Q3 2020 Twin River Worldwide Holdings Inc Earnings Call
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Good morning, and welcome to the Twin River worldwide Holdings' third quarter Twentytwenty earnings Conference call. All participant lines have been placed on listen only mode to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you would like to ask a question at that time. Please press star followed by the number one on your telephone.
Then keypad if you should need assistance. Please press star zero. Thank you I would now like to turn the call after Craig Eaton Executive Vice President and General Counsel. Please go ahead Sir.
Good morning, everyone and thank you for joining us on todays call by now you should have received a copy of our Q3 2020 earnings release issued earlier. This morning. If you have in the earnings release and presentation that accompanies this call are available in the Investor Relations section of our website at Www <unk>.
Watch wind river W.W. holding spot on.
The the news and events and presentations tab.
On today's call. It's worked happened here, our president and Chief Executive Officer, Steve Kim Our Chief Financial Officer, Mark Christa Foley, our executive Vice President of strategy and operations. He is also president of our Rhode Island operations filled.
Phil Giuliano, our Chief marketing Officer, and Joe Mcgraw Hill.
Keith Accounting officer.
Before we begin you would like to remind everyone that comments made by management today will contain forward looking statements before.
These forward looking statements include plans expectations estimates and projections that involve significant risks and uncertainties. These reps are discussed in the company's earnings release and does he see filings.
Actual results may differ materially from the results discussed in these forward looking statements.
During today's call management will refer to certain non-GAAP financial measures reconciliations to the most comparable GAAP financial measures are included in the schedules contained in our earnings release.
Not provided a reconciliation of forward looking non-GAAP financial measures due to our inability to project special charges within certain expenses.
Todays call is also being broadcast live on the Investor site and will be available for replay shortly after the completion of this call.
I will now turn the call over to George George.
Thank you Chris Good morning, everyone Bruce.
Were extremely excited to take this time.
Some additional color on a multitude of recent announcements we've made.
Well, we appreciate you joining us since our last call. We have made significant progress on many or strategic growth initiatives.
And there's a lot to cover so we'll just get right into it.
Getting back to our first acquisition in hard rock flux in 2014.
Renewing towards over downs merger going public in early 2019.
Then through the strategic acquisitions that we have announced or consummated in just the last six months.
We have been disciplined and targeted growth initiatives.
We have transformed from a single property operator in Rhode Island.
Increasing national player.
Soon to be 14 casino properties.
More importantly, operating in 10 seats.
We've made significant progress towards our goal of becoming the industry leader for gaming.
Entertainment in America.
There's still a lot of work to do but we feel reached a major milestone with yesterday's announcement that after acquiring the iconic valleys bran from students back on October 13th.
We will be rebranding the company has allergies Corporation, let's.
Let's begin trading on the New York stock exchange under the ticker symbol.
Hey, Al why beginning November night.
Valleys is an iconic brand that's.
That's commensurate.
Premier properties and amenities that the finer diversified portfolio the.
The brand has a rich history of gaming and entertainment that will provide immediate and enhance nationwide brand recognition.
This is a significant part of our long term growth strategy.
Acquiring the sprint accelerates our ability to execute on.
We have begun the process of evaluating how we will best leverage this prestigious brand.
Forward to talking more about our vision for the brand over the next several months.
Since our last call we've taken significant steps in our evolution of advancing our disciplined portfolio diversification strategy.
Opportunistically expanding our regional presence through accretive transactions.
Finally, with Juniors and just two days ago.
Element of our latest acquisition Africana Evansville property from key and then.
Unlike our past acquisitions and Indiana, we have partnered with the right to purchase the operations of Adams.
Gee LPI acquiring real estate.
The transaction, we will also be selling real estate of Dover Downs GLP I.
Entering into a long term master lease.
Both properties rent.
Rent totaling $40 million here.
Structuring the deal with GLP allows us to acquire the operations in Evansville for $140 million, which represents an adjusted EBITDA multiple of 4.4 times on pre Colby basis.
Using any cash not increasing outstanding debt as.
As a result of this transaction.
Net of the master lease payments, we expect to pick up $20 million of EBITDA.
As a result of this transaction on top of that we're also acquiring unencumbered rights in sports betting.
Gaming skins associate it with the Evansville operations ex.
Excess the growing Indiana market.
This transaction represents our first foray into propco opco structure look forward to partnering with GLP I suppose the Evansville, and Dover properties as well as our potential opportunities in the future.
Steve will provide more detail on the transaction and specifically the refinancing aspect of this transaction in a few minutes.
In addition to this week's announcements earlier this month, we announced our intention to acquire the Juniors Casino Hotel Rocco, Illinois.
Delaware North the.
The purchase price for this acquisition was $120 million, which represents a 7.4 time multiple based on tumors adjusted EBITDA for the year ended December 31 2019.
We completed our offering of $125 million additional senior notes on October nine.
This will aid in the payment for the purchase price for Juniors.
Acquisition is expected to be immediately accretive to earnings.
We are confident that both of these acquisitions represent value accretive multiples for bricks and mortar operations on a standalone basis, while further expanding our geographic reach into additional attractive markets. This.
This transaction also provides access to growing gaming markets in Indiana, and Illinois with the potential to capitalize on lucrative sports betting and gaming opportunities.
For the opportunity to leverage our operational expertise and proven integration approach to drive incremental revenues and cash flow improvements at both locations.
We continue to be very active in the M&A market, taking a disciplined approach our pipeline is strong and the markets are seeing increased activity.
We'll continue to be opportunistic.
Finding the right opportunities that align with our long range strategic goals.
But M&A is not our only growth strategy we're.
During the third quarter anticipating the closing of valleys in Atlantic City in Q4.
We announced several exciting strategic partnerships, both in sports betting and gaming for several of the licenses will be acquiring as part of the transaction.
We remain enthusiastic about the proposed GTM joint venture in Rhode Island, We expect these partnerships to be accretive to earnings.
Mark will provide a further strategic update shortly.
In addition to all these announcements we reported strong third quarter financial results.
We closed out the quarter with adjusted EBITDA of $38 million up $2.4 million or 6.8% in the same period in 2019 motion.
Most encouraging and these results was the improved margin performance, which when coupled with the incremental EBITDA provided by our newly acquired properties helped to offset the decrease in revenue we experienced as a result of covert related capacity restrictions.
And ensure that operationally, we were cash flow positive for the quarter.
Consistent with what we discussed in our last call that our operational performance in late Q2 in early Q3.
Segments, where the company, we're able to operate that close to the normal capacity.
With more amenities available for most of June most notably in southeast segment, which consists of Biloxi and Vicksburg.
In the mid Atlantic segment, which consists of Dover, we experienced strong demand and significantly improved margins.
For the second quarter in a row, the strongest individual performer in the portfolio was or hard rock casino in Biloxi.
Overall, the southeast segment provide an adjusted EBITDA of $16.4 million for the quarter.
Within that segment hard rock accounted for $14.4 million of adjusted EBITDA in Q3.
This represents an increase of 4.5 million or 46% over prior year.
Expert also outperformed our expectations for the quarter and contributed year over year adjusted EBITDA percentage growth.
Consistent with that of Biloxi.
[noise] Dover also shows strong adjusted EBITDA growth in the quarter, increasing $1.3 million or 20.6% although.
While there will be revenue was down approximately 24% adjusted EBITDA margin showed an almost.
200 basis point improvement year over year.
We also saw gradual lessening of restrictions and wrote off over the quarter.
Did that impact results.
Especially compared to our initial period in June.
Although demand in Rhode Island has rebounded is still below FICO that levels.
Our restrictions that went into place and Thats juices in August coupled with minimal food and beverage offerings and the continued closure of hotels still remain headwinds.
However.
In spite of this Rhode Island segment still produced adjusted EBITDA of $15.1 million as margin improvements of over 300 basis points somewhat mitigated the revenue reductions and help ensure the segment generated positive cash flow.
On our West segment. Thanks.
Specifically some commentary on the performance of casino Casey the first.
First quarter of ownership for the first quarter. The segment contributed approximately $90 million of revenue and $4.7 million in adjusted EBITDA.
These results are extremely encouraging as not only do they represent a strong first quarter in Kansas City, which was relatively in line with historical performance for the property, but they were also.
Only recently allowed to open 24 hours, we are still operating with limited food and beverage operations. Additionally, these strong results do not reflect any upside we might expect as a result of the planned $40 million capital improvements, which will kick in for kick off next year.
Recurring theme of this quarter was robust margin improvements.
Digging into the numbers a bit more since reopening.
We have realized meaningful new efficiencies with reductions in labor expense and marketing spend which has helped to drive operational free cash flow.
We continue to be selective with our amenities in Q3, focusing on higher margin business as.
As a result of these expense reductions and new efficiencies. We're now operating at an even higher margin than prior to the pandemic.
For the third quarter on a same store basis, we noted an adjusted EBITDA margin increase of approximately 650 basis points.
Labor savings accounted for approximately 270 basis points of the improvement.
Our marketing savings led to another 160 basis points.
Many of the increase can be attributed to lower cost of goods and the elimination of certain lower margin revenue offerings such as buffets.
While the acquired properties were slightly dilutive to adjusted EBITDA margins for the third quarter. It should be noted that the same store margin is artificially high because revenue in Rhode Island, and Dover is reported net of gaming taxes, which is atypical for the industry.
Even with this impact the overall adjusted EBITDA margins were up over 500 basis points.
While the margin results are very encouraging and we think there is certainly a component of this improvement that is likely to be more permanent in nature gaming environment continues to be very dynamic we will remain adaptive and we will continue to be willing to spend money through pain to captured market share and drive revenue we believe many.
The efficiencies we have realized are sustainable over the long term and result in improved profitability for properties going forward, even though increased sanitation and safety costs are likely to become the norm.
Before I turn the call over to Mark I also want to comment on exactly where we are from an operations perspective.
As we go into Q4, particularly given the ongoing pandemic.
Rather than going through the list line by line I would refer you to slide five of the Q3 Investor presentation, we posted on our Investor site. This morning for current rundown of our operations in light of current restrictions at the property level.
Overall, we are operating with greater capacity and amenities versus the end of Q2.
Seems as though we continue to get closer to full capacity. However, we are still somewhat limited.
We are excited for the day, when we can fully reopened and provide all amenities to our customers in the meantime, we remain committed to meeting or exceeding all guidelines established by the CDC as well as our property specific comprehensive health and safety protocols that.
We had been developed in close consultation and state regulators.
Health officials local jurisdictions.
I am very proud of how hard the teams at the property level are working.
To keep our customers and team members safe during this challenging environment.
I will now turn it over to Mark.
Thanks, George and good morning, everyone, let's focus first on valleys Atlantic City, we continue to work through the licensing process with the New Jersey Division of gaming enforcement and we have our hearing with the Casino control Commission next week, we are optimistic that we will obtain approval and take ownership in mid November.
Concurrent with the licensing process. The team has worked diligently to develop a comprehensive and exciting integration and strategic initiative plan for Bally's AC we will launch that plan immediately after closing on a targeted basis, we will greatly improve the property and customer experience, including a phase totaling refurbishment and the addition of several new and.
Entities. These capex capex projects will be spaced out over multiple years, starting in early 2021 to minimize any customer disruption.
Sports betting is an important part of our plan for New Jersey, we are thrilled to announce that pending licensing.
Licensing and regulatory approvals, we have partnered with Fanduel to manage our Sportsbook italys facing.
Fandel has been a great partner for us in Colorado, and we are very excited to expand our relationship with them by adding a robust market like Atlantic City.
The permanent Sportsbook location is going to be one of the many exciting changes we have in store for bally's and.
It has a unique location just steps away from the center of the Boardwalk, where millions scroll by annually. We look forward to commencing construction on the permanent Sportsbook, which will have a direct entrance from the boardwalk. Shortly after closing we anticipate opening the permanent fandel sportsbook in the spring of 2021, while construction is proceeding we will own.
And a temporary sportsbook on the first floor of the casino.
This fandel partnership is the latest announcement involving sports betting and gaming in New Jersey, where we stand to acquire three sports betting and five igaming skins upon closing of the transaction.
We have already announced strategic partnerships with points that E Sports Entertainment sport trade and the score at.
All of these agreements are accretive to earnings and bring something new and different to the expansive and cutting edge, New Jersey mobile gaming market.
We're also keeping one sports betting and one igaming skin in new Jersey for our own future use right.
Retaining skins for our use is an important part of our emerging national interactive strategy as George mentioned with our pending acquisitions. We will now operate in 10 states. The company's rapidly growing footprint will allow it to serve the over 80 million customers that reside within the markets for these 14 Premier casino properties.
In addition, the customers in the company's database will increase to approximately $14 million, we intend to do to continue to grow this great footprint with the same discipline that we have always extra to exercise it.
With the Bally brand and the unencumbered skins, we have acquired and reserved in our portfolio. We can now unite our customer offerings across our various physical properties, while having a singular online and mobile presence with a brand that is synonymous with gaming we intend to be the first to Omnichannel gaming company operating both physical.
Focusing on those as well as seamlessly integrated digital solutions.
We will not be a land based operator that is afraid to lose the past instead, we will take advantage of our regulatory incumbency and the retail customer database to embrace the incredible growth potential that a digital future holds.
This is all happening in real time and with each announcement, we make we are adding another piece of the puzzle. We look forward to unveiling our rebranding rollout strategy that broad George previewed in the first half of 2021.
Please let me take a minute to update you on the status of our other pending transactions. We continue to make progress on regulatory approval in both Louisiana in Nevada and believe we are on track to close those acquisitions.
In in late Q1, we currently believe Juniors, Illinois will close in Q2 of 2021, and we are aiming for Indiana to close in the first half of 2021, we.
We look forward to working with the local regulatory authorities to receive all the necessary approvals and complete these acquisitions.
Let's now turn to the status of the IBT joint venture, which George mentioned as we noted on our last call. The proposed legislation that would enable this joint venture has the full support of leadership in both chambers of the General Assembly as well as the Governor and her administration. We are hopeful that the assembly will come back after the election in November to address and pass this legislation.
In the event that does we remain committed to proceeding with the expansion of our twin River property in Lincoln quickly. We are close to completing the design and receiving the necessary permits and approvals essentially the project a shovel ready right now.
With respect to the other terms of the legislation we expect to assume management of a portion of the VLP is on the floor in early 2021, and we expect to joint venture with GE to commence on January one 2022, as we have previously announced we will provide a further update as this develops the.
The final item I would like to cover with you. This morning is capex. The Lincoln expansion project will occur over 18 months commencing shortly after passage of the legislation, we expect that capex to hit both 2021 and 2022.
We have also resumed some of the projects. We had previously placed on hold the sugar factory in Dover is now under construction. We just completed the development of a new restaurant at Twin River in Lincoln, Jerry Long goes meatballs and martinis and that is expected to open as early as next week. We also moving forward on our redevelopment plan at Casino Casey.
For approximately $40 million that project should greatly enhance the property and guest experience driving growth at a nice return for us on our investment the Kansas City Casino. The Casino Casey project is largely a 2021 event, but we expect it will finish sometime in early 2022.
More broadly we continue to plan scope and position ourselves for a full return to normal activity levels. At this point there have been no material changes to the project Capex plans, we discussed last quarter I will now turn it over to Steve.
Thank you Mark.
First I'd like to address cash liquidity in our recent financing transactions as George mentioned on October 9th we closed on an incremental $125 million in aggregate principal amount of 63 quarters senior unsecured notes due 2027.
The new notes were a tack on to our existing 63 quarter senior notes due 2027.
We had pretty good timing to take advantage of a robust high yield market and in essence, three fund our acquisition in tumors, while preserving our strong liquidity position.
Speaking of liquidity at September Thirtyth, we had cash on hand of approximately $150 million pro forma pro forma for $125 million bond offering, we just closed and taking into consideration $250 million of available borrowings under our revolving credit facility. Our current total liquidity is right about 490.
A million dollars.
If you compare that to be outlays, we expect from committed acquisitions now under contract in the next 12 months.
Which is comprised of $25 million with valleys $140 million for Shreveport, and month Bloom Lake Tahoe and $120 million to tumors when by the way zero revenue Bill.
We have pro forma liquidity of approximately $200 million. In addition, we expect to continue to be generating free cash flow from operations much like we did this quarter as George mentioned.
We feel this is a very comfortable position and with all the EBITDA, we've picked up still a very attractive and conservative leverage neighborhood with plenty of dry powder to continue to be an opportunistic player in the M&A market.
Regarding the Indian acquisition and GLP I.
We often get asked the question on the restructure and why we have not participated in such a structure to date. So what makes this transaction different essentially if a debt free means of some significant growth with no cash out of pocket plus we're picking up the ice skins and excited in the exciting Indiana market.
We're doing this now because as usual we're being opportunistic.
We like the Evansville market and this particular asset quite a lot theres.
There is limited potential for incoming competition the skin for Indiana are extremely attractive and we feel the property will fit into our growth strategy very well.
In addition to all the details that George mentioned regarding the transaction with GLP I let.
Let me, let me tell you about another angle of thought as we approached this combination of transactions.
In essence, we merged with Dover Downs for $97 million of equity in March of last year.
We're retaining approximately $12 million of that EBITDA net of the annual lease payments. So what we're doing is trading in the real estate there for an incremental $32 million of EBITDA. So net net we're out $97 million of original purchase price in return for $44 million of total EBITDA for an ownership multiple of.
2.2 times.
Oh and by the way is.
As as Mark mentioned, we pick up the very important jundee and skins to supplement our emerging interactive strategy.
So were thrilled.
A new partnership with.
LPI and those.
Those transactions overall.
A quick mention on segment reporting.
The house cleaning on our Q3 financials.
As you will notice in our release and what George alluded to earlier beginning in the third quarter of 2020, we changed our reportable segments to better align with our strategic growth initiatives in light of recent and pending acquisitions. We will now report four segments. The Rhode Island segment, which is comprised of the Lincoln and Tiberon properties. The southeast segment, which is the hard rock.
Lexi and Vicksburg properties to mid Atlantic segment, which for the moment is only go up or down and the west segment comprised of the Kansas City and Black Hawk properties.
We are still evaluating how we will integrate Illinois, and Indiana and so you may see a fifth Midwest type segment in the near future.
Tuned.
Regarding taxes.
As we noted last quarter there are certain aspects of the cures Act that will benefit us we continued to benefit from the employee retention credit, which helped the company by $1.2 million in the third quarter. In addition, we are exploring other aspects of the act, including maximize inner well carry backs through tax planning initiatives and taking advantage of the relaxing of the.
Interest deduction limitation we.
We believe the overall cash positive cash flow to the company over the next year could well exceed the 25 or $30 million, we mentioned on our last earnings call.
As for guidance.
Consistent with what we noted last quarter.
We continue to live in uncertain times, especially in the short term and while we do not currently anticipate any significant operational interruptions near term outcomes are heavily dependent upon COVID-19, and our country's response to it.
As such we are not able to accurately project results in the short term and therefore continue to refrain from providing specific guidance at this time.
And one final remarks.
As evidenced by our new relationship with GLP.
Which we're quite pleased with we will continue to be situationally opportunistic and expanding this company and delivering accretive growth for our shareholders and other stakeholders.
Our leverage remains moderate our liquidity profile is very strong we have considerable unencumbered real estate.
That combination is foundational for our ongoing growth ambitions as an omni channel providers brick and mortar and interactive gaming entertainment to a large and growing customer base.
And with that I'll turn it back over to George.
Thank you Steve that concludes the prepared remarks will fall.
We'll now ask the operator open it up to questions.
At this time it seems like asking a question. Please press star one on your telephone keypad, if you wish to remove yourself and Mckenzie you may do so by taking the pound key.
There are many please UN mute your line plan introduced and if possible pick up your handset for optimal sound quality.
We'll now take our first question.
On the line as Danny Chung, but to instantaneous.
Okay.
So just to start you've obviously been very opportunistic.
M&A at very attractive prices, but going forward.
What would you want to see from a strategic perspective.
About really a massive portfolio here, just what would you ask future M&A.
We look for.
So.
Thanks for your question Barry This is George So obviously, we've been pretty effective in the execution.
Of what I'll call, a disciplined growth strategy and quite frankly has been acquiring properties at reasonable and in some cases immediately accretive low multiples and these properties that we are acquiring no.
Based on our operation style that we'll be able to improve on that from a bricks and mortar perspective, we're following onto that we we've assembled property now in 10 states.
And have positioned ourselves is what I believe is the most important regional portfolio.
Base, where we have unencumbered sports and.
EPS worth spending licenses and we feel as though the future potential for legislation that is going to make us well positioned for I gaming licenses and we're going to continue to add more space.
As the opportunities present themselves. So so where we are now is we feel we're in a great position to take advantage of the transformative opportunity presented by sports betting and gaming given the access we have the capital.
And now the broad market access and databases, we possess.
The newly announced brand that we just acquired on October 13th that will be rolling out.
So we're exploring next steps really to deliver what we consider to be the best Omni channel and game.
Again under the radar Weve built the foundation to take advantage of this what we feel is really incredible opportunity.
Great great.
And then Steve I think in the past you've talked about some sort of a normalized pro forma run rate EBITDA for the portfolio could you give us an updated number there I guess factory the M&A, but also if you could give us anything on sports betting synergy is just.
I'm curious if there's an updated number there.
Yes, Barry we.
We are we're constructing a portfolio that Scott.
A lot of potential, but it put it that way.
But we are up a little.
Let me give you Kevin Turner ballpark for now.
Because as Mark mentioned, our interactive strategy is emerging and we're quite focused on that and we're.
We're not in a position to quantify that for for the street at this point that Barry but up.
Rick and mortar brick and mortar basis.
Of the.
Various properties under contract and.
Shifting properties on a call to Cree cobot run rate basis.
We now view this portfolio in the <unk>.
In the low $300 million EBITDA neighborhood.
And Thats quite frankly, very before we are able to implement for example, capex at Kansas City, the new casino floor in Rhode Island, a rolling Capex program in Atlantic City that Mark went through.
We like it.
Historically, we've been.
Low fours.
Mid threes quite frankly, I think mid threes, maybe a little bit low as.
As we think about proper shareholder return parameters.
But I think you could expect to see us in a kind of mid mid to low fours neighborhood has.
As a desired long run target.
That's where we're comfortable and at supplemented of course by high levels of liquidity, which is a strong preference for us.
For for obvious reasons.
Great.
And you are still developing that interactive strategy with the Bally's brand addition, but anything you can share about how.
Right now you think about the opportunity balanced by the investment required I mean, I think you know there are some competitors pure plays out there who are putting up pretty substantial losses on the near term. So curious if you can share anything early on on how you're thinking about the opportunity.
Well, I'll, let mark or George pipe in as well, but yes. We are at this time pulling together the various pieces of the other.
And then.
Then elaborate puzzle and.
We've been in a bit of a land grab mode and you can see that from the various headlines in our.
Acquisitions under contract.
Big Big piece of it.
And as George mentioned, we intend to be one of the premier operators nationally of both brick and mortar and interactive gaming strategies across sports betting and igaming as that becomes more.
More available across the country.
Look we have the we have the balance sheet and liquidity to sustain customer acquisition costs as we go forward and whatever whatever form those might take.
Great. Thank you so much really helpful.
Thanks for the question Barry appreciate it.
Your next question comes from the line of John Decree with Union gaming.
Oh, Hey, John you might be on mute.
[laughter].
[music].
Hi can you hear me now.
Yes, yes, we got it.
Great sorry about that [laughter] and thanks for all the color so far in debt. Congratulations I mean, when you say the acquisition announcements or perhaps let's start there.
I guess, yeah, we kind of look [laughter].
You lose every kind of Monday morning seems like when you ever has a another ah interesting in strategic announcements to make and I've got to imagine there's some competition for.
The acquisitions that you guys have successfully announced them yet.
Yet between ever continues to kind of get ink on the paper and still pay.
Hey, what's pretty attractive entry multiples on the surface and then with the you know even improved to some of the financial moves you've made so I guess my question, Georgia, Steve is what do you attribute to your success in this.
This environment over the last six to.
10 months to kind of continue to sign deals to do and grow at reasonable prices.
So.
I'll take the first crack at that these are big part of this has to do with kind of how we will prepare recall. It you know we tend to have a.
Favor a lowly levered.
Low low leverage and high levels of liquidity that put us in a really great position when opportunities arose and then and then as a result of the consolidation or I mean, the acquisition of season with the El Dorado.
I just provided us with with opportunities and you know since we were embarking on our strategy of accumulating states primarily for our interactive strategy.
It just put us in the right physicians is to get deals done and now they know that we have the ability to bring his deals across the finish line you know, we have more opportunity or access to the expenses arrangement.
I don't know that we're going to add anything to that.
Well that's exactly right.
George John you have the other thing I would mention is you did you know we're we're I think we're harvesting some of the root of the strategy that the that the board.
Intended to implement.
Going back a couple of few years back.
I think we said this before but but listen I think we're I think we're I think we find ourselves in the sweet spot and were and where they are deliberately what I mean by that is you know back in the day as you well know John are.
There were lots of kind of smid cap regional players here was as tar at Ameristar and Pinnacle and.
Colombia Classics, and you know all those all those names and.
You know this industry has consolidated and those those names are gone and so the regional players are big players.
Somewhat less interested in some of the properties that we've had an opportunity to pick up the other players tend to be much much smaller than that perhaps private less access to capital.
Depending so we've kind of floated right up into that when I think of as a sweet spot.
Able to move the needle on growth with properties that some players are less interested in and other players can can't get access to.
And all the while building the size and the financial wherewithal.
To play the game at a bit bigger level, which is where kind of where we find ourselves now. So I think John's combination of we're in the right place at the right time.
On hand, and then what George said, which is kind of preparedness and leaving no stone unturned on M&A opportunity on the other hand, but its a very good question John Thanks.
Okay. Thank you guys again, congratulations on the success, so far maybe to switch gears to the kind of budding sports and gaming strategy and I realize there's probably not a ton you guys can stay on this one, but but I'll try to ask it anyway.
When we look at some of the.
The agreements you reached with third parties like San Dhillon end points that we kind of look at these types of agreements as kind of grab share to the license provider in this case you guys.
Wondering if you could give us any kind of high level general color Clos.
Kind of portfolio and third party agreements is is it a revenue share you guys getting kind of seems epsilon how do we think about.
In general what kind of partnerships with those third parties in the sports and gaming space and and I was kind of a clean steels financials.
Sure John I'm going to turn this over to Mark the answer thanks, John So obviously, we don't go into details with any one of the specific contracts, but it has been our strategy to try and partner with the likes of Draftkings and Fanduel wherever we can and then other player and then also retain a skin for ourselves generally speaking those deals around market type terms. So you should think about it in terms.
Of Rev shares with some minimum annual guaranteed some other considerations market by market. It is accretive day, one its very little investment required by us other than in some of the hard costs. When we're doing the sportsbook and we're going to continue to do deals like that but we don't really get into the specifics of any one deal.
Yes fair enough one last housekeeping item, perhaps Steve for you could you give us a sense of what kind of run rate maintenance capex might look like on the kind of portfolio.
It's being acquired today annualize those buildings hasn't closed yet, but I think you've mentioned that to Brian's question, maybe about 300 Bucks at EBITDA, what what would it be a good range for maintenance Capex. If you could take a guess now.
Well, John I said, that's a good question that that's a pretty long list.
Of of of new property.
Frankly, so rather than go through that with you online let me let me take you offline, we'll talk about that.
Pulls back looking online.
Thanks, Tim appreciate a lot I discuss reality thanks.
Thank goodness.
Thanks, John.
I cannot say that Cascade question Press Star one on your telephone.
Your next question comes from the line of Kristina Cowen.
The question and congrats on a.
On a on a great quarter here all circumstances consider my one question has to do with the difference between margins. This this great margin performance, we got at the consolidated company level versus margins just looking at the gaming floor itself because when I look at the 26.
$6 million or so in gaming and racing expenses for Threeq you 20, that's about the same as the 26 million that we got in Threeq 19, but it's you know it's on a lower sales amount so it almost looks as if.
The margin got words, just just optically I'm curious if that is that something going on at the gaming level or maybe that just reflects the inclusion of of new acquired properties with a with a different margin structure. So if you can talk about those than if they would be helpful. Thanks.
But I don't know exactly what you're looking at but certainly we've added more more properties to our portfolio. So that would have an impact we do know in Rhode Island was a which is taking down the margins because of the.
The existing protocol for coated that's having a little bit of an impact but same store margins are up six as lever up about 6.5%.
Six and a half 656500 basis point 650 basis points from sorry and.
You know that and that.
Net of the new properties that we've added I think roughly about 500 basis points. So there were certainly seeing a flow through from a margin improvement.
And we can get into what we see but.
I'd have to see kind of what you're looking at but wrote.
Rhode Island, and Delaware for the most part or a little bit of a phone outliers. When you look at when you compare them to the industry because the you don't use GR news use net of the net of the tax impact.
Net revenues are way way lower for comparative purposes.
Some factors to skew that.
Morning.
Alright Thats helpful. Thank you.
Your next question comes from the line of Adam It sounds like the gravity.
I have a two part question I Wonder about your 14 million customers pro forma and your database where are you in organizing.
The database now the existing program do you have a loyalty program, where do you get a loyalty program and how long will take to get that database in order to.
Go after the customer acquisition for sports betting Igaming and also for a loyalty program.
Sure. So I'll take I'll take the first crack at that.
So we do have loyalty programs at every one of our every one of our properties.
That are maintained but it is not a one brand or national brands. At this point that's part of the reason why we went out and acquired value brand.
So we're going to be going through processes develop the plan.
Constellium fully integrate that the brand in oil properties as well as the or interactive technologies for sports betting and gaming for that brand will be across all those platforms.
But we're not going to just be lapping a name on a building per se, we're going to we want to be in a position to deliver the promise of the value brands. So we're going to roll out property standard services, one card systems products and we'll watch that at each of the properties when were sure we can deliver on that promise.
Do you have a sense of how long it will take and what it will cost to get it done.
We we scored.
Opportunities.
The path to incorporate this so we understand from the technology perspective, how to handle it.
This is something that's going to probably be rolled out over the next.
12 months to maybe even 18 months.
Sure.
Excellent and.
In terms of once you get this.
National Bally's brand.
Established in the database up and loyalty program up.
But what are the chances you could do a deal with bally's Las Vegas to sort of create a synthetic hub and spoke even though they're under different ownership. They sit on the same they have the same brand and know little know the difference is that something that could potentially be in the cards between you and Caesars.
That would be.
I would say that that would be situational nature, I mean, ultimately we will be creating our own our own brand.
One brand.
And as far as Vegas is concerned they have the rights to that name only through the period of time, where they are where they are dispose of that asset or sell that asset.
So right I'm talking about you know the.
Eldorado made a big deal about saying that when they did the deal with seizures that they could use loyalty points to drive or to the enticement of trips to Vegas to drive casino visits it at the regionals is there something you can do with that with valleys Vegas.
Yes, I mean, it was listen again situational nature, we're not we're not exploring those types of.
Relationships.
And you know we feel from a portfolio perspective that we have.
More destination type markets than we have had historically with the adding that they see the adding of Lake Tahoe.
And we utilize it in the past with our hard rock property.
Property in blocks in the.
So we think we have more than enough cross opportunity cross marketing opportunities.
We're not going to get into that type of relationship.
Thanks, a lot.
At this time there are no questions I'll turn the call back over to John which May have been asked for additional closing remarks.
Okay, well, thank you operator, and I want to thank you all for joining our call today and hope you all have a good.
Good day and weekend. Thank you.
This does conclude thanks.
Labour worldwide Holdings' third quarter 2020 earnings call. Please disconnect your lines at this time and have a wonderful day.
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