Q1 2020 Earnings Call
These statements that we make our based on assumptions as of today and we undertake no obligation to update these statements as a result of new info.
Nation.
During this call we will present, both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in today's earnings press release.
The press release in form 10-Q are available on our website at Churchill Downs incorporated Dot com.
And now I'll turn the call over to our Chief Executive Officer, Mr. Bill Carstanjen.
Thanks.
Snack good morning, everyone.
With me today are several members of our team, including Bill Mudd, Our President and Chief operating Officer, Marcia Dall, Our Chief Financial Officer, and Brad Blackwell, Our General counsel.
Just nine weeks ago, we shared our 2019 year end results and our growth plans for 2020 and beyond.
We talked about the exceptional year, we had and we were just as excited as we look forward.
As we've all seen however, the global pandemic covert 19 has change lives throughout the world and inflicted harm on our citizens our economy income.
Please throughout America.
If there was one point I'd like you to understand today. It's this.
On the relevant government authorities permit the reopening of our businesses Churchill Downs will be prepared to do so following all the best in class policies and protocols to keep our customers employees.
These and communities as safe as we responsibly can.
Our team has determined to attack the challenges imposed by covert 19.
And manage through them with determination and creative.
Tivity.
As the daily routines of Americans changed over the last month, so to the business landscape for our company.
Over a period of several days, we closed all of our gaming properties.
We also discontinued racing a turfway park and fair grounds.
The racetrack are only two tracks conducting live racing at the time.
We elected to keep the backstretch of these facilities open in order for the horses and the people who take care of them to have a place to stay.
It was the right thing.
Do.
Prior to closing our properties in March our company had experienced very strong results.
While our final first quarter numbers were significantly affected by the closures of our brick and mortar operate.
Sure.
As we will be our second quarter, we immediately took the necessary actions to reduce a broad array of expenses and ensure and six significant liquidity.
With our exceptional back.
Now lets sheet and careful focus on managing cash expenses, we are strongly positioned to whether this period and will emerge and more efficient and focused company with a strong roster of growth opportunities.
Today I'll update you on several important topics and then Marcia will walk you through the financials for the first quarter and provide an update on our capital management liquidity than we will have be happy to take your questions.
I'll begin with an update on the spring Nita Churchill Downs racetrack.
After careful in collaboration with the Governor of Kentucky, Andy Bashir and the Kentucky Horse Racing Commission, we've developed a series of comprehensive safety protocols under which we will open the backside of Churchill Downs Racetrack on Monday may 11th and begin live racing on a spectator free basis. Soon thereafter on a day we expect.
To announce shortly.
We are among the very limited for businesses to open in the first round in Kentucky.
And our team has worked very very constructively with the Governor's office to earn that privilege.
Racing with spectators and of course opening Derby City gaming will follow as soon as the relevant authorities concluded a safe to do so.
We support their careful.
Deliberate process and we'll continue to be active and constructive participants in the development of the appropriate protocols.
As a result of the closure of our gaming properties.
We have significantly reduced our maintenance and growth project capital expenditures for 2020.
Weve eliminated nearly all maintenance expenditures, except for mandatory items until our properties are reopened.
Regarding growth project capital, we've elected to continue investing where it makes sense and stop where the timelines to completion are far out the bulk of the expense has largely not yet been incurred or in the case of hotel developments, we need to revisit assumptions regarding.
The occupancy rates and travel patterns going forward.
I will talk about the larger projects one at a time.
Okay Grove Hrn facility in hotel.
We're going to finish the historical racing machines and hotel facility at Oak Grove with a planned opening of September this first or as soon thereafter as permitted under state and local protocols.
We have put the equine event center outdoor concert venue and other non core still unfinished elements of the build out on hold for now.
We will be incurred.
We nearby in Florence, Kentucky.
This is analogous to our Derby city gaming property located close.
Two and associated with.
Sure.
We will build the Newport extension and existing shopping center and we hope to open in the.
Fourth quarter of 2020.
The revenue generated from this facility will.
Ultimately 500 historical racing machines and the bar area. This creates 73 full time equivalent jobs in northern Kentucky area.
Hello.
Mark.
And state regulations.
We have a second location to conduct simulcasts.
Thing.
The additional historical racing machines at Derby City Gaming Churchill Downs racetrack.
Correct.
For extension annual growth will significantly increase jobs and tax revenues in the Commonwealth increased the purse money for the horses that race at our racetracks attract more money to be wagered on our races because of the increase in the quality of our.
Current artificial racing surface with a new state of the art artificial surface call to Peter.
We have placed a temporary hold.
On the continued architectural design phase of the new grandstand in historical racing machines facility. While we complete this initial work we are not.
Not surrendering much time from the completion date and certainly it makes sense to balance conserving cash with ordinary course growth project growth capital product efforts.
Wow.
You can pause on the design work without losing much time, so we have.
As the fate opens up and we complete the tear down of the existing grandstand and the installation of the new racing surface. We expect we are likely to pursue the next phase with all delivered speed.
Derby City gaming smoking patio.
We also announced that we will be adding a second outdoor smoking patio on the south side of our existing Derby City gaming facility that will provide for approximately 200 additional historical racing machines by early fourth quarter of 2020.
Our existing smoking patio outperforms, the gaming floor and it is clear we will substantially benefit from lower smoking positions.
We will be able to incorporate more the new titles from our two new suppliers of machines scientific games in IGBT through this expansion.
We introduced 24 machines from scientific games on the Dirty City game or late February and we're very pleased with their performance.
Rivers.
This planes casino in Illinois.
The reverse casinos in the process, we're building a parking garage in connection with the recent authorize gaming expansion, allowing for an additional 800 positions it's already 90% complete.
As you might remember 130 of this.
Additional positions were added in the fourth quarter of last year to the existing facility.
We have now paused on the planning and execution of the expansion necessary to accommodate the additional 670 additional positions.
We have also paused on the parking garage, but that is a decision. We will continue to think about given it is fairly far along and as a prerequisite to the expansion to absorb the other 670 positions.
Miami Valley gaming.
We previously announced that EMG.
It would be expanding their gaming floor, adding a garage and adding a hotel we've put this on hold for now.
Turtles racetrack.
We've completed the quarantine barn and medical equine.
These next two derbys, which will now be running fairly rapid succession. The September and then next may.
We remain extremely committed to investing in the build out of Churchill Downs Racetrack. However, we feel it is prudent at this time to pause this investment until we have greater clarity on timing for a return to economic stability.
As this is a project where a lot of cash would be good.
Pulling out the door for construction with the revenue from opening still 18 months or more way really makes sense from a cash perspective to hold onto the funds for now.
Churchill Downs Racetrack virtual durable party and the 146, Kentucky Derby.
We announced last week that we've partnered with NBC to develop and host a day long at home, Kentucky Derby Party on Mesa.
Second the original date for the 146, Kentucky Derby with the goal of raising $2 million Workover 19 emergency relief efforts.
Eurs of Mbcs broadcast from three to six P.M. Eastern standard time.
We'll experienced the magic of the Derby, while revisiting the 2015, Kentucky Derby that began American Ferros historic Triple Crown Ron.
There will also be lots of other updates and surprises during the telecasts.
MVC broadcast will highlight Churchill downs first ever virtual horse race, the Kentucky Derby Triple Crown showdown.
A computer simulated version of the Derby under the Twinspires, featuring the 13 Triple Crown winners throughout history with the outcome of the simulated raise determined by a random number generator generator factoring in.
Based upon the relative past performances of each horse.
And can vote on their favorite horse to win a Kentucky Derby Dot com.
Inner to win a deluxe Derby hospitality experience and can make a charitable donation to covert 19 emergency efforts.
The Churchill Downs Foundation will match up to $1 million of charitable donations made by fans related to this event on Kentucky Derby Dotcom.
Please watch NBC, the Saturday and enjoy what I think will be great fun for everyone.
Our team continues to plan and prepare for the 146 running of the Kentucky Oaks and the Kentucky Derby.
Our team relishes the challenge of the September Derby and is deeply committed to holding the very best Kentucky Derby ever and certainly the most unique in any of our lifetimes.
September fair to still four months away a lot can happen in our country and I expect that it will.
We will adjust and respond or whatever the circumstances, and we'll work tirelessly with state and local officials to develop any and all necessary protocols and procedures to make our event a safe and responsible spectator events.
The Derby has been held every single year since 18 75, most years, it's easy.
This year, we have to work hard with our state and local leaders to make it everything it can be and we will do that.
The impact of the Kentucky Derby extends well beyond the Twinspires at Churchill Downs. It is an incredibly important time for the city Louisville, and the Commonwealth of Kentucky culturally economically.
And with respect to our time honor traditions.
As I said, we are working extremely closely with federal state and local authorities as well as leading experts to take all necessary.
Steps to protect the health and safety of all who attend and participate in the Derby.
The reopening of our gaming properties.
In every state where we have a gaming facility. There are ongoing discussions that will impact when and under what conditions gaming facilities will reopen.
We are active participants in those discussions.
It is likely that no two stage will be exactly the same with respect to timing and operational protocols, but certainly all or most states are studying what others are doing and thus we are like likely to see some commonalities between jurisdictions.
We remain optimistic that reopenings or on the horizon, but we do not controllers, we only controller participation preparation and commitment to the reopening process with the state and local authorities and our various jurisdictions are ready, we will be ready as well.
Before I turn the call over to Marcia I'd like to share a few brief additional thoughts on our first quarter earnings.
One of the things that makes us unique in the gaming space is the diversification of our businesses are twinspires business within the online wagering segment has grown significantly as more individuals that online, particularly with so many brick and mortar bedding outlets closed and perhaps with fewer entertainment options in general.
Even as the number of race tracks that are actively running races has declined twinspires really capitalized. This has been even more true as we progress through the second quarter.
We have been very pleased especially since the quality and quantity of racing content has declined we are excited for Churchill Downs racetrack to open sometime in May which will provide a further boosted twinspires dot com.
We have always been thoughtful stewards of our shareholders' investment in our company. We have maintained a capital structure with modest leverage that has provided flexibility to invest in our existing businesses and also to pursue strategic investments to create long term shareholder value.
We are well positioned to navigate these difficult times, we now face as a result of the decisions we've made over the past number of years.
We have enhance the diversification of our earnings in our three core segments and created a pipeline of organic investments and greenfield opportunities that will still exist for our company when cities in states begin to reopen for business. We are built to get through this and succeed over the long term.
We appreciate all of our team members customers partners and community a government leaders, who are working with us through these challenging times together, we will reopen our properties again over the coming months and gratefully welcome back our employees and guess.
Marcia.
Thanks, Sarah and good morning, everyone.
Our leadership team has always had a commitment to maintaining a strong balance sheet with relatively low leverage in relation to others in the gaming industry and the capital structure that provides flexibility to support organic growth and enable our business to be nimble is different economic cycle.
Our focus on Andrey core segments Churchill Downs online wagering and gaming has provided strong and consistent growth and diversified earnings stream Entertainment company.
Our commitment and focus along with our leadership teams resilient.
Have enabled us to respond to this unprecedented can get a crisis with actions that have treater and provide additional financial resources to our company to whether these difficult time.
As Bill discussed as a result is accounted 19 pandemic in late March we began declared all of our wholly owned gaming property and certainly horseracing related operations.
Prior to beginning at the property closures are adjusted EBITDA results through the first two months in the quarter. We're tracking significantly ahead of last year's quarterly results and head of our expectations.
We benefited from a full quarter ever equity investment in various displays.
Strong growth quarter over quarter at nearly all of our wholly owned gaming company and from Miami Valley Gaming.
Continued gradual diversity gaming based on gross revenue per machine today and ongoing best in class gaming margin.
And second quarter over quarter growth and wagering on Twinspires.
As you can see from our press release in 10-Q, the primary driver or the reduction in adjusted EBITDA in the prior year quarter as due to the overall impact to the property closures in March.
Bill discussed cylinder decisions related to the counter the property closures.
We've aggressively reduced expenses related to our gaming related property.
We have furloughed most of our gaming property team members and we've implemented salary reductions for all remaining salaried employees across our entire company based on the graduated percentage with the highest earning salaried employees, taking the highest percentage reduction in salary.
We've also eliminated discretionary spending and working with our business partners to obtain discounts.
The favorable terms, we reduced our cash burn while our properties are closed.
Our team has approached the reduction stemming from the viewpoint.
Our stand is variable stand.
Opportunity for reduction in light of the sacrificing our gaming property team members and making during these difficult economic times.
Based on these expense reductions waving monthly burn rate and approximately $16 million, which includes operating in corporate expenses and interest expense.
This amount excludes working capital and capital expenditures.
Please turn rate can be further reduced should we need to make further reduction.
As Bill discussed we've also significantly reduced our maintenance impact capital.
We spent $9 million on maintenance capital in the first quarter.
With all of which had been sent by the end of February.
We've eliminated maintenance capital spending exceptionally mandatory items.
Lead time items and capitalized labor related improvements to our Twinspires technology platform until our property reopened.
We'll reevaluate our total year maintenance capital spending projection after our comprehensive reopened and we will provide an update on our next earnings call.
We said $39 million on project capital and the first quarter.
All of which we said on the Elk Grove facility and the backside context, Fixler renovation and initial phases, the first turn hotel and HR and content and Churchill Downs racetrack.
As Bill discussed, we paused project capital, except for investment necessary for projects that have near term adjusted EBITDA growth potential with high returns.
These projects are.
Finishing the Elk Grove, HR and hotel facility for September opening.
Building on a Turfway Park extension in Newport, Kentucky, and we'll be ready to open in the fourth quarter as our finishing the initial stages of our main Turfway Park facility.
Adding an additional smoking patio every city gaming that we'll be ready to open in early fourth quarter.
And finishing fixler renovation at Churchill Downs Racetrack in time for the 146, Kentucky Oaks and Derby on September 4th intact.
We remain committed to building the hotel in Asia and facility at Churchill Downs Racetrack as was the Turfway Park atrium facility. However, it is prudent at this time deposits projects until we can have better clarity on a year and longer term impact as this crisis on the U.S. and global economy.
Based on the current environment, we are planning to stand Patrick capital of 180 million to $220 million in 2020.
We will provide an update on our next earnings call.
At the end of March we had net leverage of 3.4 times, which is net of the $688 million the cash Alec outstanding on our revolver.
As you can calculate color numbers I provided you can see that even with this significant level as cash capital.
And an ongoing property closures scenario.
We have cash liquidity well beyond the next 12 months.
With the flexibility to adjust the capital spending as necessary in the coming months.
Regarding our credit facility, we obtained an extension and a lower pricing Grail for our revolver from our bank partners on March 16, and we have no long term debt maturities until the second half of 2024, except for $4 million, an annual amortization and our term loan b.
We have to maintenance financial covenants in our revolver and we are in compliance with these covenants at the end of March.
We are proactively obtained waiver for these covenants is the financial Covenant reporting period, ending June Thirtyth 2021, with modified Covenant calculations credit reporting period, ending September Thirtyth 2021 December 30, Onest 2021.
As part of the waiver agreement, we've agreed to a minimum liquidity requirement of $150 million and we agreed to refrain from share repurchases until we are no longer under the waiver agreement either through compliance with the covenants.
Opting out as a labor agreement.
With proactively obtained flavor due to the rescheduling of Derby week from second quarter 2020 to third quarter 2020.
And the uncertainty regarding the timing of the reopening of the gaming properties second quarter.
It is important to note the shifted Derby week from second quarter to third quarter more impact comparability of our quarterly financials in the second quarter in third quarter as this year as well as next year.
And finally on our last earnings call to 60 days ago, I discussed a list of organic projects for which we have good line of sight to the projected economics.
Let me say split our properties are in ramping for business, where any unique position and having a significant over a number of opportunities to support our long term growth.
For example, we will still have many opportunities to create unique experiences for our customers to go to every week every year and to add the hotel in Asia and facility at Churchill Downs racetrack at the appropriate time.
We will still have the opportunity to expand historical racing machines in Kentucky, and diversity gaming Turfway Park and outgrowth with top tier titles from additional manufacturers, which will help increase personal any far racetracks support the horse racing industry in Kentucky and increased Johnston tax revenues in the Commonwealth.
We will still have the opportunity to expand reverses planes and the potential new casino expansion opportunity in Illinois, like our Midwest Gaming partners.
We will still have an industry, leading online wagering platform for horse racing with brick and mortar gaming facility in market access deals in key states, coupled with an experienced team leading the Sasha sports betting in Igaming state by state.
We will still have a diverse portfolio a smaller wholly owned regional gaming assets that collectively and scale to a level then and now enables our gaming leadership team can manage these properties efficiently.
And most importantly, we have a great team that is dedicated to delivering long term shareholder value.
With that I'll turn the call back over to Bill for the Econoprop call for questions.
Thank you Marcia.
Stephanie I think at this point, we're ready for everybody's questions.
Stephanie can you please open the call for questions.
Thank you as a reminder to actually not your question. Please press star followed by the number one on your telephone keypad.
And your first question is line of Dan Pulitzer with JP Morgan.
Hey, good morning, everyone and thanks for thanks for all your commentary.
Good morning. So my first question is on the Derby is relatively high level, but obviously, we're in on chartered waters here in terms of uncertainty I was hoping you could maybe give some high level thoughts on just how you're thinking about what the that may look like in England timber and Bill I know you mentioned, there's protocols and procedures in place that you're looking at forsaken responsible spectator that.
I mean are you considering your social business being a fan is there any chance you will see dr. raised without bands in the standard or is there an alternative setup just just wondering some high level thoughts here.
Sure.
Good morning there.
So first it's still four months away I think we see.
Everyday.
New events in changes and new examples of what other people are doing.
Another thing that we pay a lot of attention to is what does the progression of of the pandemic and.
I've been pleased to see and Kentucky for example over the last week on a weekly comparison basis.
New Hospitalisations have dropped by 75% from about.
80, a day down to less than 20.
At about 4% of the hospital beds in the state.
Our currently occupied by Cobot 19 patients. That's that's about 4% so somewhere around 250 people in this state or in the hospital for covert 19, and so that's just an example of data we track and it's good to see the general progression of the data in our area and.
Certainly if there are material changes in their data, particularly for the worst than than we would have to revisit lots of assumptions and lots of planning, but recently the data at least in this area is looked.
Looked promising but of course, the Derby is an international order our national event.
So so there's lots of data to track, but generally what the future looks like over the next four months is going to be a reflection of the policies and procedures in the protocols that have been put in place buys and by the various states are localities and the effectiveness of those are those policies and so far we see a lot to two.
I'd be happy about there's been a lot of good decisions that have been made by by leaders, including those in this state so.
Without being able to address every potential hypothetical I would say in general that it's fair to expect.
Even under the reasonable cases in the best cases scenarios, it's reasonable to expect over the next four months at after four months, we're still going to have protocols were still going to have differences. There is still going to be social distancing issues, there's still going to be.
Other processes and protocols were going to expect companies to fall and our customers to follow in order to hold a safe event and we're committed to working with local authorities and with our customers and team members to make sure that we implement those protocols.
But I think what those protocols will ultimately be we'll have to see there a lot of.
There are lot of things yet become but we always caution our team members to not overreact to every quick fade article that's out there, but just calmly progress for process through the data.
And work.
With the authorities work with each other to just make sure we reflect best in class practices. So whatever is capable of being done in this country in four months whatever can be done whatever is the the the maximum.
Acceptable.
Processes and protocols, all that's where we'll be that's that's what will be offering that's what we'll do so im fairly optimistic on more than cautiously optimistic I am optimistic that we'll find a way through this but again I can't sit on calls like this and address every potential hypothetical or give you a crystal ball and say that things will be great.
In the country.
I would say in general a lot of really good decisions have been made by really strong governors that have put the country in a in a position where they have shown improvement in some of the metrics that will really matter not not only now but four months from now so I think in our state.
It was really gratifying to work directly with Governor Bashir on the protocols to open up Churchill Downs racetrack.
If you've seen some of his commentary he was fairly complimentary of us with respect to the comprehensiveness and the complexity of our processes to keep everybody safe that comes on our property and Thats just what you can expect from us going forward. So.
Dan you may have a follow up on that.
But when you said in this share you have to I have to balance.
Conveying accurate information without sort of drifting down any potential hypothetical that we couldn't even quantify on a call like this.
Yes and I.
Completely understand I appreciate the color.
I guess we.
Continuing with the Derby at least could you maybe give some color on comp what conversations have been like sponsors broadcasters in premium seating customers given the move to September and I guess, maybe what are the some of the segment that that may be more impacted in others.
Across your revenue EBITDA margins.
Sure so.
Generally I'd say.
If you are familiar with our facility for the listeners that are familiar with our facility out there you know that we're not like a football stadium perhaps.
In the sense that everybody is not sitting shoulder to shoulder and a bowl.
One after another in lines of people are facility has ever it's well more than 1 million square feet and it has a variety of different environments. So we have environments that are similar to.
Hi, and restaurants.
In terms of.
Density and and.
The core we have a festival type atmosphere in the in field.
We also have some stadium seats.
But generally you see a variety of different different environments and so the protocols for each of those will be different.
I'd say our customers in general I had been particularly.
Humble behave.
By the level of commitment to our AR.
Our event our customers remain excited we offered refunds in the in the the percentage of both pursuing refunds certainly.
It was less than I expected, so there's still a great deal of excitement.
And our community and among our customers from wherever they come from and our event and and I think there's an expectation on their part there we'll work through whatever challenges are necessary to to softer than the experience as close as possible to what they normally expect I'd say, that's true generally with our sponsorships too.
Generally and I can only speak in generalities generally when you're when you're when.
Well I think about our.
Network partner NBC, and when I think about our our major.
Sponsors Theres just been a real commitment to working with US none of us have a crystal ball. This pandemic has been.
That event that's new.
To the world it's.
Not just to America, our two American companies so.
So everybody I think brings a sense of.
Hi, wanting to work together and wanting to see what the order the possible will be but I think.
Dan just.
It's important to convey when we talk about these issues with our teams.
We remind them that nobody gives you anything no. One says it's going to be easy no and tells you you're.
You are entitled to something we expect to earn.
[music].
Everything we get we expect to earn the right to hold our event, we expect to earn the right to earn our customers business. We expect to work hard to make this a positive this event.
Happening, we expect to have to workforce so.
I'd say our team generally relishes the challenge our our morale both among our sponsors and our partners and our team members is let's get on with it we got four months to figure. This out we've got four months to prepare let's do that.
Alright. Thanks. Thanks, that's helpful. And then I guess, one last one which is highly for March on on cash burn. It seems like you can pretty aggressively cutting your year strengthening our costs across your property that they're close as to what extent.
This is Daniel and I guess, how many of the cost come how much of this cost come back.
So asked another way as we look at a few years down the road, assuming a more normalized environment should we expect margins to maybe better than they were in last couple of years and that's it for me.
Yes again.
Well just said yeah, Dan it's really difficult to talk about hypothetical us out a couple of years at this point, we're really just focused on.
Controlling the cost during this period time as I am I talked to in my portion of the discussion reviewed every cost as variable that's how the team a purchase it on ongoing basis anyhow during our normal operating environment and.
Really we're focused at this point in time getting our businesses in our property.
We opened going forward so.
You know well have to see.
Two years spent the team has always been very focused on margins as you know Dan.
Yes, Okay, alright, guys. Thanks, so much good alright appreciate it.
Thank you Dan.
Your next question is from the line of David Katz with Jefferies.
Hi, good morning, everyone. Thanks for your commentary and and.
And calendar.
I'm sure we'd all agree that we normally work with an incomplete set of facts, but this is a little ridiculous.
What I what I wanted to ask about was just going back to some of the commentary about capex.
I believe that you said maintenance Capex is.
$9 million in one Q through February.
No no maintenance Capex plan for the rest of the year.
It would it be wise for us to estimate some kind of a bogey that.
Thats that is out some lesser.
Right through the rest of year that they're ultimately will be some over the next four to six months.
This and that and the second part of the question is really around the growth Capex, which I think you said was one a 200 for the full year with 39.
Spent.
Yes, how would you have us.
Cadence that.
Through the quarters. Please.
So David starting with maintenance capital actually said that we've eliminated maintenance capital expending, except for mandatory iden long lead time items.
And capitalized labor related improvements are transfers technology platform and from our property to reopened.
So right.
Is that 9 million I mean is happening first quarter, right, which almost all of it was expense.
For the end of February and so I do think that if you were running a projection you should assume some level of sand grain second quarter.
Properties close at this point in time related to those items. There I did not provide a number it really is dependent upon when we reopened the properties and thats massively are giving an update.
At the end the.
Next earnings call, we'd given your prior projection iron maintenance capital spending for the year that assume that we'd be open at our properties entire year. So.
Thats kind of the outer balance of what and when it would be if we then open the entire year. So.
And Thats the extent that we're willing to give guidance at this point in time.
And then regarding project capital David actions have one Navy hundred 80 million to $220 million.
Yes.
And so I think your question was really the cadence of that if you think about it the majority of the spend.
You know is really going to finishing out oak grove and for that to be ready.
The second is the cash trends after that to be ready by the meat you know the September timeframe.
You can think about that as that's really a heavy focus on second quarter and they really in the third quarter. There maybe some of that coming into the early part of fourth quarter.
When you think about the.
An extra turfway.
The extension for Turfway that also is going to be ready for fourth quarter second I think it's in the majority of the spend.
And the smoking patio as well for every city gaming those are all going to be sort of in that second quarter in third quarter and this year there'll be some that will fall into the fourth quarter, but not as much.
Right.
And if I could just go back to the growth projects, which I appreciate your.
Updates on them I, just wanted to be clear about.
The fact that as we sit here today.
As best as.
We're considering considering that is on hold rather than.
Yes, cancel right I mean were our we conserving cash or are we.
No revisiting.
No I just was hoping for a little more depth.
Yeah.
Please.
Sure David This this is.
Bill Carstanjen again.
These projects are on hold.
We expect to resume those we expect to picking back up we expect to return to a growth trajectory for this company that is similar to what we've done over the last number of years, but we have to do so prudently. We we don't have a crystal ball either and covered 19 is.
Something that.
Nobody seeing.
In several generations.
Pandemic like this that impact that America like this so this is just about being prudent.
I have.
I had the benefit of.
Being around for a long time, and I remember prior difficult economic periods, and and and it's something we've all.
[noise] sort of ingrained here within our within Churchill in this senior management team cash is really really important and so when the economy took this turn because of the pandemic. We went into a different load we want to make sure that we have adequate liquidity, we want to make sure that we manage our projects at our cash flow very.
Very carefully we were very proactive very quickly with respect to reducing expenses and with respect to putting projects on hold until we have better certainty and better clarity, that's how we'll run because having been through economic ups and downs before that's how you should do it in our opinion. So this isn't.
Subtle commentary.
That we think these projects will never be viable or something like that at all it's quite the opposite this is just prudent management of cash and.
Candid recognition that we don't have a crystal ball and we want better clarity on on how this in this.
Pandemic effects the economy, how long it takes to get a vaccine how long it takes to develop treatment.
Protocols.
As we get better clarity, we'll be right back at it were generally an aggressive group, but but without aggression comes a fair amount of prudence and some basic core principles like always understand your cash position always understand your expenses and be quick to adjust if you've seen any weaknesses in your assumptions.
Perfect and one last follow up if I may.
For Marcia, which is.
Has have you thought at all about I mean, you have normally had.
A relatively conservative balance sheet.
Now in that kind of threes range.
I think it's possible that you come out of this with a more conservative.
Stance on it does those two to three become the new three to four.
Yes, David I think that.
10, severally again, a hypothetical question.
As to everyone, we'll see.
As the timing of the adjusted EBITDA movement, you will see leverage move up a little then.
Our company at level said, yeah, we have historically not right and then you will see it come right back down in line.
Yeah, we've never really I think as a company and viewed it as we have to hit a target leverage.
As we've talked in the past David It's always about is it the right acquisition to make for all of the reasons. It Bill has talked about in the past around what are the strategic filters.
He is.
Others put deals through and is it the right investment organic investment for us to make US a company based on whether it's going to create long term shareholder value for us versus really saying Hey, we got ahead of target leverage number and related to create long term shareholder value that's really what that.
That's really how I think we his leadership team will Ali.
You know remains focused on.
Got it thank you very much.
Your next question just line actually lived assets that Kohona.
Good morning, everyone.
Had a couple of questions.
Regarding your online segment is good.
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I guess the three main questions that I had.
It is largely just looking at you know the growth in unique say, yes, you know the quarter was strong for online.
Certainly there seems to be an expectation right. That's that's going to continue but you posted 11% uniques gross in the quarter.
And that's suitable for you've been able to grow that business in terms of uniques double digits now for.
A number of years and I'm wondering is the type of customer that debt you're acquiring is that.
Whatever you can share with us on that so that's number one number two is if you can kind of talk about.
The competitive landscape.
It seems to be a two horse race between you and TV G.
TVG now is kind of ramping their product offering with sand all in what you think that means.
And then finally, how will you use this asset twinspires right given the scale that you have there.
And what product development plans you have.
To be able to use this asset.
Ample site.
That America.
Thanks, Ed.
Great Great group for questions I would say first of all the twinspires growth rate in the first quarter.
If you look at kind of first 11 weeks is completely different than the last two weeks of the quarter last two weeks of the quarter kind of post.
At March 16th saw a significant increase and handle so the first quarter.
Number really isn't reflective of lower experiencing and twinspires today.
As as all the Ltvs.
And on and tracks are racing live.
Our or dark for that matter, where customers that go to wager on horse racing that really has forced a acceleration of that transition of customers going to bricks and mortar locations to conducting their business online and I think that.
You know people that have been resistant to.
Transferring and going to online channels have probably learned about it and a good experiences and and we will probably stay there to be quite honest post close. This crisis. I think this is only one of those industries that has a a permanent change in how.
The industry goes to market.
Terms of I can't say, we've done any that I've seen any analytics over the last couple of weeks. It says what is our customer well do our customers look like.
But anecdotally I can say that we picked up a lot of core horse players, but we've also picked up a lot of other players now that are playing Thoroughbred racing because all the sports event sporting events that have been canceled across the world and there is nothing else to too.
I have fun with and go go later on so we picked up a whole bunch of new ones.
New customers and I'll had a data, but my gut says that it's all over the more.
In terms of the competitive landscape with with that Twinspires and TVG you know.
We keep an eye on that obviously we have.
There is a barrier to entry and horse racing that doesnt exist, maybe with sports and that barrier to entry as you have under the federal law you have to add the consent of the horsemen.
And the race track that is conducting the race in order to take wagers on it so that's a pretty big barrier to entry barrier to entry.
[noise] Doesnt exist. If you have the gaming license and some of these states is still exists with respect to horse racing, but if you have a sports wagering license in New Jersey, Your Pennsylvania, Indiana, you can't take wages, a horse racing, even if you guys sports wagering without the consoles horsemen and has to be in apparel mutual format, unless otherwise consented to.
So I.
No I think its a.
I think that kind of falls and evolved into both your questions with respect to Fandel. They would have to go get concerned people to be able to do that.
But also falls into I don't want to go to deepen the strategy, but certainly having asset flights, Kentucky Derby. If you can go away drawn a derby on the same Matt as you can wager on the Lakers or the local cardinals or or New York mix than.
Thats Thats, an that's another offering and other people may not be able to offer so I think it puts us in a good position once we get all the technology.
Situated in sorted out.
We got a great team that knows how to market to customers and acquire with right price. So hopefully that answers your question.
Yes, it does.
Thanks, and just one clarification I guess you know.
Over time or.
Maybe one it's reasonable to have a single wallet.
Okay.
So the offering within Twinspires, and then bet America.
Look I know, it's it's it's probably naturally very sensitive in terms of competitive and so forth, but I know theres, just a technology obstacle as well and I'm wondering like how long are what when that could conceivably get there is it a is it two years or is it a year.
In those ballpark turns because I I realize it's a little census.
Yes, no no problem.
You know technology takes time I think it's all of matter a prioritization. So when you have technology teams and scrum teams that are doing different aspects of the of the plan from your billing you got to say do I want to have a single App, where somebody New Jersey, Pennsylvania, Indiana as they go through states can they sign on to one app and get into this.
System, and that's something I think a lot of.
Online sports wagering companies are struggling with.
And even going live in states, where radical Ivan Staters my priority to get Parimutuel wagering on a same platform. So that's it becomes down a prioritization and a lot of cases I think if we made at the main priority we could do it a lot faster, but I'd like a year is kind of a good benchmark and I may be off our six months on either side, but.
And our fans of 10 more states go lives and low price focus on going live in those states over over this is a priority, but I would think a year is probably a fair way to think about it.
Makes sense, thanks very much.
And at this time there no further questions.
Well thanks, everybody. We appreciate your interest in our company on your continued investment with US we promise to do our absolute best to generate returns for you and do the right thing to grow our business.
Mid term in the long term. So thanks very much we look forward to talking to you next time and.
B wells spaced out there. Thank you.
Thank you. This does conclude today's meeting you may now disconnect.
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