Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) Q4 2023 Earnings Call Transcript February 28, 2024
Gaming and Leisure Properties, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greeting and welcome to Gaming and Leisure Properties' Fourth quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jim Leahy. Thank you. You may begin.
James Leahy: Thank you, Rob. Good morning, everyone and thank you for joining Gaming and Leisure Properties fourth quarter 2023 earnings call and webcast. The press release distributed yesterday afternoon is available on the Investor Relations section on our website at www.glpropinc.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. Forward-looking statements may include those related to revenue, operating income and financial guidance, as well as non-GAAP financial measures such as FFO and AFFO.
As a reminder, forward-looking statements represent management's current estimates and the company assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to risk factors and forward-looking statements contained in the company's filings with the SEC, including its 10-K and in the earnings release, as well as the definitions and reconciliations of non-GAAP financial measures contained in the company's earnings release. On this morning's call, we are joined by Peter Carlino, chairman and Chief Executive Officer at Gaming and Leisure Properties, also joined today's call are Brandon Moore, chief Operating Officer, general Counsel and Secretary; Desiree Burke, chief Financial Officer and treasurer; Steve Ladany, senior Vice President, chief Development Officer and Matthew Demchyk, senior Vice President, chief Investment Officer.
With that, it's my pleasure to turn the call over to Peter Carlino. Peter, please go ahead.
Peter Carlino: Well, thank you, Jim and good morning, everyone. We're especially pleased to be here with you this morning talking about the windup of a very good year, last year and off to a good start in the first quarter of this year. I think the critical issues are well outlined in the first four paragraphs of my written comments in our press release. I would encourage you to read them there rather than having me repeat them as is our normal approach. I'm going to ask Desiree Burke and Matthew Demchyk to make some -- or to highlight some things that we thought you might want to hear, and then we go straight to your questions and answer the things that really interest you. So with that, Desiree?
Desiree Burke: Sure. Good morning. For the fourth quarter of 2023, our total income from real estate exceeded the fourth quarter of 2022 by over $32 million. This growth was driven by the addition of Bally's Biloxi and Tiverton, which drove an increase of cash rental income of $12.1 million. The Rockford acquisition increased cash rental income by $3 million. The Casino Queen Marquette acquisition and the Baton Rouge landside development increased cash rental income by $2.3 million. The recognition of escalators and percentage rent adjustments on our leases added approximately $3.6 million of cash rent and the combination of higher non-cash revenue gross-ups, investment and lease adjustments, and straight line rent adjustments drove a collective year-over-year increase of approximately $11.6 million.
Our operating expenses increased by $12.8 million, primarily related to increases in non-cash expenses such as depreciation and the provision for credit losses. The annualized rent reduction in the amended PENN percentage lease was $4.4 million, which began in November of 2023. However, we did achieve full escalation on that lease of $4.2 million annualized and $3.5 million escalation on the PENN 2023 master lease annualized. In addition, our PENN amended and Pinnacle-Boyd master leases have rent resets occurring on May 1st of 2024. We expect these resets will increase percentage rent adjustments between $4 million and $5 million annually. From a balance sheet perspective, during the fourth quarter, we sold 3.9 million shares of common stock under our ATM program raising approximately $179 million.
An interior shot of a gaming operators facility, gaming machines reflecting the lights.
Subsequent to year end, we sold an additional 182,000 shares. Our net leverage remains under five times EBITDA. Included in today's release is GLPI's full-year 2024 AFFO guidance, ranging from $3.70 to $3.74 per diluted share and OP unit. Please note that this guidance does not include the impact of future transactions. for modeling purposes, our non-cash straight line rent adjustments for 2024 will be approximately $62 million, which will be needed to be included in revenue and then deducted for AFFO purposes. I would also like to note that our first quarter dividend was declared of $0.76 per share and our rent coverage ratios remain strong, ranging from 1.95 to 2.75 on our master leases as of the end of the prior quarter. With that, I will turn it over to Matthew for his comments.
Matthew Demchyk: Thanks, Desiree and thanks to everyone for joining today. Over this past quarter, we've watched as market participants vacillated between diverse views on interest rates, inflation in the economy, headlines around looming commercial real estate loan issues and the potential for more abound. It's a very interesting backdrop to further highlight the relevance of GLPI's enduring cash flows. Our thoughtfully constructed portfolio of safe and durable cash flows combined with our liquidity and capital markets discipline have set the stage for opportunity. And to that end, this past quarter, we again demonstrated our team's ability to uniquely source and structure a transaction to the benefit of our shareholders. Our team created a bespoke solution for a new tenant partner, American Racing with our recently-announced Tioga Downs acquisition, in which we issued OP units and achieved an 8.3 initial cap rate on $175 million investment.
The transaction took a long time to finalize and underscores the sweat equity that our team invests into deals as we compete on capability and not just cost of capital. Our capital market actions reemphasize our commitment to balance sheet strength and our respect for the role it plays in our long-term success. With an appreciation for our pipeline of opportunities, including Tioga, we also opted to lock in equity through our ATM program. Our very healthy net leverage positions us to be highly opportunistic in our use of debt and equity for new deals. We've underscored our dual commitment for GLPI to be both safe in a Voldo [ph] environment, and also very well positioned to take advantage of opportunity if and when it arises. Our core message to potential counterparties is that despite the macro backdrop in volatility, we are very much open for business.
Our overarching objective remains the same, increasing long-term intrinsic value per share. Thank you to our shareholders for the confidence you've placed in our efforts to make prudent long-term decisions for you. And with those comments, I'll turn the call back to Peter.
Peter Carlino: Well, thanks, Matthew. I think that well summarizes kind of our philosophy of operating with this company. And the growth, which I'd love to look at. The 19 properties we left when we spun from PENN, we did so with 19 properties. Today, we have…
Desiree Burke: 62 including Tioga.
Peter Carlino: Yes. we just added that. The script I have here says 61, but things get old here quickly. so, we're pleased to say 62 properties in the time, we've been in this business. We're proud of that. Okay. with that, time to open the floor to your questions. Operator, would you please do so?
Operator: Thank you. [Operator Instructions] Our first question comes from Jay Kornreich with Wedbush Securities. Please proceed with your question.
