This article first appeared on GuruFocus. Total Retail Revenue: $1.5 billion, up 5% year over year; record third-quarter revenue. Retail Adjusted EBITDAR: $502 million, up 7.7% year over year. Same-Store Revenue: Grew approximately 1% year over year. Same-Store Adjusted EBITDAR: Grew approximately 5% year over year. Retail Adjusted EBITDAR Margin: 33.7%, up 84 basis points
Total Retail Revenue: $1.5 billion, up 5% year over year; record third-quarter revenue.
Retail Adjusted EBITDAR: $502 million, up 7.7% year over year.
Same-Store Revenue: Grew approximately 1% year over year.
Same-Store Adjusted EBITDAR: Grew approximately 5% year over year.
Retail Adjusted EBITDAR Margin: 33.7%, up 84 basis points year over year; third consecutive quarter of year-over-year margin improvement.
Flow-Through: 50% in the third quarter, higher year over year and quarter over quarter.
Rated Revenue: Grown for eight consecutive quarters; Q3 delivered the second-largest increase over this period.
Interactive Revenue: $348.4 million, including a $191.4 million skins tax gross-up.
Interactive Adjusted EBITDA: Loss of $18.3 million; improved sequentially in each quarter of 2026 excluding the Alberta launch investment.
Interactive Gross Profit Margin: Significant year-over-year improvement, driven by targeted promotions and a larger iCasino revenue mix.
Full-Year 2026 Retail Revenue Guidance: Raised by $16 million to $5.89 billion.
Full-Year 2026 Retail Adjusted EBITDAR Guidance: Raised by $10 million to $1.973 billion.
Q4 Interactive Revenue Guidance: $445 million, including $242 million skins tax gross-up ($203 million excluding gross-up).
Q4 Interactive Adjusted EBITDA Guidance: $18.7 million; full-year loss of $20 million, inclusive of $20 million Alberta launch investment.
Other Category Adjusted EBITDA: Expected negative $122 million for 2026, a $3 million increase from prior guidance due to legal fees.
Capital Expenditures: $59 million total in Q3, including $17 million project CapEx; full-year 2026 CapEx guidance refined to $390 million (maintenance $220 million, project $170 million).
Liquidity: $2 billion total, including $1 billion cash and cash equivalents.
Leverage: Lease-adjusted net leverage of 5.6x and traditional net leverage of 2.3x; expected to improve ~1.5 turns and ~2.4 turns respectively by year-end 2026.
Cash Interest Expense: Projected $150 million for 2026, net of interest income.
Lease Payments: Total cash payments under triple net leases expected at $1 billion in 2026.
Cash Taxes: No cash taxpayer expected in 2026.
Share Count: Fully diluted weighted average of 135.4 million shares at end of Q3.
Property Highlights: Hollywood Columbus posted all-time record gaming volumes, revenue, and adjusted EBITDA (18% revenue growth); Aurora active database up 96% year over year with revenue 2x prior year; M Resort set record Q3 revenue, slot, and table volumes.
PENN Entertainment Inc (NASDAQ:PENN) delivered record third-quarter revenue and strong year-over-year adjusted EBITDA growth, driven by same-store performance and completed development projects.
Retail segment adjusted EBITDAR margins improved 84 basis points year-over-year, marking the third consecutive quarter of margin expansion.
The company raised full-year 2026 retail revenue and adjusted EBITDAR guidance by $16 million and $10 million, respectively, reflecting better-than-expected Q3 results and current trends.
Interactive segment adjusted EBITDA improved meaningfully year-over-year, with US iCasino revenue growth driven by the standalone Hollywood iCasino app and efficient user acquisition.
PENN Entertainment Inc (NASDAQ:PENN) is making progress on deleveraging, with lease-adjusted net leverage expected to improve by approximately 1.5 turns and traditional net leverage by approximately 2.4 turns year-over-year.
Negative Points
Interactive segment reported an adjusted EBITDA loss of $18.3 million in Q3, including a $20 million investment in the Alberta launch.
West segment margins compressed due to low table game hold at M Resort and one-time accounting items, with Las Vegas market softness in Q3.
The company expects US online sports betting and US integrated iCasino trends to continue adjusting to normalized levels post theScore Bet rebrand.
PENN Entertainment Inc (NASDAQ:PENN) faces increased gaming tax rates in Illinois due to Aurora and Joliet moving into higher tax tiers, impacting margins.
Fourth-quarter guidance implies a sequential downtick in interactive revenue, with potential weather impacts and construction disruption at Council Bluffs.
Q & A Highlights
Q: With the implied fourth-quarter guidance showing a slight sequential downtick, is there anything one-time being lapped, and what is the split of Q4 growth between new projects and same-store? A: CEO Jay Snowden said the mix of contribution to Q4 revenue and EBITDA growth will be very similar to Q3, with development projects ramping and positive same-store sales across the rest of the portfolio. The guide implies the second-highest growth rate of the year on both the top and bottom lines, behind Q3. Management chose not to “get over our skis” given weather risk across Midwest and Northeast properties and minor parking disruption from the Council Bluffs groundbreaking. CFO Felicia Hendrix added that Q4 guidance implies growth both with and excluding development projects, i.e., on a same-store basis as well.
Q: Can you provide updated thoughts on the M&A environment and PENN’s appetite, given the improving balance sheet? A: CEO Jay Snowden laid out capital allocation priorities clearly: (1) deleveraging remains priority one, with traditional net leverage approaching a “one handle” and lease-adjusted leverage targeting a “four handle” in the near future; (2) share buybacks look attractive with a free cash flow yield over 20% and will be discussed at the board level heading into 2027; (3) internal growth projects are a high priority, with Council Bluffs (2028) and New Orleans (2029) in the queue and others under analysis; (4) M&A is last and “not a high priority,” requiring a very high implied free cash flow return, low risk, and strategic value such as a new market or large database.
Q: What are the potential implications for PENN from the midterm elections, particularly regarding Texas and other states? A: CEO Jay Snowden called Tuesday night “a good day and a good night” for the sector and especially for PENN. The company owns two of the three Class 1 thoroughbred racetracks in Texas (Retama near San Antonio/Austin and Sam Houston in Houston) and has strong relationships and lobbying in the state, positioning it to “play offense” if Texas moves on gaming. He also noted that pro-skill-based-gaming advocates lost elections or influence in Pennsylvania and Missouri, which is positive for PENN’s four Pennsylvania properties plus VGT route business and three Missouri properties. Pennsylvania’s October gaming revenue growth was the strongest of 2026, largely fueled by the back half of the month after the October 14 skill-game shutdown. A failed Indiana casino license referendum in three counties was also a favorable outcome for incumbent operators.
Q: How is the Alberta launch tracking versus expectations, including competition and market share compared with Ontario? A: CEO Jay Snowden said Alberta was “busier at the starting gate” than Ontario, with most major operators launching simultaneously alongside incumbent gray-market operators converting to regulated models. Online sports betting is off to a strong start, already approaching Ontario-level market share of low double digits (9%-10%) within the first three months, while iCasino is about halfway to Ontario levels. Encouragingly, the Alberta iCasino TAM looks larger than anticipated due to a more mature gray market. CTO Aaron LaBerge added that theScore brand is helping, with share of voice strong and OSB handle share growing faster than the market each month since launch.
Q: What drove the better-than-expected margins in the South segment, and were there any one-timers? A: CEO Jay Snowden said there were no one-timers. The improvement largely reflects lapping the Q1 2025 opening of a competitor in Bossier City, Louisiana. He credited the Bossier City team led by Maureen Wasloski and Harold Rowland, who oversees Louisiana and runs L’Auberge Lake Charles, for a fantastic quarter across top line, bottom line, gaming, and non-gaming, supported by investments in hotel renovation, new restaurants, and gaming floor changes.
Q: Can you discuss the Pennsylvania skill-game shutdown, enforcement, and the opportunity with unrated customers? A: CEO Jay Snowden said enforcement since October 14 has been real, with games being shut down across the state. October produced PENN’s strongest year-over-year gaming revenue growth in Pennsylvania all year, mostly from the unrated segment, suggesting displaced skill-game players are migrating to regulated slots. PENN’s VGT truck-stop route business in Pennsylvania has seen 30%-plus growth since the ban. He noted the state should see a strong October tax-revenue month given slot taxes above 50%, and argued skill-based games should be gone forever, though regulated VGTs done in partnership with the land-based industry is a different conversation. PENN is adjusting marketing allocation toward retail unrated customers during this period.
Q: What is the outlook for 2027 retail momentum, including consumer health and the ramp of recently opened properties? A: CEO Jay Snowden described 2027 as “a pretty clean year” with stable same-store sales, no significant new competitive openings or major expansions in key markets, and all four development projects continuing to ramp in revenue and margin. He acknowledged some softer markets such as Tunica and a small Illinois property but said regional gaming should continue to benefit from customers staying closer to home amid elevated inflation and gas prices. He noted healthy operating trends continued through October, with Halloween weekend among the top revenue-producing weekends of 2026.
Q: How much additional OpEx opportunity remains in interactive as you lap cost reductions, and what is the path to profitability? A: CTO Aaron LaBerge said the company will continue to rightsize the business, with ongoing opportunities in vendor and technology costs and disciplined, focused marketing to retain mid- and high-value users through 2027 and beyond. CEO Jay Snowden added that Q4 2026 will be profitable and 2027 will be profitable for the year, saying the days of negative EBITDA are “largely in the rearview mirror,” barring anomalies like a low-hold quarter or a new market launch such as Alberta. He highlighted that iGaming is now roughly 50% of non-skin interactive revenue, a more predictable, higher-margin stream.
Q: Why not delever and buy back stock simultaneously, and is there anything in the covenants preventing buybacks before crossing the leverage targets? A: CFO Felicia Hendrix said there is nothing in the covenants precluding buybacks; the approach reflects the strategy laid out by CEO Jay Snowden. She emphasized that de-risking the balance sheet is one of
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