Good morning. My name is Maria, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Twin River Worldwide Holdings Second Quarter 2020 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Craig Eaton, Executive Vice President and General Counsel. Please go ahead.

Good morning, everyone, and thank you for joining us on today's call. By now you should have received a copy of our Q2 2020 earnings release issued earlier this morning. If you haven't, the earnings release and presentation that accompanies this call are available in the Investor Relations section of our website at www.twinriverwwholdings.com under the News and Events and Presentations tabs. With me on today's call are George Papanier, our President and Chief Executive Officer; Steve Capp, our Chief Financial Officer; Marc Crisafulli, our Executive Vice President and he's also President of Twin River Rhode Island; Jay Minas, our Vice President of Finance; and finally, Joe McGrail, our Chief Accounting Officer. Before we begin, we'd like to remind everyone that comments made by management today will contain forward-looking statements. These forward-looking statements include plans, expectations, estimates and projections that involve significant risks and uncertainties. These risks are discussed in the company's earnings release and SEC 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 or the presentation that accompanies this call. We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to project special charges within certain expenses. Today's call is also being broadcast live on our Investors site and will be available for replay there shortly after the completion of this call. I'll now turn the call over to George. George?

Thank you, Craig. Good morning, everyone. I hope that everyone is continuing to stay safe during these unprecedented times and appreciate everyone joining us. When we last spoke exactly 90 days ago, all 7 of the casinos we owned at the time had been closed in response to the COVID-19, and we faced significant uncertainty as to when and to what extent we can reopen. Fast forward it to today, we've emerged in the quarter with all mind, including our newly acquired Casino KC and Casino Vicksburg properties having successfully and, just as importantly, safely reopened. As part of Twin River's overall COVID-19, reopening plan at each property, we committed to meeting or exceeding all guidelines established by the CDC. As such, the company has implemented property-specific comprehensive health and safety protocols developed in close consultation with applicable state regulators and public health officials and local jurisdictions, and we are very confident in the environments we have created for our guests and valued team members. Speaking of our team members. I would like to extend a heartfelt thank you to all of you. You were responsive and enthusiastic when it came time to reopen and their hard work, especially in the face of new procedures and many new safety and sanitation protocols does not go unnoticed. Thanks to your efforts and tremendous attitude, our reopenings have been extremely successful. As we discussed last quarter, the impacts of COVID forced us to make the difficult decisions to place most of our team members on furlough. While we have been able to welcome back a large percentage of those affected, there are still a number of employees on furlough as we await the ability to increase capacities and amenities. We said it last quarter, and I'll reiterate it again. We care deeply…

Thanks, George, and good morning, everyone. As George noted, when we first opened our Twin River and Tiverton properties in Rhode Island on June 8, we did so in a very limited fashion that we liken to more of a preopening pilot phase. We were only open to a limited number of invited guests as we worked with local regulatory and health officials to ensure that our reopening in the state was done in a methodical, safe manner. At the time of our initial reopening, we were operating under significant restrictions and limitations, including limited hours, fewer gaming options and reduced amenities. As a result of the constricted nature of operations during the period, we experienced less of a recovery of revenues than we experienced in our other markets and ended the month with slightly negative adjusted EBITDA during this ramp-up invitation-only period. Despite the impact this had on the financial results, we viewed the month of June as a success in Rhode Island. The experience gained during the preopening pilot phase provided valuable and necessary training for our staff as we welcome back our valued guests while providing necessary assurances to local health officials that we can operate in a safe and prudent manner. On June 30, we received permission from the state regulatory authorities to eliminate the invitation-only requirement and to broaden our offerings and expand the number of guests in our 2 Rhode Island casinos, while continuing to adhere to the strict social distancing and health and safety protocols we have put in place to protect our guests and team members. Since reopening to the general public at the end of June, we have experienced a rebound in revenue and profitability in Rhode Island, though we are still operating under material capacity and amenity restrictions. Looking at…

Marc, thank you. First, I'd like to address cash and liquidity. As you know, we closed a new $275 million loan financing in May. And so with those proceeds, we ended the quarter with cash on hand of over $330 million. And our $250 million revolver was completely unfunded for total liquidity at the end of the quarter of over $580 million. On a pro forma basis, for the approximately $230 million we paid to acquire Casino KC and Casino Vicksburg just last month, the company had total liquidity of approximately $350 million, again, including the unfunded revolver. Looking out even further, to factor in the amounts we'll invest in the purchase of Bally's and the Shreveport and MontBleu properties, which purchase price totals $165 million at closing, pro forma, we have total liquidity of $185 million. If we were to face another period of shutdown as a result of the COVID-19 pandemic, based on our current cash requirements and ability to endure a Phase 2 extended shutdown scenario in a completely 0 revenue environment, we believe our current liquidity of $185 million provides us with operating cushion well through 2021, inclusive of the acquisition commitments just mentioned. In terms of capital expenditures, all major CapEx projects have been suspended, and we have greatly reduced our expected CapEx spend for the second half of this year. However, in the meantime, we are planning, scoping and continuing to position for a full return to normalcy at any time. As George mentioned, we certainly still intend to move forward with our proposed CapEx program at Casino KC for approximately $40 million as we think the project there will greatly enhance the property and guest experience, driving growth and a nice return on investment. However, with the timing of the close and the…

Thanks, Steve. That concludes the prepared remarks section of the call. And I'll now ask the operator to open it up to your questions.

[Operator Instructions] Our first question is coming from the line of Barry Jonas of Truist Securities.

The Chairman of the Board said in an interview that he's aiming for $500 million earnings a year. I think that's about 2x your normalized LTM run rate once all the M&A closes. Just curious how long you think you could reach a target like that? And with that, maybe any broader commentary on the M&A environment out there right now?

Thanks, Barry, for the question, and I'm going to hand this over to Steve.

Thanks, George. Thanks, Barry. Thanks for the question. Look, Barry, I think the paraphrase on our Chairman's comment in that interview was not necessarily to be taken specifically but rather that it's true to mean that we are not done building the company that we do, as just mentioned, maintain a balance sheet that's deliberately prepared for opportunity as well as liquidity in terms of preparedness. And that eyes wide open, we will continue to be vigilant and focused on accretion as we look at future opportunities. But as I just mentioned, we're not done building the company. There's a lot more to do here, and we are focused on getting there. To your question, I don't want to go down a rabbit hole of how long it takes to double the size of the company even from here. It all depends on the environment, right, and valuation multiples in this market and the like. But suffice it to say, I think what he meant was we are very focused on continuing to grow the company and to do so accretively. And Barry, as it relates to the M&A environment, I think your second question, look, it's very dynamic time out there. And I think -- obviously, the 2 keys to the M&A environment are, what are the -- what are the multiples that buyers and sellers are going to agree on in this very unpredictable environment and how well positioned is the company's balance sheet to actually execute on an acquisition. Those 2 things obviously drive M&A in a particularly relevant -- in this environment because of the uncertainty around revenues due to COVID on the one hand and then secondly there aren't that many companies really in a position to execute on M&A from a funding standpoint. So in that regard, we feel pretty good.

Thanks, Steve. This is George. I just want to add to that. We've said this previously, we're going to just continue our disciplined diversification strategy. We're going to take an opportunistic approach and continue to evaluate opportunities with a strategic element to it. We like the idea of continuing to enter into new sports betting markets, especially with the potential for iGaming license. And in the meantime, we're going to focus on the assets we just acquired and digest that through integration into our portfolio.

Great. I really appreciate all that color. That's really helpful. Then just touching on Rhode Island. A really helpful commentary in terms of the opening there, the preopening and the ramp. Just curious what do you think needs to happen in Rhode Island to kind of generate the sort of results you're seeing in the other properties right now?

So I'm going to let Marc give you the lay of land from a government perspective and then I might add some color to that. So Marc?

Thanks, George, and thank you, Barry. There are couple of thing in Rhode Island. We're still not even at 24 hours yet. Our VLT count is about half, and the table games are about a quarter. So we need to be able to start to expand that. Unfortunately, Rhode Island right now from a COVID results standpoint, numbers have been creeping up, and it's actually been burdened a little bit by some quarantine rules. So if you're in Rhode Island -- if you visit Rhode Island and you go back to another number of other states like Massachusetts, New York, Connecticut, then you have to quarantine or demonstrate a negative test. So we're hopeful that the state can turn around the coronavirus issues in the next few weeks and get back to normal. And then we would like to get to 24 hours is a big step, continuing to expand table game availability, VLT counts and maybe get some of the amenities running. We are running some of the restaurants there, but not all of them, obviously. So that's -- we're kind of on that pathway now. Hopefully, in the next few weeks to a month, we'll see some improvement again.

Yes. If I could just add a little color to that. When we opened up in other markets, we had always anticipated some pent-up demand, and we did better than we had anticipated, particularly in the markets where we could use more of the amenities associated with that facility. In Rhode Island, they're a little bit more stringent on their philosophy of allowing gatherings, I'll call it. And as that lightens up as we improve from a COVID perspective, there's certainly the demand that's there. So we think we're going to benefit from that as soon as the state starts lightening up on the restrictions.

Got it. And then just last one for me. We've heard some commentary over the past few days from your peers about kind of a younger demographic coming in, older demographic, maybe a little more cautious coming in. Just curious if you can give any commentary about the types of players you're seeing. And with that maybe is the player catchment widened or narrowed? Any sort of color on who's coming in today would be really helpful.

Sure. Well, each market is -- has a little bit different nuance to it. Some people are less concerned about COVID than others. And what we're seeing is it's primarily our -- the demographic that we typically would see. In some cases, with the older demographic, there's less visitation. However, their spend seems to be up. We are drawing some, but not really noticeable younger crowd. So again, it really does depend on the market, and it depends on the amenities that you're providing. I think, really, the impact that we seem to be having is more around the concern of government when they impose what I'll call negative COVID actions. But the demographic that we have is still an older demographic, some of this with discretionary income, primarily from their investments as the market's been doing better from that perspective. And we're just seeing a little bit larger wallet currently.

Our next question comes from the line of Brad Boyer of Stifel.

First one, I just want to expand upon Barry's question on M&A. I mean as we look at the landscape today, just kind of curious if there's any sort of strategic drivers at this point for M&A, but truly just kind of comes down to the numbers, so to speak, i.e., if a deal makes sense from a multiple acquisition perspective than it's something you would consider? Or are there any particular markets, jurisdictions what have you that are of particular interest today?

It's George. I touched on this a little bit earlier. We're certainly going to be disciplined in our approach. And I did mention that we like states that currently have sports betting. So we're looking at sports betting markets, and we're especially interested in the iGaming market. So we feel as states look for more revenue, there may be or tend to be more legislation associated around that. So we're going to be opportunistic in what we look at, but certainly, we're going to be aggressive about entering into new markets, particularly as it relates to sports betting and iGaming.

Okay. That's a good segue into my next question, just around sports. Kind of a broader question. I mean if we look at sort of some of your partnership announcements thus far, you obviously have 2 big brands in Colorado and a nice, what I would call, a nicher player in New Jersey. I guess just how should we think about the evolution of your partnerships here? I don't want you to totally pull back the curtain. But any thoughts around how you are approaching partnership relations as you enter new jurisdictions?

Well, part of our strategy, again, is through diversification to try and enter into these markets. We really believe that casinos and other forms of gambling are converging. We believe that they're complementary to each other and not necessarily cannibalizing each other. So we feel there's an opportunity to be in both spaces. We love the idea of attaching brands, existing brands, as you've seen with FanDuel and DraftKings. So we're going to continue to look and explore for opportunities as it relates to that. And in the meantime, as we develop as a company, we'll start to focus on how we either burned with or potentially acquire or integrate with some tech stacks. And that allows us to really get more fully immersed into iGaming and sports betting.

Okay. Helpful. And then lastly, just a housekeeping question. Steve, is there any way you could put some numbers around the back half CapEx outlook? I know you said it was likely going to be down, I think you said, but any way to put some numbers around that?

Brad, you mean for 2020?

Yes.

Well, it's going to be minimal, actually. I don't have -- I don't have a number for you, Brad, but look, we didn't even -- we didn't even make it through Q1 on a normal operating basis. And as you might imagine, we virtually shut down CapEx expenditures as of March, not knowing what the future would hold for the foreseeable. So look, on -- obviously, I have to distinguish between maintenance CapEx and expansion CapEx, if you will. We have -- we've done some -- for example, we did some F&B work at Dover. And we have planned similar to that elsewhere, not in the CapEx budget -- excuse me, not the maintenance CapEx budget. So look, I think for 2020, the maintenance number is going to be a fraction of the kind of guidance we've given in prior years on the prior kind of the 2019 portfolio of properties was approximately $20 million, low 20s. We're going to be -- we'll be a fraction of that for this year. Obviously, this year is not finished. This thing -- if we could pivot on COVID and come out strong, then that number could actually change even somewhat materially this year. But at this point, we're probably operating at kind of 25-ish percent of that budget for the year, plus/minus.

Our next question comes from the line of John DeCree, Union Gaming.

Steve, George, I wanted to ask about New England's and Rhode Island. Pre-COVID, it was one of the more promotional markets with new supply coming online. And it's been a couple of weeks since things are kind of going again. But curious if you've seen competitive behavior as it relates to kind of reinvestment in New England, any different than you are in other markets? Is it coming back more quickly? And so anything you've seen so far? And then if you have an expectation, if post-COVID world, you'll see that rationalization that's kind of taking hold in the U.S. and work in New England as well?

John, so yes, there's certainly been a rationalization around marketing spend. Some of that may be driven by the fact that the states are concerned about large gathering. So I think everyone is being cautious about that from a promotional perspective. But Connecticut had a little bit of a head start. They've opened up a little bit more fully than we had in Rhode Island. And as you know, Massachusetts opened up maybe about a month subsequent to our opening. So we certainly see rationalization from the spend in the market. We think that's an opportunity for everyone to kind of take a step back and understand that you could operate at better margins, particularly from a marketing perspective, as you're more targeted towards specific customers. So I think that -- I think the -- that's going to linger for a while, particularly as we continue to migrate through this COVID crisis. And hopefully, as a result of that, we find out that we don't need to be really irrational from a marketing perspective because the margins have improved.

That's -- will get segue into my follow-up question, which is probably mostly around where you see sustainability and some of the margin gains that you've realized through reopening? It sounds like targeted marketing is a good area. But just wondering if you could kind of unpack a little bit or give us some insight as to some of the buckets that you see some sustainable margin improvement?

Well, the exercise that we were forced to go through as a result of a big shutdown really trying to understand how you mothball the operations really provided some valuable information to us, particularly in the ability to really understand from a contract perspective and purchasing perspective, there's opportunities there that we were able to take advantage of. So we see that continuing for the time being. We also -- obviously, one of the big items is labor. We've taken a step back, as I said, and we've learned how to operate our operations just a little bit better from a variable perspective. We think that's going to be continuing. And lastly, what we touched on initially was from a marketing perspective, certainly going to be more targeted for the foreseeable future. And it's going to be a slow ramp-up back to being aggressive about promotional marketing, large events and entertainment. So again, that's going to linger for a while. And what we'll realize is that we may be able to maintain the same levels of business that we have historically with less of a promotional and marketing approach.

[Operator Instructions] Our next question comes from the line of Chris Sinnott of Cowen.

Just one from me. I believe previously, at the outset of all this, you guys had talked about burning, maybe it was about $7 million to $8 million in cash per day at the outset of the pandemic and then improving that down to a figure that I think was more closer to like $3 million. If we were to step, see a step backwards in terms of shutdowns, maybe what efficiencies have you found that could potentially adjust that $3 million or pressure in the other direction? And how might that be factored into the liquidity outlook that you provided earlier?

Thanks, Chris. And Steve, I'll let you handle that.

Chris, that $3 million, would you clarify that for me? Did you say $3 million per month?

I think that's what you guys told us at the outset of COVID. It might have been on the 1Q call, I'm going back to my notes here, but I thought it started at $7 million to $8 million, and then you've moved it down to closer to $3 million in your last set of prepared remarks.

Yes, listen, where we were at the outset of COVID was, obviously, exploratory in locking down expenses and we were kind of $7 million, $8-ish million, even $10-ish million at that initial phase. And as we get further into it and realize what we could do, that number did come down quite a bit. Remember, what you're talking about there is an OpEx number, right, but there's still a balance sheet number, right? We still have debt service. It's not part of that -- if we take your $3 million -- and look, I'll tell you, I think that $3 million is a very whittle down number. But -- so when you add the balance sheet to it and do the math on those numbers, you end up with a carry that I mentioned in the initial call that in a 0 revenue environment takes us well through 2021. That's kind of the math around all of that stuff. But yes, yes, your numbers are accurate. And I will say that as we work toward getting what was initially $7 million to $8 million per month down to $3 million to $4-ish million or so, that took a lot of introspection and a very sharp scalpel, if you will. We feel like we could get there if we had to. So you can do the math, and that's your annual carry kind of together with debt service. So we're -- we feel pretty good about our ability to manage this business in difficult circumstances.

Ladies and gentlemen, that was our final question. I'd like to turn the floor back over to George Papanier for any additional or closing remarks.

Well, thank you, operator. I want to thank you all for joining our call today. Hope you all enjoy the rest of your summer.

Thank you, ladies and gentlemen. This does conclude today's Twin River Worldwide Holdings Second Quarter 2020 Earnings Conference Call. Please disconnect your lines at this time, and have a wonderful day.