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Segmental performance of Pinnacle Entertainment

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Overview

Pinnacle Entertainment, Inc. (PNK) reported adjusted earnings before interests, taxes, depreciation, and amortization (or EBITDA) of $141.5 million, up 38% year-over-year in the third quarter of 2014. The adjusted EBITDA margin increased by 42 basis points to 24.9%.

Part-3

Midwest segment

In the company’s Midwest segment, adjusted EBITDA increased by 56.4% to $86.5 million. Adjusted EBITDA margin was 28.3%, a decrease of 10 basis points year-over-year. Improvements in results were mainly due to the acquisition of the Ameristar properties. However, the Midwest segment’s adjusted EBITDA was also negatively impacted by severance expense due to operational leadership changes at Ameristar Casino Kansas City. On a same-store basis, adjusted EBITDA increased by 3.3% year-over-year, and adjusted EBITDA margins increased by 82 basis points year-over-year.

South segment

For the company’s South segment, adjusted EBITDA decreased by 0.4% to $56.3 million year-over-year. Adjusted EBITDA margin was 27.8%, a decrease of 160 basis points year-over-year. The South segment’s adjusted EBITDA was negatively impacted by cost associated with a team member retention program implemented at L’Auberge du Lac Resort Lake Charles in the 2014 third quarter. On a same-store basis, adjusted EBITDA decreased by 6.5% year-over-year. On this same basis, adjusted EBITDA margin contracted 160 basis points year-over-year.

The Lake Charles property experienced abnormally low table hold percentage from losses in its high limit business that negatively affected adjusted EBITDA and margin percentage. Both Ameristar Casino Hotel Vicksburg and Boomtown Hotel Casino Bossier City experienced declines in adjusted EBITDA due to a challenging marketwide revenue environment.

West segment

Adjusted EBITDA for the company’s West segment was $22.2 million, up 109% year-over-year. Adjusted EBITDA margin was 37.9%. On a same-store basis, adjusted EBITDA increased by 11.1% year-over-year, and adjusted EBITDA margin increased by 351 basis points year-over-year. Segment performance was driven by operational efficiencies at Ameristar Casino Resort Spa Black Hawk.

Pinnacle Entertainment’s peers

Boyd Gaming (BYD) reported a 5.5% year-over-year increase in adjusted EBITDA in the same period. Penn National Gaming (PENN) started to report adjusted earnings before interests, taxes, depreciation, amortization, and rental lease expense (or EBITDAR) following the spin-off of its real property assets division into real estate investment trusts (or REITs) named Gaming and Leisure Properties (GLPI). To know more, read the article Penn National Gaming’s performance metrics.

Casino companies are components of exchange-traded funds (or ETFs) such as VanEck Vectors Gaming (BJK) and Consumer Discretionary Select Sector Standard & Poors depositary receipt (or SPDR) fund (XLY).

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