Penn National Gaming (NASDAQ: PENN) reported Q2 EPS of $0.57, $0.07 better than the analyst estimate of $0.50. Revenue for the quarter came in at $826.9 million versus the consensus estimate of $840.62 million.

Timothy J. Wilmott, Chief Executive Officer, commented: “Penn National delivered another strong quarter in which we exceeded our guidance for income from operations and adjusted EBITDA. Our solid second quarter results are largely attributable to same store revenue growth at nearly two-thirds of our gaming operations and the continued success of our ongoing margin enhancement initiatives. As a result, all three of the Company’s operating segments generated year-over-year adjusted EBITDA growth. Our margin enhancement initiatives, which began last October, continue to yield results, with ongoing focus on procurement, marketing and labor.”

2018 Second Quarter Financial Highlights:

• Net revenues of $826.9 million;
• Income from operations of $181.8 million, up 34.6%;
• Adjusted EBITDA of $247.1 million, up 8.7%;
• Adjusted EBITDA after Master Lease payments of $131.2 million, up 15.7%;
• Adjusted EBITDA margins increased by 133 basis points to 29.88%, with 18 of 23 gaming operations delivering improved margins; and
• Reduced traditional debt by over $120 million. Traditional net debt ratio declined to 1.94x from 2.25x and gross and net leverage inclusive of master lease obligations declined to 5.21x and 4.99x, respectively, from 5.45x and 5.20x at March 31, 2018.

Financial Guidance for the Third Quarter and Full Year 2018

Reflecting the current operating and competitive environment, the table below sets forth full year and third quarter 2018 guidance targets for financial results based on the following assumptions:

• Excludes any impact related to the Pinnacle transaction;
• No contribution from the Company’s management contract for Casino Rama after mid-July;
• Corporate overhead expenses of $78.9 million, with $21.1 million to be incurred in the third quarter;
• Depreciation and amortization charges of $235.1 million, with $58.4 million in the third quarter;
• Rent payments to GLPI of $461.7 million, with $115.9 million in the third quarter which continues to be fully tax deductible;
• Maintenance capital expenditures of $103.6 million, with $45.2 million in the third quarter;
• Cash interest on traditional debt of $57.9 million, with $20.6 million in the third quarter;
• Interest expense of $468.5 million, with $115.6 million in the third quarter, inclusive of interest expense related to the Master Lease financing obligation with GLPI;
• Interest expense includes the impact of the five-year variable rent reset related to the Master Lease effective November 1, 2018, which reduces 2018 annual rent by $1.9 million;
• Interest expense also includes $0.9 million related to the maximum escalation that is projected to be incurred at the conclusion of year five of the Master Lease on October 31, 2018;
• Cash taxes of $32.7 million, with $14.7 million in the third quarter;
• Our share of non-operating items (such as depreciation and amortization expense) associated with our Kansas JV will total $5.1 million, with $1.3 million to be incurred in the third quarter;
• Estimated non-cash stock compensation expenses of $11.6 million, with $2.8 million to be incurred in the third quarter;
• LIBOR is based on the forward yield curve;
• A diluted share count of approximately 94.0 million shares for the full year; and,
• There will be no material changes in applicable legislation, regulatory environment, world events, weather, recent consumer trends, economic conditions, oil prices, competitive landscape (other than listed above) or other circumstances beyond our control that may adversely affect the Company’s results of operations.

For earnings history and earnings-related data on Penn National Gaming (PENN) click here.