Penn National hopes for expansion pay-off as Q3 expectations are missed

Penn National Gaming is hoping to reap the rewards of a series of strategic acquisitions and developments, in addition to US-wide sports betting and igaming roll-outs, as the firm missed analysts guidance in its Q3 report.

Expecting to close its previously announced acquisition of Margaritaville Resort Casino in Bossier City, Louisiana, by the end of the year, PNG also points to a potential $230m investment within its home state of Pennsylvania for its Hollywood Casino’s in both York and Morgantown, as considerable development activity.

Regarding potential future developments, Timothy Wilmott, chief executive officer of PNG, explained: “On the sports betting front, we began taking live wagers at our Mississippi properties in August, and at Hollywood Casino at Charles Town Races in West Virginia in September.

“We look forward to implementing sports betting in Pennsylvania later this year, as well as real money igaming in the first quarter on 2019.

“Meanwhile, as the nation’s largest regional gaming operator, we’re actively exploring strategic relationships with several sports wagering and igaming operators, as well as leading media companies and content providers.”

Further expansion came in the shape of the company’s $2.8bn acquisition of Pinnacle Entertainment, whose sports wagering, online gaming and social platforms are to also see continued upgrades.

“The acquisition is expected to be substantially accretive to Penn National’s free cash flow per share in the first year after closing, and we are expecting to achieve a run rate of more than $30 million of our two-year, $100 million cost synergy target by the end of the fourth quarter,” stated Wilmott.

“With the expected significant free cash flow to be generated from our expanded base of operations, we are well-positioned to embark on an active leverage reduction program while pursuing accretive strategic growth investments, as well as evaluating opportunistic returns of capital to shareholders through our current share repurchase authorisation, which has approximately $75 million remaining through next February.”

In its third quarter PNG reported net revenues of $789.7m, missing the $807.1m guidance and down from 2017’s $806.2m, with adjusted EBITDA of $229.7m, up from the previous years $225.2m but slightly missing the $231.9m analyst projection.


Income from operations however did see an 8.4 per cent boost to $155.8m, with Wilmott adding: “Penn National generated record third quarter income from operations, led by our Las Vegas properties and the West region overall, despite facing increased competitive pressures in Illinois and Mississippi.

“Our operating teams continued to execute against our margin improvement initiatives, as the company drove further adjusted EBITDA margin improvements across all three operating segments by an average of 115 basis points, to 29%, with 17 of 23 gaming properties delivering improved margins.”