Earnings Call Transcript - BALY Q1 2020

Operator, Operator

Ladies and gentlemen, thank you for being here, and welcome to the Twin River Worldwide Holdings, Inc. First Quarter Earnings Call. I will now turn the conference over to Craig Eaton, Executive Vice President and General Counsel. Please go ahead, Mr. Eaton.

Craig Eaton, Executive Vice President and General Counsel

Good morning, everyone, and thank you for joining us on today's call. I hope that each of you, your family, friends, and colleagues, are safe and staying healthy. By now, you should have received a copy of our Q1 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 President of Twin River Rhode Island; Jay Minas, our VP of Finance; and Joe McGrail, our Chief Accounting Officer. Before we begin, we would like to remind everyone that comments made by management 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. I will now turn the call over to George.

George Papanier, President and Chief Executive Officer

Thanks, Craig. Good morning, everyone. I hope that everyone is staying safe during these unprecedented times and appreciate everyone joining us. These trying times remind us how sacred life, family, and friendships are, and we would like to thank all of the frontline workers for their hard work and bravery every day in fighting this battle. In response to the COVID-19 outbreak, we announced and have executed a multifaceted response, which has been outlined over the last several weeks through our press releases, including this morning's earnings release. We will have more on our response in a few minutes; however, this is our first public opportunity to discuss some exciting new developments and our ongoing corporate strategy. So I want to start there. About 2.5 weeks ago, we announced our intention to acquire the Eldorado Shreveport Resort, Louisiana, and the Montbleu Resort Casino & Spa in Lake Tahoe, Nevada from Eldorado, as well as an agreement to acquire Bally's Atlantic City from Caesars and VICI Properties. These transactions are expected to be immediately accretive to earnings. We are extremely excited about the prospect for future growth from these three properties. These acquisitions represent a unique opportunity to continue executing on our expansion and diversification strategy in attractive markets and even more attractive valuation multiples. As we have stated before, our disciplined approach to M&A, strong balance sheet, and low leverage compared to others in the industry, as well as our proven track record of successfully integrating new properties to effectively compete, position us well to take advantage of opportunities as they arise, and these acquisitions are a perfect example. Starting with the Eldorado transaction. The company will acquire Shreveport's operations and real estate and MontBleu's operations. A $155 million purchase price for these two properties includes a $15 million deferred cash payment, bearing no interest, payable one year after closing. This purchase price on a combined basis represents an implied trailing 12-month pro forma EBITDA multiple of approximately 4.1x, excluding any potential impact from cost and revenue synergies. We also entered into an amended agreement with MontBleu's landlord, including the extension of the lease term to the end of 2035 with options to extend through 2060. Shreveport is a top-tier property in the Shreveport, Bossier City market with a lot of characteristics of our Hard Rock Biloxi property, where we have had considerable success. MontBleu is a beautiful resort property and recently went through a major renovation. We're looking forward to offering an experience there as a great reward destination for customers throughout our portfolio. The company's proposed acquisition of these two properties is subject to FTC and state and local regulatory approvals and is conditioned upon the completion of the merger of Eldorado and Caesars. The acquisition has been subject to a financing condition. However, that was satisfied this past Monday, when we closed on our new debt financing of $275 million, which Steve will cover in a few minutes. Turning to the Bally's acquisition. The purchase price of $25 million represents an implied trailing 12-month EBITDA multiple of approximately 2.1x, excluding any potential impact from cost and revenue synergies. The agreement with Caesars and VICI is structured as an asset purchase, covering certain assets of Bally's and the property on which they are operating. As part of this acquisition, we will also acquire the license to build out a sports book and launch online sports betting and iGaming, which we believe will provide nice upside to the existing cash flows from the property. Our executive team collectively has had many years of experience in that market, and we believe our current model fits very well there. Being able to acquire Bally's with its center of the Boardwalk location was also incredibly attractive to us. We note that all three of these assets have been well maintained and do not require any material deferred maintenance CapEx or any short-term significant capital investment. So we do expect to refurbish approximately 700 of the rooms at Bally's, which will be phased over a three-year period and is not expected to require significant capital investment. Along with our previously announced acquisitions of Kansas City and Vicksburg, we believe that the addition of these five contracted properties will meaningfully enhance our financial profile while strengthening our presence in a number of key geographic markets. We see significant opportunities to create cross-marketing for customers of multiple Twin River locations. We believe all of these assets are a great fit for our portfolio and are eager to apply our proven operating and integration approach to drive incremental revenues and cash flows. We're currently working diligently through the regulatory process, including obtaining the required approvals from the FTC, and we expect the Kansas City and Vicksburg acquisitions to remain on track to close in Q2 2020, pending Missouri regulatory approval. Additionally, we expect the Bally's acquisition will close in late 2020, while Shreveport and MontBleu are likely to close in the first half of 2021. We're currently on the agenda for the next Gaming Commission meeting in Missouri later this month, and expect to close on that transaction soon after. I'm extremely excited about our M&A successes and what they will mean for the company going forward. Within the next 12 months, we will be operating five additional properties that we collectively acquired at 5x.

Stephen Capp, Chief Financial Officer

Thank you, George. As he mentioned, we recently closed on a new $275 million term loan B, which fulfills the financing requirement for our agreement to acquire the Shreveport and MontBleu assets from Eldorado Resorts. Since the regulatory approval process will take time, we repaid all $250 million borrowed under our revolving credit facility. This facility remains available for future borrowings. The interest on the increased term loan will be at LIBOR plus 8% per year until it matures in 2026. I want to address the recent amendment to our financial covenants. We were compliant with our leverage covenant as of March 31, 2020, but on April 24, we announced that we had collaborated with our lenders to amend our financial covenants to provide relief from the impacts of the COVID-19 pandemic. We no longer have to comply with the maximum total net leverage ratio covenant, but we do need to maintain a minimum liquidity ratio at the end of each month during the relief period. Specifically, we need to have $75 million in liquidity by April 30, which we achieved; $65 million by the end of June; $55 million by the end of July; and $50 million at the end of each month afterward until March 31, 2021. After this period, the leverage ratio targets are set at 6.25 for March 31, 2021, 6.0 for June 30, 2021, 5.75 for September 2021, and 5.5 for December 31, 2021, dropping to 5.0 thereafter, aligning with the original credit agreement terms. The applicable interest rate on borrowings from our credit facility will be LIBOR plus 2.75% throughout the leverage ratio covenant period lasting until March 31, 2021. Now regarding our cash balances, at the end of March 31, 2020, our cash on the balance sheet stood at $361 million. After accounting for the new $275 million financing, the repayment of our $250 million revolver, and related fees, our cash position exceeded $370 million, plus the availability under the revolver brings total liquidity to over $620 million, with no significant debt maturities until 2024. Even when factoring in all five contracted acquisitions, our liquidity remains above $210 million. We've taken measures to manage our expenses effectively. We utilized the period in March and April to prepare for a potential lockdown, reducing costs as needed. In the event that we must enter lockdown or Phase II in June or July, if no path to reopening appears, we anticipate lowering our monthly operational cash burn rate to around $3 million. This would allow us to sustain operations for more than 18 months, covering all acquisitions and debt servicing. Given our current cash requirements, we believe we have ample resources to navigate through these challenging times. Regarding capital expenditures, we have suspended all major capital projects and significantly reduced our anticipated CapEx spending for the remainder of the year, depending on when we can reopen our facilities. We are still committed to advancing our proposed CapEx plans in Kansas City, estimated at around $40 million, as we believe this project will significantly enhance the property and guest experience, thus driving growth and generating a solid return on investment. However, due to the timing of the close and necessary approvals, this CapEx will primarily occur in 2021. We also mentioned potential CapEx linked to a proposed VLT contract and joint venture with IGT, which would involve expanding our flagship property in Lincoln, and Mark will share an update on this soon, pending legislative approval. Concerning taxes, we expect to leverage various aspects of the CARES Act, including the use of NOL carrybacks and additional interest deductions, which may yield a positive cash flow of $15 million to $20 million, possibly even more, within the next year. Regarding our return of capital program, we repurchased approximately 1.6 million shares for around $30 million during the quarter at just below $19 per share. Consequently, the total shares outstanding are now 30.4 million, down from about 41.1 million when we went public in March 2019, representing a decline of 26%. Following these repurchases and as part of the credit facility amendment, we have paused any further spending under our capital return program, including share buybacks and dividend payments. In terms of guidance, as stated in our announcement this morning, due to the uncertain effects of COVID-19, we are withdrawing our full-year guidance for 2020 that we provided on March 3, and we will not be offering further guidance at this time. However, I'd like to reiterate George's earlier comments. In the next 12 months, we will operate five properties not included in our historical results. We're acquiring these five at an average purchase multiple of about 5x, reflecting our last three acquisitions at a purchase multiple of 3.6x, which is both very accretive and allows for simultaneous deleveraging. We are genuinely excited about the company’s future prospects.

George Papanier, President and Chief Executive Officer

Thanks, Steve. So turning your attention back to the quarter. While a mandated closure of our properties was a necessary part of the broader effort to stop the spread of COVID-19, the impact on our company, our team members, and our communities has been substantial. Before the pandemic began in March, our company was on track to report strong first-quarter results, opening the year with two consecutive months of solid year-over-year revenue and adjusted EBITDA growth across all but one of our properties, the level of which exceeded our internal expectations. Through February, overall revenues for the company were up $17.1 million or 23%, and adjusted EBITDA was up $2 million or 8% compared to the same period in 2019. This included a strong start to the year at Biloxi, which saw revenue and adjusted EBITDA increases of 13% and 35% in the first two months of the year, respectively, as well as Tiverton with increases of 15% and 66% year-over-year, respectively, which continued to ramp and showed market resilience in the face of competition. Finally, Dover contributed $17.3 million of revenue and $3.8 million of adjusted EBITDA in the first two months, a continuation of the success story there. We also closed on our acquisition of Mardi Gras, Golden Gate, and Golden Gulch Casinos in Black Hawk in late January. These transactions were immediately accretive, generating positive EBITDA in February in line with our expectations. We integrated those properties in the first month of operations. In addition, our May 1 sports betting, including online and mobile, went live in Colorado. Through our announced partnership with DraftKings and FanDuel, we're excited about the opportunity and look forward to opening our DraftKings' Sportsbook lounge inside the Mardi Gras later this year. The only property that did not report year-over-year increases in revenue and adjusted EBITDA in the first two months of the year was Twin River in Lincoln, which will not lap the year-over-year impact of new competition in the region until late in Q2. However, this story there was one of stabilization and recovery as, on a GAAP basis, gaming revenue for the first two months at Lincoln was down 21% year-over-year with slot volumes down only approximately 1%. Factoring in the gaming revenue from Tiverton, total gaming revenue for Rhode Island was down approximately 15% in the first two months, while our slot volumes were actually up approximately 3.6% year-over-year. Upon the COVID-19 closure, Twin River was at the point of handling the storm of the new $2.6 billion Encore casino that opened in June 2019. Twin River was continuing to outperform market expectations in the fourth quarter of 2019 and, more importantly, in profitability. Through the first two months of this year, we were exceeding the performance expectations of both the fourth quarter of 2019 and our expectations for the first quarter of 2020. With the $8.6 million of adjusted EBITDA in the month, February represented the strongest month of operating contribution at Lincoln since Encore opened, and we believed we were on track to exceed our recovery expectations. As expected, performance deteriorated dramatically in March as a result of the closing of all our properties mid-month. As a result, our total Q1 consolidated adjusted EBITDA was down just under 50% to $22 million, with Rhode Island down 53% and Biloxi down 42% compared to the prior year, offset by the full quarter impact of Dover and a partial quarter of Blackhawk, which were acquired in late Q1 2019 and the current quarter, respectively. In response to the shutdowns, we have taken broad-based actions to reduce expenses and also enhance liquidity, as Steve just mentioned. Beginning with our team members, the crisis has forced us to make some difficult decisions, and by far, the most difficult is placing most of our team members on furlough. We care deeply about the well-being of our team members, and we recognize the impact that these furloughs have had on those affected. While we can't possibly mitigate the full impact on them, we have sought to provide continued support in the form of ongoing health benefits coverage at no cost. We also established a fund to provide financial assistance for those employees experiencing significant hardship. We hope to bring these employees back as soon as possible. As Marc will speak in more detail in a few minutes, we are actively preparing to do so. When we do, protecting the health and safety of our team members and customers will be our utmost priority, and the safety protocols we put into place will meet or exceed the standards set forth by local, state, and federal health officials. For those team members who have remained on the job throughout these closures, thank you for your hard work in keeping your property safe and secure. Your dedication and efforts have positioned us to open quickly when the time comes. As we look forward and prepare for a return to business, we believe we will benefit from our status as a regional gaming company focused largely on local and regional visitation. The majority of our business comes primarily from local customers. We're not reliant on airlift, destination, or convention businesses to drive results. As operations resume, we believe our local customer base will position well within our industry. While these are certainly unprecedented times, we know that they will come to an end, and we look forward to the start of the recovery. One byproduct of the current environment was a heightened focus on cost control and the potential to leverage the experience gained through this experience to better manage costs in the future, which we think will help us improve margins and profitability long term. Though we will vary slightly by property, we estimate that property-level EBITDA will breakeven with 30% to 36% of prior year revenues. It should be noted that even socially distanced, we believe we can achieve 65% of prior year's revenues after an adjustment period based on occupancy. I'll now turn it over to Marc to discuss in a bit more detail some thoughts and updates on reopening efforts.

Marc Crisafulli, Executive Vice President and President of Twin River Rhode Island

Thanks, George. I wanted to reiterate that I hope everyone is safe and healthy. As we think about reopening, consumer confidence is going to be the key to economic recovery, and thoughtful reopening strategies are going to be crucial to success for us in the short term and in the long term. We have been laser-focused and hard at work on this. While it will vary slightly from state to state, let me briefly outline our thinking about the question of how we reopen using Rhode Island as the example. In Rhode Island, Governor Raimondo's stay-at-home order expired this past Friday, and the state has begun the process of reopening its economy in a smart and measured fashion. It has not yet been determined when the state will authorize us to reopen the casinos. However, beginning almost from the moment we closed the properties, we started working on a detailed, comprehensive reopening plan. We have been working very closely with state and local government officials, public health officials, and experts in epidemiology and biosafety to develop a phased approach to reopening with a set of protocols that will help deliver a safe environment for everyone. We cannot emphasize enough how focused we are on the safety of our team members and our guests. The plan is likely to include, among other things, the screening of team members and guests upon entrance of the properties, potential use of thermal imaging cameras, enforcement of social distancing guidelines, including spacing between VLTs, and limited or no table games to start, frequent cleaning and sanitizing protocols for all areas, mask protection, and public awareness signage. The plan is likely to roll out in several phases, with the first phase designed to open with more significant restrictions and limitations, including limited hours, fewer gaming options, and reduced amenities. Over time, as experience and broader environmental factors in the state improve, the expectation is that some of the restrictions and limitations will be relaxed and more options will be available for our guests again in a smart and measured fashion. We will continue to be driven by data, science, and public health guidelines as we evaluate and evolve our operating practices and guest interactions, and we remain focused on prioritizing long-term outcomes over short-term considerations. As for the timing of reopening, it will ultimately depend on decisions made by government officials consulting with public health authorities and industry and company representatives. We are preparing to open our properties in phases as soon as we are allowed to reopen. At this point, it would appear our Hard Rock Biloxi property is closest to reopening, and we expect that to occur very soon, potentially as early as next week. We are optimistic that openings at our other properties will follow shortly with both Rhode Island and Delaware potentially opening within the next month. It also appears that Missouri may join Mississippi in opening next week. As George mentioned about Kansas City, we are scheduled for our regulatory approval hearing later this month, potentially positioning us to close on the Kansas City and Vicksburg acquisitions in June. While it is impossible to predict, and the situation remains somewhat fluid, we may have as many as six casinos open in Mississippi, Missouri, Rhode Island, and Delaware by mid- to late June, if not sooner. None of this is finally determined, however, and it is subject to change and dependent on a myriad of factors, including the health and safety of our team members and customers, which will remain of paramount importance. I also wanted to provide an update on the status of the IGT Twin River joint venture. As we discussed on our last quarterly call, the new contracts and amendments with the state require authorizing legislation. That legislation was introduced by leadership of the House and Senate in February. On March 11 and 12, Rhode Island House and Senate Finance Committees conducted hearings on the proposed legislation. Immediately after those hearings, Rhode Island suspended legislative activity due to the COVID-19 crisis. The Rhode Island legislature has resumed some level of activity while being careful about the health and safety of everyone involved. We remain hopeful that the legislature will address this legislation during this session, but we cannot predict whether that will occur. In the event it does, we remain committed to proceeding with the expansion of Twin River in Lincoln as soon as we can complete the design and receive all necessary permits and approvals. Our expectation is that all material provisions are as previously described, although the date that Twin River is able to assume management of a portion of the VLTs on the floor may be delayed from July 1 of this year until on or before October 1, given the current circumstances. There should be no impact, however, on the timing of the joint venture with IGT, which we expect will remain as January 1, 2022. We will provide a further update on all of this as it develops. I'll now return it to you, George. Thank you.

George Papanier, President and Chief Executive Officer

Well, thank you, Marc. This concludes the prepared remarks section of the call, and I will now ask the operator to open it up to your questions.

Operator, Operator

Our first question today comes from Barry Jonas from SunTrust.

Barry Jonas, Analyst

So just to start, we've seen some really encouraging anecdotes from the first few tribal reopenings so far that really point to pent-up demand. Is it too early to think that could be the case at your properties? And with that, how should we think about the potential reduced gaming supplies impact on revenues?

George Papanier, President and Chief Executive Officer

Larry, this is George. So yes, we've been encouraged by the results of the first six tribal casinos that have opened. It certainly appears to be some pent-up demand there. Now they've been operating at 50% capacity. Indications that we're getting from our regulators as it relates to Mississippi should be around 50%. And for Rhode Island, although we have about 40% of our gaming positions that will be able to be utilized, that effectively equates to about 65% of the positions that are utilized at any peak period of time. So we feel comfortable about that. We think there's going to be some pent-up demand. We think the openings will be limited from an amenity perspective, so you'll be getting more of a pure gamer that comes to the facility. I've been obviously reading up a lot on everything that's been occurring, and it appears like a gamer is a risk-taker. That bodes well for us and certainly makes sense. It's to be seen what happens, but we're prepared for all scenarios. We can certainly go into any level of detail from our phasing perspective as it relates to that. But we're encouraged by the initial results, and we feel because we're in a regional market we'll have an upper hand as opposed to being in a resort or an area that requires any airlift transportation.

Barry Jonas, Analyst

Great. That's really helpful. And then, look, the Northeast saw somewhat aggressive promotional environment before coronavirus started. How do you think the environment will be upon reopening in the Northeast and I guess across all your properties from a promotional perspective?

George Papanier, President and Chief Executive Officer

So listen, we instituted a communication plan immediately after closing that focused on all our customers with special attention to our top 20%. Effectively, they're responsible for about 80% of our business depending on the property. So we've been continuing to communicate via e-mail. We've placed updates on our websites regularly. Player Development has been very active in contacting this 20% group for the most part and using all normal methods like by phone, e-mail, for example, certainly through tech. So we feel encouraged that they've been very responsive to our outreach communication, and we feel that they're going to be kind of excited about returning, and we've provided all levels of scenarios we're communicating, either traditionally or electronically. So we're going to be opening in phases in Rhode Island, Delaware initially. I talked about that in the last question. So we're cautious about the levels of staffing initially, and we're going to be scheduling staffing the volumes as we experience whatever the reactions from the customers are going to be.

Barry Jonas, Analyst

Sorry. I guess I'm wondering if we might see a more aggressive promotional environment at the beginning that could affect margins. Or is everyone going to focus heavily on costs to avoid that?

George Papanier, President and Chief Executive Officer

So it's going to be a little bit of a wait and see. I don't think anybody is going to come out of the gate aggressively. As it relates to the regulatory bodies, they seem to be very cautious about going aggressively after high promotional activity. They're concerned about getting too much of a response, where you're interrupting any of the physical distancing requirements that they have. So we're going to open a little bit more cautiously, which is in line with the fact that they're only allowing us to open at a percentage of capacity. In some cases, not even with restaurants, depending on the jurisdiction. So we're not going to be aggressive. We're certainly ready. We have all types of programs that are shelved and ready to go. So we have a variety of approaches, and we're going to react based on the initial responses. So it's a little bit more of a wait and see initially, not to put any additional burden or concern on the Departments of Health in each of the markets.

Barry Jonas, Analyst

Got it. And then last one for me. How are you thinking about capital allocation once the credit release period ends? Specifically, should we expect the dividend to recommence? Or is maybe the focus potentially more on higher ROI, M&A? Just any color there would be helpful.

George Papanier, President and Chief Executive Officer

Steve, why don’t you take that?

Stephen Capp, Chief Financial Officer

Yes, sure. Barry, thanks for the questions this morning. Yes. Listen, we have endeavored to exercise a balanced approach to capital allocation from day one, particularly as a public company from last year. We'll continue that going forward. So the split between CapEx and capital return, i.e., buybacks or dividends and M&A cash for that, is all a balancing act. But the unilateral singular concept that we look to move forward is accretive investment. So if the stock price is X, then the M&A opportunity is Y, the CapEx is a Z return. We look at X, Y, and Z and make decisions according to accretive opportunity and strategic initiatives. So not a question that I don't think we can answer specifically today other than we'll be guided by that kind of analytical exercise for sure.

Brad Boyer, Analyst

First question, it's just around the Bally's acquisition. I know it's a small number on face, but I know it's a market where a lot of folks on this call spent a lot of time over the year. So George, if you could just help provide some additional color around how you're thinking about that deal, not only in the near term, but sort of the longer term as to what that could become for you guys, that would be helpful.

George Papanier, President and Chief Executive Officer

Sure, Brad, how are you doing? So listen, as far as the rationale, the pre COVID-19 market was a stabilized $3 billion market, including iGaming. This acquisition, which we're excited about, certainly allows us to enter what I consider to be a profitable New Jersey iGaming market and providing sportsbook licenses. So the location center of the Boardwalk sees very heavy summer traffic. It's been well maintained. There’s really no deferred CapEx. However, as we stated earlier, we'll be implementing a rooms refurbishment program to address some dated rooms over the next several years. Another point about this agreement was that we were able to negotiate with Caesars that they would retain the unfunded liability under the existing multi-employer pension plan with the unions there. Local 54 has allowed us to enter into a new adjusted pension plan. There are a couple of other facilities in the market that are also under this new adjusted pension plan, but that effectively has no historical unfunded balance. So that was a nice concession and a direct benefit to us. We feel, aside from recapturing lost market share, which was orchestrated over the last few years by Caesars purely to benefit its sister properties, we feel we could capitalize to recapture that based on the way that we aggressively market and we're not afraid to compete. Also, there's 80,000 square feet of convention and meeting space in that facility, and that's effectively one of the largest in Atlantic City. So that allows us some future opportunity to get some good traffic into the facility. Its historical LTM is somewhere in the $12 million EBITDA rate. We think that there's an opportunity to probably move that almost up to a 100% gain over the next three years.

Brad Boyer, Analyst

That's helpful. And then with respect to MontBleu, it's obviously a smaller asset. I think there's some chatter in the market that there's potential expansion opportunities around that asset. I guess, can you provide us some additional color around your rationale to acquire that asset, given its size, and sort of how it fits into the portfolio? And any thoughts around, again, sort of long-term opportunities there?

George Papanier, President and Chief Executive Officer

Sure, Brad. So this is a beautiful property. It recently went through a $25 million renovation. We feel we can establish the property, which would be beneficial to us as a destination property for a customer base, who we can cross-market to. This provides considerable incentive for what we consider to be our most loyal customers. Other than Biloxi, we really didn't have an opportunity to do that. We think that will be a direct benefit to our database. We see opportunity in capturing not only lost market share but local market share. Recently, there was an announcement of one of the five facilities that's in Tahoe that closed, and it effectively serviced the local market. I think we were the second marketer to the local market behind this facility. So again, there's some potential upside there. That's not going to open post COVID-19. We also feel we're a direct beneficiary of the recent city-approved convention center that is literally built on the perimeter of our site. So we're going to see if that comes to fruition. If it does, there's some opportunities to do some project CapEx that will be complementary to that.

Brad Boyer, Analyst

Okay. And then lastly, just kind of a bigger picture question around sort of some of the fallout from COVID. Yourselves and others have talked about how the shutdown has allowed you to really hone in on the operation and find some inefficiencies within the business, potentially offsetting any incremental costs related directly to enhanced sanitation, what have you. Can you provide us any additional color or granularity around any of these efficiencies that you've uncovered thus far? I think that would be helpful.

George Papanier, President and Chief Executive Officer

Yes. So any time you have something like this that you take and time on your hands effectively from an operational perspective, you have an opportunity to go back and look at how you ran things versus how you would have to run things in a crisis. There are still going to be some initial costs associated with sanitizing throughout the facility, as well as other products that are going to be required, like, for example, face masks and defensive gloves. There's some other physical barriers that need to be constructed. So you put those costs aside. Subsequent to the COVID-19 crisis, once they find whether it's a therapeutic or a vaccine, then you get into how you see you ran your operation. A lot of that does evolve around levels of staffing that you're providing based on the volume. There are certainly some opportunities there as you find out you can run a little bit more efficiently. I think, in our case, we've always run a very efficient operation. So from a variable perspective, there will be some. I don't know if we could overstate the amount of that. We'll certainly learn more as we go through the phasing process. But we do find, from a fixed perspective, there is opportunity as well. So we think, overall, there's going to be a benefit to margins as a result of this unfortunate exercise.

John DeCree, Analyst

Two for me, one on the acquisitions and then one housekeeping item for Steve on the liquidity. I guess, first, as it relates to Shreveport and MontBleu, obviously, the valuation you guys had was quite attractive given the environment, but I think these assets were for sale a couple of months ago. Curious if you had a look at demand and then kind of what other than the valuation, what different lens did you see these buildings this time around relative to last time if you did take a look last time?

George Papanier, President and Chief Executive Officer

Yes. So we did take a look. Aside from the fact that the properties, in our opinion, each brought something unique to our portfolio, these were opportunities that were presented to us at different times in 2019. So we were familiar with them. We had an opportunity to do a fair amount of due diligence at the time. We did pass on them due to price at the time, more specifically Eldorado, Shreveport. So they were already on our radar. When the opportunity arose again, we negotiated a good price, and we felt comfortable with the opportunity.

John DeCree, Analyst

Got it. Okay. And then maybe for Steve. I wanted to clarify your comments about liquidity and cash needs from your prepared remarks. I believe you mentioned that the cash need would be around $3 million a month, particularly if additional mitigation measures are necessary. Can you confirm that? Also, could you provide some insight into what the cash needs would be before implementing any additional mitigation measures?

Stephen Capp, Chief Financial Officer

Yes, John. So harkening back to the original press release we made about liquidity in light of the COVID-mandated shutdown of all of our properties, we had mentioned we intended to adopt kind of a Phase I/Phase II approach. Phase I, which frankly, where we're still in today, kind of a modified version of that, was focused on two things: maintaining a posture for reopening quickly and efficiently in the event that that would happen in the near term. That's as Marc commented, and that certainly seems to be the case. If that were not to be the case, then Phase II, we would flip to, which was essentially a lockdown or mothball type of mode where we would eliminate, I should say, furlough, any and all employees not otherwise necessary to maintain the properties or maintain our corporate footprint and presence. That would be a very kind of draconian scenario. We have maybe a handful of employees per property, including just a couple of salaried staff and facilities, security surveillance, just bare minimums per property. At corporate, we've cut way back and would maintain our reporting requirements and overall strategic initiative staff and the like, but it would be a bare minimum strategy. And that's the basis for which we could pare our OpEx back to $3 million. Bear in mind, John, that's OpEx. So that's property and corporate on a monthly basis. But debt service cost and some of the lumpy stuff is in addition to that. So property tax payments and then insurance payments are kind of lumpy and separate from that. So there are two buckets of costs, and the $3 million is the monthly OpEx. But to your question, we're running at circa $7 million to $8 million today on that OpEx number, and we could take that down by more than half to $3 million if we needed to. That was the basis for my comments. When you take that number and if you were to average out the other lumpy cost debt service and then the others I mentioned that we have, even in the context of funding for cash, all five of the acquisitions over the next six to nine months, we'd have in excess of 18 months of liquidity in this environment in a Phase II lockdown type of mode.

John DeCree, Analyst

That answers my question, Steve. Thanks for the additional clarity. And good luck on quick and safe reopening of the properties.

George Papanier, President and Chief Executive Officer

Thank you, John.

Stephen Capp, Chief Financial Officer

Thank you very much.

Operator, Operator

Our next question comes from Lance Vitanza from Cowen.

Lance Vitanza, Analyst

Congratulations on the recent mergers and acquisitions. I wanted to ask two questions. First, regarding profitability levels and margins as the casinos begin to reopen, can you achieve an operating profit at 50% capacity? Can you manage your debt? What breakeven percentage do you need for the casinos to reach operating profit or to be free cash flow positive? More generally, how do you anticipate this recovery will unfold compared to the period following the Great Recession? I understand it will be different, but in what ways do you think it will be better or worse for operators like Twin River?

George Papanier, President and Chief Executive Officer

So I'll take a piece of this. Steve, if you want to add on to the first part of the question, and then we could get into the second part of the question. But in the first part of the question, we think somewhere in the 55% to 60% of historical revenues gets us to breakeven with all debt service included. This is a pre-pro forma of the new assets, but based on our existing operations and existing levels of debt. To give you an example, you asked a question about profitability. If we use Twin River, for example, if we get to 50% of historical revenues, we'll be doing close to $3 million in EBITDA as a result of that.

Lance Vitanza, Analyst

Do you notice any significant differences in how this recovery unfolds? As gamblers return to the casinos, is there any speculation on who will come back first and what impact that might have on your path to profitability?

Stephen Capp, Chief Financial Officer

George, I'll start and then you can add your thoughts. Lance, I believe the main difference lies in the state of the consumer, which I think is the biggest change we've seen from the 2008 financial crisis to now. Back then, the consumer was significantly affected; unemployment was very high, and discretionary income was correspondingly low. We were just emerging from a strong bull market and faced a serious downturn that would take years to recover from. However, this time could be quite different. I'm not suggesting it's a straightforward V-shaped recovery, but rather that the government support for small businesses and those furloughed or unemployed has introduced a considerable amount of liquidity into the system. We're still in the context of a pre-COVID bull market that was performing reasonably well. We see the potential for a U-shaped recovery, combined with the resilience of the American spirit to move beyond the restrictions and begin rebuilding, alongside the significant liquidity from various federal agencies, which suggests this recovery could take a different path. Some early results, like the reopening of casinos that George mentioned earlier, could be indicative of this.

George Papanier, President and Chief Executive Officer

So just I could add one more point to that. It echoes what Steve is saying. If you recall, the regional markets after the recession, they bounced back pretty quickly. Obviously, there were declines in 2008 and 2009, but by 2010, they were at prerecession levels and grew from there. We also think that's an encouraging point to us, which I mentioned earlier is that our properties are in markets where the customer is a local market. So we're really a regional operator at this point. A customer comes within 20 to 30 minutes distance from a drive-time perspective. Certainly, no airlift required to get to our properties, and we don't rely on convention and meeting business as well. So we have an opportunity to really attract the more of the pure gamer.

Lance Vitanza, Analyst

And then just lastly for me just on the Bally's acquisition, and I appreciate the comment about none of these acquisitions having deferred CapEx needs. But I would think that Caesars never put a lot of money, or at least recently, hasn't put much money into that property. I would think it would be an opportunity, should you want to avail yourself of it, to put some money into that property, whether it's upgrading or updating rather or what have you. But it doesn't sound like that's sort of on the agenda, at least in the near term. Am I getting that right? I'm just wondering. And then more broadly, what are you seeing here that Caesars Eldorado didn't see? What makes you think you can run the property more effectively? Or was this just simply an opportunistic situation where those guys had to sell the property to get their deal closed?

George Papanier, President and Chief Executive Officer

We have significant gaming experience in the Atlantic City market within our company. I previously managed resorts in the early 2000s, which gives us insight into the potential there. The location is very attractive to us, and we’re thrilled about the opportunities it presents. Moreover, we hold a sportsbook license and have a chance to enter the iGaming space. This will be our first involvement in a market outside Delaware, which isn’t adequately set up, making Atlantic City a much better model for iGaming. We also plan to invest in refurbishing 700 of the over 1,200 rooms, as many of them are outdated. We intend to introduce brands to this market successfully, as we have done in Hard Rock and are on track to do in Delaware. The property has a great position by Bally's, which features a summer beach bar area that is likely the most profitable in Atlantic City. Additionally, the convention business is significant, boasting 80,000 square feet—one of the largest in the area. Caesars has been shifting a lot of their convention business to sister properties like Harrah's, causing them to lose some market share that we believe we can reclaim. We may invest in the convention aspect, but we need more time to assess that. Interestingly, Eldorado looks for efficiencies in their operations, but this often comes at the cost of market share. We are prepared to compete in these challenging markets and believe that we can do so in a more profitable manner than other operators. We see this as a chance to regain market share, especially since we acquire existing customer data, which will aid our marketing efforts. Our goal is to reintroduce brands that could enhance the property and attract back customers who have not visited recently.

Operator, Operator

This concludes the Q&A portion of our call. And I would like to turn it back to George Papanier for final comments.

George Papanier, President and Chief Executive Officer

Well, I want to thank you, operator, and I want to thank you all for joining our call today. Thank you.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.