Regional casino giant Penn National Gaming has 41 properties in 19 states.
So a third quarter dip in one market can be offset by results from casinos in other locations.
Penn National said Thursday it grew overall revenues for the three months that ended Sept. 30 more than 7.5%, to $1.35 billion. The results were fueled largely by a 12.1% increase from the company’s properties in the northeast region and a 12.7% jump in the south region. However, Penn said revenues declined 19% at its Plainridge Park casino in Massachusetts, due to competition from the opening of Encore Boston Harbor in June.
During a conference call with analysts, Penn National Chief Operating Officer Jay Snowden said the company had some “unsolicited interest” in its Illinois-based slot route operator, Prairie State Gaming, and the land holdings at Tropicana Las Vegas.
“We’re continuing to engage in those conversations,” Snowden said. “We’ll see where they take us. We’re encouraged by some of those conversations, but nothing’s done until it’s done.”
Penn National CEO Tim Wilmott added that the “fluidity of these discussions” made it impossible to put a timetable on any conclusion.
Penn’s net income rose 4.6% to $43.7 million during the three-month period, while cash flow increased 15.2% to $407.9 million.
“Our results for the quarter reflect the consistency of the consumer that we have seen over the last year,” Wilmott said in a statement. He said the company’s expected cash flow was lower due to “a greater-than-expected impact from a new competitor in the northeast.”
Wilmott said the regional gaming giant, which is based in Wyomissing, Pennsylvania, was able to balance some of the impact “by strong performances in other markets.”
Stifel Financial gaming analyst Steven Wieczynski said Penn’s operating results in the quarter “were pretty much right down the middle,” adding that the company “continues to execute on its strategies of driving profitable revenue growth and further refining the cost structure across its portfolio.”
Penn has been active in the acquisition market this year, adding Margaritaville Bossier City in Louisiana in January and Greektown in Detroit in May to the company’s portfolio. Both properties were acquired in partnership with real estate investment trust VICI Properties.
Rent payments to the company’s REIT landlords increased in the quarter, to $222.6 million from $107.4 million, due to the addition of various casino properties.
Penn National said it expanded its sports betting operations by opening facilities during the third quarter, opening locations at a casino in Iowa and two in Indiana. In October, the company opened a sportsbook at the Meadows Casino near Pittsburgh, and one of the company’s “skin” partners has launched online sportsbooks in West Virginia and Indiana and will soon be live in Pennsylvania.
Penn National also launched its Internet gaming operations in Pennsylvania.
“We are very encouraged by early market share results from these operations and are excited about the new growth opportunity,” Wilmott said, citing the company’s player database of 5 million customers.
“Our industry leading regional casino footprint positions us well to capitalize on the rapidly expanding sports betting and iGaming markets in a way that maximizes shareholder value,” Wilmott said.
Jefferies gaming analyst David Katz called the company’s quarterly results “as-expected” but added his focus is on where Penn progresses going forward. Shares of Penn closed at $21,32 on the Nasdaq Thursday, down 53 cents or 2.45%, following the earnings announcement.
“The potential for value capture through further real estate sales and development of ancillary technology businesses should be key to driving the shares higher,” Katz said.
Penn National has almost $2.5 billion in long-term debt and the company said it paid down $100 million during the quarter. The company is also moving forward on two casinos in Pennsylvania, the $120 million Hollywood Casino York and the $111 million Hollywood Casino Morgantown. Wilmott said both properties are expected to open in late 2020.
The earnings announcement was the last for Wilmott, who is retiring at the end of the year. Snowden will become CEO on Jan. 1.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
