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Twin River Worldwide Holdings, Inc. (TRWH) Q1 2019 Earnings Call Transcript

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Twin River Worldwide Holdings, Inc. (NYSE: TRWH)
Q1 2019 Earnings Call
May 14, 2019, 4:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Sheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the Twin River Worldwide Holdings First Quarter 2019 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Thank you.

Joe McGrail, Executive Director of SEC Reporting, you may begin your conference.

Joe McGrail-Executive Director, SEC Reporting

Good afternoon, everyone, and thank you for joining us on today's call. By now, you should have received a copy of our Q1 earnings release issued earlier today. 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.

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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 from the results discussed in these forward-looking statements. We would also like to point out that 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 the earnings release.

With that, I will now turn the call over to George.

George Papanier -- President and Chief Executive Officer

Thanks, Joe. Good afternoon and thank you for joining our first quarters earnings call today. After I give my introductory comments, I'm going to turn it over to Jay and Steve to give a little more detail about our financial and operational results. Before I discuss the results of the quarter, I wanna talk about the recent developments and our corporate strategy as the first quarter saw us achieve some important milestones in our ongoing transformation as we closed our acquisition of Dover Downs on March 28th, began trading on the New York Stock Exchange on March 29th, and completed our debt financing this past Friday.

Starting with our acquisition of Dover Downs, we completed our previously announced acquisition four days prior to the end of our first quarter and have hit the ground running on our integration efforts. This acquisition was and is all about being strategic in the way we create value for our shareholders. I'm happy to report that as we have begun to integrate our outlook for the combination is as strong as ever.

Based on the efforts completed thus far, we currently anticipate that the acquisition will result in net estimated annual cost synergies of approximately $3 million per year. These net estimate cost synergies are approximately $2 million of legal, accounting, and other expenses that we expect to incur as a public company. Cost synergies are expected to be driven by the elimination of certain corporate overhead redundancies and approved property-level efficiencies with limited, incremental costs required to scale operations and integration. What these identified synergies do not include is any estimated impact of changes in tax legislation that were enacted in Delaware on July 1, 2018 in which we also estimate will provide incremental EBITDA over what was already realized by Dover Downs in the second half of 2018, first quarter of 2019.

I, along with the rest of the team at Twin River Worldwide Holdings, have enjoyed getting to know every new colleague at Dover Downs. Suffice it to say there's a heightened level of excitement and energy now that we've combined the two organizations. In conjunction with the acquisition of Dover Downs, we've commenced trading on the New York Stock Exchange in the quarter. As previously noted, we feel this represents a major step in the evolution of the company as we look to open our equity to a broader investor base. We've also begun a process to refresh our Board of Directors as we seek to build a board that has the right combination of skills and expertise of existing and new board members to add value to the company for the integration and transformational growth ahead. As Steve will speak to in detail in a few minutes, I'm also very excited about the debt refinancing, which closed this past Friday.

Now, for the quarter. The first quarter of 2019 we saw net revenue increase 15.1%, with gross gaming revenue increasing 13.6%. Focusing on our Rhode Island segment, net gaming and racing revenue was up $9.5 million, or 15.8%, in the quarter compared to Q1 last year when gross gaming revenues were up 12.9% over the same periods. In addition, non-gaming revenue was up $4.2 million, or 35.1%, as the company continued to see a nice ramp in operations and revenue in both Tiverton and from the new hotel at Twin River.

We continue to focus our marketing efforts on certain geographic areas within our market in an effort to continue to grow our business. Considering the recent increased competition in our market, we continue to be pleased with the results from our meaningful investments in Rhode Island, which we believe has been affected. Expect these investments to be particularly key as we anticipate increased competition in the region with Encore Boston Harbor. While increased competition will likely have an impact on our Rhode Island operations, we believe that our focus on the local customer base, enhancing our marketing efforts, including use of free slot play and guest complimentaries, favorable legislation in Rhode Island versus Massachusetts, which includes the younger legal minimum gambling age and ability to smoke in Rhode Island casinos, are designed to position us to respond to the opening of Encore Boston Harbor.

We also believe our properties have a significant drivetime advantage for several large population sectors between our properties and Encore. Note that less than 20% of our Twin River Casino Hotel's rated slot play originates from an area within a drivetime closer to Encore Boston Harbor than Twin River. In addition, the majority of our rated play at Twin River Casino Hotel comes from players within a 30-mile drive. As we have previously explained and I want to reiterate, our approach to marketing during a period of increased competition is to focus our efforts on retaining our existing customer base, as opposed to subsequently recapturing it once the market stabilizes since our experience strongly suggests that the cost to retain a customer is lower than recovering one. Obviously, we can't be sure what the impact will be, but we are sure that we're focused on doing what we can do to respond.

Jay will get into details shortly, but Q1 once again saw meaningful growth in our market share in slots revenue. Rhode Island table games results were also strong. [Inaudible] Newport Grand operated with no table games. We had no table games database that we could transfer to Tiverton. Since the opening of Tiverton, we effectively established a new database of table games players while being sensitive to minimizing cannibalization of Twin River table games customers. We grew our combined table games by $8.1 million over the prior year period in our Rhode Island segment. Looking beyond Rhode Island, our Hard Rock Casino in Biloxi, Mississippi continued to show steady results of growth moderated with a top-line increase in 3.4% year-over-year with gaming driving the majority of the increase.

Finally, I wanted to provide a quick update to our previously announced pending strategic acquisition of three casinos in Colorado. We continue to work through licensing and other regulatory requirements and note that the transaction remains on track for an expected close later this year or by Q1 of 2020. We remain excited about the strategic opportunities associated with this anticipated transaction.

Now I'll turn it over to Jay.

Jay Minas -- Vice President of Finance

Thanks, George. Overall, net revenue for the first quarter was $120.6 million, an increase of 15.1% from the first quarter of 2018. In addition, gross gaming revenue was also up 13.6% versus Q1 2018. Income from operations was up 21.8% to $30.3 million in the current year compared to $24.9 million in the first quarter of 2018, and net income for the quarter was $17.6 million, representing an increase of $5 million, or 39.3% year-over-year. Adjusted EBITDA for the first quarter of 2019 was $43.9 million, compared to $43 million in the first quarter of 2018.

Diving into the results a bit more, while we saw very strong top-line growth, increases in both gaming and advertising general and administrative expenses did impact the bottom line. Gaming expenses were up $4.4 million over the prior year. $3.4 million of this increase relates to the Rhode Island segment, as the Tiverton operation has higher operating costs versus Newport Grand in the prior year.

Additionally, we had increases in gaming labor due to new gaming amenities in the current year, such as sports betting and stadium gaming. Table game supervisory rates also increased over the prior year in a concerted effort to retain talent in the face of increased competition in the market. Also, within gaming expense, Biloxi saw an increase of $0.5 million, probably due to higher gaming taxes associated with higher gaming revenues. And finally, we saw another $0.4 million of gaming expense related to Dover, which closed on March 28th of this year.

Advertising general and administrative expenses increased by $7.3 million from $39.2 million in the first quarter of 2018 to $46.5 million in the current year's quarter. $4.6 million of this increase relates to the Rhode Island segment of which $2.6 million is from comparing Tiverton operations in the current year to Newport Grand last year, and the remaining $2 million is from our Lincoln facility. Focusing on Lincoln, the $2 million increase is due to $0.6 million in marketing costs, excluding labor, $0.4 million in insurance and property taxes, and the remaining $1 million increase is partly due to the new hotel, SportsBook and stadium gaming operations, as well as higher facility related costs.

In addition to the increase in Rhode Island, we also saw increases in general and administrative expenses in corporate costs of $1.9 million, mostly due to increased costs of becoming a public company, and we also had additional general and administrative costs for Dover Downs for the post-close period.

Let's now review operational performance by reporting segment, 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, Twin River Casino Hotel and Newport Grand Casino. As George mentioned, our gaming revenues saw nice increases in the quarter as the momentum that started late last year from our Tiverton operation continues to build. Table games revenue, which generates a higher profit margin than slots in our Rhode Island segment, grew $8.1 million, and slot revenue grew by $3 million. This increase was partially offset by higher incentives offered to players in an effort to maintain and grow market share, primarily related to our new hotels at both Lincoln and Tiverton for an increase in net gaming revenue of $9.4 million, or 15.8%, over the prior year's first quarter.

We not only grew our gaming revenues, but we continued to improve our market share. We define the market [inaudible] Connecticut, Rhode Island, and Massachusetts Casinos prior to any adjustments for guest incentives. Our market share increased by approximately 40 basis points over the prior year, despite the addition of MGM Springfield to the competitive set. Our total net revenues increased from $72.4 million to $86.1 million, up $13.7 million, a 15.8% increase in gaming revenues, along with higher food and beverage revenue of $1.8 million, hotel revenue of $1.6 million, and other revenues of $0.8 million helped to drive this 19% increase. Income from operations grew by 23%, up $5.8 million to $31.3 million versus $25.5 million in the prior year's quarter.

An increase in net revenue of $13.7 million was partially offset by higher expenses of $7.9 million. Included within these comparable results, our current year increases in management fee of $1.9 million, appreciation and amortization for our new facilities of $1.5 million, and a prior year charge of $5.9 million that did no reoccur relating to the disposal of Newport Grand.

Additionally, $6.3 million of the expense increase is from the costs of operating Tiverton this year versus Newport Grand last year. These are completely different operations, and the cost structures are not similar. Newport Grand operated without table games, a hotel, or other gaming amenities that Tiverton offers, an additional $1.6 million of the increase, attributable to bringing revenue-generating amenities online at Lincoln, including our new SportsBook operation, stadium gaming, and the new hotel. At Lincoln, the company also saw increased expense of $0.3 million as a result of higher labor costs, excluding food and beverage labor and labor related to the additional amenities, which amount to a modest 1.9% increase over the prior year, $0.6 million increase of higher food and beverage expenses, including related labor, and $0.6 million of increased marketing.

We also experienced general increases in administrative costs as a result of higher property taxes and insurance premiums, other general price increases, and higher maintenance costs. These additional costs amounted to an approximately $1 million increase year-over-year. The increase in food and beverage expenses are a direct result of the higher revenues, which more than offset these costs. The higher marketing costs are largely attributable to the comparable timing of recognizing the marketing reimbursement from Rhode Island, as total spend on marketing was flat year-over-year, excluding certain guest complimentaries, which are included in the gaming revenue line.

Turning now to the Biloxi segment, income from operations decreased by $0.3 million, but this was inclusive of higher management fees of $0.5 million. Revenue in Biloxi increased by $1 million, driven by higher gaming revenue of $0.9 million, which was attributed to higher slot wins. The increase in revenue was offset in part by higher comparable payroll costs, and to a lesser extent, high gaming win tax. It should be noted that all management fees noted in the segments of discussion are all between companies within our group and upon consolidation completely eliminate.

And I'll now turn it over to Steve.

Stephen Capp -- Executive Vice President and Chief Financial Officer

Thanks, Jay. Just a couple of brief notes from me. You may recall that we have had a very short balance sheet. Until last week, our revolver matured in January of 2020, and our term loan matured in July of 2020. With the cooperation of the credit markets, we've addressed those maturities as of last Friday. On Friday, we closed a new bank deal comprised of $250 million, five-year revolver, maturing in 2024, and a $300 million, 7-year Term Loan B, maturing in 2026. We also priced $400 million of 8-year senior unsecured notes, maturing in 2027. Bank deal priced at [inaudible] plus 275, and the senior notes priced at 6.75%.

There were two principle uses of these proceeds. First and foremost, to repay approximately $420 million of fundings under our prior bank deal consisting of a revolver and Term Loan B. The second use of proceeds is for general corporate purposes, including for working capital, capital expenditures, acquisitions or other transactions, and also potentially the repurchase of our common stock. Any stock repurchases may be affected through one or more private repurchase transactions, tender offers, and/or market or accelerated stock repurchase programs. The amount, timing, and terms of any of these returned to the capital of shareholders will be determined as a function of prevailing market conditions, our financial condition and prospects, our debt and regulatory covenants as applicable, our long-term cash requirements, and other factors.

Finally, on this topic, I'll say one thing. The potential for share repurchases or other avenue of liquidity for our shareholders and the introduction of new shareholders to this company is important to us, and we're considering these many issues on a real-time basis. That said, we won't address any more specificity on this topic in the Q&A, as we're working on this topic right now.

So, thank you, and George, back over to you.

George Papanier -- President and Chief Executive Officer

Thank you, Steve. Before we move on to the Q&A portion, I do wanna take a moment to recognize the incredible work done by all the team members of the Twin River family. Their hard work and dedication, especially in times of rapid growth and change, is already paying dividends in all we have accomplished in a short period of time. I'm confident we will continue to work hard going forward in the best interest of the company to drive and create shareholder value.

...

With that, I will open it up to your questions.

Questions and Answers:

Operator

To ask a question, please press *1 on your telephone keypad.

The first question comes from Brad Boyer of Stifel. Please go ahead. Your line is open.

Brad Boyer -- Stifel -- Vice President, Equity Research

Thanks for taking the questions, guys. First one probably for you, George, you touched on this a little bit in the prepared remarks, but just curious, it sounds like we have a little bit more certainty around the Encore opening with Wynn targeting sort of an end-of-June time frame. That said, just curious how you're envisioning Encore impacting your Rhode Island operations in the near term, what steps you guys plan to take without revealing the whole playbook obviously. And then were there any learnings from the Plainridge opening that you guys think you can apply in this scenario to potentially mitigate any impact? Thanks.

George Papanier -- President and Chief Executive Officer

Thanks, Brad. So, I'll start with I guess your last question. Our approach to Encore will be consistent with how we approached the Plainridge opening, to a lesser extent the MGM opening, which effectively is as our database geographically gets closer to Encore, we enhance our database incentive offerings to support and maintain our market share. This approach started actually during the second quarter, and we're gonna continue to intensify this leading up to and even after the Encore opening. The other thing is we've created more awareness in the Boston area.

But let me take a step back, which I think answers the first part of your question. Since the passage of mass gaming legislation, we've been pretty much readying ourselves to compete with this new competition, not just try and mitigate it. So, we've focused on the legislative initiatives. We added a lot of marketing tools that we felt would be required to compete effectively, and that included opening for 24 hours, adding free play, marketing subsidies, table games, and we also focused on creating an environment for a customer through some capex initiatives, which included we built a non-smoking casino within our casino for those that would prefer that environment, although we know a smoking environment is an advantage, and we view it that way, but we wanted to not ignore the fact that there is a non-smoking segment in our customer base.

And we build a hotel, Tiverton. We opened that in the fourth quarter of last year. We were the first in New England to have SportsBook, we added stadium gaming, and we also over time created the right mix of [inaudible] to accommodate our lower to mid-level work customer based on what Encore has been just kinda representing out there is that they were gonna be looking for a more affluent customer. And I think that could be supported by the fact that the project includes a really high end [inaudible] hotel, and it has only a little over 2,000 parking spaces, which does not support going after the masses. We have 5,700 parking spaces, which does support kinda the clientele that we go after.

Additionally, my feeling is there's a significantly underpenetrated market from Boston north to New Hampshire, which effectively is the size of our market, the market that Twin River currently competes in, and we compete in that market with Plainridge and the Connecticut casinos. So, I feel that they can go target that untapped market to fill in their mid-week business at a much less cost than competing head-to-head with us. And the other thing I think that supports the fact that this market is still lucrative and underpenetrated is if you look at the gaming revenue per capita, it's at $144, and if you look at other kind of comparative markets, this just continues to support that there's room enough in this market to support an Encore-type facility.

Brad Boyer -- Stifel -- Vice President, Equity Research

That's helpful. And then second question is just around Dover. Obviously, you guys have been in there now operating that asset for a little over a month. Just curious as you've gotten in and gotten a little bit more hands on, if you have any updated thoughts around the property, maybe how you can grow EBITDA there from here? Thanks.

George Papanier -- President and Chief Executive Officer

So, our approach initially was to take all the synergistic opportunities, and I think we've done that very quickly. There's still some opportunity for the continuation of creating efficiencies with the property, but we feel pretty comfortable that we'll be able to grow revenues in that facility with the help of reducing the tax rate, particularly in table games. We feel that they've kinda stepped away from that market, and we feel that there's an opportunity to get back into the table games business. And we're gonna do some other stuff that's gonna enhance the facility that we think will create some attractions that they really don't have at this time.

Brad Boyer -- Stifel -- Vice President, Equity Research

Okay, helpful. And then lastly, maybe for you, Steve, since coming public, you guys have been fairly open about your desire to continue to grow and diversify the business. That said, could you just provide us with some color? I think it'd be helpful in a public forum around what you guys look for in an asset. And then beyond valuation, are there certain types of assets or markets you prefer more than others? And then lastly, obviously, there's three triple nets out there today that's resulted in a number of operating companies, as opposed to HoldCos. If you could just share your views with respect to potentially considering acquisitions of OpCos as opposed to HoldCos moving forward? And that's all from me. Thanks.

Stephen Capp -- Executive Vice President and Chief Financial Officer

Thanks, Brad. So, three-part question. I'll take them in that same order. So, on the M&A front, I think we like the position we're in, Brad, called a smid-cap regional gaming company. In this space, as you well know, there used to be a whole bunch of companies kind of like us, including the old Pinnacle, and the old Ameristar, and the old Aztar, and the old Isle of Capri, and then of course smaller companies were Penn, and Boyd, and the like. And those companies have all either gone away or gotten really big, and so the three super-regional now are Boyd, and El Dorado, and Penn. So, we've kind of floated up into this space in between one or two asset properties and those super-regionals, and so we're kinda uniquely in that little smid-cap space. We kinda like that spot. But what I'm getting at is from a growth standpoint, there are things out there that are maybe too small to be interesting to other companies that can still move the needle for us on a growth and on an accretion basis.

And so, look, the mandate is it's to continue growing this business. We kick a lot of tires. We bid on a few things here and there, and you know how it is, it's kind of a volume business. You have to sift through a whole lot of things and do a lot of diligence and be smart about deployment of capital and the like, and every once in a while, you get one that fits all of your criteria, but they're hard to come by and they're rare. But look, would we prefer to make M&A trades that are kind of $20 million in EBITDA or north? Yes, that's 10% of pro forma just at EBITDA for us. That's I'd say 10%. That's a pretty nice number for us. So, yeah, something in that zip code, $20 million, $25 million, $30 million, even upwards of $40 million or more from a sizing standpoint would be interesting for us.

If you take a look at our strategy historically, there's historically been a strategic component to where we've gotten involved in M&A as well as a cash flow accretion component. At Biloxi in 2014, it was about diversifying away from a single property, which was Lincoln at that time, and we've also increased EBITDA there for about 40% from where we picked it up, so both strategy and cash flow accretion. Newport Grand, we picked up and moved to the Massachusetts border. We see a significant cash flow accretion opportunity there, and we like the synergies involved in having that asset interplay with Lincoln as well, and so there's been some strategy to that and some cash accretion. Dover Downs is obviously about going public as well as taking a hard look at operations and making changes that have worked for us and accreting that cash flow as well. And Colorado has a same kind of a playbook strategy, and we believe cash flow accretion potential there.

So, that's the road map of where we've been on that question, and look, those are hard to find and take a lot of work, but that's where we start. You can't always get both of those. You can't check both those boxes in every trade you make, but we do try, and we focus on being very efficient and very disciplined with our use of capital in that regard.

As to markets, George may have a couple comments. There's not a whole lot out West. There's a little bit down South. There's more in the Midwest, but I think I would tell you we're not afraid of any geography in this country. We've got a young, capable team, and we're willing to travel, and we've got a pretty good model of rolling out what it is we do well that does tend to work pretty well. So, we go where the opportunities are, and we're pretty malleable, we think, in tucking those in, integrating those, and making those work. So, we're pretty open on the question of markets.

And lastly, Brad, on the REIT topic, we consider it an advantage to be an owner-operator of everything that we currently have. There's option value we think in the future to being able to consider a REIT-type transaction, and so we'll just kind of leave that for what it is. Look, personally, I'm not entirely convinced that the REIT structure's not a bit more of a flavor-of-the-month from Wall Street, but maybe it's got more legs than that, not unlike the hotel industry. Maybe it doesn't, but we'll see.

And in terms of stepping into an OpCo position, look, I think OpCo by definition gives up a little flexibility, given the nature of it, not owning the asset. It's not like you own an asset, and you go put together a financing on it, and in the future, you've got flexibility about you can refinance it, or unfinanced it, or sell the asset or whatever. OpCo doesn't own the asset, so OpCo's a little bit constrained in what it can do, both with the cash flow that it manages and in terms of the asset and the associated liability. So, you don't own the asset, but you do own the liability, which is an interesting financial construct. So, listen, we've studied those transactions quite a bit. We're open to things that make sense, but we're pretty aware of some of the limitations in that structure as well, so we just kind of take all of that under advisement, and we'll try to be smart as we proceed forward.

But Brad, thanks for the questions by the way.

Brad Boyer -- Stifel -- Vice President, Equity Research

No problem. Thanks for all the color, guys, and good luck going forward.

Stephen Capp -- Executive Vice President and Chief Financial Officer

Thanks a lot, Brad.

Operator

Again, to ask a question, please press *1 on your telephone keypad.

The next question comes from Eric Bourassa of Jefferies. Please go ahead. Your line is open.

Eric Bourassa -- Jefferies -- High Yield Desk Analyst

Good afternoon and thank you for taking the questions. So, just the first one, I believe weather had a pretty big impact on some of your competitors within the region, specifically citing Mohegan. I was just wondering if you guys can kinda describe what, if any, weather impacted the quarter within the state of Rhode Island?

George Papanier -- President and Chief Executive Officer

This is George. Hi, Eric. Yeah, weather did have an impact on the first quarter, but obviously, weather in the first quarter historically and toward the end of the fourth quarter is always a little iffy, particularly in the Northeast. The weather pattern was kinda odd this year where it seemed to snow only on the holiday weekends. So, obviously, we do a lot of business on the holidays, but we do a lot more business on the weekends, but we do a lot more business on the holiday, so it impacted us, but we were able to recover.

Eric Bourassa -- Jefferies -- High Yield Desk Analyst

Understood. And No. 2, what type of impact do you think you guys are kinda seeing from the MGM Springfield Casino, and how are you guys kind of thinking about the new JV Casino that's gonna be going up in Windsor, CT? And ultimately, it sounds like New Hampshire will probably likely open up commercial casinos sometime down the line. I was just wondering if you guys would have any interest in pursing a casino within the state.

George Papanier -- President and Chief Executive Officer

So, I'll answer the first question. We always anticipated that MGM would have a minimal impact on us. It's a 110-minute drivetime away. It's 75 miles distance away. So, we never really anticipated any impact on us. If we did have some erosion, it might be in the Worcester area, but when we kinda reviewed our database from that market, there was some trial, but we still maintained a level of visitation that we historically had had. We are seeing a little bit of what I'll call ripple effect or domino effect as a result of MGM marketing aggressively, primarily for the Mohegan and to some extent the Foxwoods business. So, as a result of that, we feel Mohegan and Foxwoods may be marketing a little bit more aggressively in our kind of traditional markets. Other than that, there really hasn't been a direct impact from MGM.

As far as the JV Casino for Mohegan and Foxwoods, it's not approved yet, so they still have to go through some final steps there. The interesting thing will be to see whether they actually build it or not based on whether they'll be able to get financing or not for it. It's gonna be sited in the Hartford area, and I don't know what type of return that they're anticipating on that, so I'll leave that there.

As far as New Hampshire, technically, we can't operate in New Hampshire, Connecticut, or Massachusetts as a result of our contractual arrangement with the state of Rhode Island, so we would have no interest [audio cuts out].

Eric Bourassa -- Jefferies -- High Yield Desk Analyst

Understood. And then just kinda going to Rhode Island, with respect to the four-times leverage test that Rhode Island has within the covenants, I was just wondering if you guys were to go over four-times leverage, what kind of amendments would you need with the state?

Craig Eaton -- Executive Vice President, General Counsel and Compliance Officer

So, this is Craig Eaton. It's just a simple amendment to our regulatory agreement with the state. It's been amended before [audio cuts out].

Stephen Capp -- Executive Vice President and Chief Financial Officer

Hey, Eric, we should probably point out that back in 2010 on our emergence, that number was 5.0, and that was lower in 2014. We've not led the investment community toward that number because it has changed over the past, it could change in the future, so it's interesting guideposts, but it's perhaps somewhat malleable.

Eric Bourassa -- Jefferies -- High Yield Desk Analyst

Understood.

Craig Eaton -- Executive Vice President, General Counsel and Compliance Officer

And [audio cuts out] confirm no legislation's needed. It's a simple agreement, so it's [audio cuts out].

Eric Bourassa -- Jefferies -- High Yield Desk Analyst

And then just lastly, moving to Colorado, I was wondering if you guys can talk about what the EBITDA is from that acquisition, what the purchase price is, and how you guys expect to fund the transaction? Maybe if you could just discuss a little bit more about the strategic nature of the asset? And that's all from me.

Stephen Capp -- Executive Vice President and Chief Financial Officer

Eric, I'll go first. Maybe George wants to talk about strategy there, but we're held to confidential terms as to that purchase-sale agreement, and so we have not disclosed the purchase price or the underlying trailing EBITDA. Suffice it to say, again, we have mentioned to the street a number of times that we do consider it to be financially immaterial in the aggregate. So, it's a little bit of upside for us in terms of the tactical or the cash flow accretion opportunity, but those numbers are just not big enough to be material, and they've not been disclosed.

George Papanier -- President and Chief Executive Officer

And I'll just add to that. So, the rationale was both strategic in the respect that we do have an unrestricted sub, Arapahoe Park. It's a racetrack in Colorado. We had 13 OTB licenses associated with that. You might recall we ran a referendum a few years back, and one of the criticisms at the time was that we were an out-of-state company, and we've always kinda have targeted the Colorado market strategically because we felt that it would be good to find a property that we felt had some upside to it, and we focus only on the Black Hawk market because of the proximity to Denver.

We feel that the market's underpenetrated, so we found an asset there that was underperforming and only 53% of market share, and we felt that there would be some upside associated with that. But also, in addition to that, we felt we could maybe be more involved legislatively in some efforts associated with Arapahoe we feel has some option value for maybe the potential to do something there in the future that's more significant. And also, we wanted to be part of the gaming association just to kinda understand globally what's going on in that market.

The last thing I'll point out is Monarch's kind of slated to open maybe six months from now and depending on how successful they are at expanding the market, there may be an opportunity for us to further develop the property that we acquired. With the property we acquired, use the opportunity to build hotel rooms on top of an existing parking structure. And they also have adjacent land that's vacant that we would be able to expand to also. So, again, I feel that the Denver market's lucrative. There's 4 million people there. Population's growing. They're expected to be about 4.3 million within the next couple years, and I do believe it's underpenetrated. We looked for some upside opportunity there.

Eric Bourassa -- Jefferies -- High Yield Desk Analyst

Thank you. Appreciate the questions.

Operator

Your next question comes from Rich DeMaio, a private investor. Please go ahead. Your line is open.

Rich DeMaio -- Private Investor

Good afternoon, gentlemen. Congratulations. Sounds like a good first quarter. I inherited this stock by being a Dover Downs shareholder, and I'm happy about that. I read a lot of online reviews, and the Tiverton property does not get real good reviews. I know you haven't been open that long. Is there some growing pains there, or what's the situation there?

George Papanier -- President and Chief Executive Officer

Well, the Tiverton property opened during the fourth quarter -- actually, opened September of 2018. We've always anticipated there would be some ramping associated with that. It's a new facility, so obviously there's reviews on it, and this always seems to be the individual that has something negative to say, but we get a lot of positive customer comments. It's a smoking casino, but we have a state-of-the-art HVA system there, and we have all the amenities that we feel that market requires, and we're actually pretty pleasantly surprised with the outcome of the facility and the performance thus far.

Rich DeMaio -- Private Investor

How about assuming they allow online and phone betting in Rhode Island, that sounds like a good opportunity because in New Jersey, I think almost 80% of the betting comes from online and phone. Do you have a good plan? Is that approved?

George Papanier -- President and Chief Executive Officer

I'm gonna give you a comment on New Jersey. I think that's probably the best model out there for online game, but I'm gonna kinda give you kinda where we are legislatively in the online betting process.

Craig Eaton -- Executive Vice President, General Counsel and Compliance Officer

This is Craig. So, online betting, as you know or may not know, has been approved legislatively, and I believe the state of Rhode Island is in charge of getting that instituted. So, I believe it's about 4-6 months away. There is a challenge in court to constitutionality of it, but at this point, we don't see that as a material challenge.

Operator

This completes the allotted time for questions. I would now like to turn the call over to George Papanier for closing remarks.

George Papanier -- President and Chief Executive Officer

Well, thank you, operator. I wanna thank you all for joining our call today and for your interest in the company [audio cuts out].

...

Operator

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

Duration: 42 minutes

Call participants:

Joe McGrail-Executive Director, SEC Reporting

George Papanier -- President and Chief Executive Officer

Jay Minas -- Vice President of Finance

Stephen Capp -- Executive Vice President and Chief Financial Officer

Craig Eaton -- Executive Vice President, General Counsel and Compliance Officer

Brad Boyer -- Stifel -- Vice President, Equity Research

Eric Bourassa -- Jefferies -- High Yield Desk Analyst

Rich DeMaio -- Private Investor

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