Caesars Entertainment - Earnings Call - Q4 2017

Transcript

Speaker 0

Ladies and gentlemen, please standby. We're about to begin. Good day, and welcome to this Eldorado Resorts Fourth Quarter Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Joe Jaffoni.

Please go ahead, sir.

Speaker 1

Thank you, Shannon, and good afternoon, everyone, and welcome to Eldorado Resorts twenty seventeen fourth quarter conference call. Joining us today from the company are Chairman and CEO, Gary Carano Chief Operating Officer Executive Vice President, Anthony Carano and President and Chief Financial Officer, Tom Reed. On today's call, we'll review the company's fourth quarter financial results, success with the integration of the Isle Of Capri operations and progress against the company's other key strategic priorities. We will then open the call to participants for questions. This afternoon, Eldorado Resorts issued a press release announcing its fourth quarter financial results for the period ended December 3137.

The release is available in the Investor Relations section of the company's website at www.eldoradoresorts.com. Before we get started, I'd like to remind everyone that this call is being recorded and a webcast replay will be available for ninety days, the details of which are outlined in today's press release. During our call, we may make certain forward looking statements about the company's performance. Such forward looking statements are not guarantees of future performance, and therefore, one should not place undue reliance on them. Forward looking statements are also subject to the inherent risks and uncertainties that could cause actual results to differ materially from those expressed.

For additional information concerning factors that could cause actual results to differ from those discussed in our forward looking statements, you should refer to the cautionary statements contained in our press release as well as the risk factors contained in the company's filings with the Securities and Exchange Commission. Eldorado Resorts undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances that occur after the call. Also during today's call, the company may discuss non GAAP financial measures as defined by SEC Regulation G. The GAAP financial measure most directly comparable to each non GAAP financial measure discussed and the reconciliation of the differences between each non GAAP financial measure and the comparable GAAP financial measure can be found on the company's website at www.eldoradoresorts.com by selecting the press release regarding the company's twenty seventeen fourth quarter financial results. Thank you for your patience with that.

And at this time, it's my pleasure to turn the call over to the company's Chairman and CEO, Gary Carano. Gary?

Speaker 2

Excited to be here today reporting some great results of the fourth quarter. Debt revenues of $428,000,000 basically flat with pro form a year ago levels, while we grew adjusted EBITDA by 16% to $91,000,000 reflecting a 300 basis point improvement in our consolidated EBITDA margins. For the full year, pro form a net revenues were down 2% to $1,800,000,000 while we grew pro form a adjusted EBITDA up almost 9% to $4.00 $7,000,000 Our growth initiatives and operating results made 2017 a year that highlighted the transformation of Eldorado Resorts into a true regional gaming powerhouse. Our acquisition of Isle Capri in early May diversified our operations into new markets and our integration success with these assets over the last eight months of the year again demonstrated what we believe is a core strength of Eldorado, namely our ability to acquire properties in accretive transactions and then operate them in a manner that unlocks previously unrealized upside performance. We've accomplished this now several times in our history.

First, with the acquisition of Eldorado Shreveport, next, with the acquisition of the MTR assets followed by the acquisition of Circus Circus and the 50% interest, which we did not own of the Silver Legacy in Reno and then finally, the acquisition of Ilef Capri. In each case, we have successfully grown property level adjusted EBITDA across the acquired portfolios by focusing on providing great guest service excellence combined with rational marketing and promotional programs to ensure we drive profitable revenue. We continue to see upside in the aisle assets. We're still in the early innings of affecting changes in our marketing spend across all our properties and customer segments to drive more profitable revenue as well as our continued work on managing our direct labor costs. As you can see from this quarter's results, we also continue to capitalize on opportunities at our legacy properties also.

With that, let me turn the call over to Anthony. Anthony? Thank you, Gary, and good afternoon to everyone on the call. In a moment, Tom will review the fourth quarter results in detail with color around our four regional reporting segments and their respective performance in the period. But let me first provide some high level operating perspectives.

The fourth quarter again demonstrated strength across the property portfolio as each of our regions generated material EBITDA growth led by the East and the West. We had nine properties grow EBITDA by greater than 14% in the fourth quarter led by Lake Charles, Pompano, Blackhawk and Reno. We were able to dig deeper into the Isle properties during the quarter after the initial discovery period following the deal closing. We have found and continue to find opportunities in customer acquisition, traditional advertising, food and beverage operations and labor throughout the portfolio. As Gary highlighted, we are still in the early stages of optimizing the acquired IL assets even as we have already achieved our targeted $35,000,000 in synergies.

And while we are further along the path at our legacy properties, we continue to see opportunities to drive additional profitable revenue from that. We also continue to reap the benefits of the growth capital that we invested over the past few years, such as the smoking patio we added at Mountaineer, the new Brew Brothers restaurants at Scioto Downs in Presque Isle and the new hotel at Scioto Downs. These investments drive true returns on their own, but also have contributed to growing gaming volumes. More recently, as you know, we have been working on comprehensive upgrades at our Reno Tri properties. The upgrades were undertaken against the backdrop of what continues to be a very favorable economic growth in the region for which the longer term outlook continues to be positive.

Downtown Reno has been significantly revitalized over the last few years, and development in the area is ongoing. More broadly, the region continues to be attracted to new business investment, and it was recently reported that the 107,000 acre Tahoe Reno Industrial Center is now nearly sold out. A recent report from the Kaufman Foundation notes that the Reno Sparks Tahoe region ranks number one in the country for the highest start up density per MSA sized glass, ranks number three in the country for the most business friendly tax climate and ranked ninth among the top 100 places to live in the country. In terms of our Tri Properties investment programs, we have completed to date upgrades to more than 1,000 hotel rooms and suites, updated food and beverage operations across the facilities, created new public spaces in all three properties and opened a new poker room in Sportsbook. On our third quarter conference call, we discussed our plan to pull forward additional growth capital in Reno Tri properties based on the exceptional returns we have generated thus far.

In 2018, we expect to spend an additional $37,500,000 on growth projects in Reno, including renovation of more than 1,200 rooms and suites across the Tri properties and a beautiful new spot at Silver Legacy. With Safari Club and Interbike coming to Reno in the first quarter of twenty nineteen and a larger bowling group in the second quarter, we should be in great shape to continue our strong momentum as these projects come online. I think the progress we've made throughout 2017 in integrating the Isle assets, including exceeding our targeted synergies, continuing to focus on effective marketing and promotional programs so that we are generating higher profitability across the portfolio and our success with and the returns we are generating from our capital investment initiative in Reno demonstrate the potential of the Eldorado platform. I'll echo what Gary said earlier, in that we continue to have levers to pull to further grow the company, both organically as well as through accretive acquisitions going forward. With that, I'll now turn the call over to Tom to provide some detailed insights on the fourth quarter financial performance and additional details on our balance sheet and capital structure before we open the call to Q and A.

Tom?

Speaker 3

Thanks, Anthony. This is when the fun starts with these acquisitions. When you go into these deals, you get a look from the outside as to what you think might be possible once you own these assets. Then you close the transaction and you spend the first quarter or so kind of getting your legs underneath you and figuring out what the real opportunities are. And this quarter is really the first quarter where you see us starting to execute across the aisle portfolio post transaction.

What's gratifying for us is, obviously, we had a strong quarter. All of the each region contributed. And as Anthony and Gary went through, most of our properties contributed meaningfully to EBITDA growth. That's validation of our strategy. I talked to a lot of you about I think that we're doing something different in terms of customer acquisition, and you can see I hope that you see the fruits of that in terms of just relative performance versus our peers.

And I'll go into some specific examples in a moment. The we had a mix of top performers in the quarter out of both legacy portfolios. Lake Charles, Blackhawk, Pompano on the Isle Side all had extremely strong quarters. Reno and Scioto, in particular, out of the legacy Eldorado portfolio continue the strength that they've been generating for quite a while. In the West, Reno RevPAR was up 15% for the quarter.

So we're continuing to show kind of mid teens RevPAR growth even though we're lapping significant RevPAR growth quarters. So that's heartening to see. We think a lot of that has to do with obviously, it has to do with economic backdrop, but a lot of it has had to do with growth CapEx that we put into the Reno market. Blackhawk actually outperformed Reno a little bit on a growth basis this quarter, so it had just an extremely strong quarter. The Denver market remains very strong.

And to kind of talk you through how we think we're or what it looks like the way that we approach things versus prior owners, I talk about there's a colossal amount of waste in the regional gaming space in terms of chasing customers and that you don't get a lot of value following monthly GGR from us. So I want to take you through Pompano for a little for a moment here. In the quarter they had, Pompano, I got a lot of calls during the quarter about GGR. Total revenue was down 7.5% during the quarter. And I talked to you a lot about what's real revenue and what's just promotional cycling through the property.

In the quarter, we cut customer acquisition cost, player reinvestment on rated play by over 40% at Pompano. While we did that, casino net profit improved by over $1,000,000 just out of the casino. We cut our food loss by more than 50% in the quarter. And again, this is really just the start of what's happening there. Our labor savings flowed through.

So on a 7.5% revenue decline at Pompano, EBITDA was up almost 30%. And EBITDA margin was up over 700 basis points. So when we talk about what we're doing and we're doing something differently and I hear back well, we hear that from other people, they're cutting marketing, Nobody is doing it on this scale that I'm aware of. And you see that the results that it's driving. We've continued to drill down on the aisle assets, and we found areas of opportunity that we were not aware that were their property labor levels being chief among them.

Lake Charles, you know that we took that back during the quarter. So we kept the $20,000,000 deposit on $134,000,000 purchase. So the way I look at that is we just bought this asset for $114,000,000 of purchase price, and it's it was doing a little bit less than $15,000,000 of EBITDA when we took it over. We have a property in Shreveport that does marginally better on the revenue line and does more than twice as much EBITDA as Lake Charles. So we see a substantial opportunity there in the existing asset.

EBITDA margin in the fourth quarter almost doubled at that property. So we're making significant changes in these properties. There's an there could be an opportunity there to move to land based. If you if you move that thing to land based, your, you know, your sub $15,000,000 of EBITDA almost certainly is over 30. So we're just really excited with what we're finding in the Isle portfolio.

When we announced the Isle transaction, what we said was we saw a path to 25% consolidated EBITDA margins in the company. As we got into the assets, last quarter we told you we think we could do better than 25%. I would tell you that that number keeps climbing the longer that we own these assets. I think we can ultimately get these our consolidated EBITDA margin into the high 20s. And I don't know that that's the end of the game.

We don't see the end of the runway yet. And if you look at Aisle in its former state, it was doing a little over $200,000,000 of EBITDA. And I would tell you by the time we're through with the portfolio, I would expect our total EBITDA out of those assets to exceed $300,000,000 So we've really got a lot of momentum here. Tax Reform Act, you saw the balance sheet adjustment that we had that flowed through the income statement in the quarter. But I don't know that we could have written a better tax bill for our specific situation.

We've got just on a from a rate standpoint, I think we'll save in excess of $40,000,000 of cash taxes over the next two years versus where we were before. The way that your capital is treated now, you're incentivized to pull forward growth CapEx projects that have the right ROI that would have been waiting, and you can see that we've done some of that. So you get in the situation where your you pull forward CapEx projects that historically have had have demonstrated high ROI, and it reduces your cash tax bill. I would expect this to be a de minimis federal cash taxpayer in 2018. So we've got a lot going for us.

We had a very good finish to 2017. As we start 2018, we experienced the same crappy weather that everybody experienced in the Midwest and the South and the East in January. But what I would say is we have the benefit of an easy comp in Reno, and Reno's comps have been quite strong. And then we have the savings front that we're rolling through aisle. So yes, we were impacted by weather.

What I would tell you is January is the least important month of the year from a contribution standpoint. So we think that will be a minor blip and was we have some offsets as well. So we still feel very good about both first quarter and 2018 as a whole. And with that, I'll open it up to any questions that you have.

Speaker 0

Sir. Thank you. Thank you. first go to Chad Binion with Macquarie.

Speaker 4

I want to start with margins. You guys did a phenomenal job in the quarter. And then, Tom, your comments of raising that goal is certainly something that's nice to hear for investors. Can you help us think about how we should think about that goal and certain targets, particularly in light of the CapEx that you talked about that will be going on in 2018? Does that kind of delay the coiled spring of margin improvement to 2019?

Or do you still expect to kind of continue on this path as expected in 2018? Thanks.

Speaker 3

Yes. Chad, I would say we'd expect to be materially better in 2018 and better than that in 2019. 2019 has some calendar benefits in Reno in terms of group business that should accelerate as this growth CapEx is coming online. So 2019 should be a particularly strong year for us. But the timing is we feel good about both 2018, '19 from a margin expansion standpoint.

We don't know how long we can keep going. As you see in our numbers, you know that the East Region has is predominantly legacy Eldorado properties and is still having very strong year over year improvement in EBITDA and EBITDA margin. And we're, what, over three years post the acquisition of MTR. So we're learning this as we go through in terms of what's possible and how far we can go. And we have not in the reduction in customer acquisition costs, there's not a single market in our 20 properties where we've had to stop.

So we're still going.

Speaker 4

Great. And then my follow-up separately on Lake Charles. The first three quarters of the year, at least from a GGR perspective, that property was down roughly 10% on average. In the fourth quarter, that improved. So this is kind of before you took it back and implemented some of your strategies on the revenue and EBITDA standpoint.

So first off, could you help us think about if that market is starting to recover just kind of post flood and if you're seeing customers come back to the market? And then secondly, if you can quantify if there was any margin impact just bringing this back into your portfolio because I believe it was more of a lower margin property. Yes.

Speaker 2

So

Speaker 3

it is a below average margin property even with the improvement in the fourth quarter, so it brings down our consolidated margin some. The market seems to be doing fine post hurricane. There's no I can't tell you that there's a dramatic spike in terms of a lot of FEMA money coming in where you've seen areas like you've seen in the past. I would tell you from a revenue standpoint in 2018, I would expect a lot of noise in our reported GGR number there. This is we took over Shreveport in a from a free fall bankruptcy that was highly contested.

The property was doing $7,000,000 of EBITDA and was kind of in a death spiral. And in terms of the shape of how they were operating it, I think that was doing a little bit better than Lake Charles when we took it back. So I mean, there's a tremendous amount of opportunity in Lake Charles. They were spending a lot of money chasing business that just didn't make any sense. And you're going to see that unwind very quickly, and it's going lead to some noise in the GGR numbers.

Speaker 4

Thanks, Tom. Best of luck all.

Speaker 3

Thanks, Chad. Thanks, Chad.

Speaker 0

We next move to Danny Valloy with Deutsche Bank.

Speaker 5

Hi, guys. Good afternoon.

Speaker 3

Hey, Danny.

Speaker 5

Just on the $37,500,000 you plan to spend in Reno in 2018, can you quantify any disruption you're expecting? And was there any disruption from the renovation in the 4Q numbers?

Speaker 3

There was no disruption in the 4Q. We will likely continue construction longer into the peak period this year than we did last year. So we may have a floor or two that's out of service at peak times. But frankly, we think we'll be able to make that up in rate. So we wouldn't expect to see much in the way of disruption in the Reno numbers in 2018.

Speaker 5

Great. And just a quick one on M and A. Now that there are three gaming REITs, are you seeing more M and A activity in the space? And along with that, have your thoughts changed around holding on real estate or disposing lower EBITDA assets?

Speaker 3

No. There's a lot of chatter that I've heard others talk about. We would echo it. There's it seems to be an active environment in terms of discussion. Would say from where we sit, I'm I'm reasonably optimistic that we'll be able to find something that fits our, you know you know our goals of buying assets that, you know, we end up buying for three to six times what we're doing with that asset post transaction, I'm optimistic that we'll find opportunities that we can execute on if you're looking out in the intermediate term.

Speaker 5

Great. Thanks very much.

Speaker 0

Next question comes from Dan Poulter with JPMorgan.

Speaker 6

Hey, guys. Thanks for taking my question. So with respect to the comment on tough weather, you and peers have mentioned that you've seen in January and your strategy of limiting marketing and promotional spend, how would you characterize the traffic you're seeing? And have you seen any impact regarding that strategy? And I guess also as you look out across the different markets you're in, are there any markets where you're not as much impacted by weather?

And what are the trends there?

Speaker 3

I would say absent weather, the trends are not materially different than they were at the end of last year. You have Midwest, South and East have all had a combination of snow and cold that you had seen going through the regional numbers. Reno has had spectacular weather versus a very difficult first quarter last year weather wise. But so you had two different questions there. From a weather standpoint for us, you've got impact in three regions, but you've got a significant offset in the West.

And then you've got us reducing the still rolling through the reduction in costs out of aisle, so we still look fine. And in terms of I think the second question was have we had seen any impact on traffic based on cutting back marketing other than unprofitable players showing up less and showing up profitably when they do? No, we haven't seen an impact.

Speaker 6

Got it. Thanks. And just on Pompano, in the past you've talked about expanding that property maybe with the JV. Can you just give us if there's any update there on that?

Speaker 3

I would say that's an enormous opportunity in front of us. You should expect that we're working to be in place to develop the undeveloped land at Pompano in a way that would provide significant value through the venture where we do the development and that it would stimulate significant visitation to the casino that would generate significant incremental revenue and EBITDA. And I'm optimistic that we can we would be in a position to talk about that some point in the first half of this year.

Speaker 6

Thanks. And just one last quick one. On your CapEx, so you're doing $37,000,000 at Reno, roughly half of your 150,000,000 is project CapEx. So other than Blackhawk, where are you spending the balance of that project CapEx?

Speaker 3

It's a mix. So Anthony can touch on that.

Speaker 2

We're doing a Brew Brothers restaurant in Waterloo, Iowa, Colorado in the fourth quarter, rooms and spa in Reno. Also Bloomfield gets a Brew Brothers re new one there.

Speaker 3

Yeah. On the growth side, Dan, Reno and Colorado are about 80% of that number. The rest is kind of a, smattering of Brew Brothers that are a couple of million of piece in some of the Midwest markets.

Speaker 6

Got it. Thanks so much, guys.

Speaker 0

Next question comes from David Katz with Jefferies.

Speaker 7

Hi, afternoon. Hi, David. I wanted to just follow-up on the CapEx question, just given the change in status for Lake Charles. And it may not be necessarily the most straightforward issue, but my last visit to the property was some time ago, but I could certainly see and accept arguments that it could use it could benefit from some investment as it is, you know, right now versus contemplating a land based replacement for it. Are you thinking about allocating any capital specifically to that property?

Or is it entirely just an operating story for the moment?

Speaker 3

For the moment, it's an operating story waiting for the result of the legislature this session. We'll I would say we're certainly going to invest in the property as we do all of our properties. But from on a materiality standpoint, the opportunity is if they go land based, since you're familiar with it, if you could put a box that would connect the hotel and the parking garage, kind of replacing where the the escalator and the atrium are. So you bring your you bring your casino right to the front door. And those a box like that cost in Iowa about $55,000,000 So you can do it fairly reasonably with a higher return on investment.

Speaker 2

So all you have to do, David, is get Louisiana to approve the legislation, and we're very excited about that opportunity.

Speaker 7

Got it. If I can ask just one more. And obviously, the margin improvement across the board is impressive. One of the issues, Tom, that we've talked about in the past is looking at the margin opportunity in the context of the gaming tax rates in which you operate? And is it fair to look at the West Region where Reno presumably has the lowest gaming tax base relative to the others as having more opportunity than the others irrespective of aisle versus legacy properties.

If you could just sort of comment on that notion, I'd appreciate it.

Speaker 3

I would say that's accurate, but you have to keep in mind the size and scale of the Tri properties introduces a lot of operating leverage to your equation. So that's going to be a big factor in terms of the margin that you can get to there. I would point to as a region, we've got the Midwest into the low 30s now even in the fourth quarter, which is a relatively low volume period of time with an average tax rate in the high 20s. So there's we're not worried about running out of opportunity regardless of the tax rate that we're in.

Speaker 7

Got it. And if I can ask one last one, specifically about the Isle assets where over time they could approach a $300,000,000 number. Given some of us and myself included propensity to get ahead of ourselves. If you could just talk about trajectory to make sure we're thinking about it in a measured way?

Speaker 8

Yes. I mean what I

Speaker 3

would say is you think in round I think in round numbers, and I wouldn't take this as guidance, but what I would say is 28% on our current revenue base is about $500,000,000 of EBITDA. And I only choose that because that's a round number. Does it seem possible that we can get there out of this portfolio? Yes, it does. And does it seem possible we can ultimately get beyond that?

It's too early to say that, but we're feeling better about that all the time as we run these assets. I would say, you know, looking at what I've seen in terms of estimates where you're in the kind of the mid-400s this year and the high-400s next year, that all seems eminently achievable to me. But if everybody ran out and said, we're going get to a 30% EBITDA margin next year, you're ahead of yourself. You're ahead of us.

Speaker 7

Okay. Thanks for keeping us in line. Appreciate it.

Speaker 0

We next move to Patrick Scholes with SunTrust.

Speaker 9

Hi, good afternoon. Just a question on when you talk about and discuss strong returns and then at your Reno Tri properties in some of your development and your projects and then talk about additional investments. I'm curious, can you give us sort of quantification of what a strong return might be as far as a return on invested capital? And then going forward, what level of ROIC return do you look for when choosing projects?

Speaker 3

Our hurdle rate is typically 15% plus. I would tell you that my analysis of second half of the year in Reno of 'seventeen suggests our ROI on our growth CapEx from last year was in excess of 50%, five zero, leaves no question that we should be pursuing more, particularly in Reno.

Speaker 0

Next question comes from John DeCree with Union Gaming.

Speaker 10

Hey, everyone. Thanks for taking my question. Tom, perhaps one for you that I wanted to circle back to that you mentioned in your opening remarks that seems to be pretty significant for the whole industry, but I think you sized it up really well, was tax reform and what it means from you from a free cash perspective going forward. Think first, just wanted to see if you could clarify, I think you mentioned $40,000,000 over the next two years in kind of savings. Wasn't sure if that

Speaker 3

was per year or

Speaker 10

over the next two years combined?

Speaker 3

That's over the next two combined.

Speaker 4

And then 40,000,000

Speaker 10

Got it. As you kind of think about cash flow, talked about some growth CapEx coming forward based on the returns. We know that you're seeing and some other projects that you might have as well as the opportunity for depreciation and tax benefits. But when you kind of think about the balance sheet and deleveraging and other uses of cash, how do you kind of prioritize those kind of after you address some of that really high value, high ROI CapEx?

Speaker 3

Yes. Number one priority is continue to grow through acquisitions. We think there's nothing unique about Isle in terms of the way that they operated their properties. We think that most regional operators have that operate similarly. Obviously, some are better than others, but we think there's a large opportunity set in terms of us doing the same thing operationally that we're doing in the assets that we bought.

So we want to keep going there. We in the interim, we use free cash flow to pay down debt with EBITDA rising, our leverage is going to continue to come down quickly. I would say if we were in a position where leverage was headed down sub four times and we didn't have an acquisition opportunity in front of us, I think we'd be looking to return capital to shareholders. My inclination now is that would lean toward dividend versus buyback. And so, you know, you know where your model puts us as to when we would be in that position.

I would tell you, as we sit here today, I'm optimistic we would have an acquisition before we got there.

Speaker 10

Got it. That's helpful. Appreciate that. And then wanted to cycle back a lot of time that we've spent on this call on margin, but one item that I think is worth talking about a little bit more is wage inflation. It's something that a lot of your peers have kind of started to talk about.

I think in the opening remarks, talked about adjusting and rightsizing property labor levels. So I guess, first part of the question is, are you guys facing some wage inflation as well? And then the second part is, given what you can do on kind of managing and adjusting labor levels, is it really a nonissue for you as you guys think about just improving margins across the property level?

Speaker 3

I would say across the entire portfolio, it's a nonissue. There are markets where, particularly in the West Reno and Denver, our tight labor markets, costs are increasing, but you'll notice that those are markets where our top line is growing so that, you know, it's swapping the impact of the tight labor market. So, yes, we're we're experiencing some of the things that others have have pointed to, but we're not experiencing any material wage inflation in markets where we're not seeing significant top line growth.

Speaker 10

Great. Very helpful. Thanks again and congratulations on the year.

Speaker 3

Thanks, Chad. Next

Speaker 0

question comes from Andrew Berg with Post Advisory Group.

Speaker 4

Hey, Tom. Just a quick update on the balance sheet. Where does debt stand at the end of the period, actual levels in terms of what you've repaid on the term loan at this point?

Speaker 3

The term loan is in the neighborhood of $950,000,000 at the December.

Speaker 4

Okay, great. Thank you. We

Speaker 0

next move to Steve Emerson with the Emerson Investment Group.

Speaker 11

Congrats on yet another great quarter and year.

Speaker 2

Thanks, Steve. This

Speaker 11

is an off the wall question, but is there any way to, on the back of an envelope, give what an approximate EBITDA should be for the hotel portion of the business? And I'm only looking at this because hotels enjoy a mid teens EBITDA multiple.

Speaker 8

Yes. I mean, what I would say

Speaker 3

is you can see our hotel revenue.

Speaker 11

Yes.

Speaker 3

Our hotel revenue is dominated by Reno, which is going to be more cash than comp. So it's a reasonable it's a our hotel revenue is a reasonable approximation. And hotel margins will run, depending on the property, 60% to 70%. So that should get you to your EBITDA margin. And if you wanna throw a cap rate on that, you can get to a back of the envelope.

Speaker 11

Excellent. And should we then allocate a portion of the G and A, etcetera, to that or not relevant? It's too hard to unscramble the egg.

Speaker 3

Yeah. I mean, now you're getting more even deeper. I I guess, yeah, I would probably allocate some g and

Speaker 11

a to it. Thanks. Yes.

Speaker 0

And gentlemen, there are no further questions in the queue at this time. I'll turn it back to you for closing remarks.

Speaker 2

Thank you very much, and thank you, everybody, for joining us today. It was a great quarter. Excited to report to you, and we'll see you again in May when we report our first quarter. Thank you very much.

Speaker 0

Thank you, ladies and gentlemen. That does conclude today's conference. We thank you for your participation. You may now disconnect.