Gaming and Leisure Properties, Inc. (GLPI) Earnings Call Transcript & Summary

Greetings, and welcome to the Gaming and Leisure Properties Second Quarter 2026 Earnings Conference Call and Webcast. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Joe Jaffoni. Thank you. Please go ahead. .

Thank you, Carrie, and good morning, everyone. Thank you for joining Gaming and Leisure Properties' Second Quarter 2026 Earnings Call and Webcast. The press release distributed yesterday afternoon is available in the Investor Relations section on our website at glpropinc.com. In addition to the second quarter press release, GLPI also posted supplemental earnings presentation, which highlights the events of the quarter, recent developments and future considerations that can also be accessed 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 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-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, Chairman and Chief Executive Officer of Gaming and Leisure Properties. Also joining today's call are Brandon Moore, President and Chief Operating Officer; Desiree Burke, Chief Financial Officer and Treasurer; Steve Ladany, Senior Vice President and Chief Development Officer; and Carlo Santarelli, Senior Vice President, Corporate Strategy and Investor Relations. With that, it's now my pleasure to turn the call over to Peter Carlino. Peter, please go ahead.

Well, thank you, Joe, and good morning, everyone, and thank you for joining us this morning. So we're happy to announce another strong quarter that sees our ASFO expanding 10% year-over-year. And we anticipate healthy growth in the near and medium term as that pipeline, which you all can see pretty clearly provides a lot of visibility into the pace of our growth, which continues to remain strong. So we believe the environment for continued transaction activity remains healthy, and we're optimistic that this trend will continue through the balance of this year and beyond. Of importance, and I think critical importance during the second quarter is that the regional gaming market remains strong. I hear a lot of [indiscernible] been in action of teeth that suggests that somehow the gaming regional gaming business is weak, it is absolutely none. In fact, there's some lovely numbers being produced by some of our tenants with properties existing and new and expanded. So the operating environment in the region of the world is still very, very strong. Our tenants are benefiting from good same-store growth and return on investment where they have opened new properties or expansion of properties. So it's very strong. I have said for many, many years, and I'll stand by it today despite all the rexine in the marketplace, the gaming revenues are bulletproof. And you can write that one down. They're bullet proof and gaming companies just are a stable and investment that exists on the planet. So I would also note that, by the way, this quarter, our dividend was increased by 5% to $0.82 per share bringing our 3-year dividend growth compounded to 4.4%. So our balance sheet remains strong, providing flexibility for ongoing projects. We can finance everything that we've got announced with what we have available today. We have no need to go to the market and we don't feel like it. Given our progress to date, we feel good, by the way, about the second half of 2026, first half has been very, very strong. So with that, we're happy and believe that the company remains well positioned to continue on the path that we've set and that gives me the great opportunity to turn the microphone over to Desiree who can't wait to get to you.

Thanks, Peter, and good morning. For the second quarter of 2026, our total income from real estate exceeded the second quarter of $25 million by over $35 million. The growth was driven by approximately $43 million in increases in cash income resulting from acquisitions and escalations. For Bally's, the acquisition of the Lincoln Real Estate increased our cash income by $14 million. The Chicago lease increased cash income by $9 million and the Belly's development project increased our cash income by $2.4 million. For Penn, the Joliet Aurora and M Resort funding increased cash income by a collective $5.8 million. The Sunland Park strategic acquisition increased cash income by $3.8 million and the Dry Creek Ion and Cordish Virginia loans increased cash income by $4 million. The recognition of escalators and percentage rent adjustments on our leases added approximately $4 million of cash income and then the combination of our noncash items from revenue gross-ups, investment and lease adjustments and straight-line rent adjustments resulted in a decrease of $7.2 million. Our operating expenses decreased by $54 million, mainly due to the noncash adjustments and the provision for credit losses. We also included in today's release guidance of between $1.219 billion and $1.225 billion or $4.10 to $4.12 per diluted share in OP unit. The guidance does not include the impact of future transactions. However, it does include additional development funding of approximately $400 million to $450 million would be funded relatively evenly over the next 2 quarters bringing our total development spend to $750 million to $800 million, the same as what we projected last quarter. From a balance sheet perspective, Peter mentioned that our leverage ratio is at 4.8x, slightly below our target level of 5x to 5.5x and we did settle our forward contract issuing 7.6 million shares and raised net proceeds of $351 million. I'll end with a reminder that our significant development projects pay us cash income upon funding and our rent coverage on our master leases range from $1.58 billion to $2.46 billion this quarter as of the prior quarter end. -- that is. With that, I'll turn it back to Peter.

Thanks, Ezra. Yes, look, I hope this highlights that we sell the company is in a terrific position, scarcely ever been better. So we're very positive here as we sit around this table with what we have in front of us. So with that, let's get to your questions. Carrie, please go ahead. .

[Operator Instructions] And our first question will come from Ronald Kamdem with Morgan Stanley. .

Great. Just 2 quick ones. Obviously, there's been a lot of news about some of the operators potentially going private and so forth in the industry. Would just love to hear some thoughts just from your perspective, sort of how you're thinking about the impact of GLPI? How do you think about this trend overall for the industry? Any color there would be helpful. .

Ron, this is Carlos. So look, I mean, obviously, 2 larger operators that have announced would be effectively take private transactions. We have no relationship with MGM, Caesars, we do have a relatively small portfolio that's about 7% of our cash rent I think the biggest thing that it shows is something we believed all along, which is that the business -- the gaming business and the operator business in the public markets has been undervalued. So I think from our perspective, that's been pleasant to see that others kind of view similarly. I'll turn it over to Steve to kind of talk about what he thinks it could mean for us from an opportunistic standpoint.

Yes, that's fine. I don't think that there's -- I don't think there's any reasonable -- there's not a reason to believe that there will be definitive M&A that will fall out of those transactions. In other words, I don't think there are set divestitures that will be required to occur or meaningful divestitures that either of the buyer -- potential buyers will require to occur. So I think from our perspective, we are -- we have a phone. We're happy to answer it whenever someone calls we have dialogue with our tenant there, and we would be receptive to any discussions if there were certain avenues they were pursuing or things they were interested in discussing, but I think as a base case, we are not assuming that there's a derivative M&A that comes out of this.

Great. Helpful. And then if I can ask just the second one, just one more specific on the guidance to $400 million to $450 million. Is that -- obviously, it sounds like a big piece of that is going to be Bally's, but is some of that the Live Virginia project as well? Just any color there. And if I could take a step back and just ask a broader question on your pipeline and how that's changed given what we've seen with the 10-year movement.

I'll start with the beginning of your question, Yes, the $400 million to $450 million includes Chicago, I own Dry Creek and Virginia projects. So all 4 are included in our guidance and they are all moving forward and expect to have -- we expect to put money out during 2026. As for the second part of your project, I will turn it over to Steve.

With respect to the 10-year treasury, that's what you're asking about?

Yes. And how that's potentially impacting sort of the pipeline and conversations.

Yes, no problem. So with respect to the existing pipeline, obviously, there's no real impact. We're committed to provide that capital and we will provide it. With respect to future potential transactions and things we're talking to folks about. I think it's a double-edged sword in that obviously, it impacts our cost of debt in our borrowing costs. So that is a factor that weighs into where we could price potential transactions. . I think the opposite end of that pendulum is that it does -- because borrowing costs are going up, not only for us, but also for operators, I think it does create another level of discussion and a little more interest as far as people seeking out alternative financing routes as they move forward with their capitalization.

Our next question will come from Greg McGinniss with Scotiabank.

I was hoping you could just touch on the Rockford loan extension and how -- what the option for the building improvements would look like in terms of how you would execute on that option, what the amount might be? .

Yes, Greg, I don't think we're going to get too much into the details on the option piece. But look, I mean that was $150 million loan. It's good yield for us. The property is ramping nicely. You could all see the GGR results. Obviously, that property has been very well received. The city of Rockford has announced plans to put a hotel around the site, which should only further kind of help that property ramp. So I think just in talking with the partner and Steve could perhaps opine more on this. It just felt like a good move for us to kind of let that money roll forward while also kind of cementing that option on the building down the road.

Yes. I think, look, obviously, the partner is -- would prefer to not sell the building improvements to us down the line. So obviously, that's an item that we'll see where we land as we get further into this -- into the loan term. But I think the reality is they're excited about the property. The GGR continues to perform. We're comfortable with the loan, and therefore, it just made sense for us to roll it at that rate. .

Okay. And then on the financing side, potential acquisitions, leverage is low relative to range you guys typically target cost of equity is a little expensive versus where I'm sure you'd like it to be. Should we expect that any potential acquisitions or investments will be just be funded with leverage at this point?

I really think it depends on what the opportunity is. Obviously, we will be pricing in our cost of capital to any opportunity that we decide to -- anything we decide to acquire I wouldn't just assume we're always going to use debt for now. I think we'd have to price in our cost of equity if it was a larger transaction.

Yes. Look, our business, of course, is a spread to our cost. And some of the yields that we're able to attain, because of the skills and capabilities that we bring to the table, the development ability and understanding construction willingness to do some things, maybe some others are less well equipped to do. We can command a price that gives us the margin that we need. So it's deal by deal. I think these answered it perfectly well. We're not going to do -- and I underscore again, we won't be -- you won't we've seen this do anything crazy. .

We'll go next to Brad Heffern with RBC. .

There's obviously been the site over VGTs in Chicago. Can you talk about if you expect that to have a meaningful impact on the Bally's Chicago project 1 way or another? And if it would have affected your underwriting?

Yes. Thanks, Brad. So the VGTs, quite frankly, were in our underwriting. It's Chicago, it's Illinois. It's been -- it's a very long, obviously, relationship that we will have with that asset. So clearly, you can imagine everything in anything would have been in our underwriting. The thing I will point out is I read something recently, I believe there's about 7,000 sweepstakes machines already in that market. So to believe that this type of gaming wasn't already taking place, I think, would be naive. Clearly, Bally's is going through some things right now with the city as it relates to how this impacts some of the agreements that they've previously come to. But in our view, this -- the VGT concept was included in our underwriting. And another thing that was included in our underwriting also was Hawthorne, which seems to not be coming to fruition. So I would say the puts and takes there are pretty benign overall.

Okay. And then on the Las Vegas Stadium site, can you give an update there if and when you expect your remaining committed capital to be used? And then if you have any more thoughts about participating in a larger project or sometime down the line.

Yes, I can take that one. I think the timing of the $125 million is somewhat uncertain still. The stadium is proceeding quite nicely. I think you would hear from the age at the stadiums ahead of schedule. And we've had the opportunity to visit that stadium at least Peter and I this year. And I think it will be a spectacular event venue, and that will drive a lot of value to the site. So we're keeping an eye on it. as is coming close, I think, to a more concrete plan for some of the critical infrastructure that needs to support the stadium. And by that, I mean excess wave, the podium, utility, conduits, things like that. there may be an opportunity for us to invest more in that property and some of that key critical infrastructure. And we'll take a look at that when that time comes. But I don't think we're prepared at the present time. to commit to anything over the $125 million, and we'll continue to work with Bally's and see if that makes sense.

And we'll go next to Barry Jonas with Truist Securities.

Churchill Downs formally announced they're exploring the sale of most of their gaming assets, and I believe they said they're looking to execute in the coming months. Just curious if that's something you're looking at in conjunction with or without specific tenants at this time?

Yes, it's something that we're aware of. I think any process, broader process that's run will definitely be involved, and we'll definitely take a look. I would assume that most of the processes you're not supposed to be working with anyone in particular per your NDA. So I can't speak to any discussions that may or may not be happening on those fronts. But I can tell you that we're definitely aware of the assets, we've spoken with various folks that are involved in that process, and we will see how it proceeds. There are some assets there that are they are quality assets. There are other assets that are maybe a little more challenging, but at the same time, depending on whether it's an existing tenant that we have a relationship with that finds value in certain assets or more importantly or equally as important, potential new tenant relationships that might find interest in certain assets, whether it's because of ability to cross manage when garner synergies or the like, we're willing to have discussions with anybody and see if there's paths forward on various levels.

That's really helpful. And then just as a follow-up, I think this week, a large casino operator, the kind of voice increasing optimism for gaming legislation to pass this year. They stated Virginia, Maryland in Indiana. You guys have been certainly vocal with your views on iGaming, but just curious if you share that view on those states or just in general, gaming legalization in the near term?

So with respect to the 3 states you mentioned, I agree that there is legislation moving in those states, and there does seem to be some momentum. But whether or not that will get across the finish line is unclear. I think from a broader level, predictive market, sports betting, it's all coming under some level of attack in a lot of states, both when it comes to predictive markets, certainly the federal level and even sports betting on the state level, where people have started to take a closer look at some of the social ills that are occurring in certain demographics, online gaming and sports betting. And I think that's garnering a lot of attention in a lot of states. And I think in the 3 states you mentioned, that's still a hot topic of conversation as to what impact allowing mobile and social type gaming, what impact that's having on certain segments of the population. And so I know, depending on who you talk to, people are either overly optimistic that they can expand iGaming or overly optimistic that they can put in into gaming. I think in both arguments have some momentum in different areas. And the 3 states you mentioned, I would agree some momentum toward iGaming. But on balance, I think you'll see most states are proceeding very, very cautiously with increased online gaming.

Our next question will come from Smedes Rose with Citi. .

You provided an update on the Las Vegas opportunity. And I was just wondering if there are any updates you can provide on the New York opportunity with Bally's at this juncture.

From our perspective, not much has changed on Bally's New York. We remain optimistic that's going to be a positive and accretive project for the Bally's team. I don't think it makes a lot of sense for us to be involved with our cost of capital at the front end of that project. And I think that's something Bally's knows and we know we remain close to them, and there could be opportunity needs for us as that continues. We do have a ROFR in New York on certain aspects. But I think it's way too early in that process and they're pulling together their financing and construction financing cost of capital and those things. . Cost to really know what kind of role will play, but we'll stay close to it. I think we remain interested in being a part of New York, if it's the right part, and it's something we can do at an accretive level.

Okay. Okay. And then I just wanted to ask you, last quarter, you had mentioned a few challenges at the Tropicana in Atlantic City, and it looks like the coverage there ticked down just a tiny bit. I mean it's still realize it's still strong. But any sort of issues or updates you can provide on that property?

No. I mean I think you did have that 1 challenging quarter, which would have been the calendar 4Q '25 coming in at that point. What I saw when you look at it sequentially is stability as you move through the first quarter. Looking at the results from the likes of Caesars and Boyd and even Churchill from the regional properties in the second quarter. And remember, we're reporting those coverages 1 quarter in arrears. So we won't see that until we report 3Q. But we're going to have 2Q trends and the performance of each of those tenants that I just mentioned. I think there should be a nice tailwind in their operations and certainly, things have strengthened for those operators in the regional markets. So I think broadly speaking, that's a pretty good leading indicator for us as we look ahead.

We will go next to David Katz form Jefferies.

So to that very same comment you just made Carlo. We are seeing some real strength out of regional gaming. And I'm curious to get your collective perspective on whether that is economically driven macroeconomically driven, whether that's a function of some of the smarter operators having put forth some capital into their properties and improve their value proposition, which we've seen pretty broadly, including the 1 company, Peter, you founded, right? What is the driver of that? And what gives you that confidence that a year from now, we're still going to be having that same conversation?

My sense is the consumer market generally is still pretty strong despite all the negativity you see sometimes in the press. The economy is strong. some -- there are areas, of course, of weakness. But by and large, I think people are in the marketplace. You've heard me say many times, David, that people don't give up their entertainment, food, shelter and gambling are the priorities in people's lives. So across the board, we're sensing because we get numbers when you get them, that demand is extremely strong, extremely strong. And I have talked broadly with some of the folks at Penn, their new projects and their investment in capital in hotels and so forth has been apparently off the charts. I mean, we'll all wait and get the final result quarter-to-quarter. But just a terrific result. So I mean, we visually feel just a lot of enthusiasm out in the marketplace right now. And I think it's just a broad look at the economy generally.

David, and I'll just I think going all the way back to kind of Boyd spend at Treasure test, what you've seen is really healthy returns on incremental capital dollars put in place, including, as Peter just mentioned, Joel yet, the early results out of the temporary at Live Virginia have been incredibly positive for a temporary facility. So I think dollars being put to work, you're seeing very healthy returns on them. I think that bodes well.

But we said new project. You got a new hotel in Columbus, you've got -- which I understand is going well. You've got the hotel in NM, the expansion there that has also been apparently very strong. So this is still a good stuff for us. .

Moving on to Daniel Gulino with Capital One Securities. .

Questions. This is shaping up to be an interesting year across gaming with mergers, asset sales and development. but so much happening. Can you just remind us what you all look for in deals to make sure that they align with the long-term sustainable growth focus?

Yes. I think, look, I think when we go through our underwriting process, and anybody can add on at the end here, but I think we go through our underwriting process on really any transaction regardless of how big or small it may be. We're going to look for the things you would expect. So stability, long-term performance, competitive -- the competitive threats or opportunities, the credit quality of the tenant, do we have master lease? Is there a way to diversify not only geographically, but just based across the portfolio and the asset base. So we're going to take a lot of factors into account. I think we would do that, whether it was this year or last year or 10 years ago. So I don't think our underwriting process has changed. There's obviously with the expansion of gaming into new jurisdictions over the last few years, I think that definitely changes the way we look at things. And I think it continues to mold the way we think about potential new jurisdictions and whether they will come to fruition and where would the asset that we're looking at be located on a geographic map as it relates to potential future competition. So those are all things we think about. I don't know if anybody else has any that...

I mean I think it's important to double back on something Carlos said in the beginning, which is some of the M&A activity in the regional markets, whether it be Bally's MGM or Caesars it is probably being driven by dislocation between the perceived value of these operations and assets and the actual value of these operations and assets. And I think what you're finding is people get the stock prices get to the point where people say this has gotten to the point where we're just going to act on this and take it private and realize the value that the market is not seeing. And unfortunately, for GLPI, I think the same dislocation feeds into our stock. We have very strong tenants that operate in markets that are doing quite well. And despite what some of the reports written, we see a lot of strength in our tenants' operations in the regions. And I think you're seeing that drive M&A and I think you're seeing that I think you're seeing that in some of the M&A activity out there. So as long as those dislocations persist, I think you'll continue to see activity there.

Look, the gaming broad-based gaming world has been around for more than 30 years. And I commend anyone go back and just take a look at the track record of properties and performance over the long, long term. This is an incredibly stable industry, incredibly stable. We love these assets, getting the market to appreciate the value of what we've got has been really a challenge.

Yes. I think whether our coverage is [indiscernible] these assets are all performing quite well. These are all portfolios and leases that our operators will want to continue to own and pay rent on. So while we remain frustrated at times with the equity cost of capital here, we're still very happy with the performance of our overall portfolio.