Affinity Gaming reported a 17.3 percent increase in operating income and a 10.1 percent jump in EBITDA for the second quarter of 2016 on Monday, marking the company’s sixth consecutive quarter of double-digit EBITDA growth.
Despite an overall dip in net revenue of 6.8 percent from the prior year quarter, the company’s cost and process management and marketing refinement efforts compensated sufficiently to deliver another strong performance.
“Our focus on elevating the effectiveness of our promotional campaigns and refining our marketing programs is leading to higher margin revenue at our properties, which when combined with process improvements and realized cost efficiencies drove a 10.1% increase in 2016 second quarter Adjusted EBITDA to $19.4 million,” said Michael Silberling, who assumed the chief executive role in 2014.
On a conference call with analysts, Silberling and other Affinity executives noted that while year-over-year revenue comparisons were choppy, the company was coming off its strongest-ever month in terms of EBITDA in July and is well positioned for a strong second half of 2016.
Affinity’s performance comes on the heels of a strong first quarter that featured a 10.9 percent and 15.1 percent year-over-year growth in EBITDA and operating income, respectively.
The second quarter showing comes amid an aggressive acquisition attempt by the private equity firm Z Capital Partners, which currently owns 41.1 percent of outstanding Affinity common stock shares and stresses that the company would be better operated by a single owner.
On August 1, Z Capital submitted a bid to buy out the remaining shares of the company at $15 a share and valuing the company at more than $560 million.
On August 10, the equity firm upped its offer to $17.35 a share, and the two parties have since entered into an exclusivity agreement, according to a news report showcased on Z Capital’s website.
“The all-cash offer we are proposing provides Affinity’s shareholders with a compelling opportunity to realize substantial and immediate value,” said James Zenni, President and Chief Executive Officer of Z Capital said in an August 1 statement. “We have always believed that Affinity Gaming needs a singular voice and direction with a long-term capital partner to position it for future growth.”
Z Capital made a previous buyout offer in 2015 of $9.75 a share that was ultimately shot down by other shareholders.
Also of note, the company closed the second quarter by concluding an overhaul of its capital structure that will reduce its annual interest expenses from $27.9 million to just $15 million. The restructuring, which secured $375 million in new loans to pay off old debt and retire securities, is expected to decrease the company’s leverage ratio from 5.3 times to 4.2 times, dramatically improving its risk profile in the eyes of Wall Street analysts.
In a statement at the time of closing, Silberling said the more flexible capital structure and lower cost of capital will allow the company to “drive additional operating improvements, generate increased cash flow, and enhance value for shareholders.”
Founded in 2010 and based in Las Vegas, Affinity operates a total of 11 properties – most notably Buffalo Bill’s Resort & Casino and four others in Nevada, three in Colorado, two in Missouri and one in Iowa.
