Penn National Gaming exceeds guidance in 3rd quarter

WYOMISSING, Pa. - If you bet on Penn National Gaming to do well in the third quarter of 2017, you would be a winner.

The Berks County-based company reported record revenues and income from operations, resulting in adjusted EBITDA (earnings before interest depreciation and amortization) of $107.3 million.

"The third quarter marked another period of strong spend per visit trends across all three of our operating segments, leading to consolidated positive same facility revenue and adjusted EBITDA growth that exceed guidance," according to Timothy J. Wilmott, CEO of the company, which is headquartered in Wyomissing.

"Our Ohio, Nevada, Massachusetts, Prairie State Gaming and Penn Interactive Ventures operations each grew third quarter adjusted EBITDA by 10 percent on a year over year basis," Wilmott added. "At Plainridge Park, which recently celebrated its third year of operation, refinements in our marketing strategies are allowing us to effectively drive more profitable visitation.

"In Ohio, all four of our properties continue to build momentum, both with respect to top line growth and margin improvements. Similarly, our two Ohio racinos have experienced strong market demand and continue to drive increased revenues and win per unit with their expanded machine counts," he said. "Additionally, results continue to improve at M Resort and Tropicana Las Vegas in Nevada."

As a result of strong recent performance, future prospects, and significant levels of historical earnings, Penn National reversed the majority of its valuation allowance on its deferred tax assets which resulted in a non-cash tax benefit of $766.2 million, which increased net income to $789.3 million in third quarter 2017. Without the reversal, net income was $23.1 million.

Net revenues in third quarter 2017 were $806.2 million, which exceeded guidance by $15.3 million, as all three of the company's operating segments generated net revenue during the period. Income from continuing operations grew by $4.4 million, or 3 percent, to $143.7 million, while adjusted EBITDA increased by 5 percent to $221.8 million. Penn National reduced traditional net debt by $80.5 million compared to June 30, 2017, while repurchasing approximately $19 million of common shares during the quarter.

"Our consistency in extracting operating efficiencies drove consolidated third quarter 2017 adjusted EBITDA margins to 27.5 percent, an improvement over last year when excluding volatility related to the cash-settled stock-based rewards," Wilmott said. "Notably, we remain committed to leveraging our scale, purchasing power and distribution capabilities to drive further margin improvements through ongoing refinements in procurement, marketing and labor."

Looking forward into fourth quarter 2017, the company said it expects net revenues to reach $756.6 million compared to $742.9 million in fourth quarter 2016. For the full year, net revenues are expected to be $3,135.0 million in 2017 compared to $3,034.4 million in 2016. Income from operations is anticipated to be $134.3 million in fourth quarter 2017, and $553.3 million for full year 2017 compared to $543.0 million in 2016.

Net income for fourth quarter 2017 is expected to be $16.2 million, compared to $5 million in the same period in 2016. Due to the reversal of its valuation allowance on deferred tax assets, net income for 2017 is anticipated to be $827.7 million, compared to $109.3 million in 2016. Fourth quarter 2017 diluted earnings per share should be $0.17, while full year 2017 is expected to show $8.91 diluted earnings per share.

Penn National Gaming Inc. (PENN: Nasdaq) owns, operates or has ownership interests in gaming and racing facilities and video gaming terminal operations with a focus on slot machine entertainment. The company has recently expanded into social online gaming offerings via Penn Interactive Ventures, LLC and the recent acquisition of Rocket Speed Inc.

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