Behind The Numbers – Twin River Worldwide (TRWH)
Twin River Worldwide owns and manages four casinos, specifically Twin River Casino Hotel (Lincoln, Rhode Island), Tiverton Casino Hotel (Tiverton, Rhode Island), Hard Rock Hotel & Casino (Biloxi, Mississippi), and Dover Downs Hotel Casino (Dover, Delaware), as well as Arapahoe Park in Aurora, Colorado, a horse race track that possesses 13 OTB licenses.
A quick background on Twin River Worldwide, provided by Stifel in their April 24th initiation note:
“In July 2018, Twin River Worldwide Holdings announced its intention to enter the public markets through a reverse merger with Dover Downs Gaming & Entertainment (DDE), the operator of a horseracing facility and casino in Delaware. The TRWH-DDE merger closed on March 29, 2019, and the combined company listed on the NYSE under the ticker “TRWH.”
After the close yesterday, the company posted its inaugural Q1 results:
-EPS of $0.46 vs $0.53 estimate – Miss
-Revenue of $120.6M vs $119.1M estimate – Beat
-Net Revenue increased 15.1% Y/Y
-Gross Gaming Revenue increased 13.6% Y/Y
As shown above, the majority of their revenue is currently coming from its Rhode Island operations. On the conference call, Vice President of Finance Jay Minas would comment its gaming revenues saw nice increases in the quarter as the momentum that started late last year from our Tiverton operation continues to build. “Table games revenue, which generates a higher profit margin than slots in our Rhode Island segment, grew $8.1M, and slot revenue grew by $3M.” However, he would note that this increase was partially offset by higher incentives offered to players in an effort to maintain and grow market share, primarily related to their new hotels at both Lincoln and Tiverton for an increase in net gaming revenue of $9.4M, or 15.8%, over the prior year’s first quarter.
In a note last night, Stifel analyst Brad Boyer would comment that Rhode Island gaming and non-gaming net revenues increased 16% and 35% Y/Y, better than the 13% and 30% growth projections included in their model. The analyst attributes the superior growth rates to a steeper than expected ramp at Tiverton and better leveraging of the new amenities (hotel, stadium gaming and sports betting) at Lincoln. Additionally, he believes management continues to make strides in optimizing their share of wallet from guests who visit both Tiverton and Lincoln.
Encore Boston Competition
If you do not already know, Encore Boston Harbor, a full-service resort developed by Wynn Resorts (WYNN) will be opening next month on June 23rd and Twin River CEO George Papanier would comment on the upcoming opening on the conference call:
“Considering the recent increased competition in our market, we continue to be pleased with the results from our meaningful investments in Rhode Island, which we believe has been affected. Expect these investments to be particularly key as we anticipate increased competition in the region with Encore Boston Harbor. While increased competition will likely have an impact on our Rhode Island operations, we believe that our focus on the local customer base, enhancing our marketing efforts, including use of free slot play and guest complimentaries, favorable legislation in Rhode Island versus Massachusetts, which includes the younger legal minimum gambling age and ability to smoke in Rhode Island casinos, are designed to position us to respond.”
Stifel would also chime in on this topic by saying, “Looking ahead, we expect to see modest margin compression in the segment beginning in 2Q19 as management accelerates marketing spend in advance of the anticipated late-2Q19 opening of Encore Boston Harbor. All told, we continue to expect the impact from the Encore opening to prove rather modest and short lived, particularly when contemplating less than 20% of Lincoln’s rated slot play comes from guests residing closer to Encore and over 75% of rated play at Lincoln comes from guests residing within a 30 minute drive of the property.”
