Penn National Gaming has completed a busy week of announcements with the posting of its financial results for the three and six months ended June 30, 2019. The company simultaneously revealed that Timothy J Wilmott will retire as CEO to be replaced by Jay Snowden who was COO on January 1, 2020.
Focusing on the financials, the firm reported Q2 operating income of $198.4m, net income of $51.4m, adjusted EBITDAR of $406.5m, and adjusted EBITDA, after lease payments of $191.6m. It also upwardly revised its 2019 full year guidance and raised anticipated Pinnacle cost synergies to $120m.
Wilmott told investors: “Penn National delivered a strong second quarter that exceeded our adjusted EBITDAR guidance even without the partial quarter contribution from the Greektown Casino acquisition which closed in May and delivered revenues of $34.2m and adjusted EBITDAR of $9.2m.
“Notably, our outperformance is inclusive of $1m of costs associated with the June 30 closing of Resorts Casino Tunica as well as the negative impact from flooding at Argosy Casino Alton (closed for 49 days during the quarter), Ameristar Council Bluffs, and River City (we currently estimate revenues and adjusted EBITDAR were impacted by $10.3m and $5.4m, respectively).
“Despite these headwinds, adjusted EBITDAR margins improved 80 basis points year over year, which further highlights the significant and continued progress we are making with operating efficiencies. All told, we have updated our full year revenues guidance to $5.3bn. We also raised our full year adjusted EBITDAR guidance to $1.6b, which reflects the addition of Greektown Casino and the $5m outperformance in the second quarter, slightly offset by the estimated impact from Hurricane Barry.”
Wilmott also updated investors on the integration of the Pinnacle properties which, he said, continues to go extremely well. “We now expect to achieve at least $120m of cost synergies (up from $115m), with a run rate of at least $60m in 2019. We remain highly focused on driving revenue synergies through the relaunched mychoice program and we believe we are well-positioned to achieve incremental adjusted EBITDAR associated with revenue synergies related to Pinnacle in the range of $15-$20m. Most of these revenue synergies should be realized in 2020 and 2021.”
Turning to sports betting and igaming, Wilmott said: “Penn National entered into multi-year agreements with leading sports betting operators DraftKings, PointsBet, theScore, and The Stars Group for online sports betting and igaming market access across the company’s portfolio. In exchange for access to our non-primary licenses to conduct these operations, Penn National will receive a combination of upfront cash and equity, one-time market access fees, and ongoing revenue sharing.”
2019 Second Quarter Financial Highlights:
- Revenues of $1.32 billion, an increase of $496.2 million year over year;
- Operating income of $198.4 million, an increase of $16.6 million year over year, with net income of $51.4 million and net income margin of 3.9%;
- Adjusted EBITDAR of $406.5 million, an increase of $159.4 million year over year;
- Adjusted EBITDAR margins of 30.7% marking an increase of 80 basis points year over year;
- Adjusted EBITDA, after Lease Payments of $191.6 million, an increase of $60.4 million year over year; and
- Traditional debt increased by $178.2 million during the quarter, principally due to borrowings under our senior secured credit facilities for the acquisition of Greektown. As of June 30, 2019, our GAAP traditional net debt ratio was 2.67x and net leverage on a lease-adjusted basis was 5.80x.