Solid quarter relative to expectations. Management guidance is setting up Q3 for another beat. July should prove a big improvement over Q2 when states release revs.
CONF CALL
Prepared Remarks
Upcoming Openings:
- Hollywood Dayton, Aug 28
- Hotel opening at Zia Park New Mexico, Aug 28
- Mahoning Valley ~850 slots, September 2014 opening.
- Plainridge MA - late Q2 opening
- Jamul CA - mid 2016 opening, backed up by 2 months
- New York - expect decision by end of 2014
Q2 2014 Results
- Operating environment remained challenged, but positive on relative basis
- Low end segments remain sluggish but health in VIP
- MW and East improved trends
- Corporate & Overhead expenses run rate $20m savings
- $253 million cash on hand at end of quarter
- CapEx $20.2 million in quarter and forecast at $72.5m for year
- Preopening expenses forecast at $8.2 million for year
- Argosy Sioux City Iowa: awaiting Supreme Court, disappointed with decisions thus far, rent reduction to GLPI of $6 million if asset closes.
Q&A:
- Regional trends, what drove the June pullback?
- Calendar driven: May better, June weaker
- Regional trends thus far in July?
- MTD: mixed bag, some mkts better, some markets feeling saturation and competitive pressures and reflected in guidance.
- EBITDA flow through, why not greater?
- Elevated pre-opening expenses in Q3 due to new facilities. Outlook remains choppy and uneven. No clear indication of meaningful movement to change previous guidance.
- Massachusetts
- Other licenses will not impact the PENN facilities, expect to have 2 to 3 year opening advantage.
- MA Referendum
- Public opinion polls show >10% lead
- New developments expect to increase active database from 4 million to 5 million - current data base additions include 10k/month in Columbus and 6-8k/month in Toledo
- Kansas JV restatement - why now and driving reason, coverage ratio impact to GLPI.
- Change more appropriately reflects PENN, co-wide adjusted EBITDA, no impact on any ratios.
- Upstate New York - how consider an upstate property as compared to Mid-Atlantic landscape and potentially Meadowlands/Jersey City casino?
- Watching closely, New Jersey voters will need to amend state constitution.
- Dayton is not in Cinci market which is crowded - separate MSA. Parking situation is good there
- Youngstown over an hour away from nearest casino - great location off interstate 80.
- Unlike PNK's Belterra Park, PENN views Youngstown and Dayton as 2 new markets.
- PA rightly being cautious and protecting existing casinos so not sure if more will be allowed
- Cash flow should be immediately generated at new racinos
- No change in acquisition strategy
- Database under-leveraged without destination property (LV Strip). Couldn't get to the right valuation on Cosmopolitan.
- Atlantic City - mgmt not bullish on AC particularly with what is being considered in NY and North New Jersey. Further revenue declines likely.
- Plainridge - stated in MA filing that $250m in revs is the number and that forecast hasn't changed.
