Twin River Worldwide Holdings, Inc. (to become Bally’s Corporation) — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020. The filing was submitted under Twin River Worldwide Holdings, Inc.; the company announced a name and ticker change to Bally’s Corporation (NYSE: BALY) effective November 9, 2020.
Business context
The company operates casino, gaming, racing, hotel and related businesses across multiple U.S. markets. Results reflect COVID-19-related closures beginning in March and continued capacity and amenity restrictions after reopening. Acquisitions also changed the business mix: Black Hawk Casinos joined in January, and Casino KC and Casino Vicksburg joined on July 1, 2020.
Financial results
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $116.6 million | $129.3 million | $254.7 million | $393.2 million |
| Operating income (loss) | $23.4 million | $21.5 million | ($0.7 million) | $85.6 million |
| Net income (loss) | $6.7 million | $7.0 million | ($25.7 million) | $41.8 million |
| Diluted EPS | $0.22 | $0.18 | ($0.83) | $1.07 |
| Adjusted EBITDA (non-GAAP) | $38.0 million | $35.6 million | $49.3 million | $126.9 million |
Q3 GAAP operating margin was 20.0%, versus 16.6% a year earlier. Management attributed the improvement to cost efficiencies and strong results at Hard Rock Biloxi, as well as the newly acquired KC and Vicksburg properties; Q3 revenue nevertheless declined 9.8%. For the first nine months, revenue fell 35.2% and Adjusted EBITDA fell 61.1%, largely reflecting shutdowns and operating restrictions. Q3 gaming and racing revenue rose 7.3%, while non-gaming revenue fell 51.4%.
- Cash flow: Operating cash flow was $1.7 million for the nine months, down from $72.7 million. Investing cash outflow was $288.5 million, mainly for acquisitions; financing cash inflow was $218.2 million.
- Liquidity: September 30 cash and cash equivalents were $115.0 million, plus $1.9 million restricted cash. Working capital was $98.7 million, down from $155.2 million at year-end 2019. The company reported the full $250 million revolving facility available and said liquidity was sufficient for obligations, debt service and pending acquisitions.
- Debt: September 30 long-term debt carrying value, including current maturities, was $943.4 million; principal comprised a $570.6 million term loan and $400 million of 6.75% senior notes due 2027. The term loan interest rate was 2.90% at quarter-end. The company issued an additional $125 million of notes on October 9, after quarter-end, bringing note principal to $525 million.
- Interest and taxes: Q3 interest expense was $17.0 million, up $5.5 million year over year; nine-month interest expense was $43.7 million, up $15.2 million. The company recorded tax benefits of $0.2 million for Q3 and $18.4 million for the nine-month period, with the latter affected by the CARES Act.
Material changes and unusual items
- The April 2020 credit amendment suspended the maximum leverage-ratio covenant through the period covering the first quarter of 2021 and replaced it with minimum month-end unrestricted-cash requirements, including $50 million per month from July 2020 through March 2021. The company reported compliance at September 30. Dividends and share repurchases are restricted during this relief period.
- Nine-month results include an $8.6 million impairment charge related to Black Hawk goodwill and intangible assets. Purchase-price allocations for recent acquisitions remained preliminary.
- Acquisitions contributed $19.0 million of Q3 revenue from Casino KC and Vicksburg and $5.7 million from Black Hawk. Acquisition timing makes year-over-year comparisons less directly comparable.
- Outstanding shares declined year over year, and the company reported no Q3 share repurchases. Nine-month 2020 repurchases totaled $33.3 million; dividends paid totaled $3.2 million.
Outlook, risks and contingencies
No formal financial guidance is provided. Management expected COVID-19 restrictions to continue materially affecting results in Q4 2020 and could not determine when, or whether, properties would return to pre-pandemic demand. At September 30 all properties were open in some capacity, with varying capacity limits and amenities unavailable. Management cited potential renewed closures, weaker consumer demand, operating restrictions, and uncertainty in liquidity and capital markets as significant risks.
Growth plans included pending acquisitions of Bally’s Atlantic City, Shreveport and MontBleu, and Jumer’s; these were subject to regulatory and other closing conditions. The Tropicana Evansville agreement and proposed Dover Downs real-estate sale-and-leaseback were announced after quarter-end. Management also described a planned approximately $40 million Casino KC redevelopment and an intended approximately $90 million, five-year investment at Bally’s Atlantic City following closing. The filing identifies litigation and regulatory risks, including a Rhode Island suit challenging sports wagering, and notes a proposed settlement of a separate shareholder lawsuit subject to court approval.
Most important facts for investors to verify
- Current property capacity, operating restrictions and demand trends, especially after the filing’s Q4 COVID-19 warning.
- Cash balances, revolver availability, covenant compliance and financing needs as acquisitions and investment plans proceed.
- Final purchase-price allocations and integration results for Black Hawk, Casino KC and Casino Vicksburg.
- Closing status, regulatory approvals, financing and lease economics for announced and pending transactions, including the post-quarter Tropicana and Dover Downs arrangements.
- Whether Adjusted EBITDA trends persist; it is a non-GAAP measure and does not replace GAAP earnings or cash flow.
- Developments in the Rhode Island gaming litigation and the shareholder settlement process.