Q2 2020 Great Canadian Gaming Corp Earnings Call
And ladies and gentlemen, and welcome to the Great Canadian Gaming Corporation second quarter 2020 results conference call at the site note that all lines I know listen only mode, but following the presentation, we will conduct a question and answer session.
Should you require immediate assistance at any time, Please press star zero for the operator also note. That's called is recorded Wednesday August 12, 2020 at this time I would like to turn the conference over to town store. Please go ahead.
That's Silvia and good afternoon, everyone and welcome to Great Canadian Gaming Corporation's Conference call to review the Companys financial results for the second quarter ended June Thirtyth 2020.
Joining me on the call. This afternoon, it's broad Baker, the company's Chief Executive Officer, John or so the company's general counsel when she privacy officer.
I would like to remind listeners that the latter portion of this call is reserved for institutional investors and analysts and you need to your related inquiries can be directed towards Chucky Lynn Executive Vice President stakeholder relations and responsible gaming.
You can be reached six all four to 474197.
Before we begin I must caution oldest intercept but this conference call me contain forward looking statements that reflects management's expectations regarding the company's 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 assumptions. These statements are made other 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 financial information. This call is presented in Canadian dollars in accordance with international financial reporting standards or I FRS, except for adjusted EBITDA and free cash flow, which are not for us terms defined in the company's mdna.
Unless otherwise noted all financial information for the comparative period exclude the financial results of the U.S. region as they have been presented as discontinued operations after breaking even getting corporations was sold on June 27, 20 Nike.
I'll now pass the call to Rod for their review upgrade Canadians financial results for the quarter will then provide an update my companies business outlook Rod.
Thank you Terry.
Good afternoon, everyone and thank you for joining us today.
The second quarter continues to be very challenging for us as our full complement gaming operations and the salary amenities remain closed for the entire period due to the impacts of the Cobot night gene Corona virus epidemic.
Well, we have taken actions to significantly reduce our operating expenses during the closure period, our second quarter results were negatively impacted materially by the closures, resulting in a decrease in revenues expenses adjusted EBITDA free cash flows when compared to the same period in the prior year.
During the period the company took measures to significantly reduce its operating expenses to mitigate the decline in revenues the gaming facility closures human resource expenses in the second quarter, primarily consisted of costs related to remaining personnel required to support the business during the closure period.
Second quarter of 2020, approximately half of the property marketing and administration expenses were related to direct property operating costs, including property taxes insurance utilities and maintenance.
The remaining half related to administration costs, including license subscriptions and professional cheese.
Great Canadians revenues and adjusted EBIT, <unk> second quarter, 2024, 62.8 million and 31.8 million respectively.
Revenues for the second quarter 2020, primarily consisted of the Ontario bundles and you only tight.
Service provider feet for permitted capital expenditures recognized in full in the second quarter and continued contractual service provider based fixed fees under the respective casino operating agreements, which resulted in a positive adjusted EBITDA.
Adjusted EBITDA was also positively impacted by $20.9 million in lease payments, which are no longer recognized as operating expenses in adjusted EBITDA due to the implementation of IRS 16, new lease accounting standard adopted in the prior year.
Sure.
During the second quarter of 2020. The company also recognized negative cash flows, which I will now discuss in more detail.
As a result at the temporary suspension of operations, we have placed more focus on monitoring our free cash flow and additional non I FRS measure, which has been disclosed in our second quarter results.
We believe free cash flow, it's a relevant measure to assess the company's performance during the closure period.
Particularly to understand the companys non discretionary cash requirements.
Second quarter 2020, the company had negative free cash flow of 123.4 million, which was consisted of adjusted EBITDA of $31.8 million as previously discussed.
Last changes in noncash working capital of 22.2 million.
Capital expenditures of 98.6 million substantially all of which was in Ontario.
Payments of lease liabilities of 20.9 million.
Interest paid up 13.5 million.
We funded the hundred and 23.4 million up negative free cash flow by borrowing an additional $60.7 million on their credit facilities for capital expenditures in Ontario, and the remainder from available cash balances.
Furthermore, prior to the end of the first quarter of 2020, we borrowed $325 million on the revolving portion of the senior secured credit facilities to ensure we had sufficient liquidity available.
As you understanding of our circumstances wasn't hence we felt it was appropriate your be pay these additional borrowings during the second quarter of 2020.
[noise] shareholders net loss from continuing operations was $31.4 million second quarter of 2020 due to the previously mentioned facility closures.
I'm now going to provide an update on the companys outlook.
Since the closure of all of our properties across the country almost five months ago, we started to develop comprehensive reopening plant with the health and safety of our team members and gas as the foundation.
As part of the planning process.
Closely with key stakeholders, including our crown corporations and regulators to ensure our plans properly address provincial health authorities guidance and recommendations as provincial economies reopened.
Certainly provinces have now approved casinos to reopen as part of their face reopening plans. We are working diligently on determining the reopening timelines and dates as we complete the necessary health and safety enhancements outlined in our plans.
It's a temporary closure took effect you have ensured that each of our operating agreements remained in good standing with our provincial crown corporations.
Once we reopened we expect our business will slowly recover with the pace of recovery governed by our gas as they adjusted the new environments and gain confidence that our safety measures. In addition, we expect limitations on gas capacity and the salary amenities to be in place for an extended period of time.
However, as confidence levels increase capacity restrictions easing and patrons, becoming more familiar with the new guest experience, we expect the business will recover further.
Following the government on trust lifting of restrictions on non critical construction projects on May 19, 2020, we have restarted certain key capital projects in Ontario with appropriate workplace safety measures in place.
We continue to reassess.
The impact to the timeline for the completion of these projects in particular, the development I take great Casino resort casino would buy.
I've communicated in last quarter's call during the second quarter 2020, we worked with our banking partners to complete amendments to each of our credit agreements to temporarily waves certain financial and other covenants as at June Thirtyth 2020, Great Canadian continued to remain stable capital.
Did you position with a cash balance of 490.2 million and 1 million, our say 1.106 billion.
Very little Undrawn credit on our credit facility subject to applicable covenants and the ongoing support from our backs.
This was a challenging quarters are great Canadian as it has been for many other businesses in our country and we expect to be honest low cost recovery when we'd be open our gaming facilities.
Our sites reopened we will gain a better understanding of our financial outlook, while finding opportunities safely improve our business performance.
I want to thank our shareholders for their continued support as well as our great Canadian team members for their hard work during these unprecedented times.
I just final and very important comment I want to thank all of our team members that Unfortunately, I've been temporary left without work to the closure for their patients perseverance and understanding.
For two welcoming you back soon.
Parents, you can now invite questions. Thank you.
Thanks, Rob and before we begin today's question and answer session I would like to remind everyone that questions will be reserve for institutional investors and analysts.
I would also like generate.
Customer relations philosophy, which encourages investors and analysts to utilize this public conference call at their principal medium for speaking with great Canadian Senior management.
Dolby we can now go to Q anyway. Thank you. Thank you ladies and gentlemen, if you do have a question at this time. Please press star followed by one on your Dotcom, Sean you will hear a three Tom prompt acknowledging you request and should you wish to withdraw your question simply press star followed by too and if you're using a speaker phone we do.
Such a please lift the handset before pricing any Keith. Please go ahead and press Star One now if you had a question.
And your first question will be from George domain Moshe Bank.
Yeah, Hi, Hi, Rod and congrats on some pretty good cost containment corridor I.
Hi, George Thank you for that.
Maybe hopefully looking ahead to the reopening here it looks like.
A very varies by jurisdiction, but can you maybe tell us your view in terms of which one what's jurisdictions, where the closest to opening and this is a real leading towards maybe more of a 50% asked me reopened some with what we've seen the U.S.
So that's a very very challenging a question to answer George So I'm going to mentioned a few items and then I think it it's up to you and everyone to try and triangulate their own fast you have just future.
The first thing I, but I would say is.
As much as Weve made.
Significant progress in all of our jurisdictions until we get to that all defining moments where it's at confirmed go.
That means that it could the timing on any particular ability to move forward thought could vary materially depending not only on <unk> microenvironment dealing with us but also the more macro environments that are communities are expecting so I think it's very difficult and challenging.
Even as we've made good progress and move things along just leave you with any sense as to what we believe the timing will actually be and I am hopeful at some point, we'll be able to surprise you with announcements that we will be opening up at some point in time and as I've message.
Yeah in the last call once we have a visibility on that you will have several weeks period or do you get the businesses organized again.
With our team members and protocols in place and and and that like so I think I think it's very important that you understand that and even if I was to give you a sense our ticket jurisdiction that I thought was not better place as we were getting close shirts I could mislead you because things could change your so I think that's oh.
For writing.
Belief that I need to leave with you Firstly I also think.
It's very important you talked you look.
Got it provinces and what they have announced so far in terms of general business opening requirements from a health and safety perspective.
And that's gonna be a key driver in terms of our ability to also opened in a safe inappropriate fashion as businesses in these communities and along those lines. There's been some visibility with that you can look to broadly and I would encourage you to do that in in all four jurist.
Frictions, you did mention about a 50% capacity and I think you all see I referred to some other markets in some U.S. markets and I don't lots of people up and trying to glean learnings from many different jurisdictions.
I think Chris I think in same number of very short term data points.
That will fall on a continuum that frankly, I think will be much more misleading and helpful. If you look at a Ontario, B C, Nova Scotia, New Brunswick opening.
Profile I think if you look at and again. This is now rod bigger personally versus Corporately, I think Canada by and large has done and out and that jurisdictions before that I mentioned, there have died and exceedingly thoughtful job <unk> containing a very difficult health situation and I do believe there is a strong.
Long strong priority to continue with the right type of reopening program broadly, which we fully fully support I mean, it's you know George we've always been in the marathon business and maybe criticized for its between robust capital structure lots of liquidity things like me.
Sure we invested for many years and I'm cherry to be successful through their modernization programs to adding multi year multibillion dollar capital programs in Ontario, where we're all about marathons not sprints.
Can I think you know coal plants has really hurt businesses that are actually like a sprint business. When they went out told okay now putting out the marathon and you sort of loan your wide and in the started my time so.
I think there's things going on in many markets that are very good similar I would be very misleading from I think the very sound and thoughtful political and health leadership that is being exhibited in Canada, which we fully support a we don't want things to get out of hand, such that that business needs to be clamped down and.
Somebody to the jurisdictions and I won't mention any in particular, but again to exercise some significant caution a lot of them talk about things like capacity and many of them have talked about fire coach capacity.
And it sounds good and say, but the reality is when a market that said we're at half capacity.
It's actually a filled up sue and they're using almost all their machines and their line people in and if you see some of these communities that I might be referring to south of the border they've got some very significant health challenges a better going on right now and I think the government's up here are thankfully and our view not on that Kroger.
From a and and will serve us well when we open so I think anything along the lines a 50% capacity the way they've got it it's not really 50% and I think for US again, no crystal ball.
That's a that's a much much much too optimistic slash reckless early days opening for facility in my view sitting here today looking at everything that we know so when we talk about and I know weve been criticized for being overly conservative the Pat I do believe it's just a marathon not a sprint.
When you get back in the game.
Get back into game that very safe and an appropriate fashion.
And to Reengage, not only with our guests, but our team members with our new operating environment and makes we do an exceptional execution of.
The guest experience, which will be extremely curtailed the limited in the early weeks and months.
At but also from a health and safety perspective make sure we do our part I'll just committee. So it's a very long answer, but I think people need to get off this thing of a 50% higher coke capacity and I think anything it's worth mentioning which again things can be different an absolute I think even within our own business. It.
Different facilities will open differently with different levels of guest acceptance and traction.
Look at some of that really they stopped some of these markets.
And I need to take people back to the regional business, which has been around for a long time certainly longer.
Much before cope it and it's been built out over the last 15 10 15 years, there was very little organic growth in many of these U.S. markets, particularly as states would increase capacity it wasn't very difficult and now all of sudden with markets close for.
Several months.
Arguably some pent up demand and then the first facilities opening so that you had.
Instead of you know eight guys open on the four corners, you have two guys opened the first week and then a phasing of that unless amenities you had some very decent results percolating out of some management teams and some facilities, which I'm not saying that business was not there.
I think people are forgetting that as you look a little bit down the road, but all the capacity is online and everybody decides that they'd like to go and trying to reach for that extra chichi. Our dollar in these markets the market hasn't grown if anything if you look at the economic impact of coated it's gonna be challenging for our business. It's a discount.
<unk> dollar business just like other so I think there's some early days almost euphoric sentiment out there, which I think the math does prove out but I think you need to look beyond that to understand what it means over the short medium and longer term and did not like yourself extrapolate out something very early.
I think that that goodness continues and multiply so again I don't want to be tell you guys had a value things are looking at things I'm, all about running our business for shareholders.
And we're setting it up to run it in a very thoughtful inappropriate fashion being supported by our crowd agencies and regulators and we're excited for that data com, but we're not there yet.
Okay. Thanks for that Im okay.
Right you get some pretty good granularity on the DNA costs this quarter and I Remember last conference call. You did talk about Henry financial burden of reopening a can you maybe tell us a little bit about the cost structure, how that looks like in a reopen scenario.
So I think it's too early to Oh go through that as I mentioned, where we have it's going to.
Cost more on a on a per unit of gaming <unk> dollar basis for sure I really have lots left gaming dollars. So.
Yeah.
I think different facilities are going to be quite different as you know we have a very modest sized community type facilities very limited embedded east with much more straight forward flows of traffic for Odyssey basis. Then we've got some that are much more complicated that require much more supply.
So there's a broad range and I think at this point in time, it will be a it would be difficult for me to let you know what the cost side of our math would be once we reopened.
As I think you noticed I think the team has done an exceptional job while we've been closed at mitigating the stranded costs, albeit at a very very significant and terrible impact on many of our team members that being said, we need to keep our business solvent. So that we can invite everybody.
He back and get everybody back to working properly here. So it's been difficult, but I think we've done a good job. There's no question. When we open our cost structure is going to go up materially from that which it has been well we've been closed.
Okay. That's helpful and just one off on the fourth hotline.
I saw 6 million of wage sub seasonal quarter like how do you expect that the trend and the back half and and the second part of the question is do we got any form of aimed at all from the MCRAM corporations.
So that's just formulaic on if you have eligible employee costs and I would leave it to you because I think it dynamic and changing every day in terms of the government or how they've been supporting businesses and some of the metrics.
I actually think if we talk too much about it now tomorrow when there's been a dash additional items or tweaks made to the planning that could make things be more relevant or less relevant for us going forward. So I think I'd like to leave that for you just to do your own homework, but as you can see.
You mentioned, there's a ratio of the amount of cost that we incurred in relation to that so I think you can use that as a ratio looking backwards I wouldn't necessarily use it for a ratio going forward, but we are.
You know very much appreciative of that support it enabled us to mitigate our losses and to have more people back to work on pace to get us back up and running sooner as opposed to later so that we can reintroduce our thousands of other team members that unfortunately are not able to work right now so I.
Buckets, it's it's a great initiate that's helped us get through this period for sure I you know in terms of the other crown's.
Keep in massively success are a supportive.
In all respects.
I think financial is why does it working with US together, we're trying to figure. This out it's it's still a very fluid situation and it's being figured out on a daily basis. They understand how important it is for us to open but to open in the safe and responsible fashion as you wheat and so.
I think that process is going.
Well in terms of.
Financial support through this period, I think you've seen contractually or what we've.
Booked in terms of other snatched supports you just curious that hasn't been a necessity or requirement.
As Weve, obviously funded our closure costs off our on balance sheet, which were more than find with don't get me wrong. So I think that's more than appropriate ER and and forward looking in terms of making sure we can't get business or in a fashion that is.
Stable and safe from that from a health and safety perspective, but that also.
It's possible from a financial perspective.
It's critically important for us and those that things were working on right now.
Okay, great. Thanks for your asset rather than a good luck with the reopening okay. Thanks very much George appreciate the questions.
Thank you next question will be coming from Subodh Con at RBC capital markets. Please go ahead.
Thanks, and good afternoon.
It's a color I appreciate the color you provided earlier on the uncertainty, but I guess, if you look at it from your perspective and apart from the government guidelines on when you can reopen do you have sort of.
Capacity threshold or.
Certain metrics that you can share that you would like to see before you reopen obviously, there's breakeven revenue amounts, but in Ontario. For example, we've got 50 people limits in some places how are you thinking about it like what would you like to see.
I mean, so so right now there are 50 people limits are in Ontario that is factually correct and that's why I was encouraging everybody to look at the four jurisdiction to see what is out there.
And so that is what's out there and so that's the current.
Environment that we're dealing with I am aware or that the government has looked at that cinema business. For example, and I think they approached it a little bit differently, but again I would encourage people to go and look at that as opposed to me trying to paraphrase something that I'm not an expert with had to get it wrong.
So I think there it's a very different situation theres a out in DC.
You know back if you look you have to look at a health authorities and the restrictions placed on large gathering. So I think this is still very fluid for us.
And so it's very difficult for me to go and tell you how I think it play out I would I, if it's not clear enough I think it's.
Streamlines thoughtful good business to open in a very sound and very manageable perspective, and get in the game in a safe and appropriate way and deliver a very good guest experience, even if it's a very different guest experience and early weeks and months I think that is absolutely and our best interest.
No stock markets and shareholders like things to happen today.
I need to look further than that I think you know and I'll just be totally honest, we're in the casino business here and we're not going to make people or get sick I think that would be very very bad thing for us and if we have to start more modestly because it's it's very much it's.
Very safe at appropriate and that's what's not only our view, but our our our crown organizations and our regulators and that's what we want to do and that's we're happy to do and to be honest you know baby steps. When you open up with new protocols or baby steps is actually a smart good thing and then as you go and you see.
Good things are working well then maybe there's an opportunity in dealing with regulators and kind of corporations and and indirectly health authorities to or have things.
Evolve on a more expanded basis, so I think people need to understand.
That's just as I call. It a marathon it sounds batch. This is a journey we're on a journey and I just a very important journey and it's very important that we said is that right at the beginning for success. So I think our business levels are going to be very modest isn't that in the early days I really do and we support that concept and.
We don't I think it's very.
Important that we don't lead a lot of.
Dollars every day I think that that gets very expensive and so we need to mitigate that but we're not going to mitigate that it opening up the doors and creating an environment. That's not contained to control them at appropriate from a health and safety perspective, So we're going to try to get the balance right and if we err on the side, we're going to err on the side of little slower.
A little more thoughtfully little more controlled so that we really make sure we do a.
Very good job here in these respect and I think are not only our our business deserve sat and will be rewarded by that.
I think our communities and and at our people that work within and come to visit us they deserve that as well. So that's our that's our operating approach.
Okay. Thanks for that and then are you I guess from your perspective are you, okay with opening various provinces and a I guess a bearing times or would you like to open all your facilities at the same time. It seems like these causes a little bit ahead of other provinces. So is it sort of a province by province decision.
So, yes, I would say.
You know you said, what do I think it's going to be and then like what's my preference so.
My preference really doesn't matter, but my preference would be if they all opened at once I think I'd be really great. I think the reality of the situation is that's probably not going to be the case here. So.
Everything is being worked on on a silo basis, but with common resources and best practices. So that we can really deliver up the right protocols and and execution path for each of the regions.
But I would expect there to be some different thing and timing of reopening timing between the different jurisdictions and I would tell you.
I think there might even be some modest changes even within a province, just based on operational execution and timing and whatnot right. So, but I think those could be more micro in nature.
Then a province by province, which which is which is binary right. Either you can open or you can't kind of thing. So yes, I I think I think it will be it probably will just evolve to being a staging but there's some chance it might not.
Okay. Thanks, and then a you mentioned in your release that you are reassessing your capex plans and sort of the redevelopment timelines can you give us your thought process of the factors are considering that you know managing your cash flow during the closure that.
Potential increases in some of these construction cost is how are you thinking about that.
Yeah. So that's a great question attitude noticed I spent a lot of time on free cash flow and we've been spent a lot of time and creating something new in this closure period. So that you guys understood. It and you understood our thinking on this there's no question that in this period, if we are not in in business and generate.
Operating free cash flow free cash flow for us has been critically important for two reasons other than showing profitability at and progress in our.
Progress in our business.
It's done two fold it in significant or capital that weve directly redeployed against our Ontario significant capital programs of which we are right in the middle loved right now and then it also provides.
Retained earnings or equity component for the amount of capital development dollars that we borrow from the bank. So it's it's been a foundational piece of how weve been able to by very significant size assets have a multibillion dollar development program underway.
While we haven't gone and issued about shares and done all sorts of other things to raise money to do that so.
With our business not generating cash so now and in fact actually a negative operating cash flow amount. It. It's much more critical through this period that we'd look at cash and cash outflow and.
I didn't once you guys to get to giddy about $30 million of EBIT da either through this closed period, which is it's really I think an outstanding number and we're happy with but you need to understand what that number is made up of and as as we as I mentioned, if it wasn't picked up.
I have for 16, we have 20.9 million of cash lease costs in Q2 that we paid and had to pay that no longer show up in our EBIT da line, which we have a regular amount of EBITDA and this is like 10% to 15% of our EBIT da then that's fine.
And this quarter it was 66% of the EBITDA number and it's a non cash EBITDA. So right away that's not there and then obviously as that business wound down as a message the last call when you're up and running regularly yep working capital levels to see this they stabilize but when business.
Stops and you have you ran negative working capital balances then they start to unwind that takes cash. So we had cash come out this quarter for that as well.
And then we get benefit by our RPC this quarter, which as you know.
His once a year and its significant $24 million, who appreciate it but even in this quarter alone. We spent $100 million of capex. So even in terms of that net if those two even this quarter alone we're still negative cash flow quite a bit. So it's critically important through this period for all of these reasons that.
That we'd look at our cash in our and our and our and our cash liquidity and cash outflow situation now that being said, we're very excited about our prospects at Pickering and Woodbine when the government allowed a non critical construction to resume weve resumed those projects.
Yes.
And we've done that I would tell you at this point in time, even though weve had delays and things will be delayed Oh, we spent another hundred million dollars. This quarter I don't think Q3 is going to be quite that high but Q3 is still going to be a very very significant capital development program.
Principally at at Pickering at Woodbine in Ontario, So.
That continues because we think that's an important part of a few trend as I mentioned, our marathon and our liquidity on our balance sheet over the years that we've been somewhat criticized what I think this is you know this is a real proof positive hit it served us well because its affording us more an ability to continue with these very significant and critically important cap.
Capital programs through what's an incredibly difficult closure period for us right now so.
No you're spot on and that's why we think that now from a timing of.
Where we have bulges in the capital program and how we're lining up to actually open both.
Recurring which as you know was coming up to this short term opening potential at the end of Q1 very early Q2, and then would buy a little further down the road, we need to be a thoughtful on when we're going to bring those properties online so were continuing the.
Capital program to create the Optionality of when we're going to actually opened those two facilities Pickering being obviously much sooner on the timeline, but at this stage the game until we have a much better understanding of opening and traction and then how health and safety protocols.
Might change overtime to enable us to have a a larger gaming experience and a more amenity gaming experience in a safe and appropriate way without understanding those metrics and and the potential behind those it would be reckless to pretend that I know when we should.
Open up these new big facilities that are very exciting and will be fantastic, but they also remember come with a whole bunch of new fixed operating costs. When you open though so we need to make sure that the business. The environment is there to support those so so we have the ability we are continuing along and as I mentioned Q.
He is going to be very very significant capital expenditure period for us as well, but you shouldn't extrapolate from that that.
We're going to open Pickering in six weeks from now because we're not going to do that.
Okay, and just a follow up on the commentary around you know obviously you going into the after Q1 reporting you indicated that there was gonna be some of these government related payments and you provided a scenario for what an operating loss could look like can you maybe give us directional metrics under what.
A shutdown through Q3 could mean for operating income and even castle.
Sorry, so if we're if were shut downs through Q3 for the entire quarter, you're you want me that.
Comment on what I think our cash flow it looks like yeah. They got Q1 reporting sort of give us an area that if the facilities remain closed through Q2, you know his one scenario for what cash flow or operating income loss or operating loss could look like would you have kind of what the absence of these government revenue payments, what what Q3 could directionally look like.
So I think if you look at Q2, that's a very good place to extrapolate out.
ER, So I would do that and then obviously as we're all very clear.
The P. C is a Q2 only if that happens once a year Q2 so.
Fire you I would back that out I also think it's a little bit difficult to say, but as I'd mentioned when you first close the business how there's the unwinding of negative working capital. So I think our working capital profile in Q3 won't be quite as punitive as it was in Q2 so.
I think you have those two items there that you should just from our Q2 operating environment and I also mentioned that our capital expenditures are going to be very very significant in Q3, but not quite the level of Q2. So I think you should use all of.
The same numbers that you now have in Q2 and think about those three important line items and adjust for those and you're probably doing not too badly then.
That's great. Thank you for color.
All right no problem.
Thank you.
Ladies and gentlemen, as a reminder, if you do have a question. Please press star followed by one stones.
Your next question will be from directly.
Canaccord. Please go ahead.
Yes, hi, Rob Thanks for that color in the and the change in disclosure, which is obviously very helpful for business had a quarter.
One question I had I think you may have just answered it but when I look at.
Your.
Yeah, you're marketing and promo costs for the quarter.
20 million.
That would you would kind of consider like a fixed cost for that line item.
So the short answer is yes.
I would tell you that there's a small amount.
But it's almost immaterial, but there's a small amount of.
One time license fees you know Microsoft's.
All those guys. The gout you did you charge way too much money that falls in this period that may not be repeated but order of magnitude.
You know.
That's what we're looking at and as we tried to provide disclosures you know we have.
I think you've seen how the math is I think our teams done a very good job, but we have these.
Monster facilities, and they come with monster cost.
And we have every intention staying current because there are life blood on these months or cost that that come with these facilities. So they're pretty much hardwired, whether we are.
Operating or not for the foreseeable future here.
Yes, okay.
Makes sense.
In terms of just your your your balance sheet.
And I understand you to get some covenant relief.
Can you just talk about like is there a covenant that we should be aware of on on and on your debt or is there a comfort level within the management team that we should we should be thinking about.
So from financial covenants perspective.
We have relief until January one 2021, which means that Q1 effectively so I think at this point in time.
With so many unknowns in terms of not only the timing, but that the traction in the environment and the math, it's going to flow out of that I think at this point, it's premature to.
Look at those kind of the items.
With any degree of confidence to see how much that needs to be focused on at this stage or not I mean, I think its look it the reality is.
When we get back in business and we're starting to rebuild our business I think that is a very important milestone.
Irrespective of the math it falls out of it and that's the first place. You started then you take it up from there, but again I think between now and even through the end of Q by 2021, Theres a lot. It's a short amount of time, but there's a lot of ground to cover not only in terms of our business operations, but as I mentioned, what's going on out in our community.
And I think that's going to be just as much a driver as taking it down to us it ticking down to our covenants or whether there needs to be a conversation or not or augment over the medium term going forward. So not to say that I've not had were not totally focused on that we absolutely are.
But I think at this point in time, it's very difficult to understand.
For someone like you are even not how to focus on it right now and what to do about if you know what I mean so.
Yes, no at fair enough. Thank you very much.
Okay. Thank you there.
Thank you.
Next question will be from David Mcfadgen Cormark. Please go ahead.
Hi, I have a couple of questions.
I'm sure.
How's it going.
Thank you you yeah pretty good.
Yes.
It seems like at this point in time.
China, but where it came out but it seems like other plan can you tell us exactly when the casino well open it so I'm kind of fluid and flat.
Any upon each provinces guidelines is sacrosanct is that crack.
Can't tell you because I don't know not because I won't tell you that is correct.
Okay, Yeah, that's what I thought and in APAC, you've given us like your top actually expenditures perspective for the second half that 20, Connie I didn't see a Indians.
But can you tell us whats the capex would be heard a lot of have plenty plenty.
So I gave some visibility on Q3 right now in relation to Q2 that it's going to be very material, but less than Q2, and I think even Q4 as I mentioned in terms of the timeline and if you look at a Pickering I think even though.
Not too far away, we we need to reassess.
Ah how much gas we put on things are not depending on when we open how that goes what our protocols are what our capacity.
Picture it looks like so I think there's many many items that are going to our team is very very nimble and thoughtful.
And we are going to.
I have to be very dynamic about managing that so that we frankly set ourselves up for the best opportunities from a timing at a cost perspective with the capital programs, but as I said sitting here today.
Not being opened at all not seeing what the environment is like operationally and there and the traction in the feedback.
From not only our guests, but from our stake holders that we worked with in support us.
I think it's very difficult even for Q4 at this point in time to totally locked down the number but my my my sense is that Q3, and Q4 will continue to have very significant capital investments and continuing our Pickering.
I would find a development programs barring a something quite negative from an operating environment perspective.
Between now and that.
Okay, and and then the like earlier on the call you said that.
When things Opana ER.
Fully up and running the cost structure is gonna be higher just because.
Increased safety protocols increased cleaning costs, whatever can you give us any idea on a percentage basis, how much those costs might be higher.
No I just want I can't I. It's it's that's that's a lot of detail and frankly, we still.
Haven't totally finalized a how sites would actually open and then fallen traveling through all of the cost because I think there's still some dynamic analysis and decision making that needs to be had in order to make that determination and it could be quite material. So.
So I wouldn't want to mislead you with something but I mean, if it.
I just want to make sure that people are clear when we're close.
Like our facilities other than.
Security in surveillance, there's nobody there right. So when we're open we have a lot of people. There. So its order of magnitude you need to look at it as operating cost environment not closure costs Q2 levels. When you talk about opening doors and that's why frankly, we are really really take.
During the time to understand how to open not only safely.
And appropriately from a from a health and safety perspective, but also to make sure that we don't get ourselves a situation, where we open and we have seriously upsides out math because that.
Would not be good scenario for us so it's in difficult stuff and it's it's big dollars and big assumption. So we're working through that and unfortunately, I wish I had honestly I wish I was at a point, where we could provide more detail to you on these matters because I know there critically important for all of us, but we just don't have them at this point in time so.
So I'm not able to share that with you.
Okay, all right there so even age or anti be I was kind of surprised I thought you would really be anymore, a parent cash right now given the current state claims.
So just wondering what's what's your what's your plants that the in San Diego.
So I don't like to message to match, we did renew it I think you know there's always optionality in things and that's just something it's an optionality renewing it doesn't mean that you're going to go spend all the money tomorrow like we haven't some other years frankly.
You haven't read the documentation, yet, but I would tell you that we dipped our toe in.
I.
Just I just after the end of the corridor.
And bought 300000 shares at 26 55.
And I think you should read into that dipped to toe and I think you should also read into it.
With some.
Significant price discipline so.
And again I never talk about price in value because it's up to you and shareholders to decide that's all I know is that the the journey from an operational perspective, and getting in business and cash flow generation and markets a lot of the time very much do at very successfully lead results. So.
I'll leave it Alex you guys Supergrid, how how much to lead and when.
But I think we so we have that there and I think it might be a tool to use to.
Create some incremental shareholder value at some point in time, but I think you'll find that will be much more disciplined.
Especially from a price perspective, but I think also from an aggregate dollar perspective through this very difficult period. So I think your assessment is not wrong at all.
In in a in the world that we're living in.
Okay, and then just on DC I mean, I think the the plan has not only casinos and who knows what the looked like until the private businesses or is that that basically mean are going away after ways her back.
Just wondering if so.
So so I think you should go back to.
The government officials site I think there was some confusion originally when.
That was published there was a statement made at the end relating to some industries, including ours and because it came at the end of all the stages. It looked like it formed a part of stage for.
My understanding is it does not form officially apart of the phased stage for that being said it still needs specific direct approval.
The government and the government Health authority right. So so I think the comment that you made and that made it into the newspaper and as we know the newspaper doesn't always get it right and then people pick it up over and over and over again I think it ended up actually being a little bit erroneous and I do believe I was told I didn't check it myself I was told if you go back to the.
Yes document now on the BC governments website that you could see that it's been re format. It. So it doesn't it's not it's not interpreted in an incorrect fashion.
Okay all right. Thank you.
Great. Thank you David.
Thank you next question will be from Eli Summer at Madison. Please go ahead.
Hi, Rod how long do you expect the business to have access to the modified thresholds and Ontario.
So at this stage I have.
No visibility on how long or the modification or any of those items. Those are as we disclosed in our first quarter that was something that was being worked on and at this point in time.
I'm not in a position to provide visibility on that.
I do think.
It's important from our perspective, and I don't ever like to.
Mentioned things out look you know as I talk about this being a marathon versus the sprint.
I don't believe and I think the orientation through a number of our stakeholders is not that this is a situation that rectifies itself in days or even a couple of weeks like it's not that it became so I think.
I can leave you with that take that impression, but anything further than that.
I would not only be inappropriate, but we're not at this stage, where I have something.
That I can disclose in that respect.
Understood and.
I guess, a slightly different question would be during the so called ramp up period. How do you expect the company share of total Chinese yards are compared to pre cobot levels and Ontario.
Sorry, you mean our share.
As compared to the entire marketplace.
No you're share basically you're putting the portion that you take back out of the total Gigi art and your market adjusted for changes in splits and changes in threshold.
So I think that same question in terms of thresholds and adjustment. So I had the same answer for you at this point in time I think.
That's not something that I I am able to give you further visibility on at this point in time.
Okay. Thank you.
Okay, sorry about that thank you like.
Thank you.
Once again as a reminder, ladies and gentlemen, if you do have any questions. Please press star followed by 100 Touchtone phone.
And next we'll hear from Subodh Con at RBC capital markets.
Thanks, and just a couple of quick follow ups, you said that there's still construction you restarted at the Ontario facilities, namely Pickering, and Woodbine can maybe give us a quick update on where Pickering is right now I think opening was expected and I think Q2, but I guess.
With that pushed out are you now onto sort of the hotel another amenities for the construction or you're still working on the main casino.
So.
You know everything went shovels down and then we've.
Weve reinstituted and we're working on it again.
We still as I mentioned, we're balancing the amount of cash outflow in this close period first inflow. So things have been stretched out a little bit and also obviously need to health and safety perspective. So.
We will maintain the ability to open the facility on.
Yeah.
Six to eight weeks notice.
When we want to and we're continuing to move it along but we're not moving along so that.
We have the entire thing sitting there and the extra last dollars of Capex sitting there because they need to be funded or in terms of the aggregate dollars and then the interest cost on it so I think you're still going to see.
As it didn't want to be opened at a phased opening and I think you need to look things can change, but I think if you look at the environment right now things like a.
Huge theater and conference Center.
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We're not opening those up in the first instance, anytime soon now right. So I think you know too many dollars in some of those very specific.
Modules or are not the best plate spend money at this point in time, wherein some others.
Like a parking garage as or whatnot, Woodbine and that type of thing whether it's always been parking charges. That's a great thing in in in any respect. So I think I don't want to get into too many details on.
Nuances that are how our team has approached six I think they've done a very thoughtful job not only from a capital development perspective, with time and auctions and flexibility, but also from a business perspective, putting dollars, where we think we can opened earlier in sooner and get some benefits from it.
That's where we're where we switched that moved to priority, which it all of these to get done, but what you do and what order get some flexibility I think can be and has been tweaked a little bit, but I I think to get into more detail than that right now.
It's going to bore a lot of people and not be it a lot of value at this point in time.
Okay, and then just on the fixed payment that you received from the oil g. for the bundles or should we assume for Q3 in Q4 that the fixed payments across those bundles, you got sort of evenly across all four quarters. The Pcs, obviously, a Q2 event, but want to get an idea for Q3 in Q4 for the fixed payments.
So the fixed payment that's contractual payment and it is ratably over all of the quarters and always has been so yes, that's that should be looked at differently than the PC E, which as a function of making significant capital investments in in the past our PC pool.
Those I'm, saying that in quotes.
Oh Gee are so filled with capex dollars that as soon as we get to the first date April onest of their fiscal year. That's when the the PC. He is recognized payable. So it is very different and you could look at the one ratably or overall four quarters.
Whereas Pete the PC is.
Well one quarter only in Q2, yes, that's correct.
Great. Thank you.
Okay. Thank you have some huh.
Thank you.
At this time gentlemen, we have no further questions. Please proceed.
Thank you Sylvia and thanks, everyone for participating on today's call before we conclude I would like to remind listeners that forward looking statements were made during this call for those who are doing joint midway I encourage you to listen to the replay of this call to hear my earlier comments regarding these forward looking statements.
This replay will be available through the Investor relations sections of our website at Www Dot GC gaming Dot com.
This now concludes our call. Thank you.
Thank you.
Ladies and ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we ask that you. Please disconnect your lines.
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