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Edited Transcript of TRVW.PK earnings conference call or presentation 12-Aug-19 12:00pm GMT

Q2 2019 Twin River Worldwide Holdings Inc Earnings Call

LINCOLN Aug 16, 2019 (Thomson StreetEvents) -- Edited Transcript of Twin River Worldwide Holdings Inc earnings conference call or presentation Monday, August 12, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* George T. Papanier

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

* Jay Minas

Twin River Management Group, Inc. - VP of Finance

* 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

* Joe McGrail

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Presentation

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Operator [1]

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Good morning. My name is Jack, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Twin River Holding -- sorry, Twin River Worldwide Holdings Second Quarter 2019 Earnings Conference Call. (Operator Instructions)

I'll now turn the call over to Joe McGrail, Executive Director of SEC reporting. Mr. McGrail, you may begin your conference.

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Joe McGrail, [2]

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Good morning, everyone. And thank you for joining us on today's call. By now, you should have received a copy of our Q2 earnings release issued earlier today. But if you haven't, the earnings release is available in the Investor Relations section of our corporate website at www.twinriverwwholdings.com under the News tab.

With me on today's call are George Papanier, our President and Chief Executive Officer; Steve Capp, our Chief Financial Officer; Craig Eaton, our Executive Vice President and General Counsel; and Jay Minas, our Vice President of Finance.

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.

Finally, it should be noted that during the completion of our financial close process and subsequent to the issuance of our prerelease on July 22, we discovered that certain customer complementaries at Dover Downs, which should have been recorded as a reduction to revenue under the accounting rules, were preliminarily recorded as operating expenses, thus overstating preliminary revenue. As a result, the actual quarterly revenue we reported in our earnings release earlier today was approximately $3.3 million lower than the amount estimated at the bottom end of the preliminary range given in our prerelease. The adjustment resulting from this reclassification had no impact on net income or adjusted EBITDA reported in the preliminary earnings release.

With that, 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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Thanks, Joe. Good morning, and thank you for joining us early on a Monday for our second quarter earnings call. After I give my introductory comments, I'm going to turn the call over to Jay who will provide more details on our financial and operational results; and then Steve, he will go into more details on a number of recent developments and our corporate strategy.

Overall, we are quite pleased with the company's results in the quarter. Our M&A strategy, where we have transformed from a single-property operator prior to 2014 to the multi-property public corporation we are today has been further validated with Biloxi, Dover and Tiverton, all performing well in the quarter now accounting for over 50% of our consolidated revenues.

Revenue for the quarter increased just under 30% year-over-year to $143.2 million. While our net income was down $3.1 million in the quarter driven primarily by increased interest expense from our recent global refinancing, our adjusted EBITDA was up $3.2 million for 7% compared to Q2 2018. Key driver in revenue and EBITDA improvement year-over-year was the performance of Dover in our first full quarter of ownership. In the second quarter, Dover contributed revenues of $25.8 million and adjusted EBITDA of approximately $5.2 million. This performance exceeded our already high expectations as their initial integration and optimization efforts are yielding immediate results. In addition to realizing some immediate synergies expected from the transaction, we have already begun instituting several changes at Dover which we expect will increase profitability. Work to date has included an initial reconfiguring of the gaming floor with the relocation of the poker room to the first level.

We have also begun to make changes to the food and beverage offerings, including the creation of a steakhouse lounge and a VIP room. Later this year, we expect to announce the addition of a nationally branded restaurant, along with other changes in food and beverage. We are very early on in our Dover transformation and still anticipate substantial, physical and operating changes to be implemented. We expect these changes will drive meaningful accretion. Based on the early results and expectation of improvements to come, we are optimistic that over time the Dover adjusted EBITDA run rate could exceed our initial estimates by as much as its double-digit percentage.

Turning to Biloxi. We were pleased to see another quarter of solid performance at our Hard Rock Hotel & Casino. Revenues and adjusted EBITDA was consistent year-over-year as profitability in the quarter was impacted by an unexpected increase in medical insurance expense for which we are full or self-insured. Overall, our operations there are stable and performing well.

At the corporate level, we continue to make investments in order to prepare for further expanded growth as evidenced by our recently announced planned acquisitions. Higher corporate costs in the second quarter reflect that investment.

Finally, in our Rhode Island segment, which Jay will provide details on in a few minutes, we felt our operations performed well despite some quarterly softness in the overall New England market. Although, performance in this market was solid in the first quarter of this year, we did see some softness beginning early in the second quarter prior to the opening of the facility in Boston and extending through the end of that quarter. We attribute some of the softness to a challenging comparable period in 2018 as pent-up demand in the second quarter of 2018 resulted from poor weather in the first quarter of that prior year. Decrease in the amount of tax, rev, return dollars is a result of the federal tax legislation at the end of 2017, they also have played a role in the quarter.

We also saw unusual weather patterns in the quarter with a very late arrival of summer in the region, which may have negatively impacted performance. In addition, we did see increased marketing by our competitors in the market, as the region geared up for the new competition.

We believe that our emphasis of focusing on in-market and out of market accretive growth is also proving itself in the early going, as we continue to grow prudently into a multi-state operator based in Rhode Island versus a single-asset regional operator. The overall effect of new competition in Boston in late June was generally in line with our expectations for the quarter. Part of our rationale for building the Tiverton Casino Hotel was aimed at anticipated competition. The ramping of Tiverton is proceeding according to plan and the new facility has shown resilience since the new competition opened.

Now a few comments about the New England market in July 2019. The new competition in the region had a greater-than-expected negative impact on our table gains at Twin River Casino Hotel, while our slots performed for the same period -- performance for the same period was in line with expectations, given the seasonal weakness that we noted earlier that impacted the second quarter. We disclosed the preliminary review into 2019 gaming revenues in our earnings release, which reflects an approximate 17% increase in slots volume and 34% decrease in table gaming volume at our Twin River Casino Hotel.

We are pleased with the lack of impact we have experienced at our Tiverton Casino Hotel, where gaming volumes in July were relatively flat to our recent monthly run rate, which we view as positive. When we conceived the plans at Tiverton property, expectation was for it to offset the impact of new competition so that operating income in the market would be flat to Lincoln alone. We are revising our expectations for combined operating income to be lower by approximately 10% from those expectation levels.

It should be noted that these July figures are preliminary as they represent gross amounts before the sharing of this revenue with the State of Rhode Island and any other accounting-related adjustments, and thus do not represent our expected revenues from July. We're providing this preliminary selected gaming volume data to provide insight into the impact of recent competition. Do not plan to regularly release these similar financial information, whether preliminary or not on an ongoing basis.

We continue to be proactive and instituted and we'll continue to institute several new marketing programs, including several specifically targeted at our table games customers in an effort to retain our customers and welcome back the customers who partook in trial play. It is important to reiterate that we will fully anticipate the impact of luxe effect and continue to reflect this visitation pattern will -- we expect this visitation pattern will rebound and normalize as we move into the fall. Nonetheless, the impact of the competition also underscores the importance of our M&A strategy.

We feel our strategy of accretive growth and diversification continues to resonate and success as we continue to focus on creating a long-term shareholder value as we strive and develop or acquire assets which we believe will prove accretive to our earnings. We could not be more excited about the opportunities to further this strategy with a recently announced agreements to purchase both the Isle of Capri Kansas City and Lady Luck Casino in Vicksburg. Steve will get into the specifics in a few minutes, but we feel these facilities expand our geographic footprint with assets in attractive markets. We believe these assets are a great fit for our portfolio and see the opportunity to increase the net cash flow from these properties by our redevelopment and operating plans. We are currently working through the regulatory process and expect this deal will close early 2020.

We also continue to make progress on our previously announced strategic acquisition of Black Hawk, Colorado and note that the transaction remains on track for an expected close later this year or in Q1 of 2020. Beyond our recently announced acquisitions, the M&A pipeline remains strong. We are out looking at a lot of assets. However, we will continue to be very disciplined with the focus on acquiring assets that we believe fit our strategy and provide the best opportunity for delivering enhanced shareholder returns. During the quarter, we also announced the capital return program under which we may spend up to $250 million for stock repurchase program and payment of dividends. Steve will speak more on this program in a minute.

Finally, I want to address the recent headlines around our vocal opposition of the proposed IGT contract extension. The proposed extension which was negotiated privately in a 20-year no-bid extension of a contract that does not expire for 4 years. Contract requires legislation that may be taken up in the special legislative session in the fall, and we are working diligently to educate leaders on why the deal should not get approved and advocating for a competitive bid process. We are posing this legislation in part because IGT currently controls approximately 85% of the floor in Rhode Island and the machines provided by IGT are significantly underperforming the machines provided by IGT's competitors in our Rhode Island facilities. We feel the ability to work with the state as operator to manage our gaming floor and ensure the best product mix. On the casino floor, it will result in an increased revenue on both the state -- for both the state and Twin River. We will continue to pose this deal and have engaged in initial discussions to form a consortium with technology key providers to complete should a competitive bid process occur.

Now I'll turn it over to Jay.

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Jay Minas, Twin River Management Group, Inc. - VP of Finance [4]

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Thank you, George, and good morning, everybody. So let's dive into a bit more detail on operational performance by reporting segment in the second quarter, beginning with our largest segment, Rhode Island, which for the quarter consists of the Twin River Casino Hotel and Tiverton Casino Hotel, and for the prior year Q2, Twin River Casino Hotel and Newport Grand Casino. Please note that we will lap the opening of Tiverton late in Q3 2019. So until then, comparability is impacted by the Newport Grand to Tiverton transition.

Despite the softness that George noted in the New England market, our gaming revenues overall in the segment did see nice increases in the quarter, as the momentum that started late last year from our Tiverton operation continues to build. Gaming revenues, excluding adjustments for guest complementaries, were 7.3% in the second quarter of 2019 versus the prior year. Table games revenue, which generates a higher profit margin than slots, grew $2.7 million and slot revenue grew by $1.3 million. Revenue from sports betting, which we began to offer during Q4 of 2018, was $0.9 million in the quarter. These increases were partially offset by higher incentives offered to players in an effort to retain and grow market share, primarily related to our new hotels at both Lincoln and Tiverton, for a net gaming revenue increase of $3.7 million or 5.9% over the prior year.

We performed well from a market share perspective as well. On a like-for-like basis or ignoring the revenues from new regional competition opened within the last year, our market share grew by 2.7%, while our legacy competitors from Connecticut and Massachusetts were either flat or down, and we defined market share as slot win prior to any adjustments for guests incentives.

Our total revenues for the Rhode Island segment increased by $7 million to $82.9 million from $75.9 million. The $3.7 million increase in gaming revenues, along with higher food and beverage revenues of $0.9 million, hotel revenues of $1.7 million and other revenues of $0.6 million help to drive this 9.1% increase.

Income from operations for the segment declined by 3.7% or $1.2 million as increases in operating profit from revenue were more than offset by increased depreciation of $1.8 million as well as increased corporate costs of $0.5 million being allocated to the segment. Excluding these impacts and other adjustments described in the press release, our adjusted EBITDA for the Rhode Island segment for the quarter was relatively flat at $38.1 million in both Q2 2019 and '18, as the increase in revenue of $7 million was offset by a similar increase in expenses. This increase in operating expenses includes a $6.7 million increase in costs to operate Tiverton this year versus Newport Grand last. These are completely different operations and the cost structures are not similar. Newport Grand operated without table games of hotel or other gaming amenities that Tiverton offers.

Turning now to Lincoln. Expenses increased $1.5 million year-over-year as a result of bringing revenue-generating amenities online, including our new sports book operation, stadium gaming and the new hotel. There were 2 main elements in the current period which partially offset these increases: a reduction in comparable labor or labor excluding those associated with new amenities of $0.3 million and a decline in marketing expense of $1.4 million. But it should be noted that marketing expenses included within operating costs only include a portion of what we consider marketing and advertising. Our electronics pre-play, which is not reflected in our financials and player complementaries, increased by $3.9 million and $0.6 million year-over-year, respectively. So the narrowly defined marketing expense decrease of $1.4 million at Lincoln is actually an all-encompassing marketing increase of $3.1 million. And as we've noted previously, our approach to marketing through a period of an expansion of competition is to retain our existing customer base as opposed to subsequently recapturing it once the market stabilizes. Since our experience currently suggests that the cost to retain a customer is lower than recovering one. This effort to retain our customer base is a short-term headwind to our adjusted EBITDA that we believe will be beneficial in the long term.

As George mentioned, our Delaware segment, consisting of just Dover Downs, had a very solid first full quarter of ownership, contributing revenue of $25.8 million in the quarter. It should be noted that the revenues of 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 a departure from how Dover was reported pre-acquisition. Operating income for Delaware was $1.9 million, as the revenue generated in the quarter was offset by restructuring charges of $0.7 million and depreciation charges of $1.3 million. The resulting adjusted EBITDA was $5.2 million for the quarter.

Turning to our Biloxi segment. The Hard Rock Biloxi saw stable results year-over-year, as revenue for the quarter increased $0.1 million, operating income decreased $0.3 million and adjusted EBITDA was flat. As George mentioned, the profitability of Biloxi was impacted by an unexpected medical insurance charge of $0.3 million under our self-insurance policy.

Finally, I'll briefly comment on the operations reported as other, which primarily consists of corporate costs and the operations of our Arapahoe racetrack. When you exclude the impact of costs allocated under GAAP to our reportable segments, the adjusted EBITDA loss increased by $2.1 million, as the company saw increased professional fees and wages at corporate as we continue to invest in operating as a public company and to prepare for future expected growth.

I will now turn it over to Steve.

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [5]

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Jay, thank you. Good morning, all. Thanks again for joining us so early on a summer Monday, and my apologies for the nasal tone. I picked up summer cold in Delaware last week, but I'll try to fight through it, hopefully clearly. As George mentioned, I wanted to make a few comments in different areas of what we're doing at a corporate level. And the first is regarding the acquisition of Isle Kansas City and Lady Luck in Vicksburg. We announced in July the acquisition of these 2 properties from El Dorado for $230 million. And let me give a bit more detail about our plan here.

At the Kansas City property, our plan is to invest a maximum of $50 million of CapEx, that's 5-0. As shown in the various renderings that accompanied our July 11 press release, we intend to dramatically improve the external appearance of the existing boat through a lightweight structural and cladding system that will encompass the entire vessel. We think that change will improve the customer arrival experience markedly.

In addition, even more importantly, we also intend to construct a new land-based building adjacent to the existing boat and attached to the existing parking structure. This building will house food and bev, retail and potentially other amenities. They will enable the relocation from the boat of certain F&B and amenities, creating a valuable on-boat square footage for an improved customer gaming experience and it will enable an indoor walking entrance directly from the parking garage to the second floor of the boat. Although we have not finalized these various plans, we continue making progress on them and we have confidence that the maximum investment required is that $50 million that I mentioned.

Let me give you a sense of how Kansas City and Vicksburg and Black Hawk fit into our overall investment thesis on M&A. So folks, in order to do that, I think it may be most illustrative if I just recap a couple of data points that I think will shed some light on our intentions regarding the new acquisitions. For example, first, Hard Rock Biloxi, George mentioned it. It was the first of our growth M&A actions back -- way back in 2014. But remember, back in that day, that property was delivering $25 million of EBITDA and we paid $250 million for it. So our purchase multiple was 10x. We have a little less than $10 million of additional CapEx into HR Biloxi since we acquired it, so call our total investment to date about $260 million maximum. And today that property is running approximately $37 million, $37.5 million of run rate adjusted EBITDA, which means that the -- although the purchase multiple was 10x, our ownership multiple today is a bit less than 7x.

Consider Dover Downs, $97 million total price, that's total stock issued minus cash required. 2018 adjusted EBITDA of about $11 million gets you to a 9x purchase multiple. We initially indicated an expectation of about $20 million of run rate EBITDA there. As George commented, we now believe that's conservative and the ultimate annual cash flow should be somewhat above $20 million. But at $20 million -- just at $20 million, if we assume that, our ownership multiple will be 5x. That's a long way from the 9x purchase multiple we originally made.

And finally, at Tiverton, with $130 million construction price and an expectation of $18 million to $20 million of EBITDA, we believe our ownership multiple will again be near or below 7x. And so that's exactly what we intend to achieve at each of the 3 announced acquisitions: Black Rock, Kansas City and Vicksburg. More specifically, we expect following the $50 million investment in Kansas City that our ownership multiple there will be below the 7x threshold that we typically target on these M&A opportunities.

Turning to the capital return program that George touched on. We did in July pay our first quarterly cash dividend of approximately $4 million, and our intention is to continue a quarterly return of capital to shareholders in this form. As to the tender offer, we did fund the $75 million offer in July. These stock purchases we made at $29.50 per share and resulted in a repurchase of approximately 2.5 million shares and a reduction in shares outstanding of approximately 6.2%. One of the way to think about that tender offer is that of the 2.98 million shares of Twin River stock we issued in March for the Dover acquisition, we just basically repurchased 85% of those at $29.50 per share and simultaneously accomplished a return of capital to shareholders.

Following the aforementioned dividend and tender offer, we still have $170 million available within our Board approved program for return to capital to shareholders and we also have both ample liquidity and very low leverage with which to continue this capital allocation program over time.

Two more quick notes. As mentioned in the release, we did complete a new debt financing back in May, pretty big deal for us: $250 million, 5-year revolver, unfunded at close, remains unfunded today, LIBOR plus 2.75%; $200 million, 7-year term loan B, LIBOR plus 2.75%; and a $400 million 8-year senior unsecured note with a 6.75% coupon. So we quite successfully refinanced our then short balance sheet, extended the maturity significantly, acquired the ability to return capital to shareholders over time and increased our liquidity substantially for working capital, CapEx, investments, acquisitions and return to shareholders.

One more important balance sheet note. At end of Q2, our net debt leverage was below 2x, 2.0 and our credit agreement leverage was below 3.5x.

And lastly and importantly, I'd like to mention that we remain a Wholeco. We own virtually all of the assets that we utilize in generating cash flow. That means, of course, that our refinancing structure remains available to us. So let me be clear about one point that we've made often in our recent equity roadshow. We are not opposed to the implementation of a refinancing or any other financing structure for that matter that would enable us to continue accomplishment of our ongoing long-term goal of creating shareholder value. And that turns out, so far we've been able to accomplish every transaction on balance sheet, whether the future transaction is more optimally financed with a REIT structure or some other financing structure or combination thereof that's available to us, we would, of course, pursue one or more of those financing alternatives. We remain open-minded to the future.

Those are my comments. And with that, George back to you.

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [6]

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Thanks, Steve. As I'm sure you can sense that it's once again been an extremely busy quarter and we're not stopping here. We continue to work daily in the best interest of the company to drive and create shareholder value.

With that, I'll ask the operator to open it up to our questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Brad Boyer with Stifel.

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Brad J. Boyer, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [2]

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First one probably best for you, George. Just wanted to see if you could provide a little bit more granularity around what you're seeing from the Encore opening? Obviously, as articulated in the release today and on this call, the impact thus far is a little bit greater than what you're expecting. Could you just give us a sense of sort of where the delta has come from? And maybe what you're seeing in the market as a whole today both with respect to the direct new competition and maybe some of the new others operating in the market?

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

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Sure. Certainly, the whole market has been impacted based on anecdotal as well as some information that's been shared with us. But in my experience, where there's been new entrances into the marketplace, which more recently is included the opening of Scarsborough and Biloxi, the opening of Plainridge, MGM in Massachusetts. And I've seen a defined trial period, and that's typically followed by a bounce back which gets you closer to kind of our historical top line trends for your property. We're clearly experiencing a prolonged trial period. I think that's been facilitated by nicer weather pattern in the summer to some degree in the Northeast, which actually helps to reduce normal traffic disruptions that we were expecting to see around Boston. I don't expect a return to normal typical disrupted traffic patterns in the Boston area until after Labor Day, which is when I feel we should see -- start to see a typical bounce back of the top line revenues. I think that...

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Brad J. Boyer, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [4]

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Okay. I mean...

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

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As I stated earlier, we're seeing a little more of an impact in our table games business.

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Brad J. Boyer, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [6]

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Yes. I mean, if we dive a little deeper into that and I don't want you to give away any of the deep dark secrets here, but I mean, could you just kind of give us a sense of, if there's any areas within your database? I mean, is this being driven more at the high end? Is it broad-based? Could you just give us a sense of what you're seeing there?

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [7]

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Yes. We're actually doing a good job maintaining our mid-to-lower segments of our business across the Board. We are seeing some of the database that we did have in and around Boston area being influenced by way of visitation. We still get visitation from customers, but we're seeing a loss of trips as it relates to those customers. But we also get a lot of information that's negative about Encore but we're yet to see the return of majority of the customers at this point and again that goes to what I concluded earlier is that I think that because of the nicer weather in the Boston market. Boston tends to kind of clear out for the shore and that's leaving less of a disruptive pattern in the Boston market. And I see once Labor Day comes around, we'll really be able to gauge that much more effectively.

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Brad J. Boyer, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [8]

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Okay. That's helpful. And then second question for whoever wants to address it, is just around capital allocation. I think there's been some, I don't want to call it mixed messaging, but obviously you guys have the return of capital initiative out there. You've also by way of the Isle KC and Lady Luck deal kind of shown that you are interested in growing and diversifying through acquisitions. I guess, with the stock kind of trading where it is today and with the buyback out there, it would seem like the stock presents the -- buying back the stock presents the -- perhaps the most optimal use of cash right now. I guess, how do you balance your desire to buy back the stock? And where the valuation is today with your desire to also grow and diversify through M&A?

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [9]

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Good question, Brad. Look, we kind of said it from the get-go when the Board approved this capital allocation program in the first place that we intend for a balanced program between these 2 somewhat different objectives. And I think, actually the activities that we announced recently and that we've addressed on this call are a really good example of that. $230 million toward 2 acquisitions that we feel like -- 2 properties that don't have fair share, haven't for quite some time, in particular Kansas City, a terrific geography, we think the best in that marketplace, real upside there. And that's on the growth side of the scale, balanced, as I said, by both the cash dividend, which is -- we just finished the first one and that will be ongoing on the one hand and then the tender offer on the other.

And then look, the program approved by the Board had no time limit on it and it's an ongoing program and we will tap into it and utilize it as the company sees best fit. And look, the analysis is ongoing and dynamic, right? As the stock price moves, the opportunity, the incentive to get into a buyback program per the Board's approval changes versus other potential allocations of capital that would be clearly on the growth side of the business. So you're right in suggesting that as the stock price moves, our analysis moves and reflects that kind of a change.

Look, we're interested in one, satisfying shareholders in their -- as they seek returns of capital. We're also very interested in maximizing shareholder returns. And that gets -- we get into a -- the analytics of where the returns are optimized, be those on the growth side of the business, where I think, frankly, this team has done a pretty good job historically versus buyback program or some other form of return of capital to shareholders. So there's no clear answer because it's -- the environment is so dynamic, but we pay a lot of attention to it. Your question is a really good one, and we spend a lot of time talking about it and the management team in the board room, and we intend to maintain a balance on a go-forward basis.

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Brad J. Boyer, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [10]

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Helpful. And then the last one for me. Steve, could you just give us a sense of what type of return cash on cash you're expecting to get out of that $50 million investment at Kansas City?

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [11]

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Yes, Brad. Thanks for being here this morning. Look, I don't think we look at it as a standalone $50 million investment, Brad. We – it is a $230 million investment plus $50 million. So look, what I meant to imply in my comments was, we're going to be $280 million all in, in the Kansas City, Vicksburg assets. So we might spend a little bit of money in Vicksburg to make that right when we focus more on that as time passes. But we're looking at a return on the entire $280 million. And that's where I -- and I didn't want to get into too many details, Brad, but that's where I kind of said, "look, we intend that -- even though the purchase multiple was 8.4, obviously the purchase multiple moves north of that if you include the $50 million CapEx investment in Kansas City. But as we've illustrated at the 3 other properties I mentioned, we intend to bring that down to 7x or better. On a combined basis, Kansas City, Vicksburg at a $280 million total investment, we expect to be at 7x or better. I'll let you do the math because you're so good at it. You can -- you obviously know what $230 million at 8.4, what the total cash flow is today, so that will tell you where we expect to get it over time in terms of an ownership multiple.

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Operator [12]

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Barry Jonas with SunTrust.

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Barry Jonathan Jonas, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [13]

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Wanted to start on Rhode Island. You've taken up promotions as a response to the Encore opening. Do you do you think these heightened costs normalize as revenue bounces back? Or does it last a little longer just to be on the safer inside?

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [14]

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Yes. I mean, I think this trial period, as I said earlier, has been a prolonged trial period. We've been -- historically, we've been able to get a -- acquire a fair share of our table games business without a lot of promotional activity. We're certainly going to have to focus more on the promotional aspects related to table games. We feel comfortable on what we're doing on slots. We have some dry powder as it relates to pre-play, certainly going to have use some of that. But yes, I would say that you will start to see a little bit of a trend of an increase in promotional activity, and that's really not just in response to Encore, it's going to be in response to what we're going to see from our competitors, mostly Foxwoods, Mohegan but also MGM.

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Barry Jonathan Jonas, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [15]

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Great. And then I just wanted to touch upon the M&A environment. You mentioned, it sounds pretty active. Just curious, are there more -- potentially more M&A opportunities as a product of the Caesars' Eldorado merger? And then maybe where does the Strip asset rank within your M&A strategy?

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [16]

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Barry, what was the last part, where does the Strip fit in?

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Barry Jonathan Jonas, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [17]

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Yes. Where does the Strip asset rank within your M&A strategy?

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [18]

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Yes. Look, I'll take up things and then George can pipe in also. I think we continue to see a pretty -- a relatively robust M&A environment, generally. There are single-asset sellers and multiple-asset sellers, and certain operators are kind of culling through their portfolios and letting go maybe smaller or underprioritized types of assets, maybe they're not core, don't fit. But that's -- that all kind of combines to make for a pretty busy environment. Our M&A team is awfully busy, running around kicking tires and thinking through how we can find accretive opportunities in that group. So we actually like the timing. We like the environment, the fact that we became public in March and got our balance sheet refied and worked with Eldorado to grab those 2 assets and kind of move this project forward as a growth strategy. We like our timing in all of this pretty nicely, particularly given the interest rate curve and the aggressive financing markets, generally speaking. Look, I'll tell you, I think that the Strip is probably a ways away for us, given the kind of size and the size of the Strip investment requirement on one hand and our size as a regional player being relatively small on the other hand, but I'll let maybe George talk a little bit more about the Strip view, if you will?

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [19]

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Sure. I'm sure you see us rumored on occasion to be in the hunt with a Strip asset. That actually ranks low in our priority list. I'll put Atlantic City in that category also. Outside of that, we're focused on regional markets to the South Midwest. So we think there's some opportunities that are going to be coming out of the Eldorado-Caesars deal, and we're going to be kicking a lot of tires.

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Barry Jonathan Jonas, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [20]

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Okay. Great. And then just last one for me, just a high-level question on sports betting. We see the numbers come in, but curious to get your sense of the importance of sports betting as a visitation driver? And maybe how you see your -- that business ramping, going forward?

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [21]

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Yes. So we -- I've commented on this a lot over the last few quarters is that we don't see this as a game changer. It's certainly an amenity that you have to have. It'd be kind of more interesting in bigger markets, but Rhode Island is not a really big market as it relates to that; as well as Delaware, I would put that in the same category. We think, futuristically, once we close on the Colorado transaction, we think there's going to be some opportunity there, as more as a driver as opposed to an amenity, based on the assets we have there. And as you know, we still have some strategic interest because we have a racetrack there. But I think overall, I think sports betting is a bridge to potentially a next step, which involves iGaming, and it could help you generate some database.

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Operator [22]

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John DeCree with 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 [23]

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Just wanted to circle back, I guess, at least one more time to the table impact that you're seeing so far. And I realize with a holiday in July, it's probably difficult to get anymore granular, but I figured out I'd ask anyway. Is there any sense in the trend or cadence of the performance you've seen, whether on tables or slots at Lincoln from late June, early July, to the back half of July? And can't really talk into August, but I guess what I'm getting at is, has that kind of 30-ish percent decline on tables getting fairly consistent or has it been kind of lumpy throughout the month?

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

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So let me just take a step back so you can understand kind of seasonality in this market. We've never -- we were never the top, I guess, competitor in the market in the summer. So once we hit June, July or August, with Foxwoods Mohegan because the way that their -- with their amenities, the way they are structured, they always did kind of a better -- they always did better comparatively to us, and I would put Encore in that category. And then once the summer is over, then we were able to actually trade with Foxwoods our ability to beat them month-to-month. So we're way more effective in the shoulder periods as opposed to the summer season in this market, and we haven't gotten there yet. And so what I'm saying is, when you look at the disruption in the market with -- because of the new entrants in the market in Boston, the traffic patterns aren't kind of the normal traffic patterns in this market. So I really need to wait until after Labor Day to really start to understand it. But to answer to your question, we saw almost immediately it was probably in the mid-20 range and then it kind of floated between mid-20s to mid-30s and that's been consistent. So to answer your question, it's been relatively consistent from a table games perspective, and it seems to be that customers that are kind of in the Boston market as opposed to customers that are in our Providence market.

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John G. DeCree, Union Gaming Securities, LLC, Research Division - Director and Head of North America Equity & High Yield Research [25]

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That's helpful color. I appreciate that, George. And then we spent some time on M&A. The big development opportunities around, I guess, is people looking at Illinois. There's a couple new opportunities and what you guys have done at Tiverton has obviously -- is on its way to being quite successful from a return perspective and a very rational development there. Just wanted to get your thoughts on Illinois and opportunities there, if that's something that -- a new development would kind of be a look for or fit into your kind of M&A strategy?

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [26]

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Sure. We're going to look -- as we said earlier, we're going to look at everything. It's certainly something that we're looking at currently. There are some potential opportunities there. The only thing that I -- we're a little bit cautious about is Chicago itself, the license in Chicago itself, it seems to be still a little fluid. So we don't necessarily know if the way that you see the legislation right now will be consistent or not. So that's probably the only area of caution, but we're certainly looking at potential opportunities in Illinois.

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Operator [27]

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(Operator Instructions) Lance Vitanza from Cowen.

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Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [28]

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I just had 2. The first -- I think you mentioned that Dover did $5.2 million of adjusted EBITDA in the quarter. Can you tell us what that number was? I know you -- obviously, you didn't own it, but what -- or you didn't operate it, but that number was for the year ago quarter?

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [29]

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Lance, I know the year-end was 10.8, Joe, if I'm right? And I mean, you can do math on that quarterly. I don't think we have that number offhand. But we can...

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George T. Papanier, Twin River Worldwide Holdings, Inc. - President, CEO & Director [30]

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Actually, it's pretty (inaudible) throughout the year.

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [31]

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Yes, it's not highly seasonal. So it's 2.5 to 2.6.

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Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [32]

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So you guys did a lot better operating the assets is I guess where I'm trying to evaluate? And it sounds like you had a pretty healthy increase there?

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

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Yes. That's correct. Agreed. Agreed.

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [34]

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Yes. And as George commented, we've got an integration team on the ground and really have only just got started with some of the physical changes and some of the marketing programs and looking to impact the overall gaming customer experience, but we see a lot of opportunities to improve margins over time there. And we have a -- got a good shot at accomplishing some of that in our first quarter of full ownership.

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Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [35]

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Okay. And then my other question is on the tender, and forgive me if I'm getting this wrong, but tell me if I am. But I remember when the release came out, I wanted to say that there were something like 35 million shares that were tendered and you took out about 2.5 million of them. Is there an overhang issue? And if so -- in the stock, obviously, and if so, how do you intend to deal with that?

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Stephen H. Capp, Twin River Worldwide Holdings, Inc. - Executive VP & CFO [36]

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Well, it's good question, Lance. It's tough for us to deal with an overhang issue because it is what it is, right? We reorganized equity, obviously, from December of 2010, and with that comes certain issues. And look, we have tried a couple things. We have tried organized secondary equity offering a little while ago. The tender helps a little bit. But we're going to -- solving that is not necessary in our control, so what we're going to do is continue to think about how to create value here and how to move this company forward both from a -- well, from a capital allocation standpoint, both in terms of finding and optimizing capital returns, both in terms of growing the company in an accretive fashion and shareholder returns over time as well. But look, we're going to continue to think about it, and we're open to ideas and the like, but our job is to run this company and then keep doing as good a job as we can with that. And we'll -- we have to let some of the other things sort themselves out over time.

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Operator [37]

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There are no further questions at this time. I would now like to turn the call back over to George Papanier for closing remarks.

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

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All right. Thank you, operator. And I want to thank you all for joining our call today and for your interest in Twin River. And I hope everyone enjoys the rest of the summer.

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Operator [39]

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This concludes the Twin River Worldwide Holdings Second Quarter 2019 Earnings Conference Call. We thank you for your participation. You may now disconnect.