Penn National Gaming Updates

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Penn National Reports Increases in Revenue, operations income, and adjusted earnings

Penn National Gaming, Inc. (Penn) is an owner and manager of gaming and racing facilities and video gaming terminal operations with a focus on slot machine entertainment. In recent days and weeks, investors and analysts were paying close attention to the company with earnings announcement set for today.

Penn National Gaming reported second quarter revenue of $769.4 million; a 9.8 percent increase compared to same three months at the end of June 30, 2015. Income from operations increased 21.1 percent to $149 million and adjusted EBITDA increased 14.5 percent to $223.8 million.

Wall Street sell-side analysts have placed a $20.562 one year price target on Penn National Gaming, Inc. (NASDAQ:PENN). This is the consensus average based on 8 firms who have recently issued reports on the equity. Penn Gaming’s year-to-date stock performance showed poor trading with a Negative value of -10.55 percent. On June 30, the company was upgraded to ‘outperform’ by analysts at Macquarie.

Timothy J. Wilmott, President and Chief Executive Officer, commented, “As reported by most jurisdictions, regional gaming industry trends began softening midway through the second quarter and remained so through June. Largely reflecting the change in the operating environment, Penn National’s 9.8%, 21.1% and 14.5% year-over-year increases in second quarter net revenue, income from operations and adjusted EBITDA, respectively, were slightly below guidance after accounting for various property level adjustments and corporate expense reductions. While the current operating environment reflects some challenges, our second quarter financial growth reflects meaningful contributions from our expansion and diversification initiatives over the last year, including Plainridge Park Casino, Tropicana Las Vegas and Prairie State Gaming. During the quarter, we saw stable levels of customer visits and spend per visit by rated players, offset by softness in the unrated customer segments in several of our key markets. Despite this operating environment, we largely preserved our operating segment and consolidated EBITDA margins by making prudent adjustments to property level and corporate expenses. Reflecting our focus on consistently generating significant free cash flow, the Company reduced bank debt by $35 million since year-end, while advancing slightly more than $100 million for the construction of the Jamul Indian Village project which we expect to open next month.

(in millions, except per share data)
 Three Months Ended June 30,

                                      2016 Actual     2016 Guidance (3)    2015 Actual

Net revenues (1)           $769.4             $786.8                        $701.0

Net income                    $34.0               $25.1                         $3.0

Plus: Impact of stock compensation, non-operating items for
Kansas JV, depreciation and amortization, changes in the
estimated fair value of contingent purchase price, gain/loss on
disposal of assets, interest expense – net, income taxes, and
other expenses            189.8                  200.4                        192.4


Adjusted EBITDA (2) $223.8             $225.5                     $195.4

Diluted earnings

per common share   $0.38                   $0.27                        $0.03


Review of Second Quarter 2016 Results vs. Guidance

Three Months

June 30, 2016
Pre-tax After-tax
(in thousands) (unaudited)
Income, per guidance (1) $ 44,016 $ 25,089
Adjusted EBITDA variances:
Operating segment variance (9,676 ) (5,908 )
Tropicana legal settlement gain, net of severance and impact of gaming floor disruption 3,526 2,247
Cash-settled stock-based awards variance 4,253 2,710
Insurance accrual adjustments, net of Dayton property tax savings (2,022 ) (1,235 )
Other variance, primarily corporate overhead costs 2,153 1,372
Total Adjusted EBITDA variances from guidance (1,766 ) (814 )
Depreciation and amortization variance 1,128 689
Interest expense variance 1,218 776
Other 243 148
Tax variance 8,147
Income, as reported $ 44,839 $ 34,035

Penn National Gaming now expects: net revenue of $3.03 billion compared to prior outlook of $3.05 billion. The company expects earnings per share of $1.08 compared to previous outlook of $0.87. Analysts polled by Thomson Reuters expect the company to report profit per share of $0.91 on revenue of $3.05 billion. Analysts’ estimates typically exclude special items.

For the third-quarter, the company expects: net revenues of $767.3 million; and earnings per share of $0.29. Analysts polled by Thomson Reuters expect the company to report profit per share of $0.23 on revenue of $770.58 million.

For earnings history and earnings-related data on Penn National Gaming (PENN) click here

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