Q2 2022 Bally's Corp Earnings Call
Business and casinos and resorts Lincoln continue to outperform expectation post removal of mass mandate and the return of smoking How's.
However, the turnaround of Atlantic City will take longer than we'd hoped for with AC having negative $3 million of EBITDA versus our expectations of a positive for.
AC is not where we want it today now most of the renovation program is complete we've moved to restructure our cost base that the go forward.
From August we've taken out costs, which should generate $10 million of annualized savings at the property.
We have halted and dimed treatments on handle and drop and getting some recent bad luck behind us on hold the earnings trend that will get better.
The rest of the portfolio performance was in line with expectations. Our EBIT margin ex AC is slightly ahead of expectations, 39%.
And internationally interactive we found the bottom in the U K in June plus 2% year over year on a constant currency basis, despite as lowering marketing spend by around 30%.
Reducing bonuses to deliver margin enhancement.
<unk> performance was more positive still and so our highest monthly active 2022, so far the.
The comparisons get easier through the third and into the fourth quarter, and we're making good progress with more dynamic jackpot strategies and enhance customer journeys powered by machine learning.
As we all know the UK White paper was delayed once more and we await a new government.
September , but we expect that to arrive with the consultation period beginning soon thereafter.
A mixture of currency weakness impacted the customer experience and lower than expected stds led to a flat quarter in Asia.
<unk> were down as we move to large affiliate promotion back into Q3. So we expect some improvement then.
Also in the second half we see growth from our recently launched sports book with the benefit of the World Cup, but at the end of the year.
The increased uptight from our refer a friend program that has increasing traction in the region.
We will continue to harvest, Spain, and a wind down of the rest of Europe .
North America interactive is still in ramp up mode. Despite having an early version of the product and without the full feature set we have in the UK, New Jersey had almost $3 million of NGL in our B to C. I casino in June with contribution margin in the mid thirties.
We expect New Jersey beat seats continue to grow and be profitable for the rest of the year.
We are targeting 6% to 8% market share in 2023 after the implementation of Omnichannel rewards by the end of this year, along with improvements in payment processing and marketing tools.
With a cta sub $250 the full marketing Tech stack improvements New Jersey is the model, we will apply to the rest of our North American rollout.
Each state will be different and our focus is on creating a blueprint for each state of a similar type before we invest in that rollout.
I can see United States are our priority and we will focus on resources in like markets, including Pennsylvania in Ontario, as well as those states. We believe that will regulate gaming in the next two years.
Our foundational sports product is now live in Arizona, and New York and will be greatly enhanced by the integration of much higher volume of sports and events over the coming months.
A player funnel continues to evolve leveraging our unique asset collection.
Our model is to focus on minimizing and optimizing customer acquisition costs and building a loyalty continuous engagement.
<unk> and driving the customer experience.
Over the next year will continue to integrate.
Casino database, providing a unified wallet and Omnichannel rewards undeveloped owned proprietary technologies that provide customers a unique engaging experiences everywhere.
Our partnership with Sinclair today provides strong awareness of the <unk> brand, but to this point, we've not taken full advantage of.
The <unk> relationship more broadly despite adding around 100000 players to our free to play offering promoted from Valley sports.
We are all working together with <unk> to design and build a watch them that product that will further evolve our strategy and keep our cost of acquisition down.
Our focus is on the continued development of our product and the market really presence rather than an aggressive rollout strategy.
Now I wanted us to take a few minutes to cover the exciting developments in Chicago.
Knowledge isn't going to be everything to online gaming. We also need flagship properties that establish our brand presence and provide a true omnichannel experience. So let me turn it over to George to introduce the balance Chicago team and discuss the road ahead for that development George Thank you Lee and thank you all for.
Joining us on this call this morning.
In May we were selected as the winner to build a unique casino property in downtown Chicago demand for gaming in Chicago is an excess of supply with many players, leaving the city and the state of Illinois to game.
Despite being the third largest city in the U S with 55 million visitors to the city and 85 million passengers through the airport annually. The city of Chicago has little direct benefit from gaming.
That dynamic will now change with our $1 $7 billion project.
Valley, Chicago will have community ownership locally focused jobs and investments that will improve the infrastructure of the city for generations to come.
We will open a temporary facility in June 2023 at the Medina Temple and the hardest Chicago.
The site and location of that project is unique and will help develop the customer list and supportive valleys interactive and ultimately the opening of the permanent facility.
We expect to invest $70 million to open a temporary facility and the property is projected to deliver at least $50 million of EBITDAR in the first year of opening not counting any benefits to valleys interactive.
The permanent facility is scheduled to open in June 2026, we expect to have 3400 slot positions and 173 table games generating $400 win per unit and $46 $100 win per unit respectively.
These forecasts are just 50% of the unit performance of our nearest competitor, we expect at least $250 million of EBITDAR from the property in the first year and that is being factored in the upsides from synergies between retail and digital.
After acquiring the valleys brand in 2020.
The board of Bally's was very focused on building a team that would support our higher ambitions for flagship properties.
That would grow our brand and integrate a rapidly developing north American interactive business over the past year, we hired two seasoned executives to lead those efforts with me today are joining the call who is almost 30 years of casino development and design experience and was most recently with MGM for 20 years.
Leading their design and develop an office also with me is <unk> meet the tell who joins us from Penn National with more than 20 years of gaming experience and.
And we will be the executive overseeing valleys, Chicago temporary and permanent facilities.
We continue to hire up for valley Chicago over the coming months I will be happy to introduce you to join and meet to discuss project to discuss the project and we will continue to keep the market abreast of developments on the property now going to turn it back to Bobby Thanks.
Thanks, George moving to the segment details.
Casinos and resorts reported $99 million of EBITDAR in the quarter. This includes minus $3 million of EBITDAR for Atlantic City.
Excluding Atlantic City EBITDA margins were 39, 2% in line with our targets of high 30 <unk>.
EBITDA for the quarter excludes $3 million of rent to <unk> associated with Tropicana Las Vegas that rent will become part of reported triple net rent when we closed on Tropicana at the end of September .
International Interactive had approximately $83 million of EBITDA at a staggering 35, 2% margin.
The UK was minus 6% year over year on a constant currency basis, and Asia was flat.
As Lee discussed marketing was off in the UK by 30% relative to budget as we focus on profitability and highly efficient spend.
North America interactive had $17 million of negative EBITDA, New Jersey had a little bit more than $6 million of revenue slightly offset by negative revenue numbers and one of those states.
Remove free play to lower the drag those states have on the overall business.
We have updated our 2022 financial forecast to reflect the adverse to reflect adverse FX headwinds the reset in Atlantic City and actual results for the first half of the year.
At current FX rates, we expect revenues to be two two to $2 3 billion and adjusted EBITDA to be $535 million to $550 million, including $60 million of North America interacted EBITDA losses.
We continue to focus on profitability and cutting costs, but some of the cost cuts will only occur with five months left in the year.
We are lowering capital expenditures for the rest of the year from $270 million to $250 million to reflect a more cautious approach into the rest of the year.
Rent expense will now be $52 million for the year with the Tropicana Las Vegas scheduled to close on September 30, we expect the Tropicana to generate approximately $6 million of EBITDAR in the fourth quarter that offsets the incremental rent expense.
On July 27, we closed our previously announced tender repurchasing four 7 million shares for a total of $103 million pro forma for the tender common shares outstanding or $48 million and we have incremental warrants options and other dilution of 13 million shares $61 million of shares outstanding.
The number you should use.
We ended the quarter with $3 4 billion of debt and $176 million of cash and no amounts drawn on our revolver, we have ample liquidity to fund all of our announced projects. We continue invest in the North America interactive business.
Our long term commitment, it's a sub five times debt to EBITDA, which we expect to hit in mid 'twenty four.
At the end of June we announced real estate sales to <unk> for now we anticipate that sale to bring in $635 million of cash proceeds on a tax free basis incremental rent on the $635 million is $48 $5 million. We continue to evaluate potential concern that would allow for a sale of Lincoln as well.
Expect either transaction closed at the end of the year and our updated guidance reflects a 12 31 2022 closing date.
And our Investor Relations web.
A presentation on our website, we have updated our three year cash forecast free.
Free cash flow.
Excluding the new rents from the sale of <unk>, which will be used to fund future growth is $280 million in 2023.
Our share count of $61 million, we get to near $5 of cash earnings in 'twenty, three and $6 in 2024, while maintaining.
Significant cash on our balance sheet, we will continue to invest as free cash flow and cash on balance sheet to drive shareholder value with that lets open up the call to Q&A.
At this time, if you'd like to ask a question. Please press. The Star then one on your Touchtone phone may remove yourself from the queue at any time by pressing star to you. Once again that this time one to ask a question we will take our first question from Jeff <unk> from Stifel.
Hey, good morning, everyone. Thanks for taking our questions.
Starting out.
Bobby you've talked in the past and given us some milestones on how to contemplate FX I was hoping maybe we could get an update there seem to recall.
Percent, yielding a certain impact pretty de minimis to EBITDA, but just any way to benchmark, how how are declining pound and euro translates to EBIT impact just to make sure. We stay anchored for further FX volatility from here.
So FX is off 10% and Thats, a $20 million hit when you factor in Asian currencies as well so the Asian business is denominated in USD, but we've seen significant indirect volatility from the consumer so with <unk>.
Currency, where it is including Asian currencies, you should look at it it's about a $20 million hit.
Yeah.
Okay, Great. That's helpful. Thank you and then on the brick and mortar business.
Sounds like excluding Atlantic City things are going.
According to plan just curious Q1, you talked about some softening lower end of the day to be in certain markets could we get an update there or has that stayed relatively stable has it gotten worse better or just any thoughts around the consumer amidst the persistent inflation, we're dealing with would be great.
So I think the trends that we outlined in Q1, Jeff have held fairly three Q2s.
Exactly where we are strengthening in the higher end of the database.
Some softness but not huge.
The lower income area and promises that we have that.
It really is as is the key one we were bracing ourselves for Q2, making sure we had a very.
All right.
On cost and we will continue to do that through the second half of the year.
Because we we would anticipate some inflationary pressures, but we didn't see any increase from what we've already seen in Q1 Q2 has been added.
Great that's really helpful and then.
If I just squeeze in one more any thoughts on on the planned project for Tropicana heading into the deal close or stay tuned there.
So we've said that we will continue to operate the property.
We obviously.
I think it's well advertised that we intend to develop at some point in the future, but we will run the property on an as is basis at least for the next 12 months until we have identified the plan and the partnerships that we want going forward.
Great very helpful. Thank you Bob.
Thank you.
Our next question comes from Barry Jonas from <unk> Securities.
Great. Thanks for taking my questions I actually had a few around the Chicago project, maybe can you start about talking about next steps from here and any risks maybe that you see for getting the full project to completion, specifically touching on inflation supply chain risks and such.
Sure George.
Sure.
Yeah, Thanks, Lee listen I'm going to this is George Hi, Barry I'm going to direct this question to Julian the Callaway introduced earlier in the call.
He is going to oversee he's actually overseeing the development and construction of the project. So I'm just going to pass it over to Joanne. Thank you George and good morning, Barry and good morning, everyone.
So we have during the development phase of the project during as we were going through the RFP process, we've taken into consideration.
As many of the common risk factors, while budgeting the project, we feel very good about.
Schedule on the project we are continuing as planned we are meeting all of the data that we have planned for on our schedule with potentially.
Finishing our drawings for submission for the temporary coming up in September and then leading on to the construction phase of the project.
Same goes for the permanent facility, we are working in tandem.
Identifying all of the site factors that we need to look at at this point in the stage.
And continuing to identify all of the long lead items that we need to work.
Work towards as well and we've taken.
As far as the budgets are concerned we've taken into consideration some of the inflationary and escalation factors that we might have to look at as we go forward as well so we feel very good about.
Where we are in the process.
Our tracking with the process, we've got really good relationships and we are tracking very well with agency approvals as well and same thing goes with community outreach programs as well.
Yes.
Great and could you maybe talk about your level of confidence around.
The EBIT numbers, you're forecasting for both temporary and permanent facilities.
Sure. This is George again, Barry I'm going to pass this over to <unk>.
To meet Patel, who will actually be overseeing the operations for both the temporary in.
The permanent facility.
Thanks George.
Good morning, Barry good to hear from you.
As far as the temporary good I just wanted to add a couple of comments on what.
Julian mentioned earlier.
When you look at our risk factors going into the temporary facilities, there's really two things that we're keeping a laser sharp focus on one is the inflationary pressures and how are we making sure that our pricing models continued to allow us to deliver on the numbers that we've given out for our cost and completion of the project.
And number two we're keeping a very close eye on the supply chain as well.
And some of the long lead items, we've taken surveys offer manufacturers right now the key manufacturers, who supply the slot machines and the parts to us.
Or actually going ahead and.
Purchasing slot machines as we speak we are ordering slot machines today in the next 90 days our thought processes. We want to stay ahead of the supply chain and make sure that we'd rather have the slot machines in our warehouse and be able to worry about them in the second or the first half of 2023.
When it comes to the operating model.
<unk>.
I think the numbers speak for themselves we alluded earlier too.
The visitation that we have in the city of Chicago, just remember and I'll start with the temporary facility first.
We are of all of the operations that are currently in Illinois, and in and around Chicago land, we will be the biggest beneficiary of the tourist market that is reviving at a very fast rate and.
And the city of Chicago.
We are going to get the highest participation of the unrated play in the city of Chicago based on her here location and where the fundamentals of the tourists in the city.
We've looked at.
<unk> talked to several key hotel operators in downtown Chicago, Chris.
Chris <unk>, our Chief Development Officer, and myself have talked to these hotel operators and they are seeing in a very healthy sign of hotel increased visitation coming back to the city as we speak in the last six months.
When you look at those fundamentals.
You do the math with what our nearest competitors do.
With reverse numbers and right now if you look at.
What we have in our host community agreement with the city, we have promised to the city.
We would have 800 gaming positions at or temporary facility, which is the Medina temple.
For those of you who have not been to the site and absolutely gorgeous stunning building right in the heart of the district in Chicago.
And it allows us to capitalize on the tourist market there.
On top of that.
When you look at the numbers that we have on win per unit that we've projected here.
There is a significant upside that we have here that just the number of physicians that we've given to the city's 800 positions and now we.
Easily going to exceed that expectation.
And as a result, we should be able to deliver on the EBITDA and the revenue numbers that we're giving out for table games win per unit in slots as well.
Great. Okay. Thank you really appreciate all that color.
Thanks Bye.
Our next question comes from Chad Beynon from Macquarie.
Hi, good morning, Thanks for taking my question.
First I wanted to ask about international interactive very impressive in terms of.
The margins and kind of holding in EBITDA, there so with marketing off 30% as you mentioned what have you seen with with the player. How is how have they responded to the reduction of marketing can you talk a little bit about number of of users are kind of the arps al just kind of what youre seeing on the back of that thanks.
Okay.
Sure. Thanks, Chad.
Really.
Astounding results really in the fact that we took marketing down so heavily.
Only reduce staff.
TD count by 9%, having taken marketing down circa 30% so.
Real efficiency in our spend.
We did it through a couple of reasons, one with some changing dynamics.
Google option and people being forced to login to Google to be age verified and that was causing some inflationary pressure, which we decided that we didn't want to chase until that settled down.
Then.
And making sure we're really that we were preparing for any further impact inflationary pressure that we might see in the consumer base. If you remember when we reported Q1 we.
We said we felt we were seeing some softening in the U K consumer.
That trend has not continued so we now have.
A strengthening of the consumer base in the UK during Q2, and what we've seen through July .
Well, we're very pleased with where we got to in terms of those marketing efficiencies has also been some efficiencies on the bonus inside as well. So we'll continue with that strategy for now until we got absolute confidence in the strength of the consumer for the rest of the year.
Thanks, Lee and then turning to the U S. Your 6% to 8% market share goal.
With valleys, New Jersey by 2023, what's giving you the confidence that you can get to that level, just given that it's a pretty competitive market. You have some other competitors that are ramping and then beyond that how should we think about some goals and timelines for other markets like Pennsylvania, and Ontario. Thank you.
Sure. Thank you, yes so.
Listen it is a aggressive target we're going for it.
We think we can get that from all of the trends that we're seeing in new Jersey today would probably circa just below 3% market share today. So.
So we think we can double.
Juror in during 2003 and actually take that market. Further if you remember when <unk> was <unk> six 5% share in the New Jersey market, we aren't seeing excellent trends in terms of the way that we can cross sell to the.
Casino database and we've made some real strides in terms of.
Upgrading product the product.
New Jersey Casino was still no on parity with the U K.
So we're still migrating features that we have in the UK market over to New Jersey as well as upgrading what we have on the Omnichannel side really tying in the rewards program. So the trajectory up to now has been great. We've got a lot more product to bring.
Lot more omni to develop over the next 12 months, so that's really what's driving that.
Confidence in the New Jersey market.
In terms of what comes next.
What we're focused on is the product developing the blueprint on a state by state basis.
The new technology that we put together between game system.
Works to create a foundation of OSB product, we're pleased with but we need to do more right. So we need to go further.
We're doing a lot of content integrations over the next three months that we'll see the volume of sports and events increased massively on that product and feature development, we still want to do so rather than go and spend marketing dollars against the product that we don't think we will.
Cut through we're going to keep those marketing dollars back until we've really developed the product for the states that we want to get in terms of what comes next as I mentioned, we'll be leaning into our gaming right. So anyway, we think gaming is going to legislate over the next two years or already exists.
We launched a web only product in Ontario.
Couple of weeks ago actually done quite well out the gate and we.
Expect Ontario will be the first place where we deploy.
Blind.
At full sports and gaming during the second half and as well as that will of course be looking at Pennsylvania.
Where we're looking for a license around the proxy as well and.
Going into next year, our focus will be on the lines of an Indiana.
And Illinois, where we think we can make progress.
Okay.
That's great I appreciate it thanks for all the color.
Thank you.
Our next question comes from Ricardo Chinchilla from Deutsche Bank.
Hey, guys. Thanks for taking the question.
Just a housekeeping item I was wondering if you could provide the.
The EBITDA breakdown for debt holders that one using for covenant purposes.
We don't have that but Rhode Island, LTM EBITDA of $644 million.
Perfect.
Moving into the forecast that you have for 'twenty three 'twenty four it could you. Please provide a little bit more color of what's implied for Atlantic City into next year and for Tropicana Las Vegas, because I see that you have like $6 million per quarter, but we annualize that it's like.
<unk> four and the rent, it's almost $23 million. So I was wondering.
How accretive that is going to be into earnings for next year and when is the Pennsylvania.
Property opening.
According to your estimates.
Yes, so on Tropicana the way we're viewing the property as it is today is the rent associated with it is $22 5 million and it will generate 20% to $25 million of EBITDAR So earnings neutral.
We do factor in next year, our JV with IGT, which generates today about 9 million of EBITDA goes from 23% to 40%.
Atlantic City.
We do believe we will get to $10 million to $20 million in the next two years very seasonal property. So.
TBD on that we have implemented $10 million of cost savings and hold for the past six months has been underperforming.
We do view international interactive as flat into 'twenty, three as we sort of work through some of the dynamics with the white paper.
So our assumptions are not aggressive there we just have a lot of projects in the $10 million to $20 million range that turned on in.
In the next year and in Pennsylvania will be a great project into sometime in 2023.
Great.
Last question for me.
Could you please comment a little bit more on your strategy towards.
The sale leaseback transaction of Linkedin it.
It seems like based on the forecast that you that you have.
Provided that.
Ed.
Would you could do fine just with <unk>.
Selling biloxi, rather than go into the sale leaseback proceeds from Lincoln any commentary on.
What what potentially could be the usage of the incremental money for that.
Sort of what are the advantages for or what are you guys thinking about the advantage for the company all of that money and particularly with regards to your share repurchase strategy.
Yes.
The Lincoln <unk> transaction.
It was $1 billion, the Biloxi keratin transaction $635 million, but on that $1 billion transaction. The bid ask on how much paydown was too wide into effectively the Lincoln transaction was liquidity neutral to actually slightly worse and so it's better for the company.
To leave Lincoln behind do <unk>, unless we get to sort of a reasonable agreement with our lenders I do say Lincoln is our flagship property. The IGT JV is awesome.
40000 square feet, we're building, we're getting sort of momentum of bringing back some of our Asian play from win so maybe we sell do sale leaseback on Lincoln a year or two years from now into fund sort of the next growth phase of the company.
Share repurchase perspective, and we did do to tender for $103 million, we will continue to buyback shares consistently to help.
Drive shareholder value.
Got it. Thank you so much for taking my questions.
Our next question comes from Dan <unk> from Wells Fargo.
Hey, good morning, everyone and thanks for taking my questions.
So I wanted to hit on the regional and then maybe just a question for George but across your properties. What are you seeing in terms of the promotional environment.
From from larger competitors smaller competitors and across different markets. Thanks.
Sure Dan.
I think I think a good data point for you to look at is with Lee said a little earlier.
Margins are not only kind of.
Stabilized, but they are improving.
So net of AC we're at 39, I think its 39, 5% margin. So if you get kind of a little granular.
To answer your question about <unk>.
One of the regions that we operate in and if you look at Rhode Island.
We're seeing oncor are really starting to focus or shift their focus.
Closer in on their market.
Towards the density of the population around them, so that only touches on the edges of our market and so that really has no influence on our promotional activities.
Our focus primarily on the free play activity.
Certainly, we certainly that promotional activity as well, but we don't really see any any impact on that market and it continues to perform if you look at another reason I would pick Evansville.
Somewhat of a protective market so our cost structure, there is pretty predictable.
So we're really comfortable about that and we're maintaining margins there as well as revenue.
Biloxi.
<unk> to drive profitability from our higher segments of <unk>.
Database, so I think that touches along with Lee spoke about a little earlier, which is really.
We're focused on the higher end of the customer hardship worse, it's driving more trips from that segment.
And even when you look at the lower portions of our database.
We're not as focused but things like eliminating the buffets and so forth.
Removes a lot of cost structure really no detriment to the operation that continues to improve there actually Kansas.
Kansas City is another market you want to look at that's focused on just driving market share and it's dropping that market share growth to the bottom line. So.
I guess in a nutshell, we're really comfortable about our operating model at this time.
Some other the only the only markets that seem to be performing not as well it would be the kind of lower lower demographic by way of household income markets. Pittsburg is a good example of that.
Got it and then just switching to interactive can you maybe give any any color on early New York progress and your appetite to go into additional states that.
That might be launching next year and just how you how you think about integrating the Sinclair media.
Media components into the App to have a more competitive offering thanks.
Thanks, Tom.
I mentioned, a few of the states earlier.
We're going to lean very heavily into gaming states either aren't gaming sites our lives today.
One is that we believe have a high chance of legislation over the next couple of years I mentioned, one, Indiana. Obviously is an interesting one for us where we have <unk> coverage and we have casino coverage.
From our point of view in terms of the product development.
That twins.
Two any con spend well firstly said the product isn't exactly why we wanted to be today.
Even the gaming product in New Jersey asset, we've got lots of things that we can still migrate across from the UK, which I think will enhance that product.
Sports product, which is live now in Arizona and in New York, We havent been heavily spending behind or pushing hard because we still have quite a few content integrations today.
The radar genius, I'm, Jay et cetera that will coming that will bring a much higher volume of sport. So.
We haven't been.
<unk> that until we've got a much richer event lineup inside of the App.
Said in June we did our first drop of that and that means that that's when it became foundational for US. We think we have a number of features which are important but of course, we will continue to develop a drop further features into that app. So in terms of a roadmap for us in terms of.
Next we can we will be adding sports to new Jersey over time, we will be adding sports into Ontario, and I said that will be our first combined that in the second half of the year as well as then leaning in to Indiana, Pennsylvania, Illinois.
Got it thanks for the detail.
Thank you.
Our next question comes from Jonathan <unk> from Cowen.
Hey, good morning, Jonathan and Fernando Thank you for taking.
Our question.
The first one is Bobby you mentioned that.
International Scott.
20 million FX headwind this quarter correct.
Could we expect the same.
For the year.
On an EBITDA basis.
Okay.
In terms of revenue then what was the impact for <unk>.
For the second quarter and what can we expect for the next two.
Yes.
Revenue for International Interactive was on a floating basis was minus 14% year over year on a constant basis minus 5%. So you can say that there is a 9% FX hit but there is an incremental issue with FX related to Asian currencies.
We do we do operate in USD, but the player lives and thinks in Asian currencies.
And so ultimately.
Those consumers definitely pulled back and so on.
Our guidance assumes currencies effectively at 10%.
Wind into 'twenty two.
That's how we're thinking about it but there is some issues that are not directly FX related or FX translation related or more that the consumer is thinking and operating in a different manner.
Sure that makes sense.
For the next two quarters and can we expect in the second quarter and international will be the lowest or.
Can we expect incremental improvement from here.
Second quarter is the level.
Second quarter.
Understood.
Then.
Maybe a liver liver or an update on.
New York Downstate casinos, I understand you're probably limited in what you can share but.
Just want to know like how are you guys thinking about the opportunity still and.
And could be shared in terms of like what would and investments.
Potential property looked like or amount to if you will.
Still interested in it still exploring it.
Looking at potential sites of course, we have slightly RFP process to begin later this year or early next year.
<unk>.
We are minded to participate in that.
It is very much in the development stage at the moment. So no further nothing further to say on that right now.
Got it and my last one.
With a new prime minister coming in and onto the U K, what if any changes or can we expect from the UK gambling regulate or should it stay the course and nothing will change from your perspective.
Well I mean, new Prime Minister same policy right. So.
I don't expect radical shifts from.
The former Prime Minister.
Succeeds.
A lot of work has already been completed of course with the relevant Ministry.
But we'll have to wait and see whether <unk> Trust on September five.
We wouldn't expect any radical departures from the current trajectory I think from our perspective and from everybody in the industry's perspective, we'd like to get it out there we'd like to have a consultation done would like to pay the other sides that we know exactly what we're working with everyone's got stability and upside in many many times.
Whenever we've had regulatory shift in the U K over over the following 18 months, we've been a net winner and I expect it to be the same here.
Got it thank you.
Thank you.
Our next question comes from David Katz from Jefferies.
Good morning, Thanks for taking my questions.
Understanding <unk>.
<unk> interactive strategy and performance and the land based stability is clear can you just talk a bit more broadly about the capital strategy right.
Where are we trying to get to in terms of owned versus leased.
Does the leverage look like.
If you can help us.
With obviously there is some capex out there, but some repurchases sort of how that you expect that to progress over the next.
Six months, one year three years et cetera.
Thanks, David I'll, let Bobby pick that one up so.
So you go into 2023.
Rents is sort of a $120 million.
On.
400, plus of EBITDAR, when you factor in Tropicana upside from Kansas City IGT, Pennsylvania.
Chicago, So we do believe that our land assets are a core asset and strategic asset of the company.
But at the end of the day.
If somebody is willing to pay me 14 times for the real estate under Lincoln, then we would do that.
And we will go invest that in higher return projects, our internal ROIC is 15%.
And so if there is.
Theres projects do with Chicago is clearly that.
We're still evaluating what return we can get in Las Vegas, but I'll also tell you that.
Climate.
The volatility in the market has really brought M&A back which is something we've proven that we can buy assets for $5 six times EBITDA and so if we can use our balance sheet to fund five to six times EBITDA before sort of digital synergies, that's a very attractive.
Opportunity as I said in the call we do focus on EBIT Dara from a leverage perspective, and we will be sub five times by mid 'twenty four.
Okay. Thanks very much.
Thanks.
Our last question comes from Jordan Bender from JMP Securities.
Good morning, Thanks for taking my question to follow up on the White paper comment have you guys taken any preemptive action kind of ahead of maybe a ruling there and was any of the marketing reduction in the quarter and maybe related to that as well.
Yes, sure. Thanks Jordan.
We've been taking action on the white paper for about the last three years I think.
So we feel very well prepared for it.
We've been gradually reducing slot states actually across the business for quite some time now just moving at the moment to Mac stake of 25 pounds.
Across the business in the UK.
We've been altering our.
Pulp structure, which I mentioned earlier, which means more payout to more players, but at lower levels.
And that also works into.
Kind of reinvestment strategies, which I think are going to be important once we get into different sets of thresholds for different players, which will come in during the.
The evolution of the white paper, because I think that.
And remember the what type is going to be a consultation.
That will give us a framework.
The details will get filled in over time, so I think that yes, we've had more than enough time to prepare.
But what this might mean for us in the UK market and we've actually made progress against that.
Great and then you reiterated the 60 million loss for the North America Interactive for the year I was wondering you previously guided to about $125 million for the year I was wondering if that still is in place.
For revenue.
Yes, we're not focused on revenues I mean at the end of day, we can go buy revenues, but we're just not going to do that.
Yes.
Yes.
Sure enough.
Our focus is very much on the further development of that product. So we are continuing to invest in that.
And then we believe the revenues will come to us over time.
But thats not our focus for this year, it's more about the quality of that product and getting into the right markets.
The REIT debt.
Awesome. Thanks Clay Thanks, Bobby.
Keith.
No more questions at this time and once again, if you'd like to ask a question Thats Star one.
Thank you operator, and thanks, everyone will be on the road next few months and hopefully we see some of you HGTV.
You.
Okay.
Thank you ladies and gentlemen. This concludes today's conference you may now disconnect.
[music].
Okay.
[music].
Yes.
[music].