In an effort to evaluate performance, we compare how the quarter measured up to previous management commentary and guidance
OVERALL
- MIXED: PNK posted lower revenues than contemplated by the Street but beat on EBITDA due to cost controls. However, earnings had come down considerably as States released a continuous stream of soft gaming revenues through the quarter. Cost controls were impressive but at some point someone needs to call out some of these gaming operators for the recurring "non-recurring" adjustments made (mostly up) to arrive at Adjusted EBITDA.
Business Trends:
- MIXED: Trip frequency continue to decline, while spend per trip increased 6% YoY in 1Q. The trip decline was even more evident in the markets with new competition. Management indicated that Q1 softness continued into April.
- PREVIOUSLY: Similar to 2013, trip frequencies continued to decline with people visiting less often, while spend patterns have remained relatively stable. Trip declines are particularly pronounced in the less than $100 average daily theoretical segment and end markets with new competition.
Marketing Spend:
- BETTER: Marketing reinvestment as a % of GGR was down 380bps YoY in 1Q. There is still room for improvement.
- PREVIOUSLY: Continue to be very focused on driving profitable revenue and applying a rational approach to marketing spend. Reinvestment declined both in terms of dollars and as a percentage of gaming revenue, down 240 basis points year-over-year.
Database integration spend:
- WORSE: Too many excluded costs recently. Integration of myChoice program into ASCA properties for 2014 and portion of 2015 benefit results in an upfront aggregate non-recurring charge of $5m in 2Q. Another $5.1m in Player list amortization costs associated with ASCA acquisition excluded in 1Q.
- PREVIOUSLY: Expect this year to have roughly about $10 million or so that will be spent on that in 2014. It'll be largely done by the end of this year.
L'Auberge Baton Rouge:
- SAME: L'Auberge Lake Charles and L'Auberge Baton Rouge particularly did well on the cost side, boosting EBITDA and EBITDA margins. L'Auberge Baton Rouge continued to ramp up its high end regional gaming volume.
- PREVIOUSLY:
- Market share increased 420 basis points from prior year with healthy growth from both the local and regional play
- Hotel also continues to be a very good story with this property achieving the second highest RevPAR in the company.
River City:
- SAME: Had all-time high in revenues in March. Combined with St. Charles, market share in St. Louis market increased 200bps.
- PREVIOUSLY: Continues to outperform the market with a 230 basis point improvement in market share during the fourth quarter.
Midwest:
- SAME: Struggled with polar vortex (~roughly $5m impact) but operational efficiencies led to a 680bps improvement in EBITDA margin.
- PREVIOUSLY: Performed pretty well in the face of a challenging environment, as our margins in the Midwest also improved despite a 4% decrease in net revenues.
Synergies
- BETTER: $53m annualized as of Q1 2014 - includes $5m cost related synergies and $11m of cost avoidance (healthcare benefit cost); expect more synergies ahead
- PREVIOUSLY:
- Feel very confident in ability to meaningfully exceed the target of $40 million of annualized merger synergies. In fact, PNK expects to exceed this $40 million number of implemented synergies by the end of 1Q 2014, with more to come.
- The loyalty program will launch in April, so haven't seen any impact at the Ameristar properties along those lines. VIP marketing, house coding our branch offices, all of those efforts are very early in the execution stage. Some are still in the planning stage, but we are beginning to execute most of our revenue synergies in the first and second quarter of this year.
New Orleans hotel:
- SAME: Will open this summer
- PREVIOUSLY: The project remains on budget and is expected to open early summer.
