Bally's - Earnings Call - Q2 2020

Transcript

Speaker 0

Good morning. My name is Maria, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Twin River Worldwide Holdings Second Quarter twenty twenty to ask a question at that time, please press 1 on your telephone keypad. If you should need operator assistance, please press 0. Thank you.

I will now turn the call over to Craig Eaton, Executive Vice President and General Counsel. Please go ahead.

Speaker 1

Good morning, everyone, and thank you for joining us on today's call. By now, you should have received a copy of our Q2 twenty twenty earnings release issued earlier this morning. If you haven't, the earnings release and presentation that accompanies this call are available in the Investor Relations section of our website at www.twinriverwwholdings.com under the news and events and presentations tabs. With me on today's call are George Papaneer, our president and chief executive officer Steve Kapp, our chief financial officer Mark Crissoffoli, our executive vice president and he's also president of Twin River, Rhode Island Jay Minas, our vice president of finance and finally Joe McGrail, our chief accounting officer. Before we begin, we'd like to remind everyone that comments made by management today will contain forward looking statements.

These forward looking statements include plans, expectations, estimates and projections that 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.

We do not provide a reconciliation of forward looking non GAAP financial measures due to our inability to project special charges within certain expenses. Today's call is also being broadcast live on our investor site and will be available for replay there shortly after the completion of this call. I'll now turn the call over to George. George?

Speaker 2

Thank you, Craig. Good morning, everyone. I hope that everyone is continuing to stay safe during these unprecedented times and appreciate everyone joining us. When we last spoke exactly ninety days ago, all seven of the casinos we owned at the time had been closed in response to COVID nineteen, and we faced significant uncertainty as to when and to what extent we could reopen. Fast forward to today, we've emerged from the quarter with all nine including our newly acquired Casino KC and Casino Vicksburg properties having successfully and just as importantly safely reopened.

As part of Twin Rivers overall COVID nineteen reopening plan at each property, we committed to meeting or exceeding all guidelines established by the CDC. As such, the company has implemented property specific comprehensive health and safety protocols, developed in close consultation with applicable state regulators and public health officials in local jurisdictions. And we are very confident in the environments we have created for our guests and valued team members. Speaking of our team members, I would like to extend a heartfelt thank you to all of you. You were responsive and enthusiastic when it came time to reopen, and your hard work, especially in the face of new procedures and many new safety and sanitation protocols, does not go unnoticed.

Thanks to your efforts and tremendous attitude, our reopenings have been extremely successful. As we discussed last quarter, the impact of COVID forced us to make the difficult decisions to place most of our team members on furlough. While we have been able to welcome back a large percentage of those affected, there are still a number of employees on furlough as we await the ability to increase capacities and amenities. We said it last quarter, and I'll reiterate it again. We care deeply about the well-being of our team members and recognize the impact that these furloughs have had.

While we can't possibly mitigate the full impact of this, we continue to provide support in form of ongoing health benefits coverage at no cost to our furloughed team members during the quarter. We also established a fund to provide financial assistance to those employees experiencing significant hardship. Now let's turn to the quarter and more specifically our financial results since our operations have resumed. When we talked back in May, we believe that we were well positioned, especially as a gaming company focused on local and regional visitation to capitalize on the fact that we are not reliant on airlift, destination, or convention business to drive results. The result of our reopenings to date have certainly supported this thesis, and we are pleased with the strong initial results which point to a robust pent up demand in regional markets.

In June, the first month when all our properties were opened in some capacity with the exception of Rhode Island, which as Mark will discuss a bit later, which was more in a preopening pilot phase for almost all of the month, All our segments generated positive adjusted EBITDA with meaningful increases in year over year EBITDA margin. We were able to achieve these results while operating with reduced casino capacities and limited amenities. The segments where the company was able to operate at closer to normal capacity and with more amenities available for most of June, notably Biloxi and Dover, we experienced strong demand and significantly improved margins. At Hard Rock, demand was strong with gaming volumes up a little under 10% from the comparable period prior year. While overall net revenues were up 2%, impressively adjusted EBITDA for the property almost doubled in June from $2,900,000 in 2019 to $5,700,000 in 2020, representing an increase in adjusted EBITDA margins of over 2,400 basis points.

Meanwhile at Dover, while gaming volumes were down approximately 15% and overall net revenues down 30% for June compared to the same month in 2019 as we navigated capacity restraints. Adjusted EBITDA results for the month were strong coming in at $2,100,000 which was essentially flat year over year and represented an increase in adjusted EBITDA margin of approximately eleven fifty basis points. To expand a bit more on the margin increases, as we noted in our prior releases, we leveraged the shutdown that resulted from COVID to review and optimize our operations. Since reopening, we have realized meaningful new efficiencies in marketing and decreases in operating and SG and A expenses. We have also been selective with our amenities by focusing on higher margin business.

As a result of these expense reductions and new efficiencies, we are now operating at a higher margin than prior to the pandemic. While the initial margins results are very encouraging, the gaming environment continues to be very dynamic. We will remain adaptive. And while we continue to be willing to spend money to retain and capture market share and drive revenue, we do not expect to simply return to the old way of doing business. We believe many of the efficiencies we have realized are sustainable over a long term and will result in improved profitability for our properties even though increased sanitation and safety costs are likely to become the norm.

Just taking a step back while I think about the quarter and where we are today, I'd like to think about it chronologically. Starting in April, we were in a period of no revenue and taking steps to control costs and plan for what was at the time an uncertain future. In May, we began to see signs for reopening and subsequently ramped up efforts to prepare our properties to reopen indoors. In June, we saw a return to operations in the markets where we were able to open to more normal capacity and with more amenities, strong demand, and profitable results, especially in margin, which we just talked about. Which brings us to our preliminary view of July.

While we are still finalizing our monthly close process, we are excited to report that including our two recently acquired properties, which I'll talk about momentarily. We are looking at initial revenue figures, which show a decrease in the range of 7% to 10% year over year. However, we saw continued strong margin performance and as a result, over year adjusted EBITDA is up with all segments contributing positive EBITDA for the month. So now when you factor in our modest interest burden and a relatively low maintenance CapEx requirements, we are currently generating free cash flow on a consolidated basis. Steve will provide more color around our strong liquidity position shortly.

Turning to our recent M and A activity. On July 1, we completed the $230,000,000 acquisition of our Kansas City and Vicksburg properties from Eldorado. These two new properties expand their geographic footprint with access and assets in attractive markets and represent a great fit for our portfolios. I'm also pleased to report that both of these properties have come out of the gate strong. Preliminary July results for the properties indicate strong revenue demand with revenue volumes off just a little over 10% at Casino KC and revenue volumes up over 25% Casino Vicksburg compared to July 2019.

On top of early results, we continue to see great opportunities to increase the net cash flow from these properties with our development with our redevelopment and operating plans. Notably, at Casino KC, we remain committed to our proposed $40,000,000 redevelopment plan, which we believe will greatly enhance the guest experience and enable us to reposition that property to grow market share that the property lost in recent years. As Steve will discuss, we anticipate the majority of the capital spent associated with the project will occur in 2021. We have enjoyed getting to know the local teams in the first month that we've owned the property to look forward to working with them to realize the strategic benefits of this transaction. These are very exciting times for our company.

Equally exciting are our three additional casinos under contract in Shreveport, Louisiana Lake Tahoe, Nevada and Atlantic City, New Jersey, we spoke about at length last call. We see significant opportunities to create cross marketing for customers at multiple Twin River locations nationwide. As a result of these strategic acquisitions that we paid extremely attractive purchase multiples for, we are currently working diligently through the regulatory processes in each of the respective states and jurisdictions. We continue to expect the Valley acquisitions will close in mid to late Q4 twenty twenty and Shreveport and Mont Belo are likely to close in the first half of twenty twenty one. At Valley's, we would like to address certain areas we feel need improvement, and we have a plan to fundamentally transform the property by leveraging property upgrades to the facility, including renovated hotel rooms, a full service spa, updated convention center, revitalizing the slot for dramatically improving improving the food and beverage offerings.

I'd also like to comment on our recently announced partnership with PointsBet, which we think we will be able to leverage to effectively and efficiently tap into what we feel is a lucrative opportunity in the iGaming space in the New Jersey market. PointsBet will be a great addition to our growing partnerships with innovative leaders around the world, adding an exciting iGaming experience with such a prominent partner. Subject to receiving regulatory approval for the acquisition, we are extremely excited to have the opportunity to participate in the best in class mobile gaming environment that New Jersey has created and that we believe will bring new and innovative offerings to the market. PointsBet is simply the first step for us. Speaking of our partnerships, on May 1, we launched mobile sports betting in Colorado in conjunction with our previously announced strategic partners, Bandual and DraftKings.

These partnerships result in a unique opportunity for Twin River to introduce Colorado's passionate sports fans to two of the nation's leading mobile and online sports betting platforms. In addition, we recently announced the launch of the retail sports book in connection with DraftKings at our Mardi Gras Casino. We are confident that this partnership with DraftKings allows us to provide an unmatched sports betting experience to Colorado. We are looking forward to introduce our guests to the full renovated space in the coming months. In the meantime, we are very excited to be able to provide our guests with the ability to safely place bets while many professional sports in The United States have begun to resume.

Lastly, on sports betting. It was announced in late July that the Rhode Island legislature had passed legislation which dropped the in person registration requirement for all new mobile sports betting accounts. This change will make it easier for sports bettors in Rhode Island to gain access to our online sports betting. We're confident we will experience increased mobile play as a result of this change. I'll wrap up by saying that while these are certainly the most challenging times our industry has faced, we have made significant progress over the past three months towards securing a promising and exciting future for Twin River.

While uncertainty persists in the short term, we are pleased with the initial response to the properties reopening across The U. S. And the adaptability of our customers to the new operating environments and safety protocols. I will now turn it over to Mark to provide some more detail around Rhode Island. Mark?

Speaker 3

Thanks, George, and good morning, everyone. As George noted, when we first opened our Twin River and Tiverton properties in Rhode Island on June 8, we did so in a very limited fashion that we liken to more of a preopening pilot phase. We were only open to a limited number of invited guests as we worked with local regulatory and health officials to ensure that our reopening in the state was done in a method methodical, safe manner. At the time of our initial reopening, we were operating under significant restrictions and limitations, including limited hours, fewer gaming options and reduced amenities. As a result of the constricted nature of operations during the period, we experienced less of a recovery of revenues than we experienced in our other markets and ended the month with slightly negative adjusted EBITDA during this ramp up invitation only period.

Despite the impact this had on the financial results, we viewed the month of June as a success in Rhode Island. The experience gained during the pre opening pilot phase provided valuable and necessary training for our staff as we welcome back our valued guests while providing necessarily necessary assurances to local health officials that we can operate in a safe and prudent manner. On June 30, we received permission from the state regulatory authorities to eliminate the invitation only requirement and to broaden our offerings and expand the number of guests in our two Rhode Island casinos while continuing to adhere to the strict social distancing and health and safety protocols we have put in place to protect our guests and team members. Since reopening to the general public at the June, we have experienced a rebound in revenue and profitability in Rhode Island, though we are still operating under material capacity and amenity restrictions. Looking at preliminary results, July revenue for the segment is expected to be up approximately 240% sequentially from June 2020 on a preliminary basis and is approximately 60% of revenue experienced in the same period in 2019.

These results are with less than half of VLTs and less than one quarter of table game positions available to consumers. I also wanted to provide a quick update on the status of the IGT Twin River joint venture that we discussed on last call. The proposed legislation that would enable this joint venture has garnered support in both chambers of the General Assembly as well as with the governor. We remain optimistic that it will be addressed and approved later this summer. In the event it is, we remain committed to proceeding with the expansion of Twin River in Lincoln as soon as we can complete the design and receive all necessary permits and approvals.

Our expectation is that all material provisions as outlined in the joint venture will move forward with Twin River able to assume management of a portion of the VLTs on the floor on or before October first of this year. We continue to expect the joint venture with IGT to commence on 01/01/2022. We will provide a further update as this develops. I will now turn it over to Steve.

Speaker 4

Mark, thank you. First, I'd like to address cash and liquidity. As you know, we closed a new 275,000,000 loan financing in May. And so with those proceeds, we ended the quarter with cash on hand of over $330,000,000. And our $250,000,000 revolver was completely unfunded for total liquidity at the end of the quarter of over $580,000,000.

On a pro form a basis for the approximately $230,000,000 we paid to acquire Casino KC and Casino Vicksburg just last month, the company had total liquidity of approximately 350,000,000, again, including the unfunded revolver. Looking out even further to factor in the amounts we'll invest in the purchase of Valleys and the Shreveport and Montblu properties, which purchase price totals a hundred and 65,000,000 at closing, pro form a, we have total liquidity of a hundred and $85,000,000. If we were to face another period of shutdown as a result of the COVID nineteen pandemic, based on our current cash requirements and ability to endure a phase two extended shutdown scenario in a completely zero revenue environment. We believe our current liquidity of a hundred and 85,000,000 provides us with operating cushion well through 2021, inclusive of the acquisition commitments just mentioned. In terms of capital expenditures, all major CapEx projects have been suspended, and we have greatly reduced our expected CapEx spend for the second half of this year.

However, in the meantime, we are planning, scoping, and continuing to position for a full return to normalcy at any time. As George mentioned, we certainly still intend to move forward with our proposed CapEx program at Casino KC for approximately $40,000,000 as we think the project there will greatly enhance the property and guest experience, driving growth and a nice return on investment. However, with the timing of the close and the need for required approvals, this is largely a 2021 event. As Mark mentioned, we also have talked about CapEx related to the proposed VLT contract and joint venture with IGT, which would include an expansion to our flagship property in Lincoln. We expect that is largely a 2021 to 2022 capital spend, and, again, subject to legislation being approved.

We also have some targeted CapEx refurbishment plans under development to greatly improve the property and customer experience at Valleys. This work will likely be spaced out over multiple years starting in 2021. We're working closely with the New Jersey regulators to move forward. Regarding taxes, as we noted last quarter, there are certain aspect aspects of the CARES Act that will benefit us. One such item is the employee retention credit, which benefited the company by $2,800,000 in the second quarter.

Beyond that, we are continuing to explore other aspects of the act, including, as we mentioned, the utilization of NOL carrybacks and other deductions and believe the overall positive cash flow to the company over the next year could well exceed the the 15 to $25,000,000 we previously noted. Regarding our return of capital program, we did repurchase approximately a hundred and 50,000 shares at the very beginning of the quarter prior to the COVID nineteen shutdown. Since those repurchases and as a condition of the amendment we assigned, we signed to our credit facility, we have halted spending under the capital return program, including both share repurchases and the payment of a quarterly dividend. However, our capital return program has resulted in the buyback of approximately 11,000,000 shares since last year, and we currently have 30,500,000.0 shares outstanding, which is down about 25% from the date we listed on the NYSE last year. As for guidance, as George noted, we continue to live in uncertain times, especially in the short term.

And while we do not currently anticipate any significant operational interruptions, near term outcomes are heavily dependent upon the future of COVID nineteen and our country's response to it. As such, we are not in a position to accurately project results in the short term and therefore continue to refrain from providing specific guidance at this time. My my my final remark. Look. We intend to maintain balance sheet discipline and remain positioned for future opportunities that may become available.

We're not finished building this company by any means. With the spacing of our acquisition pipeline, including recently Colorado in January, Kansas City and Vicksburg just last month, and as mentioned by George, we expect valleys later this year in the fourth quarter in Shreveport and Tahoe likely in the first half of next year. That schedule, combined with the natural timing required for acquisitions in this industry, position us quite well to consider and pursue additional M and A that is accretive to shareholders and the right fit for our outstanding portfolio of properties. Now I'll turn it back to George.

Speaker 2

Thanks, Steve. That concludes the prepared remarks section of the call. I'll now ask the operator to open it up to your questions.

Speaker 0

Thank you. At this time, if you would like to ask a question, please press star one on your telephone keypad. If you wish to remove yourself from the queue, you may do so by pressing the pound key. Our first question is coming from the line of Barry Jonas of Truist Securities.

Speaker 5

Good morning. Chairman of the Board said in an interview that he's aiming for $500,000,000 earnings a year. I think that's about 2x your normalized LTM run rate once all the M and A closes. Just curious how long you think you could reach a target like that? And with that, maybe any broader commentary on the M and A environment out there right now?

Speaker 2

Thanks, Barry, for the question, and I'm going to hand this over to Steve.

Speaker 4

Yes. Thanks, George. Thanks, Barry. Hey, good morning. Thanks for the question.

Look, I Barry, I I think the the paraphrase on our chairman's comment in that interview was not necessarily to be taken specifically, but rather that that it's to to mean that we are not done building the company, that we do main as just mentioned, maintain a balance sheet that's that's that's deliberately prepared for opportunity as well as liquidity in terms of preparedness, and that, you know, eyes wide open, we will continue to be vigilant and focused on on on accretion as as we look at at future opportunities. But as I just mentioned, you know, we're not done building the company. There's there's a lot more to do here, and we are we are focused on on getting there. To to your question, you know, I I I don't wanna go down a a rabbit hole of do you how long it takes to double size of the company even even from here. It all depends on the environment, right, and valuation multiples in this market and the like.

But suffice it to say, I I I think what he meant was, we are very focused on continuing to grow the company and and to do so accretively.

Speaker 6

Hey, Barry. As it as Barry, as it relates to the m and a environment, I think

Speaker 4

your second question. Look, it's very dynamic time out there. Know, I think the I think the obviously, the the the two keys to the M and A environment are what are the what are the multiples that buyers and sellers are are gonna agree on in this, very unpredictable environment? And how well positioned is the company's balance sheet to actually execute on on an acquisition? Those those two things obviously drive M and A, and and they're particularly relevant in this environment because of the uncertainty around revenues due to COVID on the one hand.

And then secondly, there aren't that many companies really in a position to execute on M and A from a funding standpoint. So in that regard, we feel pretty good.

Speaker 2

Thanks, Steve. This is George. I just want to add to that. We've said this previously. We're going to just continue our disciplined diversification strategy.

We're take an opportunistic approach and continue to evaluate opportunities with the strategic element to it. We like the idea of continuing to enter into new sports betting markets, especially with the potential for iGaming license. And in the meantime, we're going to focus on the assets we just acquired and digest that through integration into our portfolio.

Speaker 5

Great. I really appreciate all that color. It's really helpful. Then just touching on Rhode Island, really helpful commentary in terms of the opening there, preopening and the ramp. Just curious what do you think needs to happen in Rhode Island to kind of generate the sort of results you're seeing in the other properties right now?

Speaker 2

So I'm to let Mark kind of give you the lay of the land from a government perspective, and then I might add some color to that. So Mark?

Speaker 3

Thanks, George, and and thank you, Brad. Good morning. There are a couple of things. In Rhode Island, we're still not even at twenty four hours yet. Our VLT count is about half, and the table games are about a quarter.

So we need to be able to to start to expand that. Unfortunately, Rhode Island right now, from a, a COVID results standpoint, numbers have been creeping up, and it's actually been burdened a little bit by some quarantine rules. So if you're in Rhode Island if you visit Rhode Island and you go back to another number of other states like Massachusetts, New York, Connecticut, then you have to quarantine or demonstrate a negative test. So we're hopeful that the state can turn around the coronavirus issues in the next few weeks and get back to normal. And then we would like to get to twenty four hours as a big step, continuing to expand table game availability, VLT counts, and maybe get some of the amenities running.

We are running some of the restaurants there, but but not all of them, obviously. So that's that's we're kind of on that pathway now. Hopefully, you know, in the next few weeks to a month, we'll see some improvement again.

Speaker 2

Yeah. And if I could just add a little color to that. You when we opened up in other markets, we we had always anticipated some pent up demand, and we did better than we had anticipated, particularly in the markets where we could use more of the amenities associated with that facility. In Rhode Island, they're a little bit more stringent on philosophy of allowing gatherings, I'll call it. And as that lightens up, as we improve from a COVID perspective, there's certainly the demand that's there.

So we think we're going to benefit from that as soon as state folks lightening up on the restrictions.

Speaker 5

Got it. And then just last one for me. We've heard some commentary over the past few days from your peers about kind of a younger demographic coming in, older demographic maybe a little more cautious coming in. Just curious if you can give any commentary about the types of players you're seeing? And with that, maybe is the player catchment widened or narrowed?

Any sort of color on who's coming in today would be really helpful.

Speaker 2

Sure. Well well, each market is has a little bit different nuance to it. Some people are less concerned about COVID than others. And what we're seeing is primarily our demographic that we typically would see. In some cases with the older demographic, there's less visitation.

However, their spend seems to be up. We are drawing some, but not really noticeable younger crowds. So again, it really does depend on the market, and it depends on the amenities that you're providing. I think really the impact that we we seem to be having is is more around the concern of government, when they impose, what I'll call negative COVID actions. But, the demographic that we have is is still still an older demographic, some with discretionary income primarily from their investments as the market has been doing better from that perspective.

And we're just seeing a little bit larger wallet currently.

Speaker 5

Great. Thank you so much for answering my questions, guys.

Speaker 6

Thanks a lot, Barry. Our next question comes from the

Speaker 0

line of Brad Boyer of Stifel.

Speaker 7

Yes. Thanks for taking the questions, guys, and for all the color this morning. First one, I just want to expand upon Barry's question on M and A. I mean, as we look at the landscape today, I'm just kind of curious if there's any sort of strategic drivers at this point for M and A or if it truly just kind of comes down to the numbers, so to speak, I. E, a deal makes sense from a multiple acquisition perspective, then it's something you would consider?

Or are there any particular markets, jurisdictions, what have you, that are of particular interest today?

Speaker 2

George, you know, I I touched on this a little bit earlier. You know, we're certainly gonna be disciplined in our approach, and I did I did mention that we we like states that that currently So we're looking at sports betting markets, and and we're especially interested in the iGaming markets. So we feel as as states look for more revenue, there there may be or tend to be more legislation So we're gonna be opportunistic in what we what we look at, but certainly, we're gonna be aggressive about entering into new markets, particularly as it relates to sports betting and and iGaming.

Speaker 7

Okay. That's a that's a good segue into my question just around sports. Kind of a broader question. I mean, if if if we look at sort of some of your partnership announcements thus far, you obviously have two big big brands, in Colorado and and a nice, you know, what I would call a a niche year player in in New Jersey. I guess just how should we think about the evolution of your partnerships here?

You know, I I don't want you to totally, you know, pull back the curtain, but any thoughts around, you know, how you are approaching partnership relations as you enter new jurisdictions?

Speaker 2

Well, you know, part of our strategy again is through diversification to try and to try and enter into these markets. We really believe that casinos and other forms of gambling are are converging. You know, we believe that they're complementary to each other and not necessarily cannibalizing each other. So we feel there's an opportunity to be in both spaces. We love the idea of attaching brands, existing brands, as you've seen with FanDuel and DraftKings.

So we're gonna continue to look and explore for opportunities as it relates to that. And in the meantime, you know, as as we develop as a company, we'll start focus on how we either merge with or potentially acquire or integrate with some tech stacks, and that allows us to really get more fully immersed into iGaming and sports betting.

Speaker 7

Okay. Helpful. And then lastly, just a housekeeping question. Steve, is there any way you could put some numbers around the back half CapEx outlook? I know you said it was likely going to be down, think you said, but any way to put some numbers around that?

Speaker 4

Greg, you mean for 2020?

Speaker 7

Yes.

Speaker 4

Well, it's gonna, you know, it's gonna be minimal, actually. I don't have I don't have a number for you, Brad. But, look, you know, we we didn't even we didn't even make it through q one, on on on normal operating basis. And as you might imagine, we virtually shut down CapEx expenditures as of, as of March, you know, not knowing what the what the future, would would hold for the, you know, for for the foreseeable. So look.

On an on on and, obviously, I can distinguish between maintenance CapEx and, expansion CapEx, if you will. We have you know, we've we've done some for example, we do we do do we did some f and d work at at at Dover, and we we have plans similar to to that elsewhere,

Speaker 7

not in

Speaker 4

the CapEx budget or excuse me, not in the maintenance CapEx budget. So so look. I I I I think the 2020, the maintenance number is going to be a fraction of the of the the the kind of guidance we've given in in prior years on on the the prior kind of the 2019 portfolio of properties was approximately $20,000,000, low twenties. We're gonna

Speaker 6

we're we're gonna be, you know, you know, we'll

Speaker 4

be we'll be a fraction of that for for for this year. Obviously, this year is not not not finished. If this thing you know, if we could pivot on COVID and and come out strong, then then that number could actually change even somewhat materially this year. But at at at this point, we're probably operating at kind of 25 ish percent of that budget for the year

Speaker 6

plus minus. Our next question comes from the line

Speaker 0

of John DeCree of Union Gaming.

Speaker 6

Hey, good morning, and thank you for taking my question. Steve, George, I wanted to ask about New England and Rhode Island. Pre COVID, it was one of the most promotional markets with new supply coming online. And it's only been a couple of weeks since things are kind of getting going again, but curious if you've seen competitive behavior as it relates to kind of reinvestment in New England any different than you are in other markets? Is it is it coming back more quickly?

And so anything you've seen so far? And then if you have an expectation if if the post COVID world, you'll see that rationalization, it's kind of taking hold in The US, work in New England as well.

Speaker 2

Yes. How are you doing, John? So, yeah, there's certainly been a rationalization around marketing spend. Some of that may be driven by the fact that the states are concerned about large gatherings. So I think everyone's being cautious about that from a promotional perspective.

But, you know, Connecticut had a little bit of a head start. They've opened up a little bit more, fully than we had in in Rhode Island. And as you know, Massachusetts Massachusetts opened up maybe about a month subsequent to our opening. So we certainly see rationalization from a spend in the market. We think that's an opportunity for everyone to kind of take a step back and understand that you could operate at better margins, particularly from a marketing perspective, as you were more targeted towards specific customers.

So I think that's going to linger for a while, particularly as we continue to migrate through this this COVID crisis. And, hopefully, as a result of that, we find out that we don't need to be really irrational from a marketing perspective because the margins have improved.

Speaker 6

That's a good segue into my follow-up question, which is probably mostly around where you see sustainability in some of the margin gains that you've realized through reopening. It sounds like targeted marketing is a good area. I was wondering if you could kind of unpack a little bit or give us some insight as to some of the buckets that you've seen some sustainable margin improvement.

Speaker 2

Well, exercise that we were forced to go through as a result of a complete shutdown, really trying to understand how you mothball the operations really provided some valuable information to us, particularly in ability to really understand from a contract perspective and purchasing perspective, there's opportunities there that we were able to take advantage of. So we're we see we see that continuing for the for the time being. We also obviously, one of the big big items is in labor. We've we've taken a step back, as I said, and we've learned how to to operate our our operations just a little bit better from a variable perspective. We think that's gonna be continuing.

And and lastly, what we touched on initially was from a marketing perspective, certainly gonna be more targeted for the foreseeable future. And it's gonna be a slow ramp up back to, you know, being aggressive about promotional marketing, large events, and and entertainment. So, again, that's gonna linger for a while, and and what we'll what we'll realize is is that we may be able to maintain the same levels of business that we have historically with with less of a promotional and marketing approach.

Speaker 6

Got it. Thanks, George, and good luck with the continued reopening. Thank you.

Speaker 2

Thanks, John.

Speaker 6

Our next question comes from

Speaker 0

the line of Chris Snout of Cowen.

Speaker 6

Just one for me. I believe previously, the outset of all this, you guys had talked about burning maybe it was about 7 to $8,000,000 in cash per day at the outset of the pandemic, and then improving that down to a figure that I think was more closer to, like, 3,000,000. If if we were to step see a step backwards in terms of shutdowns, maybe what efficiencies have you found that that could potentially adjust that 3,000,000 or or pressure it in in the other direction? And how might that be factored into the liquidity outlook that you provided earlier? Thanks.

Speaker 2

Thanks, Chris. And and, Steve, I'll let you handle that. Chris, that that 3,000,000, would you clarify that for me? Did did she did

Speaker 4

you say 3,000,000 per month?

Speaker 6

I I think that's what I you guys told us at the outset of of COVID. It might have been the one q call. I'm I'm going back to my notes here, but I thought it started at seven to eight, and then you'd moved it down to closer to three in your in your last sort of prepared remarks.

Speaker 4

Yeah. Listen. You know, you know, where we were at the at the outset of COVID was, obviously exploratory locking down, expenses. And when we were kind of, you know, seven, eight ish, you know, even even even ten ish at at that initial phase. And and as we got farther into it and and realized what we could do, that number did come down quite a bit.

Remember, what what what you're talking about there is a is a is a is an OpEx number. Right? But there's still a balance sheet number. Right? We still have debt service.

It's not part of that yeah. If we if we take your three and and look. I'll tell you. I think that's that I think that 3,000,000 is a is a is a very whittled down number. But so so so when you add the balance sheet to it and and and and do the math on those numbers, you know, you end you end up with a with a carry that that I mentioned in the in the in the initial call that that in in a in a zero revenue environment, you know, takes us well through 2021.

That's that's kind of the map around all of that stuff. But, yeah, yeah, your your numbers are, your your numbers are accurate. And and I and I will say that as as we as we work toward getting what was initially $78,000,000 per month down to, you know, three to or or so, that took a lot of introspection and, a very sharp scalpel, if you will. But we feel like we could get there if we had to. So if you can do the math, and and that's your that's your annual carry kinda together with debt service.

So we're we're you know, we we feel pretty good about our ability to manage this business in difficult circumstances.

Speaker 6

I guess, helpful. Thank you, guys.

Speaker 2

Thanks, Chris.

Speaker 4

Yeah. Sure. Thanks, Chris.

Speaker 0

And ladies and gentlemen, that was our final question. I'd like to turn the floor back over to George Papinir for any additional or closing remarks.

Speaker 2

Well, you, operator. I want to thank you all for joining our call today. Hope you all enjoy the rest of your summer.

Speaker 0

Thank you, ladies and gentlemen. This does conclude today's Twin River Worldwide Holdings second quarter twenty twenty earnings conference call. Please disconnect your lines at this time, and have a wonderful day.