Penn National Gaming (PNG) has shrugged off the impact of weather-related impacts on its properties to post a 57.2% year-on-year increase in revenue for the first quarter of 2019.
Revenue for the three months ended March 31, 2019 grew to $1.23bn, driven by its $2.8bn acquisition of rival regional casino operator Pinnacle Entertainment, completed in October 2018. This saw PNG take charge of 16 additional properties and a Texas-based racetrack, in addition to its existing portfolio of 28 properties across 16 states.
In Q1 it also the acquisition of Margaritaville in Bossier City, Louisiana, and expects to finalise a deal for the Michigan-based Greektown Casino-Hotel by the end of May.
Revenue split
The bulk of revenue came from gaming operations, which rose 58.1% to $1.03bn, while food, beverage and hotel revenue amounted to $248.1m, up 89.4% year-on-year.
Looking at revenue by geographic split, the bulk came from PNG’s Northeastern properties, with the region contributing $550.6m of the total. The operator saw the contribution from the South, West and Midwest regions rise significantly as a result of its M&A activity, with revenue for southern properties alone up 361.0% to $291.9m.
Western property revenue was up 61.9% to $158.7m, with Midwestern revenue rising 46.2% to $271.3m. A further $10.5m came from standalone racing operations and Penn Interactive Ventures, which manages the operator’s social gaming assets. The acquisitions also helped offset softer volumes in the first few months of 2019, which PNG chief executive Timothy Wilmott blamed on poor weather affecting its Midwestern and Northeastern properties. This, however, did see PNG fail to meet its $1.30bn projected revenue for the quarter.
Rising costs
While M&A helped significantly boost company revenue, it also led to growth in costs. Operating expenses rose 70.8% to $1.1bn, with gaming expenses up to $547.4m, food, beverage and hotel costs almost doubling to $161.8m, and general and administrative expenses climbing to $286.9m.
This left an operating profit of $182.4m, up 6.0% year-on-year. Once other income and expenses of $126.6m, mainly interest expenses, were stripped out, the company’s pre-tax profit stood at $55.8m. After income taxes of $14.8m, PNG’s profit for the first quarter was $41.0m, down 9.8% year-on-year.
Looking ahead, Wilmott said PNG was making good progress in integrating the Pinnacle properties, having achieved $40m in cost synergies as of March 31. The operator now expects to achieve total cost synergies of $115m in 2019, with an additional $60m coming in 2020.
For the second quarter of 2019, to June 30, PNG expects to post revenue of $1.31bn, with the full year total expected to be in the region of $5.17bn.