Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) Q4 2022 Earnings Call Transcript
Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) Q4 2022 Earnings Call Transcript February 24, 2023
Operator: Greetings. Welcome to the Gaming and Leisure Properties, Inc. Fourth Quarter 2022 Earnings Conference Call. At this time all participants' are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Joe Jaffoni. You may begin.
Joe Jaffoni: Thank you. Good morning, everyone, and thank you for joining Gaming and Leisure Properties fourth quarter 2022 earnings call and webcast. The press release distributed yesterday afternoon is available in 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 the risk factors and forward-looking statements contained in the company's filings with the SEC, including its 10-Q 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, our Chairman and Chief Executive Officer of Gaming and Leisure Properties. Also joining today's call are Brandon Moore, Chief Operating Officer, General Counsel and Secretary; Desiree Burke, Chief Financial Officer and Treasurer; Steven Ladany, Senior Vice President and Chief Development Officer; and Matthew Demchyk, Senior Vice President and 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, Joe, and good morning, everyone. Let me there's noise on the line. Let me announce at the outset that several of us have dialed in from out of the office. And hopefully, that won't affect the smooth flow of our presentation. We are very pleased to announce another positive and eventful year here at GLPI documented with considerable detail in our published release. Some of the highlights, which we will look at in more detail as we go through this call includes notably reaching a new fixed rent agreement with PENN Entertainment, which significantly limits the rent volatility that we've experienced in the past. Additionally, we've signed agreements that define the arrangement by which we will fund the previously announced relocation of PENNs properties in Aurora, Illinois and Joliet, Illinois, along with providing long-term funding for a new hotel in Columbus, Ohio and supporting the second hotel tower at the M in Las Vegas.
Photo by Kaysha on Unsplash
This is a pretty exciting stuff, and we're delighted to be doing this with PENN. Also this quarter, we closed on Valley's Tiverton, Rhode Island property and Valley's Hard Rock in Biloxi. And additionally, as we'll probably discuss in more detail, we worked hard this past year and last quarter to perfect our balance sheet, now achieving the lowest leverage we've ever enjoyed in positioning us to do -- with the option to do things using that now if we wish and still stay within the 5% to 5.5% leverage range that we have discussed. I'm going to ask Desiree to put some numbers behind some of these things that I've just outlined. So Desiree, please go ahead.
Desiree Burke: Thank you, Peter, and good morning, everyone, and thanks for joining our call. We reported record results for the fourth quarter of 2022, and our total income from real estate exceeded Q4 21 levels by over $50 million. This growth was driven by the quarter's Live! transactions, which increased cash rental income by approximately $31 million. The addition of Valley's Black Hawk and Rock Island properties, which drove an increase in cash rental income of $3 million, the Tropicana LV land lease, which increased rental income by $2.6 million, the recognition of escalators and 10 percentage rent increases on our leases, which added approximately $4 million of cash rent, as well as the combination of higher non-cash revenue gross-ups, investment and lease adjustments and straight-line rent adjustments, which drove collectively a year-over-year increase of approximately $8 million.
Our operating expenses declined $33 million, primarily due to a reversal of prior period provisions for credit losses on our Cordish leases resulting from improved property performance and a decline of approximately $8 million in gaming and G&A expense related to the 2021 sale of our TRS operations. We continue to see strong coverage ratios across our leases. In the fourth quarter, we realized full escalation on the PENN master lease, which increased annual building base rent by $5.7 million, $1 million of which was recognized in 2022. In connection with the PENN transactions, which created a new master lease, it amended the existing PENN master lease and terminated the Perryville and Meadows leases. The portion of our rents that are variable as a percentage of our cash rents will decline to approximately 5.3% in 2023 from 11.7% in 22 providing additional visibility into uncertainty of our future revenue streams from this tenant.
From a balance sheet perspective, we had a very busy fourth quarter. During the quarter, we sold 3.2 million shares of common stock under our ATM program, raising net proceeds of $156 million. We also settled the forward sale agreement in February of 2023 and issued 1.3 million shares, raising net proceeds of $64.6 million. We used these proceeds to partially fund the early redemption in February of 23 of the $500 million, 5.375% notes, which were coming due in November of 23. Our net leverage is now just under 5 times EBITDA. In addition, we entered into a new $1 billion at-the-market program, which remains unused as of today. In today's release, we provided full-year 2023 guidance for AFFO per diluted share in OP units, ranging from $3.61 to $3.67 per diluted share and OP unit.
Please note that this guidance does not include the impact of any future transactions. For modeling purposes, our non-cash straight-line rent adjustment for 2023 will be approximately $39 million, which will need to be included in revenue, but then deducted for AFFO as it is non-cash, and it is changing due to the new leases that we entered into in 2023. I would also like to note that we declared a first quarter dividend of $0.72 per share on the company's common stock as well as a special earnings and profits dividend of $0.25 per share. The special dividend is related to the earnings and profits from the sale of the Tropicana building, which was completed in the third quarter of 2022. With that, I will turn the call back to Peter.
Brandon Moore: Peter, do you have any other further comments? If not, I think Matt had a few things he'd like to address?
Peter Carlino: I put speaker on hold. My apologies. Yes, indeed, I had turned it over to Matt. So Matt, go ahead. I know you wanted to focus on a couple of points you thought were critical.
Matthew Demchyk: Sure. Thanks, Peter, and thanks for everyone for joining us in the busy earnings season. In an environment, the economic and monetary environment with significant cross currents, volatility and uncertainty, I want to remind everyone that GLPI's business model was built with environments like this in mind. So our shareholders can benefit from a platform that is strong, resilient and opportunistic. We've worked hard and long on the effort to strengthen our balance sheet; our leverage and liquidity levels serve both as a ballast and also a strong foundation for growth. Our net leverage positions us for significant optionality as we look to fund future opportunities. At that end, we've also worked diligently the past many years to expand our tenant roster, sow the seeds of future growth through various structures of specific assets, open dialogue with new potential partners and to fortify our reputation as a collaborative landlord, problem solver that is interested in enhancing the long-term success of our tenant partners.
We've got a seat at the table for opportunities and continue healthy conversations across the board. And to the extent, 1 of our many conversations leads to an opportunity of interest, we're poised to pounce. We take our role as stewards of shareholder capital very seriously and remain resolutely focused on increasing intrinsic value per share over the long-term. With that, I'll turn the call back to Peter.
Peter Carlino: Well, this time, thanks, Matt. I don't have my mute button on. No, I think that says very well what we're all about here. And I must say, just one editorial comment that I'm very pleased with where we find ourselves today. So with that, let's open the floor to questions. Somali, would you please open the mics.
See also 13 Most Profitable Food Stocks and 13 High Growth Pharma Stocks that are Profitable.
To continue reading the Q&A session, please click here.
