit” market-share performer in Ontario.
Migration: In July, Penn migrated theScore in Ontario to its proprietary platform. The company reiterated its plan to migrate the Barstool Sportsbook to the same platform by Q323.
The acid test: Snowden suggested the test for the new platform would come when it was running at scale starting with the upcoming football season.

On the schedule: Snowden reiterated Penn expected its online arm to hit profitability in Q422. “Profitability in US interactive is already there,” he said. “We feel very good about being profitable in the fourth quarter for icasino but also profitable overall.”

Launchpad: It expects to launch in Kansas, Ohio, Maryland, and Massachusetts in the next 12 months.
Snowden said profitability wouldn’t “materially” be affected by new launch expenses.

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Bally Corporation Q2

Revenue up 106% to $552.2m, adj.EBITDA up 70.5% to $141.2m.
FY22 guidance lowered to $2.2bn-$2.3bn from $2.4bn-$2.5bn, adj.EBITDA to reach between $535m-$550m from $560m-$580m.
International interactive revenues down 7.3%% to $234.5m, North America digital losses of $24m.

Special FX: The lower revenue and EBITDA forecasts were largely blamed on a weaker-than-expected performance in Atlantic City as well as adverse FX and issues in the UK.

Interactive ramp: CEO Lee Fenton said the group was making good progress in interactive, but would continue to focus on developing its OSB and icasino app.

He acknowledged that the target of 6-8% market share was ambitious, but said interactive was still in “ramp mode” and the track record in New Jersey, where it has c3% share, led him to believe it could double from that level.
Noting the product is not yet where the company wants it to be, he said marketing spend would be delayed.

Ontario will be the first jurisdiction that will see the company launch a combined OSB and icasino app.

No pressure: Fenton said the anticipated inflationary and macro headwinds had not materialized in either UK online or across its regional US casino with the 6% due in the UK being lad at the doorstep of a drop in marketing and a focus on margins.

On the delayed White Paper, Fenton said that where ever there had been a regulatory shift in the UK, Gamesys has been a net winner.
“We expect the same here,” he added.

Blues explosion: Bally’s will open a temporary resort in Chicago’s Medinah Temple as it prepares to break ground on its $1.7bn River West casino project. The group said it had modeled all supply chain and inflationary factors when planning for the build.