Q3 2019 Earnings Call
Good morning, ladies and gentlemen, and welcome to the quick Canadian Gaming Corporation.
<unk> 2019 results conference call.
Hi online so no listen only mode. Following the presentation, we will conduct a question and answer session. If at any time. During this call your very quite upbeat [laughter]. Please press star zero for the operator also note. This call is being recorded on Tuesday November 15, 2019th and I would like to turn the conference over to Mr. parents to what please go ahead Sir.
Thanks, Toby and good morning, everyone and welcome to Great Canadian Gaming Corporation's Conference call to review the Companys financial results for the third quarter ended September Thirtyth 29 team.
Joining me on the call. This morning, as Rod Baker, the company's Chief Executive Officer, and Jon Rousseau, The company's General Counsel and cheap privacy officer also several members of the great Canadian Executive Finance team [noise].
I would like to remind listeners that the latter portion of this call is a reserve for institutional investors and analysts any media related inquiries can be directed towards truck Keeling, Vice President stakeholder relations and responsible gaming you can be reached out 604 to 474197.
Before we begin I must caution all listeners that this conference call may contain forward looking statements that reflect management's expectations regarding the companys <unk>.
<unk> future these statements, which will be identified by words, such as anticipated believe except or similar expressions are based on information currently available to the company.
Investors should not place undue reliance upon these statements, which involve significant risks uncertainties and assumptions. These statements are made as are the data this call and the company assumes no obligation to update or revise them to reflect new events or circumstances.
Unless otherwise indicated all information in this call is presented in Canadian dollars and is in accordance with international financial reporting standards or I have for us.
So for adjusted EBITDA, which is a non IRS term defined in the company's mdna.
Unless otherwise noted all financial information for the current and comparative periods exclude the financial results. The U.S. region as they have been presented as discontinued operations. After Great American Gaming Corporation was sold on June 27 2019.
Ill now pass the call to rod for their reveal great Canadians financial results for the quarter. He will then provide commentary on the company's overall operation and strategic outlook Rod.
Thank you tyrants, good morning, everyone and thanks for joining us today.
Today I'd like to go over the key highlights a great creating this quarter followed by Oh are you the company's third quarter financial results and future outlook.
I would like to start the call with our recent announcement of the acquisition of clarifies groups ownership interest in both the West <unk> partnership and the G. T. A partnership total consideration of this transaction was $51.8 million as a result, great. Canadian now owns 100% of the West Treaty partnership.
50% of the G T a partnership.
We're pleased to have been able to have increased our ownership interest in some of our key assets.
We think Claire best for partnering with a company in Ontario, and wish them continued success.
I'm now going to comment or financial highlights for the third quarter of 2019.
Great Canadians revenues have increased by 3% or $8.4 million from 332.7 million two or 341.1 million during the third quarter 2019, when compared to the same period in 2018.
The increase in revenues was attributable to the expansion of gaming and non gaming amenities to the Ontario properties.
Adjusted EBITDA was 142.3 million for the third quarter of 2019, which included a 20.7 million positive impact from I FRS 16, the new lease accounting standard adopted on January 1st 2019.
Adjusted EBITDA was 137.9 million in the same prior year quarter.
The increase in adjusted EBITDA was also attributable to the above mentioned increased revenues nantero reach and partially offset by increased operating costs related to expanded came in Ontario.
Readers are cautioned that the financial results for the comparative period in 2018 have not been adjusted for I FRS 16.
[noise] shareholders net earnings from continuing operations was 49.7 million or 85 cents per common share for the third quarter of 2019, which decreased by 1.1 million or two cents per common share when compared to the same period in the prior year did you use was primarily due to the net effect of adopting <unk> first.
16, which reduced net earnings and increased amortization related to capital investments for the Ontario development.
During the quarter, we continued to make progress with our Ontario developments, we introduced new food and beverage offerings to complement gaming and improved guest experiences which include the opening of a new buffet agreed to heron in the beginning of August .
The opening of the VIP noodle bar and buffeted launch elements Casino Mohawk in August . In addition, we expanded gaming elements casinos lambro in mid September and open the building expansion that elements Casino Grand River at the end of September .
Also well under way, it's our Greenfield development Pickering Casino resort, which once completed will feature a full scope of gaming and entertainment amenities.
The casino building with the related dining options are expected to complete by the end of the first quarter 2020, and the hotel entertainment venue are expected to open by the end of 2020.
For the remainder of 2019 and into early 2020, we continue to enhance our properties and Ontario, which include completing several renovations at the west we see a gaming facilities by spring 2020 <unk>.
Elements casino Mohawk developments are underway to introduce expanded VIP gaming and make further enhances the gaming floor and it's complementary amenities.
Elements casinos lambro, we expect to complete the new buffeted by the end of 2019 was inferior and partial exterior refreshes to follow.
Renovations at elements Casino Grand River include a recap of the gaming floor and restaurant.
Further developments to their great Blue Heron casino to introduce new amenities and the expansion of casino. Woodbine also continued to progress with hotel group to parents expected to complete the second quarter of 2022.
Great Canadian continues to enhance its capital structure. The company completed the refinancing of the revolving credit facility of Ontario Gaming E Limited partnership or what we call oak out in September of 2019, and subsequent to the third quarter extended senior secured credit facility for another year.
The new credit agreements provide improved financial flexibility that will enhance the company's ability to achieve its strategic objectives.
Continued to increase shareholder interest as demonstrated by the repurchase of 3.1 million common shares this year under the N C. IP at a weighted average price of $41.79 per share, which increased shareholder interest by 5.6%.
I said September Thirtyth 2019 company remains at a strong financial position with cash of 309.8 million.
A little capacity of 397 point Sixmillion on our senior secured credit facilities.
Available capacity of 855.5 million on the Chichi partnership revolving capital expenditure credit facilities hundred 37.5 million on on the road Valving credit facility of the West GQ partnership and 76.1 million on the revolving credit facility Oh go each subject to comply.
Hi, its with the play for both financial covenants.
Parents, we can now and take questions. Thank you. Thanks, Rod and before today's question and answer session I would like to remind everyone that questions will be reserved for institutional investors and analysts I.
I would also like to reiterate the company's Investor Relations philosophy, which encourages investors and analysts to utilize this public conference call conference call as their principal medium for speaking with Great Canadian Senior management, Sylvie well now go to the Q anyway. Thank you.
Thank you, Sir ladies and gentlemen, if you do have a question. Please press star followed by one touch Tom Tom You will then here Athree Tom prompt acknowledging you request should you wish to withdraw your question simply press star followed by too and we do outlook if using a speakerphone. Please lifter handsets before pressing any keys and your first.
Question will be from George do much at Scotiabank. Please go ahead.
Hi, good morning, Rob.
Actually my question is George.
I'm looking at the total Capex I think in the beginning of the earlier on the are you guys got you for 800 million.
Total spending for 2019 looks like we're tracking around fourfifty.
Just wondering is that lower spending all west <unk>, maybe comment on any other bundles. The could account for that trying to get a sense of I guess, the Lord cutbacks by bundle.
So I think if you go back over at least my last 12, almost 12 years here everything that we've given you we've always.
Track slower in terms of that cash spend but not in fact changed the rate of actual development I think the way the guys have always gotten the books have been very pristine and in fact conservative from a timing of cash out of our bank account into.
Somebody else's into a suppliers are contractors and so I think what's you're actually seeing is that same phenomenon continuing on.
I would tell you that being said there is a very significant push going on right now.
And it's very capital intensive focus principally around our Pickering assets.
That are going to make this quarter that run right now I believe be are our most significant capital spend in a quarter since I've been at great Canadians, which is both very exciting because it makes perfect getting very close to Pickering.
In addition to that I did give you more granularity today I think people.
Sort of forgotten gloss over when they look at numbers, especially if they're flattish type numbers that theres not a lot of significant activity going on.
There is a very significant activity level at most properties now continuing to improve the amenity base and to set those properties up for even more success in the future. So we do have in the numbers significant span out of the west DTA as well, but I would absolutely not read into.
You know for 50 versus 800 at the beginning of year showing a material change in the 2019 capital development program.
Okay and.
<unk> judgment on Friday in terms of how much capex at the partnership level or do we invested eight for the West you Jay bundle.
I don't actually have that number handy right now.
I'd have to get back to you what I would tell you as if you've watched over the corridors I think you can.
Almost sort of figured out if you could guestimate cash flow. We've I think in your morning, My breakfast read of your notes. So thank you for doing that early I think you made mention of.
$26 million of incremental leverage at the partnership level was your estimate I think if you go back and Relook at the change in our west GTH debt levels, they've gone up once since closing I think it's roughly half the number that you're referring.
Turning to there. So I think were about 112 and a half million now in terms of total debt outstanding and I think from the closing of the transaction. We were like 99 million 100, <unk> cost of call. It 100 million. So I think you know operating cash flow out of the partnership net of distributions for.
Taxes payable to partners over the last 18 months since we closed on May 1st Darren the residual cash flow was invested in the development program plus obviously, the incremental debt of call it roughly 12 or $13 million.
Helpful. Thanks.
Okay. Thank you George. Thank you are you able to comment on just one last one for me on are you able to comment on the rationale for the sale of clear vast to clear vast im just wondering how you guys price them at minority interest purchase and imply maybe from an implied cash flow multiple or are you sort of valuation you can provide.
So I would certainly affords you my view of our rationale I think its wholly inappropriate for me to put myself in someone else's shoes and represent their rationale.
What I would say and hopefully this is a this is a helpful and thoughtful exercise.
You know everybody has their own motives and reasons why summer specific to an asset you know theres other reasons as well.
I would tell you that this wasn't a direct situation not either part so I would believe that you couldn't conclude from that that both parties parties are happy with the transaction and the transaction value I would tell you from our perspective I don't like to say very excited about things, but we're very excited in some of our.
Core asset base to have increased our economic interest I think that's going to surface very very well in not only the mines, but you know looking out at years had even for those of you that are young enough and patient enough. The decades ahead and that's how we look at this is an opportunity clearly when we partnered with.
Non non gaming strategic partners. The folks that are bring tons of value from that gave me perspective, but are principally there for value creation for their unit holders.
They're going to have a different perspective and timeline as we would being in the gaming business for the last 35 years and hopefully for the next 35 years and longer a you know it's interesting as weve more than Oh lets you know the west DTA has had some delays and some challenges.
And the math certainly this quarter.
It was down materially from a the Q3 comp from last year. What's your so very very strong quarter I think that helped precipitate a transaction that from our perspective, what was both very fair to clarify fast and worked very well for the company representing shareholders and its capital here and I think one of the one of the.
Pieces that helps make math work again just to go through it. This is the world. According to ride and those of you said I understand P.E. and time value of money.
I think because we acquired the business only 18 months ago, and we used a component of leverage and if you look at a return on invested capital amount over a very short period of time, <unk> 18 months versus holding something for multiple years.
As you have the ability to earn an appropriate return on an 18 month timeframe results in a much lower purchase price because of the compounding of annual required rates of return. So I think we had a real opportunity because.
The timeframe, it's been relatively short since closing to afford someone like Claire fast a premium to what they paid and I think a a decent return over a very short period of time, but it also has the impact from our perspective, because the purchase price was financed partly by Dan.
That that the premium that we did pay over the invested equity 18 months ago is actually a relatively modest premium on the equity and then if you extrapolate that premium over the enterprise value of the asset base, it's even a more modest premium over the.
Enterprise value of the asset base. So I think it was a fortuitous event for us and I believe Clarence is happy as well, earning a decent return on their money over a short period of time and I do believe.
It's set up us for never to quote you know great investors like Warren Buffett, but to be able to compounds shareholder returns not only over quarters, but over years and even decades I think that's the opportunity create very significant value for shareholders that have the patients to hang in there over a long.
A period of time and so I think you know if it were very happy to have 55% and to be running the show were were even more pleased to have 100% of the west DTA asset base going forward. If I can just if I can just add something that you know from the readings that I had this morning.
I want people to get Super excited that this was a huge transaction you know at the Super low price like I think it was a very fair price as you've seen our west TJ Maxx, there's more work to do there. This is all of our assets continued to me to be improved on an ongoing basis and you know the west Chichi is now.
I have to similar so there's more work to be done but management is very confident very focused with a thoughtful plan.
Continued to execute not only the capital program, but the operating side of that business to make it be a very successful over the short medium and long term and the last piece you didn't ask this but I want to settle it with everybody. If you guys are clear on your math on the west you'd see a ami.
<unk> for 16 20.5 million dollar assist this quarter that I'm fine with that but the things that I read from you and a few of the others already. This morning, I think have been very generous of management in giving us the benefit of the IRS 16 $20.5 million uplifted until.
Aereo as compared to last year.
Which is fine if you're going into it eyes wide open, but I would tell you that our results in Ontario are not as good year over year, when you back that out.
And it's hard for you to totally back it out because you don't have the breakdown between bundles of the <unk> for a 16, but I would tell you what I think we mentioned it before the lion's share if it comes out of the Chichi the west Chichi partnerships and the overall partnership has virtually no I'm, an immaterial amount of IR for.
Our 16 20.5 million benefit and so I saw some readings that showed us as just big picture, the but the Ontario region being roughly 5 million of EBIT da over last year, and I think if you want to compare apples to apples were actually down.
Closer to 5 million and that's coming all off the back of the West DTA with.
Some counter balance out of oak out, which is actually up last year. So I apologize for rambling on on your time here, but I wanted to make certain that people were clear in terms of the results. So the western PA bunch more work to do but we're very focused on it and we're very pleased that we have 100% exposure and upside going forward versus 55, sorry, Joe.
George I'm going off long haul there appreciate everything I, just could you clarify dyxnet I'm Brookfield actually purchase the other 1% of though did you do your model.
So I mean, there was such a relatively modest fan and dollars. The partnership itself just use some of its excess cash and the units were bought back internally. So effectively both we and Brookfield purchased indirectly the 1% because the partnership brought it brought it back in and cancel that Sobi went.
Pro rata so the cash actually wasn't funded at the great Canadian level or the Brookfield level for that side of the transaction.
Got it okay. Thanks your answers.
Okay. Thanks George.
Thank you next question will be from Derek the late at Canaccord. Please go ahead.
Thanks. This is a leap stepping in for Derek This morning.
First thing I wanted to ask the.
I noticed that.
You guys have bought back a lot of stocks during the quarter as well as subsequent to the quarter. I was just wondering if you could give any color on what the cadence of that it's going to be moving forward.
Well I in terms of the cadence and it was that Maxim cadence or any of 1.4 million shares just by virtue of the and shape. It that we have available right now where we continue to look at this not only a as having excess capital liquidity, but where we think.
Al you is add to be able to create value for shareholders over.
The short medium and long term the one thing that we as you know totally not within our control is the stock price and if we think it does it reflect value then we're going to in fast our shareholders' capital in increasing their ownership interest without them, having to call their broker and actually buy more shares themselves. So you know if.
I mean, depending on how things go here if the stock price goes down with what we see it would not be an unreasonable assumption to think that we might be active that being said if you look at the price.
We've also not gotten Gideon we've been very patient I, we're very disciplined on making sure that we pay what we think is good value with shareholders money and look I just mentioned west GJ. It's more work to do if you looked at and it happened last quarter, we referenced that you've seen our numbers here again.
You know RPC region, it's not where it needs to be and we have some more work to do there as well. So I don't know how Mr market is going to interpret all of this over the short term and we you know that's noise to us and lots, it's an opportunity funnel and see I'd be perspective in which case, we would continue to access that.
Okay.
Switching gears to what you talked about there I know that was something that you had mentioned on the last earnings call that performance in DC I wasn't really up to your standards and I know that there was some initiatives. Some marketing programs that you had developed in the region in that you're exploring I was wondering if you guys.
Revisiting that at all and seen any improvement flow through into this quarter.
So yeah, I think there's two components to our strategy to materially improve RPC business.
One is revenue centric and the other is cost efficiency and effectiveness and some of them into relate as as they are you know service levels as well as marketing initiatives that being said I think there's a shorter term opportunity generally speaking on the cost side to improve.
The program over the short term, which we have already started to enact and then there's the part that's not quite as much within our control and that's growing our gaming revenues and we do have some thoughts.
And and strategies on fat I think that side, it's going to be more challenging as going to be more a medium term in order to see material improvement on that side of things. So from what we have here, we've got to a very satisfactory things going on one I think we're gonna have.
Better opportunity to address a chunk of it over the shorter term and as I said, we've already action some of that.
But it's going to take a little bit of time on the revenue side to get things back to where we would like them to be.
Okay and then so on the cost side is there anything specific there is it marketing is its human resources or any additional color there would be a much appreciate it I would say, yes, I would say those are our two biggest buckets in our biggest opportunity and I think we can be much smarter at how we execute on both of those and so we started that didnt.
Initiative, we've already done Oh go through of what I would call the lowest hanging fruit.
Which unfortunately, there is low hanging fruit. So that tells you we haven't been doing our job very well, so, but but that's behind us.
And now we're getting into things that are more opportunities that are going to take a little more time, both on a the HR and the marketing side of things. Okay. And then last one for me and I'll jump back in the queue I know so pickering.
We're expecting that to be fully operational odds of a Q2 is there going to be I'm a bit of a ramp before about asset as operating sort of where you would you see its long term or you expect smile. Once Q2 comes around it will be a fairly short ramp up until about a that maturity.
So I think if you look at any any new casino in any market. There are there different theres a ramp that goes frankly, five plus years.
And and I think this is not going to be similar to that I think there's there's a very distinct short term rather than we've been very clear on our disclosures. We are opening what's gonna be an amazing casino operation and associated.
Food and beverage or at the end of Q1. So as you said you know fully operational Q2, but we're also very clear is that.
The full casino entertainment experience, a with the hotel and the Big show Theater, It will not be online and and made it in until the end of 2020. So I think they'll be a look a ramp that'll be a multi year rap thatll have different.
Inclinations, depending on where we are in the lifecycle I would expect.
You know at the beginning of the probably be people coming from long distances to check it out that will be it'll be in convenient for them. So they'll be in frequent visitors in the future, but lot of people like to come see the shiny new thing and it's going to be shiny unspectacular for sure, especially compared to the.
Entertainment offerings in our industry that are more proximate to the G.
You know that being said those that are not so proximate in terms of location location location, they're going to come for the show they're going to come for the gaming, but also to the fully intertwined entertainment experience.
And that's going to take a while to bring online. So I think there's definitely going to be a ramp.
And in that ramp there's going to be maybe little accelerations, and then a lowering of the ramp until a more things come online, but I think people should look at this not as you.
The old days of there's been no casino.
Activity at all in a market and it was the very first slot in a box that was opened up you know 25 years ago and became pilings through the doors I don't believe despite how incredible this facility is going to be at how well, we think it's going to resonate in the marketplace that that phenomenon is not going to I think avail itself.
What do we open up Pickering at the end of Q1.
Okay. Appreciate it thanks for the go.
You're welcome.
Thank you, ladies and gentlemen, as a reminder, if you do have a question. Please press star followed by one I know touchtone phone.
Your next question will be from David Mcfadgen Cormark Securities. Please go ahead.
Hi, Thanks.
Oh, Hi, How's it going.
Yeah. Thanks.
So just a couple of questions I'm just on the cost you know to take Clements.
51.8, what do you talked about to get the break down between went TJ component in the GJ component.
So we're not going to disclose that and I think look.
They did the GE component was such a small percentage, it's basically immaterial and I've already message that there was a.
Premium better relatively modest premium paid on the west DTA a component of their invested capital.
So we're just going to leave it at that too because I also think.
You know if people want to reverse engineer, what they think things are worse based on these two.
[laughter] transactions, one of which frankly at 2% is almost irrelevant to extrapolate a valuation of the overall bundle I think people would be misleading themselves. If they if they try to get it down to the last a little bit and you know what analogy on that.
The way I look at things, which is it's really bad if you're trying to pay the absolute right price you know buying back 2% relatively small percentage and again as you said when there's also leveraging the capital structure. If you are buying something for.
$500 million and your plus or minus 20 million, that's paying 100 million more or less well when you're buying something for you know a few millions of dollars and you pay 20% more or less you pay a million dollars more or less it actually it almost doesn't matter in terms.
Of immateriality component. So we're just we've decided to simplify it and just call. It all one lump sum transaction and to leave it at that.
Okay.
Moving on then when I look at your Terabits. It says the hall, because that's when its disclosed when I look at the cost to generate that gross gaming revenue on a year over year basis and sensor the GTR, it's going up.
I was just wondering is going up because it gave me makes is shifting you know you're having martine loans versus slots as it is it going out because you just adding our non gaming amenities in the margins on that are lower <unk> or maybe it's all the all in all the aforementioned those R&D comment on that.
Certainly so it's it's all of the <unk> aforementioned that being said you hit the nail on the had you know the pay the opening of tables.
Overtime, but particularly Mohawk I have two of the largest extent.
And flatbread and then obviously as we've.
Whereas we've lapped Woodbine, a very labor intensive and the mix and as you look as you can see we've grown our growth in chichi. Our has very much been tables based across our Ontario business as opposed to slot based and so.
That's that's going to increase our cost side. So those the growth in gross gaming revenues are principally out of the.
Paypal side and that comes that comes with Labor I would also mention you know it.
Incrementally Woodbine will and has just recently added some more life tables and remove some EG. So there will I think continued to be some incrementality on the HR cost side, particularly other wouldn't buy side as we feel it despite.
The deep profitability margin on those incremental table revenues being on a percentage basis lower.
It's still value.
Creating.
And delivering the right kind of profitability. So that the team has been tweaking assets and those respect as well to.
Increased profitability.
Despite a operating margins going down obviously doing it on a no capital basis, you know few tables, which are de minimis in dollar cost.
Okay, and then and then just.
Just another question.
Have you heard any discussion.
From the Antero regulator about.
Possibly adding in these.
Restrictions that exist in DC now you can't come in that more than 10000 cash on licensee wired to exceed on some some parts of you have you heard any chatter about that and the Ontario copying machine that respect.
So I don't want you to read into this answer one way or the either because you shouldn't.
We would never.
Ever publicly disclose any conversations that we have with our regulators saving except if it was required from the materiality and from a public company disclosure perspective that is something that would be so far into our DNA and would be taken an absolute worst way possible by our regular.
Peter partner, so I. Unfortunately.
Questions of regulatory matters chatter conversations that we have are totally off limits in terms of these kind of conversations that we're having right now so I apologize for that but that's just that's just the reality of the environment that we work and.
Okay, all right well that's it for me thanks.
Okay. Thanks, David.
Thank you.
Next question will be from Chris Coldren breach and lets capital. Please go ahead.
Thanks for taking my questions I want to go back to the 2019 Capex. When you initially guided to 865 million and now expecting 450 million.
She had big big drops so is that.
Primarily due to coming in under budget, so cost efficiencies or is that primarily due to delays in spending.
So were good we're not that good.
And we would never pad abided by that amount with an allowance that day. So no. Yeah. This is not like a huge amount of found money and you should take your the overall development dollars that weve message to you in the past and cut them in half. So this is this is this just timing of cash out the door as.
I had mentioned as opposed to timing of when assets are being brought online.
Okay. Yeah. Thanks for the confirmation I guess related to that a year ago, you guided should total expected spend on the initial phase of between the two west <unk> of 1.86 billion.
That's still approximately that the amount you expect for this initial phase of development.
So that is that is approximately the amount that we expect at this point in time I think you know the west GTK needs to be looked at in terms of some of the components of that that were in the latter latter years and that's something that we're going to look at a little more thoughtfully this upcoming.
The quarter now to see what the timing of those initiatives should be and ER and see whether the timeline should actually be adjusted but order of magnitude that still very much a good number and.
If there is an update for that next quarter. The quarters ahead, we will let you know about that Chris.
Okay, and then the 5 million that you cited earlier.
Being the calls it W. West <unk>. It was that revenue EBITDA what was the $5 million number you sorry that was EBITDA you may not have seen it yet, but I think some of the research analysts put some ratings out already late last night and early this morning, and and I believe I read out of that that there was an assumption.
And that our Ontario region.
EBIT da in total increased roughly 5 million over last year, which is which is.
Technically correct, but it did have the assist of I FRS 16 benefit.
We have 20.7 million at that per quarter, roughly and the vast majority of that benefit is derived within our Ontario region 20.5 million of it. So yes, we were up 5 million a EBIT da but that also had a positive impact because of the I have for 16.
Change so I was just going back to apples to apples because I I you know.
Yeah, I'd like to take the the easy lift in say, we've done a great job, but we haven't penetrated job as I think was presented out there I just want to make sure people understood that we were actually down roughly 5 million of EBITDA versus a 5 million from last year and as I mentioned, you know that all that all came out of.
A decrease in the West GTH performance.
Only because last year was very very strong.
And it was somewhat offset by improvements Oh go you know.
You talked about with the board because people forget about it but you know oak help year over year, we had a new initiative with the opening of our Peterborough facility.
And despite its relatively modest size compared to the overall size of our business. Now we are pleased to to look back and check in and and to be able to acknowledge that we've grown the market by introducing our new Peterborough facility.
<unk> increased gaming revenues and increased contribution profitability to our shareholders. So that's worked out well that was the last piece that bundle and that's embedded these numbers. So that's actually even have a positive contribution against an overall net numbers. So I think that shows you how challenging from a math perspective.
The West GTV was in fact, this quarter overtime over last quarter.
And the and then that's helpful. And then the lease payments I presume, that's will grow which as you build out. These facilities. Obviously, so we kind of don't know it so no actually the lease payments as we sort of a message unless there are material changes in the leases are the terms or the rates.
20.5.
Number in Ontario, and it's been 20.7 to 20.8 in each of the quarters of this year. So far we've we've guided to basically use those as the numbers to use until something materially changes in which case well disclose that those numbers have changed.
Got it some material change wouldn't be adding Pickering casino this lease payments don't won't change.
That's correct.
Got it and then last question, sorry, if I missed it but how many slots and tables.
Added this quarter.
And the Ontario.
You know I don't have all of those numbers I can tell you off the top that we added 52 at Flam Borough I believe last quarter. We did the majority of our Mohawk I don't believe theres.
Any material increase that Mohawk this quarter.
I did mention that we did a shift it would buying I think I mean, I don't hold me to like another eight or 10 life gaming tables, I think swapping out some floor space for some CTG, but you know, but relatively small so this wasn't a this quarter from a material increase in in gaming can.
Pasadena that wasn't the theme this quarter this quarter is more about.
Getting all of our assets in a better position particular from an amenity perspective.
To be able to drive the businesses forward in a months in years ahead.
Appreciate it we're glad to see a.
Buying back a bunch of stock and keep up the.
Thanks, Thank you Chris Thanks for calling.
Thank you next question will be some Subodh Con RBC. Please go ahead.
Alright, Thanks, and good morning, I'm, just maybe a couple of questions on clear best data you already provide a little bit of color, but if we think about the 52 million that you guys noted in the press release I guess is it fair to assume that equity value and then you're also assuming.
The 45% of whatever day, you have outstanding for that bundle that correct as sort of leaving behind.
Yes, correct.
Okay, and then in terms of the I guess, if we think about the you know there you mentioned deal the cash investment and the return to your partner.
Is it fair to assume that the total cash investment both debt and equity to date.
In the West G. T. A bundle is in the somewhere in the ballpark of call. It 225 million I'm, taking the purchase price and the redevelopment capex.
So is that kind of a fair number and then second part as I think you've noted earlier that about 65% of de sort of investments are up to 60 to 65 would be through debt I'm just trying to understand if you're not to think about the equity investment you and your partners are made today.
As a 225 million dollar total number of fair estimate I don't if we assume no roughly 60% to 65% of that has been done today are those the.
Right and maybe even below numbers, so that those numbers are fair, but they're wrong.
Huh.
Because of a couple of things.
You know the way we've been funding our capex programs at all of these bundles or has been through cash flow generated in the business. So I think when you go and you look at that you need to also back out of your 225 million never thought.
But you want to use that cash flow that was generated out of the west gave for the last 18 months.
Otherwise, you're assuming the partners and through debt and equity have contributed more dollars from outside the system than we actually have.
If you. So did you follow on that Yep no. It made sense right. It's like it's like in the East side I think he spent up to speed. It's we basically work through a three year development program.
The East bundle you know we contributed our original capital and then I looked at was tied to times don't get me wrong, but the team did a very very effective job at redeploy operating cash flow to build two brand new casinos on to renovate a thousand ounce casino from the cash flow was.
Generated within within the business. So that was also a very significant an important theme in the west GCA over its first 18 months of life as well. So that's going to I think materially skew some of the math. It that you were just suggest you might use to then crimes some numbers.
Oh, so just to clarify I guess, whatever total number that we're assuming if your gen. Whatever kind then you're taking your cash from the west GTL bundle that reduces a total investment and then you'd still take 65% of that are out in the form of debt to pay and then it reduces the cash injections I guess, yeah. So I think that's I think that's as much.
More fair inappropriate and that'll get you to something closer that would make sense.
And then to figure out sort of the <unk> call. It for the cleverest a payment can we just take sort of 45% of the leverage you have outstanding for the the West Chip partnership.
Oh, sorry.
Look I look I do it differently I take that the easy of what we paid there then I assume all 100% of the equity is worth that then they add the debt and that gets me to easy I think maybe gets you there at the same way.
That's just the way I would do it for in terms of valuation allergy. Okay. And then I guess just on the same theme of you know, making investments with the cash flow generating you're obviously you bought out your partner you're buying back stock I guess you have other are you looking at other options potential M&A would that cash flow for that gets call. It.
Next 12, 20, 436 months or you primarily focused on the redevelopment program you have going on.
So you know we're always focused on our real business in business. It Hadnt. That's that's a that's the burden the hand versus the 2345 sexy once in the Bush so that business number one that being said in the almost 12 years since I've been here, we've always at the same point in time been looking at other opportunities third party opportunities things.
Coming over the transom or whatnot.
That being said, we've been extremely extremely disciplined and selective on new opportunities and no.
In my 12 years, we bought a tiny little bingo business that would be C and turn it into out what now been are great Little casino a out in Chile, RPC and we bought casino Novus Bros. Nova Scotia, 2015, and we spent upwards of 567 years.
Incubating, a and Ontario process, which has worked exceedingly well so we very much picked our spots and would continue to do so.
Okay and focused on our our business, which has a bunch of opportunity and frankly needs a lot of attention now that being said I think we have to management bandwidth and a continued to a whole balance sheet and liquidity profile to capitalize on any M&A type activities you mentioned should they.
They occur and should they make sense.
And just maybe a quick follow up on that one there would you would you potentially I know you exited the U.S. business, but would you be looking at opportunities, it's maybe outside of Canada as well or is kinda, though your focus just on automatic basis.
So look I think.
Yeah. That's a question, we would not limit ourselves to Canada, but as we've mentioned in the past you know in the years gone by is has been mentioned.
Our view is the further you get from home.
Like you know a lot less a lot lot less and lot of people get there I shouldn't say their assets hands, and that's probably an appropriate send the phone, but a lot of people as they stray too far from their core competencies, what they know even though they do a lot of due diligence like it to it the again, we're very conservative <unk> and we like.
To stay realistic on what we know and so we would absolutely go further afield, but.
We would really do that carefully and thoughtfully and and do our level of best for it to be the right kind of opportunity with the right kind of resulting outcome versus getting excited about something and getting into it and then realizing that there's more to it it and not so good way that we would need to deal with so.
Look I'm not trying to award you off one way or the other but I think you know it needs it would need to be.
Absolutely the right thing with the rights support and the right thought and the right diligence, but yeah, we would still be open to that and you look we're we're learning and growing as a company in these assets that were creating Ontario and this footprint.
It's it is now but it is absolutely.
Going to become World World Class and a world World scale and you know we are growing along with it and making it happen and I think that puts us in a much much better footing to consider over the medium and long term some pretty amazing incremental global opportunities.
But you know you should you should learn to walk and walk really well before your jog and then you should job really well before you like Ron and then before you sprint right. So you know where.
We you know that's the way we think that's the way we act.
Okay, and then one just I guess at a higher level, one maybe a two part question.
In terms of you know the interaction with the regulators NBC I guess would the M.L. investigations can you maybe update on you know where those are Oh I guess the the regulators relationships are now with you know the operators, including yourself and also a second part of being in Ontario can you maybe comment a high level on the.
Progress that has been made I guess, specifically with your bundles on the regulators any feedback in terms of as its on track with what they had anticipated just at a high level. You know just trying to understand their relationship with you on the regulators both NBC on inventory.
Sure. So I think you should focus your PC questions. There's the Cullen Commission, there's a public website, there's lots of information on it as we've said from the very beginning we very much support the initiatives out there a and we expect to fully participate in that and and were.
Sure and we're looking forward to that so I think Oh, you know it's my work for you, but you shouldn't listen to me in any event because you can go do some of your own work. So I think you should go and I understand it from a lot of disclosure. It's available perspective are you know and in terms of Ontario in there and the regulatory environment.
I mean, we're here operating a some very significant assets we've been doing it.
For three and a half years out in the east bundle and we continue to and we continue to do it to today with a very very big footprint.
I you know again, it's a regulatory question I would tell you that from management's perspective, it's our view that we are in good standing in every single jurisdiction that we operate and it's our intention to absolutely remain in the very best of standings with all of our regulatory partners.
Okay, and then why that's important and this is just parents my I think one point about would be you know and all of the Canadian jurisdictions, I think we have very strong and very appropriate regulators and from our point of view it and our perspective the stronger the regulator is and the more in tune they are with being proactive to make sure that the.
Business is being regulated inappropriate way the more comfortable we are in and we're happy to say that and Oliver jurisdictions, we have very confident regulators and we appreciate the work they do to keep this business quite honestly and in a very good place.
Thanks for that and then just one last one on B C. I guess you made some commentary earlier on how the various facilities are doing but I guess as you look forward.
No.
What do you I guess whats the timeline that you're working with in terms of in a winner regardless when river all can pick up on hard rock I guess.
Becomes even stronger is trying to understand I guess, if we can call. It a turnaround in results. There following some of the regulatory impact us over the last year and a half when those facilities are that entire segment can maybe there was some sustained growth.
So you know that that's a good question I tried to give some visibility on that from our perspective again, the future I'm, We're management, which is awesome, but the features on the future like that's you know if I knew the future I wouldn't have to work because I could just going bad on it and it would be would be a no brainer. So look.
I think it's still going to take time on the revenue side of things.
Or the cost side of things and were pretty good at the cost side of things for those of you that have followed us for a long period of time. So we've already as I as I mentioned started to action or the cost efficiency effectiveness side of the equation, which I think will improve things materially from a math perspective.
In terms of looking for.
Material growth in gross gaming revenues, I think I think everybody needs to understand in most regional markets.
In fact on almost all of them very material Chichi our growth in our industry is is it's very hard to come by and you know I think BC for many many years had.
You know it had a unique level of sustainable year end of year in Gigi our growth because if a localized phenomenon. A you know I think it's going to be difficult to how's that re occur where we have very significant gigi our increases.
On a consistent and regular and sustainable year over year basis, I mean look I'm, not saying that we're not going to try to do that we may not get there I'm just trying to be very realistic and level set. So I think if we can generate some percentages of growth on that GTR side out there will continue to have very good and strong.
Business that generate tremendous free cash flow and as not only been our roots, but it's at afforded us to do a whole bunch of amazing things across the rest of the country office that offer that engine out there and I think it'll continue to serve us well as an engine to accomplish.
Our corporate objectives for many years to calm, but its you know this is not like and I would never promise I think and you know in three months all of a set are going to start growing change your by 10% out in BC that that should not be an expectation.
By our shareholders.
Okay. Thank you.
Thanks, a lot.
Thank you.
And at this time Mr. dwell we have no further questions you May proceed.
Thank you Sylvie and thanks, everyone for your participation. This morning before we conclude I would like to remind listeners that forward looking statements were made during this call for those who join midway I encourage you to listen to the replay of this call and hear my earlier comments regarding these forward looking statements. This replay will be available through the investor.
Relations section of our website at Www Dot GC gaming Dot Com. This now concludes the call. Thank you.
Thank you, Sir ladies and gentlemen, this doesn't do you conclude your conference call for today. Once again, thank you for attending and at this time, we do asset you. Please disconnect your lines enjoy the rest of your day.
HM.
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