Penn National Finds Benefit in Coronavirus Closures: Online Business Is Booming
Posted on: April 20, 2020, 08:34h.
Last updated on: April 20, 2020, 10:42h.
As is the case with all of its rivals, Penn National Gaming (NASDAQ:PENN) is dealing with casino closures across the country because of the coronavirus. But the company’s Penn Interactive Venture online gaming business is benefiting, as gamblers are seeking alternatives to temporarily shuttered brick-and-mortar properties.
In a letter to investors released earlier today and obtained by Casino.org, Penn CEO Jay Snowden highlighted the strength of the company’s online operations, saying he expects it to be a meaningful contributor to top and bottom line growth next year and beyond.
We expect our digital businesses to deliver meaningful revenue and profit contributions in 2021 and beyond,” said Snowden.
Penn Interactive runs the desktop and mobile apps of HollywoodCasino.com, HollywoodRaces.com, and Viva Slots, and it’s expected the company’s online footprint will be bolstered by a partnership with Barstool Sports. Earlier this year, the gaming company paid $163 million to take a 36 percent stake in Barstool, a move aimed at increasing Penn’s exposure to younger, tech-savvy gamblers.
With gaming stocks being punished at the hands of the COVID-19 pandemic, Penn is one of the worst offenders this year. That’s happened amid concerns about the company’s liquidity position and ability to survive in an extended zero-revenue environment.
However, the company is taking steps to allay those concerns. Last month, the operator parted with the property assets of the Tropicana Las Vegas and the ground lease of an asset in Morgantown, Pa. to Gaming and Leisure Properties (NASDAQ:GLPI) for $337.5 million, and furloughed workers across the country.
Snowden adds that Penn has $730 million in cash and cash equivalents on hand as of March 31, and that cost-saving actions cut the company’s monthly burn rate to $83 million.
“The temporary closures of our properties have provided us with a unique opportunity to reimagine our casinos, and we have already identified ways to improve our operating model while enhancing the guest experience,” said the Penn CEO.
Penn National stock has more than tripled over the past month, and has nearly quadrupled off its 52-week low.
Under the terms of the deal announced in January, Penn can shell out another $62 million over the next several years to boost its Barstool stake to 50 percent, and eventually acquire all of the sports blog for a total of $450 million.
“Our unparalleled distribution network will also help power the launch of our Barstool-branded mobile sports betting product in the third quarter of this year, as our product development team has remained fully engaged and focused on delivering a best-in-class product on time and on budge,” said Snowden in his letter.
The Penn CEO did not offer up forecasts or specific financial contributions related to the Barstool relationship.
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