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Edited Transcript of TRVW.PK earnings conference call or presentation 14-Nov-19 10:00pm GMT

Q3 2019 Twin River Worldwide Holdings Inc Earnings Call

LINCOLN Nov 27, 2019 (Thomson StreetEvents) -- Edited Transcript of Twin River Worldwide Holdings Inc earnings conference call or presentation Thursday, November 14, 2019 at 10:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Craig L. Eaton

Twin River Worldwide Holdings, Inc. - Executive VP, General Counsel & Secretary

* George T. Papanier

Twin River Worldwide Holdings, Inc. - President, CEO & Director

* Stephen H. Capp

Twin River Worldwide Holdings, Inc. - Executive VP & CFO

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Conference Call Participants

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* Barry Jonathan Jonas

SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst

* Brad J. Boyer

Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst

* John G. DeCree

Union Gaming Securities, LLC, Research Division - Director and Head of North America Equity & High Yield Research

* Lance William Vitanza

Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst

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Presentation

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Operator [1]

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Good afternoon. My name is Cheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the Twin River Worldwide Holdings, Inc. Third Quarter 2019 Earnings Conference Call. (Operator Instructions)

Craig Eaton, Executive Vice President and General Counsel, you may begin your conference.

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Craig L. Eaton, Twin River Worldwide Holdings, Inc. - Executive VP, General Counsel & Secretary [2]

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Good afternoon, everyone, and thank you for joining us on today's call. By now, you should have received a copy of our Q3 earnings release issued earlier today. If you haven't, the earnings release and the presentation that accompanies this call are available in the Investor Relations section of our corporate website at www.twinriverwwholdings.com under the News and Events and Presentations tabs. With me on today's call are George Papanier, our President and Chief Executive Officer; Steve Capp, our Chief Financial Officer; Marc Crisafulli, our Executive Vice President and President of Twin River, Rhode Island; Jay Minas, our Vice President of Finance; and Joe McGrail, our Executive Director of SEC Reporting.

Before we begin, we would like to remind everyone that comments made by management may contain forward-looking statements. These forward-looking statements include plans, expectations, estimates and projections that might involve significant risks and uncertainties. These risks are discussed in the company's earnings release and SEC filings. Actual results may differ materially from the results discussed in these forward-looking statements. During today's call, management will refer to certain non-GAAP financial measures. Reconciliations to the most comparable GAAP financial measures are included in the schedules contained in our earnings release or the presentation that accompanies this call.

I will now turn the call over to George.

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [3]

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Thank you, Craig. Good afternoon, everyone, and thank you for joining us for our third quarter earnings call. After my introductory comments, I'm going to turn the call over to Steve who will follow-up and provide more detail about our financial and operational results as well as discuss the steady execution of our proven corporate strategy. We're excited about the progress we've made as we continue to transform the company. Over the last year or so, we feel that the steps we've taken has strategically and opportunistically grow and diversified the company, all while creating shareholder value and returning meaningful capital have positioned us extremely well for long-term value creation.

Early results on both Tiverton and Dover continue to meet and exceed our already high expectations. We look forward to applying our demonstrated track record of successful M&A to Black Hawk, Kansas City and Vicksburg upon the expected closing of these previously announced deals in early to mid-2020.

Despite the anticipated short-term impact of competition to our Twin River Casino Hotel in Lincoln this quarter, we believe that our overall plan remains well on track and see no change to the long-term value proposition we have laid out for our investors. In the quarter, as we introduced on our call for Q2, the new competition in the region had a greater-than-expected impact on Lincoln, particularly on our table games business in the third quarter. Promotional activity in the market, particularly in Massachusetts was extremely aggressive during the quarter, which we feel fueled the prolonged trial period. Despite our competition's $2.6 billion investment, we have seen a little in the way of market expansion, which was significantly less than most observers' expectations. Overall, the market only grew approximately 9% in the third quarter. We believe that our competition's spend for market share during the quarter is unsustainable. When you think about it, our market right-sized $130 million Tiverton Casino project generated as much profit in its first quarter of operations as the $2.6 billion competition did.

After taking some time to fully understand the impact that new competition was going to have on the market, we began our competitive response with a targeted marketing spend as well as operational efficiencies. We feel we've dealt with the initial market competition spend during the period of trial, and I'm optimistic there will be a more rational market spend going forward.

I have yet to see a marked moderation in promotional environment, we did note that the overall revenue impact of the competition appeared to moderate and bottom out in August, reflecting what we feel are initial signs of recovery post Labor Day, in line with my expectations.

For September, revenue at Lincoln was down 17% year-over-year compared to decreases of 22% and 24% in July and August, respectively. The breakdown of September numbers at Lincoln a bit more slot volume showed signs of recovery were down less than 13% in September year-over-year compared to decreases of approximately 17% and 16% in July and August, respectively.

Table games continue to see more of an impact with volumes down 30% in September compared to the same period in 2018, but we saw a moderation compared to the 34% and 38% decreases we experienced in July and August. Also, taking into consideration the fact that September 2019 had 1 less Saturday than the prior period, we view the September trend is positive, and expect to see an accelerated recovery as we head towards year-end.

We also note that the trend continued for October, where volume indicators show slots and Lincoln continue to moderate and only down approximately 9% year-over-year while table games also showed signs of recovery, with year-over-year declines of 27%. Helping to offset the competitive pressure in Lincoln is the performance of our Tiverton Casino Hotel. We are extremely pleased with the performance of the property, which continues to show marked resilience in the face of new competition. In fact, October volume indicators for Tiverton showed estimated increases year-over-year of approximately 12% in slots and 22% in tables underscoring this resilience.

Regardless of what the competition is doing, we're doing fine. We're executing on our marketing strategy, which is continuing to claw back market share, and we've implemented our efficiency initiatives. It should be noted that the current Massachusetts impact is the only significant competitive threat that our portfolio is facing. And aside from what we believe to be a short-term competitive impact at Lincoln, we were quite pleased with the company's results in the quarter at our other properties.

Our M&A strategy, which has enabled us to transform from a single property operator prior to 2014, with a multi-property public corporation we are today, continues to be further validated with Dover and Tiverton both performing extremely well in the quarter, and Biloxi continuing to provide consistent, steady contribution to the group.

We've been particularly pleased with Dover, which contributed revenues of $25.9 million and adjusted EBITDA of approximately $6.1 million in the quarter. This adjusted EBITDA represented a 17% sequential improvement versus Q2 in just our second full quarter of ownership. This property continues to outperform our already high expectations.

In addition to seeing continued benefits from the initial synergies expected from the transaction, we have already begun to see an increase in profitability as a result of instituting meaningful marketing strategies and several physical changes at Dover. We still feel we are in the early phases of our Dover transformation and anticipate additional upgrades and operating changes to be implemented. We expect that these additional changes will drive even more meaningful contributions to earnings over time.

Based on the results of the quarter and expectation of improvements to come, we reaffirm our belief that Dover adjusted EBITDA run rate could exceed our initial estimates by double-digit percentages.

Turning to Biloxi. We were pleased to see another quarter of consistent performance at Hard Rock Hotel & Casino. Revenues and adjusted EBITDA were consistent year-over-year. Overall, our operations are stable and performing well.

At the corporate level, we continue to make the necessary investments to prepare for further expected growth, as evidenced by our announced planned acquisitions in Colorado, Missouri and Mississippi. These transactions continue to work through the regulatory process and remain on track for their scheduled closings.

We expect the Black Hawk will close in early Q1 of 2020, and that Kansas City and Vicksburg will be soon after that in late Q1 or early Q2 2020. We did recently receive regulatory approval in Mississippi. In Colorado, we were very pleased that Proposition DD recently passed, which will result in us obtaining 3 sports betting licenses in the state upon closing of our Black Hawk acquisition. These licenses were not contemplated at the time we entered into the acquisition and represent unexpected upside to what we felt was already a compelling strategic and accretive transaction.

We remain extremely excited about the opportunities to further our strategy of accretive growth and diversification through these acquisitions. We believe these assets are a great fit for our portfolio and see the opportunity to increase the net cash flow of these properties by our redevelopment and/or operating plans.

Beyond our recently announced acquisitions, the M&A pipeline remains strong. We are actively looking at many assets and opportunities, and we will continue to be very disciplined. We remain focused on acquiring assets that we believe fit our strategy and provide the best opportunity for delivering enhanced shareholder returns. Further to the subject of shareholder value creation, we made significant investments under our previously announced $250 million capital return program, with repurchases of approximately 6.6 million shares for a total consideration of approximately $163 million and the payment of a quarterly $0.10 per share dividend during the quarter.

We continue to have one of, if not, the best balance sheets in the industry. Given our current position, there are many ways we feel we can return value to shareholders. We will continue to explore disciplined M&A of accretive assets. However, if we find that our shares represent a more prudent investment, we will not hesitate to continue to buy back shares as we did at meaningful levels in Q3.

Finally, Twin River continues to inform the public and legislators in Rhode Island on why they should reconsider the current proposed IGT deal. As a reminder, the primary reason for our position to this deal is that it locks in IGT's virtual monopoly controllers, slot machines in our Rhode Island casinos. It is worth noting that machines controlled by IGT are underperforming compared to that of competition in Rhode Island. We believe that the State and Twin River could improve performance with a more traditional approach to securing the best content for our customers. Over the course of the last 2 months, Twin River has testified at hearings scheduled by the Finance Committee in both chambers of the Rhode Island General Assembly. At present, the proposed IGT deal is under intense scrutiny, and we believe any legislative action is now most likely deferred to next year. Furthermore, we're pleased that the House of Representatives have moved to solicit bids for an independent analysis of the transaction. And the analysis will include a focus on ensuring the state and the facilities maximize VLT performance. We're also pleased that this process has already led to some positive changes from our perspective. The lottery has reallocated 360 VLTs from IGT to other suppliers. Our customers have responded well to these products.

In addition, we are receiving another 270 new units under IGT's allocation, including Aristocrat's Lightning Linkings (sic) [Lightning Link], which are some of the best-performing games in the region right now.

And now I'll turn it over to Steve.

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [4]

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George, thanks. Before I get into some segment-specific commentary let me make an overarching comment about the business, which is that our business has growing revenues. We're an expanding company. Look, we just -- we added in 2 of 3 months in the quarter for Tiverton kind of annualizing, if you will, in the quarter. We added Dover. The top line of this company is expanding. Yes, we have some pressure in our cash flow -- our revenues and our cash flow at Lincoln. As George mentioned, we believe that those are short term in nature. We do believe those have bottomed out in the July-August time frame. We've seen some initial signs of recovery in September and October there. So we'll work through that. I do expect that Q4 of this year will resemble Q3 in a lot of ways, by the way. But nonetheless, we think the impact at Twin River Lincoln is more permanent in nature. Bigger point being that our business is growing in the top line, and we're very pleased about that. And we've got more coming with the acquisitions in Black Hawk, Kansas City and Vicksburg, into the first and second quarters of next year.

Turning to the Rhode Island segment in particular, yes, the net income and adjusted EBITDA of $6 million and $35.6 million were down $11.4 million and $6 million, respectively. That, of course, was driven primarily by the decrease in profitability in Rhode Island, which is offset somewhat by the earnings at Dover Downs. Bear in mind that the increased interest expense resulting from our global refinancing in May had about a $5 million year-over-year impact on net income in the quarter.

Regarding the Rhode Island segment, please note that Tiverton opened in September of 2018. So we lapped the opening in the third quarter of 2019. Therefore, a portion of the Q3 comparability are impacted by the Newport Grand to Tiverton timing misalignment. Our total revenue for the Rhode Island segment decreased $7 million to about $68 million from about $75 million. This -- the $9 million decline in gaming revenues was partially offset by $1.7 million increase in hotel revenues due to Tiverton's hotel only being open for a partial quarter last year and Lincoln's hotel not opening until the fourth quarter of 2018.

Higher food and beverage revenues of about $0.5 million were offset by lower entertainment and racing revenue. It should be noted that gaming revenues were impacted by increased incentives to players in an effort to retain and grow market share at Lincoln and Tiverton, respectively. These were primarily related to our new hotels at both Lincoln and Tiverton. These incentives are shown as a reduction of gaming revenues.

As part of our competitive response, we are actively launching several new initiatives with an emphasis on regaining table games market share. These initiatives include the introduction of Macau-style baccarat and Pai Gow tiles to our offerings as well as introduction of free bet incentives on table games.

In addition, we continue to launch new marketing programs aimed to drawing back customers who took part in some trial play at the new competition. We believe the decline in revenues hit bottom in August and since Labor Day, to say again, we've seen some stability and some recovery, and we're very pleased with that trend line at this point.

Despite the decline in gaming revenue, overall, we actually performed better than our competitors from a market share perspective. On an apples-to-apples basis, or excluding the revenues from new regional competition opened within the last 2 years, our market share actually grew by 73 basis points, which was more than our legacy competitors from Connecticut and Massachusetts. We define this market share as slot win prior to any adjustments for guest incentives.

The total revenue decline of $7 million, combined with an expense increase contributed to an adjusted EBITDA decline of almost $11 million in the third quarter of 2019 versus the prior year comparable period. Drivers of this increase in expense include increased marketing and entertainment spend as well as the increased cost structure associated with operating Tiverton and as well as new revenue-generating amenities at Lincoln for a full quarter. As a reminder, last year's operations consisted of Newport Grand for 2 months and Tiverton for just one. As we've stated before, the 2 operations are quite different, and the cost structures are not similar. Additional revenue-generating amenities not in place last year include a new sportsbook operation, stadium gaming and the new hotel.

We did experience some labor savings in the third quarter, which reflect reductions made primarily in the third quarter, which we expect will be more pronounced in the fourth quarter as the labor reductions will be in play for the entire quarter. You should also note that additional incentives in the form of player comps and electronic freeplay increased by $3.3 million year-over-year. These costs are netted with gaming revenues and are not reflected in operating expenses.

Switching to the Delaware segment. As George mentioned, our Delaware segment consists of only Dover Downs, and that continues to exceed our expectations, contributing revenue of nearly $26 million in the quarter. We want to remind everyone that the revenues at Dover are reported net of the state share of gaming revenues, which is consistent with our presentation of revenues in our Rhode Island segment, and it represents a departure from how Dover was reported pre-acquisition.

Operating income for Delaware was $3.8 million as the property begins to see benefits from cost savings initiatives and marketing investments instituted in both the second and third quarters of this year. The resulting adjusted EBITDA, as George mentioned, was $6.1 million for the quarter.

This quarter, we finalized our reconfiguration of the gaming floor at Dover and several updates to food and beverage options. Including the opening of a new Italian restaurant. I'd also like to take this opportunity to announce a Sugar Factory licensing agreement, which we expect to open in the beginning of second quarter of 2020. We're quite excited to introduce this premium national brand, which we think will have a very positive impact on the overall customer experience.

Turning to Biloxi briefly, Hard Rock Biloxi saw stable results year-over-year as revenue for the quarter was about $33 million, decrease of $100,000. Operating income decreased about $400,000 to $6.8 million and adjusted EBITDA was $9.8 million, decrease of about $600,000. That decrease is just the normal ebbs and flows of the business. That remains a very stable operation for us, consistent performer and a very nice and important part of the portfolio.

Finally, I want to briefly comment on the operations reported as other, which primarily consists of corporate costs and the operations of our Arapahoe Park racetrack in Aurora, Colorado. When you exclude the impact of costs allocated under GAAP to our reportable segments, the adjusted EBITDA loss for our other segment increased by about $400,000. In essence, this is additional corporate expense. We have certain additional new staff as we start to settle in as a public company, and prepare for full SOX compliance readiness in 2020, among other initiatives and requirements. So yes, we continue to invest in corporate as necessary to properly settle in as a public company.

With that, let me turn away from the segment reporting and address a few other items that I hope will be interesting and important to our investor community. The first is a bit more detail about our return of capital program that George touched on, the $4.1 million dividend, which we paid in Q2 is well known. I think the tender results are pretty well known, but there's a slight modification to those. We did invest $74 million in the final tender of the second quarter, and with that, purchased 2.5 million shares. There were a few shares return and $1 million essentially backed out from a mistake by 1 of the brokers involved in the process. But don't worry, we redeployed those funds rather quickly. Following the tender offer and the necessary quiet period, we did pick up another 4.1 million shares in the company's stock buyback program on an open market basis and invested another $89 million in that program.

So from the pre-tender share count of 41.1 million, we invested about $163 million in total and picked up 2.5 million shares in the tender, we picked up 4.1 million shares in the buyback program through the end of the quarter. We invested another $8 million subsequent to that during the month of October, pick up another 300,000 shares and where that brings us is to a total shares purchased all in of 6.9 million or approximately 17% of the 41.1 million shares having been repurchased through to the tender. I mentioned both of the dividends that have also been paid. So if you add all that math up, we do have, as of November 1 and subsequent to all of that buyback activity I mentioned right about $70 million, that's 7-0 million dollars left under the $250 million capital return program approved by the board earlier in the year.

We've been busy at this. We're very pleased to be making what we believe are potentially an accretive investment in our own stock in the form of this capital return program. And as George mentioned, there's a balance between growth and capital return, and we will continue to maintain that balance. And as long as we see this being one of the better alternative investments that we will -- we may very well continue.

A couple more comments on what George has mentioned about our balance sheet position. We have one of the strongest balance sheets in the entire industry. We have some of the lowest leverage in the entire industry. We finished the quarter with $230 million of total cash. In addition to that, we have an unfunded revolving credit facility of $250 million. So we have nearly $500 million of available liquidity to us. We had $700 million of total debt at the quarter's end and about $260 million of book shareholders' equity. Our cash flow leverage on a net debt basis was under 3, at 2.8 specifically.

Let me make a couple of comments about what I perceived and received some feedback about the perception of a shareholder overhang issue facing the company. And in a nutshell, I think we've addressed much of that perceived problem. We've had a very active tender offer and share buyback program and anecdotally, I understand that one or more of our prior shareholders who had been seeking liquidity have found our liquidity along the way. And the upcoming Forms 13 filings, we may learn some specific details. I'm not sure exactly what will come out of that. But we've seen some interesting lift in the stock from the low 20s recently to where it is. We think a part of that may very well be attributable to addressing that issue.

I'd also like to comment on some perception that Standard General may be a desirous seller. We do not believe that to be the case. We do not believe Standard General is a natural seller at this time. And the example cited to me when I get called in on this are that, "Well, the Standard General put a couple of million shares into the secondary offering," We tried to get off back in June. So obviously, they're a seller. The fact of the matter is that Standard General was trying to lead the way and provide some momentum for that secondary offering. To this day, I continue to think that secondary was a great idea. We tried to serve -- we, the company as a pivot point or would be sellers to address the overhang issue I'm talking about into would be buyers. And George and Craig Eaton and myself put on a long road show that week. And it's -- so we were looking to enable that kind of pivot of shares in an organized secondary fashion. It didn't work, but we thought it was a good idea, and quite frankly, it should have worked. My point is that we believe Standard General put in as a show of leadership and to stoke some momentum in the sell-side aspect of that book and otherwise a natural seller. Likewise, I get feedback that, "Gee! Standard General is all in on the tender offer." Well, yes, but that's because you have to do that, if you want to preserve your percentage ownership, your pro rata percentage ownership in the company, and we believe strongly that, that's exactly what the motivation was there as well. So from an overhang perspective, I think we've made a lot of progress. I don't think the largest shareholder of the company is a seller, so there's real progress. And quite frankly, we'll continue to do what we can as necessary on a go-forward basis.

So look, the summary of George's comments and mine are that we think the outlook for the company is robust. I do believe that as we get through Q3 and Q4 of this year, and we continue what we believe will be a ramping of a recaptured market share at Lincoln, particularly in table games. And as the Northeast market stabilizes, that we will continue to see lift there and a recovery of market share. In conjunction with that, as we annualized Dover in our results, and as Tiverton annualizes this quarter, we will fold in Black Hawk, and then we'll fold in Kansas City and Vicksburg is the plan subject to regulatory approval. I anticipate that after we get through 2019, we will continue to back on the schedule of ramping by growing EBITDA quarter-to-quarter and that will be on a robust cash flow growth profile at that point.

So essentially, what we're doing is, look, given some of the competition that we've had at Lincoln set us back a quarter or 2 in terms of the growth trajectory and cash flow we had anticipated. But all this is, is kind of a recalendarization of the growth in cash flows that we expect to see starting early next year with the Black Hawk and beyond, and continued improvement at Dover. So the valuation program here is very much still in line. We are excited about the future and see growing cash flows into next year.

One final comment. I've said this before, I'm not sure it's entirely clear. So I'm going to try it again. In Delaware and Rhode Island, the lottery system of gaming requires that the state be the operator -- technically, the operator of VLT machines. And as such, we don't own the machines and we don't purchase the machines, and we don't actually maintain the machines. What that means is that we don't actually spend CapEx dollars for the machines in Rhode Island or Delaware. There's about 7,300 machine between the 2 states. We calculate that the avoided capital expenditure from that gaming structure in these 2 lottery states for us is worth approximately $28 million is based on a couple of assumptions, right, $25,000 purchase price of a new machine, 7-year placement cycle, you can play with those assumptions, if you want to.

But my point is, most of us use adjusted EBITDA in this industry is a proxy for free cash flow. That's great. We've been doing it for years. It's easy. It's effective. It's efficient. But if you want apples-to-apples with our adjusted EBITDA to the rest of the industry, I think you have to add back $28 million per year. Because that's the translated difference from our adjusted EBITDA to a pure free cash flow, after CapEx, after interest, you get the free cash flow. Our is $28 million higher than you would expect to see if we were not in the lottery system of gaming in these 2 states. So that's just a word, call to action, if you will, that we think there's more bite to our EBITDA, then the rest of the industry has. Feel free to give me a call if you want to walk through the math on that. We've mentioned this at ad nauseam on a couple of prior road shows. It's real cash. It flows to the bottom line. It's real purchasing power at the free cash flow level, we think it's pretty powerful relative to the overall size of our EBITDA in the company.

So those are my comments. I'm going to turn it back to George. Thanks for your attention.

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [5]

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Thank you, Steve. With that, I'll ask the operator to open it up for your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

The first question comes from John DeCree of Union Gaming.

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John G. DeCree, Union Gaming Securities, LLC, Research Division - Director and Head of North America Equity & High Yield Research [2]

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Steve, George, I wanted to talk about the, I guess, operating leverage or margin in Rhode Islands. I think everyone is pretty well aware of the revenue trends, the state reports those. But when we saw like the kind of sequential margin decline, obviously, some fixed costs there that you've talked about some labor adjustments, wondering if you could elaborate on some of those cost initiatives, what you think about for

(technical difficulty)

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Operator [3]

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(technical difficulty)

John DeCree, your line is still open.

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John G. DeCree, Union Gaming Securities, LLC, Research Division - Director and Head of North America Equity & High Yield Research [4]

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Did you guys not hear the question? I apologize.

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [5]

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You got cut off halfway, John. Sorry, could you repeat?

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John G. DeCree, Union Gaming Securities, LLC, Research Division - Director and Head of North America Equity & High Yield Research [6]

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Sure. Just, Steve, could you give us a little bit of additional color on some of the efficiencies you're looking to harvest in Lincoln, given the new level of gaming volumes and if we should expect kind of a recovery in the overall margin over the next couple of quarters, or if we need to see some gaming volumes come back before we see some material margin improvement?

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [7]

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Well, I think it's 2-way street, John. Hard to get all the margin back with cost cuts on a business that's got a pretty significant fixed cost component to it. So we think it's very much hand in glove, if you will. With the recovery -- with the modest recoveries we've seen so far in September and October, we certainly expect that, that's a trend that we think will continue as the Northeast biz marketing -- excuse me, the Northeast gaming market settles out and digests the relatively new competition within the last 18 months or so. So that sort of relatively rising tide

(technical difficulty)

pretty, pretty focused on that. So we've had some labor cuts. Those have been announced along the way. Those have been widely publicized. As mentioned in the call, those were imposed along the way in Q3. So those will have relatively more impact in Q4 when they're applicable the entire quarter than the Q3. And so that will matter. Recovering revenues, if slowly, and the quarterization, if you will, of some of our initiatives will come through more in Q4 and beyond. George, what else did you say?

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [8]

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Yes, I mean, Steve touched on it as the fuller effect of the cuts from the third quarter will take place in the fourth quarter because we initiated those cuts effectively mid-August. So we're going to continue to create efficiencies through 2020, as a part of our -- this is part of our -- the direction that we're providing to the property. Just -- I think the point I would add is this is -- it's a crowded market that we're very effective in competing in, and we're going to stay focused on profitable marketing, which is a big part of what we're implementing after we took a wait-and-see approach, and we're going to continue to provide the level of customer experience that the customers are attuned to, and we're going to keep costs in check. So we feel good about the direction that we're heading.

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John G. DeCree, Union Gaming Securities, LLC, Research Division - Director and Head of North America Equity & High Yield Research [9]

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If I could ask one other on some of the negotiations with the state in Rhode Island that you've talked about, I think you mentioned some additional machines coming from different suppliers. But some of the media reports we've seen, not the best source of information, but I talked about or, I guess, reported some other potential concessions that might be available as part of your negotiations, maybe something like a slot tax reduction or anything along those lines. I was wondering if you could comment on any of that. And if there are some other opportunities for some concessions along the way as you continue negotiations with the state?

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Unidentified Company Representative, [10]

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Sure. So we've enjoyed some really good discussions with the state recently. We're not looking at any sort of changes to our VLT tax rate or anything else. We have made some progress on adjusting our regulatory agreement to kind of fit our long-term growth strategy. And beyond that, we're just going to continue to work in partnership with the state to evaluate the IGT deal. We -- there are some scenarios under which we would submit a competitive proposal if that goes out to bid, and we think we have an opportunity to improve the quality of the products that we're offering to our consumers. But right now, as George mentioned earlier, that's something that we really see as coming off until next year.

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Operator [11]

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Your next question comes from Brad Boyer of Stifel.

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [12]

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Hey Brad, you there?

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Operator [13]

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Brad Boyer, your line is open.

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Brad J. Boyer, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [14]

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Guys, can you hear me?

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [15]

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We hear you, Brad.

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Brad J. Boyer, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [16]

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Can you hear me now?

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [17]

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Yes, yes.

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Brad J. Boyer, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [18]

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Yes, sorry. Yes, so I had some technical difficulty. So I apologize if John asked this, I kind of heard the start of his first question. But I mean, questions for George, Steve, whoever wants to take it. But I guess, I think, some pretty encouraging signs there when you talk about sort of the trends you're seeing in October? I guess the question for me is sort of how should we think about the path back, so to speak, for the Rhode Island property and for Lincoln, in particular? And what I'm getting at is obviously, it sounds like you guys are going to introduce some new game types, maybe dig in a little bit on the promotional side. But there's obviously the 2 levers to EBITDA are margins and revenue. I guess just how should we be thinking about that here over the next couple of quarters? I mean is this going to initially be a focus on rebuilding the revenues back maybe at the sake of the margin, a little bit of both? How should we just be thinking about that?

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [19]

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Brad, that was close to what John DeCree asked previously. Well, maybe we'll just summarize again in a nutshell. But look, we don't suggest that there's any golden solution to this. It's going to be a multi-faceted response by us over time. Just as -- we've not seen a dramatic turn in results at Lincoln in either September or October, although there has been a bit of a turn, we believe, that's going to be incremental, the margin rebuilding and the work we'll do there will be incremental. And some of it kind of depends on the timing for how the Northeast gaming market kind of settles out. And for how long the marketing and the promo activity remains as aggressive as it's been. Some of what we saw in September and October, we think, is a bit of a pullback on free play that could return. You don't know. We don't think that's long term sustainable, and George commented on that earlier.

So all these things are incremental, taking a taking a harder look at costs, which, as George just mentioned, we'll -- it will be in place for a full quarter, and we're doing some other things as well, introducing new games and also looking for a revenue market share regains, if you will, along the way. So kind of multifaceted. George, anything else?

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [20]

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Hey, Brad. So listen, we touched on this earlier, but it's -- there are 2 levers. We're looking to generate revenue, increase revenues, and we're also focused on cost containment. From a marketing initiative perspective, we touched on this a little bit earlier, we're focused on table games. That seems to be where we've had more of a significant impact. And we've -- what we've done is we've introduced or providing incentives to table games related customers that we historically did not do in the past. Steve mentioned, free bets is an example of it. I'm not going to get real granular in the detail because it's competitive, but we introduced Macao-style baccarat, Pai Gow tiles, and we're increasing the rate of offerings for BJ and mini-bacc tournaments. And focus a little bit more directly on to some of the Asian business that's more -- that lives in closer proximity to the Boston, and we're also going to -- there's also going to be a component of relating to the introductions of project CapEx in 2020 that will allow us to enhance some of these offerings that we have. So you know what -- we're not just sitting around, waiting to see if things happen. We're aggressively pursuing what we think will be profitable opportunities on both the table and slot side of the business.

And just to add to a fact -- a point that Steve made, I really feel that when Encore opened up, there was a little bit of -- there was a level of kind of rational behavior as they're trying to track database, and they weren't really focused on the $2.6 billion that they had spent, which I felt was in itself has the ability to draw some trial as opposed to the level of marketing that they did. So I really feel starting in -- after Labor Day that the level of this irrational spend in our zone, in particular, started to diminish and hopefully, they're looking towards the underpenetrated market that I always thought existed from Boston North and they could garner a lot more visitation from that at a lot less cost as opposed to competing directly with established competition, South of Boston.

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Brad J. Boyer, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [21]

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Okay. That's helpful. And then second question is just around capital returns. I realize you guys have the $200 million number out there. And I think you said you're kind of just shy of $80 million as of November 1. I guess is there a sort of hard and fast time line around when you expected to expand that $200 million? Was it sort of in perpetuity? How should we think about that?

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [22]

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Brad, no, there's no set time line, the $250 million capital return program approved by the board earlier this year was open-ended on the time frame. And it really is about where we will look to be opportunistic, depending on the one hand, the price of the stock and our perceived return in that investment versus, quite frankly, other investment opportunities that we're looking at of various types and forms.

So no, it's an opportunistic situation, I think the number -- I think the number at the -- it was a $80 million, Joe, at the end of the quarter, left in the program. Yes, so you're right about that, Brad. So yes, look, we may spend more or less than that depending on the relative opportunity in the stock.

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Brad J. Boyer, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [23]

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Okay. And then last one is just around M&A. I mean I think we all follow this fairly closely, but it seems like it's still a pretty relatively healthy environment out there, maybe even a little bit healthier at the -- as far as opportunity set maybe at kind of that sub $40 million, where you guys have kind of like to play ball, so to speak. I guess first question is, would you guys be willing and open to entering into additional M&A prior to sort of fully ramping and integrating the Eldorado assets? And then the second question is, based on what you're seeing out there today in sort of your sweet spot, what is the competitive dynamic out there look like today?

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [24]

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Brad, thanks. Always, pleasure to have you on. Yes, look, regarding M&A, our team is pretty busy. There's a lot of tires -- to remain, a lot of tires to kick, and we continue doing that. We are very focused on accretive investment opportunities here, whether that's -- as mentioned previously, whether that's part of the stock buyback program or whether that's an M&A development or other growth initiative, and that remains the absolute overriding priority, bar none, that we consider job one. So the relative balance between return of capital and growth initiative is really settled by the perceived accretion of one versus the other.

On the M&A front, specifically, look, we keep in close touch with our counterparts in the REIT sector. And we know them well, and we spent a lot of time, and we keep in close touch. And that remains a very aggressive and viable financing option to us and to everyone else. And we've have not done -- we've not executed one of those yet. But let me tell you, we remain open to that, it is a very interesting path of liquidity available. And as you said, the M&A market seems pretty healthy. So that may be a really viable financing option for us. And look, I would just add a quick observation as to kind of what we're seeing the lay of the land out there, a lot of our would-be competitors in the M&A sector have bigger and other things going on. And we're not -- it may be that we're not seeing quite as much kind of trafficking around some of the opportunities there than -- as is would normally be the case, given other things happening in the industry. And whether that's true or whether that's just kind of a perception, it doesn't really matter. We continue to focus on accretive driven processes internally as we look at the M&A opportunities. And so we'll be very mindful of -- and disciplined for that as we proceed forward.

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Operator [25]

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Your next question comes from Barry Jonas of SunTrust.

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Barry Jonathan Jonas, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [26]

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Steve, just to clarify the last question. As you're having conversations with REITs. Is it towards monetizing your existing real estate or more towards partnering for Opco, M&A for new properties?

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [27]

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Yes, Barry, definitely. I'm kidding a little bit. Yes, that's the set of opportunities, right? We talked about all those things. You bet.

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Barry Jonathan Jonas, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [28]

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Okay. Got it. So I wanted to touch on Colorado, definitely a nice touch with the sports betting getting approved in that state. Just curious how you're thinking about those licenses. Would you look to monetize them, perhaps through partnerships? Or any early thoughts on a potential strategy there would be helpful.

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [29]

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Barry, this is George. So as you know, we expect to close on the 3 Black Hawk assets during the first quarter of 2020. And for those who are not aware, the referendum authorizes the Colorado, which is Colorado sports betting law to go into effect by May 1, 2020, and the rollout of one skin or a sports betting license for casino, and we have 3. So we're in discussions with various third-party content providers with regard to skins, but there's been no agreements at this point. But our current thinking is to potentially partner on 2 skins and keep the final 1 for the company.

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Operator [30]

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Your next question comes from Lance Vitanza of Cowen.

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Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [31]

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And thanks for repeating the question on Lincoln. I, too, had some technical difficulties. But let me ask you a little bit about the outlook. And just sort of following on in some of the other questions. Potential M&A, your leverage relative to peers is effectively even lower than it looks, right, given the sale leaseback structures. And I know that you gave the coy answer a second ago, but I would assume that if there was a property that perhaps checked all the other boxes, you certainly wouldn't just step out of the bidding because you decided not to use the sale leaseback. I mean you would, in fact, consider that for a property that checked all the other boxes. Is that fair to say?

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [32]

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Yes, Lance, that's definitely right. Yes.

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [33]

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Lance, I would say -- this is George. We're open to an Opco/Propco structure. And we'll look -- we're going to continue to kick tires. And I think that's something that, that opportunity will be situational. And it's just like our strategic plan, then we're going to be open to it.

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Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [34]

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Okay. And then...

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [35]

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Lance, look, we consider a financing option right, and it's really all of that kind of gets back to that job #1, which is which financing alternative is best, as George has said, for a given situation, and we're definitely open to that. It's all about what in the end will create the most value.

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Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [36]

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Okay. And then I wanted to follow up on Colorado with Denver, such an important feeder market to Las Vegas. And I think we may have talked about this offline in the past, but are you already having conversations with state gaming officials there, regarding potential gaming facilities in less remote areas in the state? And if so, how could you describe the tone around those? Or can you discuss that at this stage?

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [37]

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Lance -- no.

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [38]

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We're not prepared...

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [39]

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We're not going to get into that, though. Look, we're very focused on the integration -- the closing of the integration of Black Hawk right now. The news on the sports betting licenses is brand new. And although we've certainly had that on the radar screen, it's only just kind of come into reality. So our focus is on their -- look, obviously, we operate Arapahoe and we let out many of those -- of the other OTB licenses. So we're pretty busy in that state. And that's the current focus.

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Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [40]

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Okay. Last one for me is just a follow-up on the share repurchase. And I think you guys have done a lot of good work there, a lot of progress on the buyback front, I hear you, and I don't dispute that you've probably cleared out most, if any -- most of whatever overhang was there. That being said, given the low leverage, given the greater-than-expected level of competition. My thought is now, it would be a pretty good time to continue that program. Do you agree with that?

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [41]

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Look, your comment and opinion are duly noted. As I think Brad or John mentioned earlier, look, we still have a lot of gunpowder left on this -- in this program. And as I mentioned, look, it's all about opportunism and the relative accretion we can create going 1 side or the other, whether it's a growth opportunity, M&A, development, stock buyback -- look, even if I had a firm answer, I wouldn't give it to you because it's a dynamic environment, and those relative valuations change over time. But look, we're paying very close attention, as you can tell by the activity in the buyback program. We'll continue to make those decisions very dynamically.

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Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [42]

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Okay. And then lastly for me, just on the outlook for performance. You mentioned you've seen stability recovering to some extent, post Labor Day, I know that that's somewhat tempered. But how quickly should we think about potentially getting back to comping positive on the EBITDA line? It sounds like maybe that's more of a first half of '20 type of event. And I know, obviously, there's lots of unknowns, but or is that something that you think could happen in the fourth quarter?

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [43]

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Lance, would you clarify, getting back to what positive on the EBITDA?

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Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [44]

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To positive growth -- year-over-year growth on the EBITDA line. Consolidated.

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [45]

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Well, you mean like at Lincoln?

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Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [46]

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No, I mean, consolidated for the whole company.

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [47]

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Oh, consolidated.

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Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [48]

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So in other words, yes, you were comping nicely positive for the last couple of quarters, obviously, with the pressure from the Boston opening that took a little bit of a U-turn in this quarter, I know it's a temporal thing. And at some point, you're going to be comping positive on EBITDA again. My question is, just how quickly should we realistically think you get back to that? Is that fourth quarter? Or is that more likely going to be in the first half of next year?

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [49]

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Yes, look, that's a fair question, Lance. We -- look, as we look out over the horizon, we kind of see -- and I think I mentioned this in my comments, but I had so many, you probably got lost. We look at 4Q, probably lining up as a fairly similar quarter to Q3, quite frankly. Look -- and part of that's seasonal, right? We're heading into a low season quarter. It's cold. It's our lowest seasonal quarter of the year. And so that's cutting against us. So the fact that we can -- if we can maintain some measure of parity to Q3 that actually is a positive, as George often points out. So there's that going on.

And then think about the other dynamics in play here. One, we do think, as we've said that we've bottomed out at Lincoln, September, October, if that continues, then we've got that kind of growing trend as we go, or we intend -- we expect to pull Black Hawk into the portfolio. We think in January, and then April-May time frame, we think, will be the other 2 assets from our friends at Eldorado. You package all that together with the annualization of results at Dover, and we only have 2 quarters under our belt so far. We do see -- yes, we see a growing cash flow story getting into 2020 of next year. Fourth quarter, a little flattish, to be candid, likely, given all those dynamics I just mentioned. And then, yes, 2020, we anticipate growing cash flow platform program once again.

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Operator [50]

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There are no further questions at this time. Mr. Papanier, I will turn the call back over to you.

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [51]

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Thank you, operator. I want to thank you all for joining our call today and for your interest in Twin River. Hopefully, everyone has a wonderful holiday season, and we look forward to coming back and talking about Q4 in the New Year.

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Operator [52]

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This concludes today's conference call. You may now disconnect.