Twin River Reports 2Q Financial Results
PROVIDENCE, RI–Twin River Worldwide Holdings, Inc. (NYSE: TRWH) (the “Company”, “Twin River” or “TRWH”) today reported financial results for the second quarter ended June 30, 2019.
Financial Highlights – Second Quarter 2019 Compared to Second Quarter 2018
- Revenue increased 29.2% to $143.2 million
- Gross gaming revenue increased 26.5% to $228.0 million(1)
- Net income decreased 15.4% to $17.2 million
- Adjusted EBITDA increased 7.1% to $47.5 million
- Dover Downs contributed solid performance with $25.8 million of revenue
Summary of Financial Results
|
Three Months Ended June 30, |
||||||||||
|
(in thousands, except per share amounts and percentages) |
2019 |
2018 |
Change |
|||||||
|
Revenue |
$ |
143,218 |
$ |
110,815 |
29.2 |
% |
||||
|
Income from operations |
$ |
33,846 |
$ |
31,424 |
7.7 |
% |
||||
|
Income from operations margin |
23.63 |
% |
28.36 |
% |
||||||
|
Net income |
$ |
17,180 |
$ |
20,300 |
(15.4) |
% |
||||
|
Net income margin |
12.00 |
% |
18.32 |
% |
||||||
|
Adjusted EBITDA(1) |
$ |
47,457 |
$ |
44,298 |
7.1 |
% |
||||
|
Adjusted EBITDA Margin(1) |
33.14 |
% |
39.97 |
% |
||||||
|
Earnings per diluted share (“EPS”) |
$ |
0.42 |
$ |
0.49 |
(14.3) |
% |
||||
|
Adjusted EPS(1) |
$ |
0.51 |
$ |
0.56 |
(8.9) |
% |
||||
|
(1) Refer to tables in this press release for a reconciliation of these non-GAAP financial measures to the most directly comparable measure calculated in accordance with GAAP. |
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“We are pleased with the Company’s results in the quarter as the financial performance at Dover exceeded our already high expectations and our Rhode Island operations performed well despite some softness in the New England gaming markets in the second quarter,” said George Papanier, President and Chief Executive Officer. “Our emphasis of focusing on in-market and out-of-market accretive growth is also proving itself in the early going as we continue to grow prudently into a multi-state operator based in Rhode Island versus a single regional operator.”
Second Quarter 2019 Results
Revenue for the second quarter 2019 increased 29.2% to $143.2 million from $110.8 million in the second quarter 2018. The increase in revenue year-over-year was principally driven by the effects of the Dover Downs acquisition, which exceeded expectations on the top line in its first full quarter of ownership and contributed $25.8 million of revenue to the Company’s results for the second quarter. The second quarter was also favorably impacted by incremental revenue at the Tiverton Casino Hotel (“Tiverton“), which opened in the third quarter of 2018 and continued to ramp in the second quarter. The Company did note softness in the overall New England market throughout the second quarter of 2019, which was attributed to a challenging comparable period in 2018 resulting from pent up demand due to poor weather in the first quarter of the prior year, as well as the likely impact of decreased tax refund dollars in the current year as a result of federal tax legislation changes at the end of 2017. The Company notes that the impact of new competition in the region did impact revenue late in the second quarter, particularly at the Twin River Casino Hotel (“Lincoln“); however, the impact to the quarter was in line with the Company’s expectations.
Overall gaming revenue increased $18.0 million, or 21.8%, to $100.2 million, food & beverage revenue increased $6.5 million, or 52.9%, to $18.8 million, and hotel revenue increased $5.9 million, or 107.6%, to $11.4 million, in each case, compared to the same period in 2018.
Income from operations in the second quarter 2019 increased $2.4 million, or 7.7%, year-over-year to $33.8 million. This year-over-year increase, driven by the increase in revenues noted above, was positively impacted by the addition of Dover Downs and the incremental contribution from Tiverton in the quarter. Operating costs and expenses in the second quarter of 2019 include the impact of the following:
- increased corporate overhead costs of $1.1 million, reflecting the Company’s corporate investment in preparation of future growth and additional costs incurred by the Company to meet reporting requirements associated with being a publicly traded company;
- increased depreciation and amortization expense of $3.1 million driven by capital projects for Tiverton and the Hotel at Lincoln, which were completed in the second half of 2018, and the addition of Dover Downs;
- decreased share-based compensation expense of $4.4 million resulting from the timing of grants and settlement of awards which created expense volatility in 2018;
- approximately $1.7 million of professional and advisory fees incurred in the quarter associated with the Company’s capital return program; and
- increased acquisition and integration costs of $0.9 million driven by the pending acquisition of three Black Hawk, Colorado properties from Affinity Gaming and the recently announced pending acquisitions of the Isle of Capri Kansas City and Lady Luck Vicksburg casinos from Eldorado Resorts Inc.
Interest expense for the second quarter increased $4.9 million to $10.0 million as, on May 10, 2019, the Company extended its balance sheet by entering into a new credit facility and issued $400 million of 6.75% unsecured senior notes, which are described in more detail below.
Reflecting the items described above and an increase in the effective tax rate year over year, net income for the second quarter 2019 decreased $3.1 million, or 15.4%, to $17.2 million. Adjusted EBITDA for the second quarter 2019 was $47.5 million, an increase of $3.2 million, or 7.1%, from $44.3 million in the second quarter 2018.
Introduction to July 2019 Rhode Island Gaming Volumes
Our Rhode Island segment has been impacted by new competition which opened in Boston in late June. In commenting on this impact, George Papanier said, “The new competition had a greater than expected negative impact on our table games at Lincoln in July 2019, while our slots performance for the same period was in line with expectations given the seasonal weakness that we noted earlier that impacted the second quarter. Table games revenues decreased by approximately $3.9 million(1), or 34%, to $7.6 million when compared to July 2018, while our slots NTI decreased approximately $6.4 million, or 17%, to $32.2 million(1) compared to July 2018. We are pleased with the lack of impact we have experienced at Tiverton where gaming volumes in July were relatively flat to our recent monthly run-rate which we view as a positive. When we conceived and planned the Tiverton property, the expectation was for it to offset the impact of new competition so that operating income in the market would be flat to Lincoln alone. We are revising our expectations for combined operating income to be lower by approximately 10% from those expectation levels.”
The Company notes that July 2019 represents the first full month that the Company’s results were impacted by new Boston competition and the volume numbers presented above are similar to the gaming revenue numbers regularly made available by the Rhode Island State Lottery. These numbers are based on the Company’s internal data and actual results reported by the Rhode Island State Lottery may differ.
The Company is providing this preliminary and selected gaming volume data subsequent to the end of the second quarter to provide insight into the initial impacts of recent competition. The Company does not plan to regularly release similar financial information (whether preliminary or not) on an ongoing basis.
Balance Sheet and Liquidity
The Company had $383.4 million in cash and cash equivalents, excluding restricted cash, at June 30, 2019. Outstanding indebtedness, before the impact of $13.3 million of unamortized deferred financing fees and $2.1 million of unamortized original issue discount, at the end of the second quarter 2019 totaled $700.0 million. “We ended the second quarter with a rock solid balance sheet and, taking into account our very low net debt leverage, we have what we believe is one of the strongest capital structures in our industry,” commented Steve Capp, Chief Financial Officer.
On May 10, 2019 the Company completed its new debt financing, comprised of a $250 million revolving credit facility (the “revolver”) and a $300 million term loan with maturity dates of 2024 and 2026, respectively, as well as $400 million of senior unsecured notes due 2027. The revolver was undrawn at closing and remained undrawn at June 30, 2019. The Company used the net proceeds from the term loan and unsecured notes to repay borrowings under its prior revolver and term loan, aggregating $421.2 million. The balance, net of costs, of approximately $260 million is included in the Company’s cash balance at the end of the second quarter and will be used for general corporate purposes, which could include, in addition to funding operations, acquisitions, repurchases of our common stock and other transactions.
On June 14, 2019, the Company declared a cash dividend of $0.10 per common share (“Dividend”) that was paid on July 23, 2019 resulting in a $4.1 million return to shareholders. On July 26, 2019, the Company completed a modified Dutch auction tender offer (“Offer”) and repurchased approximately 2.5 million shares of its common stock for cash at a price of $29.50 per share for an aggregate purchase price of $75 million. Both the Dividend and Offer were components of the Company’s previously announced capital return program and were funded with cash on hand. After the effect of the payment of the Dividend and consummation of the Offer, the Company had approximately $171 million available for use under its capital return program.