So what have we learned so far from second quarter earnings announcements?
• Regional gaming is back, and that means downtown Las Vegas and the LV locals markets, too.
From Boyd to Penn National and from Pinnacle to Mohegan Sun the news has been about gamblers returning at all levels. And optimism abounds as casino executives say the positive trends have accelerated so far in the third quarter.
• REITs are for real. The announced deal between Pinnacle and Gaming & Leisure Properties means more than that GLPI is dramatically expanding its business as a casino landlord.
It means that splitting off operations from real estate is becoming a common way to unlock the property values of casino developments.
By the way, in our last column, we noted that the price of Pinnacle stock had risen dramatically from $9.30 on the day in March 2010 when Anthony Sanfilippo was appointed CEO. The price was actually $8.64, making the appreciation to nearly $40 as of this writing even more impressive.
• Cost controls matter. Company after company is showing the benefits that controlling costs is having on their bottom lines.
Perhaps the best example is Las Vegas Sands that, despite plunging gaming revenues in Macau, excited investors by controlling costs. That led to higher margins, and immediately to a higher stock price.
Wynn Resorts didn’t have the same story to tell when it reported second quarter earnings, but the stock shot up anyway as CEO Steve Wynn seemed to have a considerably more positive outlook on Macau.
Perhaps just as important, WYNN suggested expense improvement is on the way noting that it has a surplus of employees today in preparation for opening Wynn Palace next year, and that those costs should drop from that point on.
Bob Evans And Churchill Downs
Bob Evans might be the most unsung CEO in the gaming industry.
Now retiring as executive chairman of Churchill Downs, Evans took over a company in 2006 that for years appeared to be run more for the blue bloods in the Sport of Kings than for its shareholders.
Evans did more than change that. He transformed Churchill Downs from a horseracing company to a diversified gaming company, yet one that has protected and nurtured its prize possessions, the Kentucky Derby and its historic namesake racetrack.
A stock around $35 a share in Evans’ early CEO days is now around $135 as he steps down, and as current CEO Bill Carstanjen finishes his first year at the top.
The evidence of the revolutionary change was clear in CHDN’s second quarter earnings report.
Racing comprised just 37 percent of revenue, even though the quarter included Kentucky Derby week.
The second biggest source of revenue and EBITDA was Big Fish, the rapidly growing online social gaming company. In the three racing-light quarters of the year, Big Fish will be the Big Fish at CHDN.
The third largest producer was casinos, with $28 million in EBITDA just $200,000 shy of the Big Fish contribution. Casino revenue was zero when Evans took over.
Online account wagering operationTwinSpires.com was the fourth contributor.
Overall EBITDA was $157.2 million, 34 percent ahead of last year.
Though Evans is retiring, the management team that created the new Churchill Downs remains. And he will stay as non-executive chairman. We suspect the record of success for shareholders will continue.