Penn EntertainmentPENN

Key highlights

• Interactive losses shrinking: The digital division reported an adjusted loss of $9.5 million, which is a major improvement from the $62.0 million loss it posted this time last year. This move toward making money was helped by record results from the online casino and high interest in the World Cup.
• Retail casinos hitting records: The traditional casino business reached $1.5 billion in revenue for the quarter, and nine different properties set all-time high performance records. These physical locations achieved profit margins of 34.4%, showing that the company can still grow its old-school business while building its digital apps.
• Corporate costs falling: Spending on the main office dropped to $29.5 million from $38.7 million a year ago. The company is becoming more efficient by moving to a new organizational structure and cutting legal fees that previously went toward dealing with activist investors.
• Balance sheet cleaning up: PENN reduced its total traditional debt to $2.8 billion and repaid $106.7 million in convertible notes that were due this year. Taking care of these notes early is good for long-term owners because it prevented 4.6 million new shares from being created, which keeps current ownership from being watered down.
• Profitable path ahead: Management says the business remains on track to meet its goals for the year, supported by recent casino openings in Ohio and Illinois and a new app launch in Alberta on July 13. While they did not give a specific dollar range for next quarter, they noted that the positive trends from the second quarter have continued through July.

Our take: A strong quarter that shows the company is finally fixing its digital business. The massive drop in online losses from $62.0 million to under $10 million is the highlight, proving they can grow without burning through cash. This makes the long-term case much safer as the physical casinos fund the digital expansion.