Penn National Gaming (PNG) has reported a 53.1% year-on-year decline in net income for 2019 despite reporting a 47.8% increase in revenue for the year.
Total revenue for the 12 months to 31 December 2019 amounted to $5.30bn, up from $3.59bn in the previous year following PNG’s acquisition in 2018 of Pinnacle Entertainment, a transaction that expanded the company’s portfolio by a further 40 sites.
PNG saw year-on-year revenue growth across all of its property segments, with the Northeast segment proving to be the main source of income with revenue of $2.40bn, up by 26.9% on the previous year.
Revenue from the South segment rocketed by 184.0% year-on-year to $1.12bn, while Midwest segment revenue was also up by 33.0% to $1.09bn and its West segment climbed by 46.8% to $643bn.
In terms of revenue from the Penn Interactive sports betting, igaming and social gaming business, this was included in a separate category alongside the PNG standalone racing venues. Overall, this segment saw revenue increase by 20.0% from $40.4m to $47.5m.
However, with the expanded property portfolio, PNG also reported a significant rise in operating expenses, climbing by 60.1% year-on-year from $2.95bn to $4.73bn.
PNG’s main outgoing costs were attributed to gaming, with total spend for the year coming in at $2.3bn, a 47.1% increase on 2018. General and administrative costs almost doubled to $4.19bn, while food, beverage, hotel and other spending was up to $672.7m.
The operator also noted higher depreciation and amortisation costs of $414.2m, as well as increased impairment losses of $173.1m for the 12-month period.
This higher spending seemingly outweighed revenue growth for the year, which in turn pushed net income down by 53.1% from $93.5m in 2018 to $43.9m last year.
Income before tax slipped from $89.9m to $86.1m, but PNG did also report that adjusted earnings before interest, tax, depreciation, amortisation and rent (EBITDAR) was up by 53.9% from $1.04bn to $1.61bn.
Reflecting on the results, PNG’s president and chief executive Jay Snowden said 2019 was a ‘transformational’ year for the operator and he is proud of what the business was able to achieve.
“We completed the integration of Pinnacle Entertainment, which added 12 new gaming properties and three new states to our portfolio and over 10,000 new team members to the Penn National family,” he said.
“We accomplished this while achieving record adjusted EBITDAR, increasing margins, reducing debt, and just as importantly, coming together as one team under one company culture.”
Snowden also highlighted PNG’s recent exclusive sports wagering and online casino partnership with Barstool Sports, a deal that will also see the operator acquire a 36% stake in the digital sports media company.
“This investment creates a unique opportunity, allowing us to execute on our strategy to evolve from the nation’s largest regional gaming operator to a best-in-class omni-channel provider of retail and online gaming and sports betting entertainment,” Snowden said. “Barstool Sports is an ideal partner as it will allow us to attract a younger demographic that is complementary to our existing customer base.”
With this in mind, Snowden also praised the performance of PNG’s sportsbooks in 2019, saying properties with such facilities in place performed well.
“The analysis showed that existing guests, who started engaging in sports betting, visited our properties more frequently and contributed to meaningfully higher revenues in 2019 than they did in 2018,” he said.
“At Hollywood Casino Lawrenceburg, for instance, we saw a significant increase in gross gaming revenues, particularly driven by the table games segment. Likewise, our food and beverage business benefited substantially from the introduction of sports betting at this property.”