Penn National’s 2Q results surprise analysts; CEO Wilmott retiring
Regional gaming giant Penn National Gaming Inc. battled hurricanes and floods in several markets but surprised analysts with a 60 percent jump in revenue, the company reported Thursday.
The Wyomissing, Pennsylvania-based operator of the Tropicana and M resorts in Las Vegas also announced that CEO Tim Wilmott will retire at the end of the year and be succeeded by President and Chief Operating Officer Jay Snowden on Jan. 1.
Wednesday evening, the company also announced that it had entered into multiyear agreements with sports betting operators DraftKings, PointsBet, theScore and The Stars Group for online sports betting and iGaming market access across the company’s portfolio.
In Thursday’s conference call with investors, the company also indicated it likely wouldn’t be a buyer of Las Vegas Strip assets should they be divested as a result Eldorado Resorts Inc.’s planned acquisition of Caesars Entertainment Corp.
“I think in the short term, we want to de-risk our balance sheet and see bigger free cash flow and get our leverage levels down,” Wilmott said. “Two years from now, that story and our perspective may be different and there may be opportunities out there for Jay to consider with the management team here. But in the short term, I don’t see any need to look differently on capital allocation on the Strip in Las Vegas.”
Snowden added that under his watch, the focus would remain on deleveraging the balance sheet.
“It’s not imperative that we have a Las Vegas Strip asset or two Strip assets,” he said. “We’re going to drive success with this company through a variety of strategies … and we do believe that interactive will be a big part of our future. Would it be nice to have a center Strip asset? Sure. Are we going to overpay for one? Absolutely not. Not today, not ever. If the price is right, we’d consider it down the road.”
Penn reported a 4.8 percent decline in net income to $51.4 million, 44 cents a share, on revenue of $1.323 billion for the quarter that ended June 30. A year ago, the company produced net income of $54 million, 57 cents a share, on revenue of $826.9 million.
This year’s results included revenue for a portion of the quarter from the Greektown Hotel-Casino in Detroit. The $300 million deal that added 1,700 new employees closed in May.
The company performed above expectations, considering several weather-related closures and the shutdown of a property in Mississippi.
“We think Penn’s better-than-anticipated second-quarter results, solid second-half guidance and improving balance sheet position should be well received by investors today, especially given its meaningful year-to-date share price underperformance versus its peers and what we would describe as negative to apathetic investor sentiment versus its peers,” industry analyst Joe Greff of New York-based J.P. Morgan said in a note to investors Thursday.
Penn said there were $1 million in costs associated with the June 30 closure of Resorts Casino Tunica in Mississippi and that other headwinds included the closure of Argosy Casino in Alton, Illinois, for 49 days because of flooding. The company also had flood closures at Ameristar Council Bluffs in Iowa and River City Casino and Hotel in Missouri with revenue impacts of $10.3 million and $5.4 million, respectively.
Third-quarter earnings at Louisiana properties likely will be affected by Hurricane Barry in July.
Shares of Penn National Gaming closed down 2.15 percent Thursday to $19.10.
Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.
Penn National Gaming Inc.
Second-quarter revenue and earnings for Wyomissing, Pennsylvania-based Penn National Gaming Inc., operators of the M Resort and Tropicana in Las Vegas. (Nasdaq: PENN)
Revenue
2Q 2019: $1.323 billion
2Q 2018: $826.9 million
Change: +60%
Net income
2Q 2019: $51.4 million
2Q 2018: $54 million
Change: -4.8%
Earnings per share
2Q 2019: 44 cents
2Q 2018: 57 cents
Change: -22.8%
Wilmott's retirement
The retirement of CEO Tim Wilmott and the planned elevation of President and Chief Operating Officer Jay Snowden didn't come as much of a surprise to most gaming analysts who have been observing the company's development of a succession plan.
Wilmott joined Penn in February 2008 as president and chief operating officer, was named CEO in November 2013 and has served as a member of the board of directors since 2014.
Under Wilmott's leadership, Penn has more than doubled its annual revenue from approximately $2.4 billion in 2008 to the over $5 billion expected in 2019. Since January 2018, Wilmott has also served as the chairman of the American Gaming Association.
Snowden, 43, joined the company in October 2011 as senior vice president of regional operations. In January 2014, Snowden was appointed chief operating officer and in March 2017, he took on the title of president.
Snowden, who will take over as CEO on Jan. 1 and has already been appointed to the board of directors, joined Penn National from Caesars Entertainment Corp.
