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Gaming expansion and M&A boost PNG revenue in Q3


Penn National Gaming (PNG) has reported a 71.5% year-on-year increase in third quarter revenue, after benefiting from the regulation of sports betting and online gaming in a number of states and the expansion of its casino estate.

Revenue for the three months to 30 September, 2019 came in at $1.35bn, almost double the $789.7m generated in the prior year. 

The operator has significantly expanded its casino estate over the past year, first completing the acquisition of Pinnacle Entertainment in October 2018. It followed this with deals for Louisiana’s Margaritaville Resort Casino in January 2019, and the Michigan-based Greektown Casino-Hotel in May.

During Q3, PNG also rolled out sports betting in a number of states, launching in Iowa and Indiana, with its partner DraftKings launching mobile betting in West Virginia and a retail sportsbook launched in Pennsylvania. This was complemented by the introduction of online casino games in the Keystone State, where it led the market in September.

“We are very encouraged by early market share results from these operations and are excited about the new growth opportunity,” outgoing chief executive Timothy Wimott commented. 

“The combination of our greater than 5m active mychoice [loyalty programme] player database and 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.”

This contributed to gaming revenue jumping 68.4% year-on-year to $1.09bn in Q3, while food and beverage revenue climbed 91.6% to $266.0m. 

Chief operating officer and CEO designate Jay Snowden noted that the introduction of sportsbooks had not had a discernible impact on PNG’s slot business.

“However, the opposite is certainly true with regard to table games,” he said. “Our properties that have been live with retail sports books in the last 15 months have experienced an average of 15% year-over-year growth in table game revenue post-launch. 

“[Perhaps] most encouraging is how complimentary and incremental this sports betting demographic has been to the profile of the vast majority of the customers in our existing retail casino database,” he continued. “In fact, most of the table games and food and beverage growth at these properties has been driven by visitation and spend from new and reactivated guests to our properties.”

While the significant expansion of the operator’s casino estate has significantly boosted revenue, it has also had a significant impact on costs for the quarter. Total outgoings rose to $1.17bn – an 85.3% rise from Q3 2018. 

Costs related to gaming contributed the majority of this sum, rising to $587.5m, with administrative expenses more than doubling to $309.7m. General and administrative costs jumped from $96.0m to $171.2m, while impairment charges rose to $106.3m. 

This left an operating profit of $179.8m, a 15.4% improvement on the prior year. 

Interest payments on the operator’s debt, which stood at $2.45bn as of 30 September, increased to $133.5m, though it recorded benefits of $9.8m from unconsolidated affiliates and $7.2m from other sources. This left a pre-tax profit of $63.3m, up 40.0%, with net profit for the quarter standing at $43.9m (up 21.6%) once income tax of $19.6m and a $0.2m profit from a non-controlling interest were factored in.

Looking ahead, Snowden revealed that PNG had received unsolicited interest in its Pennsylvania-based video gaming terminal business Prairie State Gaming and in its Tropicana Las Vegas property. 

He said the operator would continue to engage in those discussions, though added “nothing’s done until it’s done”. However, he said, potential divestments could be a way to reduce the business’s debt at a faster rate.