Image source: The Motley Fool.
Twin River Worldwide Holdings, Inc (BALY)
Q2 2020 Earnings Call
Aug 11, 2020, 8:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
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.
Craig L. Eaton -- Executive Vice President and General Counsel
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 & 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 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 would 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 Investor site and it will be available for replay there shortly after the completion of this call.
I'll now turn the call over to George. George?
George Papanier -- President & Chief Executive Officer
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 seven of the casinos we owned at the time had been closed in response to COVID-19 and we faced significant uncertainty as to when and to what extent we could reopen. Fast forward to today, we've emerged from the quarter with all nine, 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 your 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 about the well-being of our team members and recognize the impact that these furloughs have had. While we can't possibly mitigate the full impact of this, we continue to provide support in the form of ongoing health benefits coverage at no cost to our furloughed team members during the quarter. We also established a fund to provide financial assistance to those employees experiencing significant hardship.
Now, let's turn to the quarter and more specifically, our financial results since our operations have resumed. When we talked back in May, we believed that we were well positioned especially as a gaming company focused on local and regional visitation, we capitalized on the fact that we are not reliant on airlift, destination or convention business to drive results. The results of our reopenings to date have certainly supported this thesis. We are pleased with the strong initial results which point to a robust pent-up demand in regional markets.
In June, the first month on all our properties were opened in some capacity with the exception of Rhode Island which as Marc will discuss a bit later, which was more in a pre-opening pilot phase for almost all of the month. All our segments generated positive adjusted EBITDA with meaningful increases in year-over-year EBITDA margin. We were able to achieve these results while operating with reduced casino capacities and limited amenities. In segments where the Company was able to operate at closer to normal capacity and with more amenities available for most of June, notably Biloxi and Dover, we experienced strong demand and significantly improved margins. At Hard Rock, demand was strong with gaming volumes up a little under 10% from the comparable period prior year. While overall net revenues were up 2%, impressively adjusted EBITDA for the property almost doubled in June from $2.9 million in 2019 to $5.7 million in 2020, representing an increase in adjusted EBITDA margins of over 2,400 basis points.
Meanwhile at Dover, while gaming volumes were down approximately 15% and overall net revenues down 30% for June compared to the same month in 2019 as we navigated capacity restraints, adjusted EBITDA results for the month were strong, coming in at $2.1 million, which was essentially flat year-over-year and represented an increase in adjusted EBITDA margin of approximately 1,150 basis points.
To expand a bit more on the margin increases, as we noted in our prior releases, we leveraged the shutdown that resulted from COVID to review and optimize our operations. Since reopening, we have realized meaningful new efficiencies in marketing and decreases in operating and SG&A expenses. We have also been selective with our amenities by focusing on higher margin business. As a result of these expense reductions and new efficiencies, we are now operating at a higher margin than prior to the pandemic. While the initial margin results are very encouraging, the gaming environment continues to be very dynamic. We will remain adaptive and while we continue to be willing to spend money to retain and capture market share and drive revenue, we do not expect to simply return to the old way of doing business. We believe many of the efficiencies we have realized are sustainable over a long-term and will result improved profitability for our properties, even though increased sanitation and safety costs are likely to become the norm.
Just taking a step back while I think about the quarter and where we are today, I'd like to think about it chronologically. Starting in April, we were in a period of no revenue and taking steps to control costs and plan for what was at the time, an uncertain future. In May, we began to see signs for reopening and subsequently ramped up efforts to prepare our properties to reopen the doors. Then June, we saw a return to operations and in markets where we were able to open to more normal capacity and with more amenities, strong demand, and profitable results, especially in margin, which we just talked about.
Which brings us to our preliminary view of July. While we are still finalizing our monthly close process, we are excited to report that including our two recently acquired properties, which I'll talk about momentarily, we are looking at initial revenue figures which show a decrease in the range of 7% to 10% year-over-year. However, we saw continued strong margin performance and as a result, year-over-year adjusted EBITDA is up with all segments contributing positive EBITDA for the month. So now when you factor in our modest interest burden and a relatively low maintenance capex requirements, we are currently generating free cash flow on a consolidated basis. Steve will provide more color around our strong liquidity position shortly.
Turning to our recent M&A activity. On July 1, we completed the $230 million acquisition of our Kansas City and Vicksburg properties from Eldorado. These two new properties expand our geographic footprint with assets in attractive markets and represent a great fit for our portfolios. I'm also pleased to report that both of these properties have come out of the gate strong. Preliminary July results for the properties indicate strong revenue demand with revenue volumes off [Phonetic] just a little over 10% at Casino KC and revenue volumes up over 25% Casino Vicksburg compared to July 2019. On top of early results, we continue to see great opportunities to increase the net cash flow from these properties with our development -- with our redevelopment and operating plans, notably at Casino KC and we remain committed to our proposed $40 million redevelopment plan, which we believe will greatly enhance the guest experience and enable us to reposition that property to grow market share that the property lost in recent years. As Steve will discuss, we anticipate the majority of the capital spend associated with the project will occur in 2021.
We have enjoyed getting to know the local teams in the first month that we have owned the properties and look forward to working with them to realize the strategic benefits of this transaction. These are very exciting times for our company. Equally exciting are our three additional casinos under contract in Shreveport, Louisiana, Lake Tahoe, Nevada, and Atlantic City, New Jersey, which we spoke about at length last call. We see significant opportunities to create cross marketing for customers at multiple Twin River locations nationwide. As a result of these three strategic acquisitions that we paid extremely attractive purchase multiples for, we are currently working diligently through the regulatory processes in each of the respective states' jurisdictions. We continue to expect the Bally acquisitions will close in mid to late Q4 2020 and Shreveport and MontBleu are likely to close in the first half of 2021.
At Bally's, we would like to address certain areas we feel need improvement, but we have a plan to fundamentally transform the property by leveraging property upgrades to the facility including renovated hotel rooms, a full service spa, updated convention center, revitalizing the slot floor and dramatically improving the food and beverage offerings.
I'd also like to comment on our recently announced partnership with PointsBet, which we think we will be able to leverage to effectively and efficiently tap into what we feel is a lucrative opportunity in the iGaming space in the New Jersey market. PointsBet will be a great addition to our growing partnerships, with innovative leaders around the world. Adding an exciting iGaming experience, it's such a prominent partner. Subject to receiving regulatory approval for the acquisition, we are extremely excited to have the opportunity to participate in the best-in-class mobile gaming environment that New Jersey has created and that we believe will bring new and innovative offerings to the market. PointsBet is simply the first step for us.
Speaking of our partnerships, on May 1 we launched mobile sports betting in Colorado in conjunction with our previously announced strategic partners FanDuel and DraftKings. These partnerships result in a unique opportunity for Twin River to introduce Colorado's passionate sports fans to two of the nation's leading mobile and online sports betting platforms. In addition, we recently announced the launch of the retail sportsbook in connection with DraftKings at our Mardi Gras Casino. We are confident that this partnership with DraftKings allows us to provide an unmatched sports betting experience to Colorado. We are looking forward to introduce our guests with a full renovated space in the coming months. In the meantime, we are very excited to be able to provide our guests with the ability to safely place bets while many professional sports in the United States have begun to resume.
Lastly on sports betting, it was announced in late July that the Rhode Island legislature had passed legislation which dropped the in-person registration requirement for all new mobile sports betting accounts. This change will make it easier for sports betters in Rhode Island to gain access to our online sports betting. We're confident we will experience increased mobile play as a result of this change.
I'll wrap up by saying that while these are certainly the most challenging times our industry has faced, we have made significant progress over the past three months toward securing a promising and exciting future for Twin River. While uncertainty persists in the short term, we are pleased with the initial response to the property's reopening across the US and the adaptability of our customers to the new operating environments and safety protocols.
I will now turn it over to Marc to provide some more detail around Rhode Island. Marc?
Marc Crisafulli -- Executive Vice President, Government Relations & President, Rhode Island Operations
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 pre-opening 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 view the month of June as a success in Rhode Island. The experience gained during the pre-opening pilot phase, provided valuable and necessary training for our staff as we welcomed 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 two 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 preliminary results, July revenue for the segment is expected to be up approximately 240% sequentially from June 2020 on a preliminary basis and is approximately 60% of revenue experienced in the same period in 2019. These results are with less than half of VLTs and less than one quarter of table game positions available to consumers.
I also wanted to provide a quick update on the status of the IGT Twin River joint venture that we discussed on last call. The proposed legislation that would enable this joint venture has garnered support in both chambers of general assembly as well as with the governor. We remain optimistic that it will be addressed and approved later this summer. In the event it is, 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, as outlined in the joint venture, will move forward with Twin River, able to assume management of a portion of the VLTs on the floor on or before October 1 of this year. We continue to expect a joint venture with IGT to commence on January 1, 2022. We will provide a further update as this develops.
I will now turn it over to Steve.
Stephen H. Capp -- Executive Vice President & Chief Financial Officer
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 zero 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 need for required approvals, this is largely a 2021 event.
As Marc mentioned, we also have talked about capex related to the proposed VLT contract and joint venture with IGT, which would include an expansion to our flagship property in Lincoln. We expect that is largely a 2021 to 2022 capital spend. And again, that is subject to legislation being approved. We also have some targeted capex refurbishment plans under development to greatly improve the property and customer experience at Bally's. This work will likely be phased out over multiple years starting in 2021. We're working closely with the New Jersey regulators to move forward.
Regarding taxes. As we noted last quarter, there are certain aspects of the CARES Act that will benefit us. One such item is the employee retention credit, which benefited the company by $2.8 million in the second quarter. Beyond that, we are continuing to explore other aspects of the act, including, as we mentioned, the utilization of NOL carrybacks and other deductions and believe the overall positive cash flow to the Company over the next year could well exceed the $15 million to $25 million we previously noted.
Regarding our return of capital program, we did repurchase approximately 160,000 shares at the very beginning of the quarter, prior to the COVID-19 shutdown. Since those repurchases and as a condition of the amendment we signed to our credit facility, we have halted spending under the capital return program, including both share repurchases and the payment of a quarterly dividend. However, our capital return program has resulted in the buyback of approximately 11 million shares since last year. And we currently have 30.5 million shares outstanding, which is down about 25% from the date we listed on the NYSE last year.
As for guidance, as George noted, we continue to live in uncertain times, especially in the short term. And while we do not currently anticipate any significant operational interruptions, near-term outcomes are heavily dependent upon the future of COVID-19 and our country's response to it. As such, we are not in a position to accurately project results in the short term and therefore continue to refrain from providing specific guidance at this time.
My final remark, look, we intend to maintain balance sheet discipline and remain positioned for future opportunities that may become available. We're not finished building this company by any means. With the phasing of our acquisition pipeline, including recently, Colorado in January, Kansas City and Vicksburg just last month, and as mentioned by George, we expect Bally's later of this year in the fourth quarter and Shreveport and Tahoe likely in the first half of next year, that schedule, combined with the natural timing required for acquisitions in this industry, position us quite well to consider and pursue additional M&A that is accretive to shareholders and the right fit for our expanding portfolio of properties.
Now, I'll turn it back to George.
George Papanier -- President & Chief Executive Officer
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.
Questions and Answers:
Operator
Thank you. [Operator Instructions] Our first question is coming from the line of Barry Jonas of Truist Securities.
Barry Jonas -- Truist Securities -- Analyst
Good morning. The Chairman of the Board said in an interview that he's aiming for $500 million earnings a year. I think that's about two times 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?
George Papanier -- President & Chief Executive Officer
Thanks, Barry, for the question and I'm going to hand this over to Steve.
Stephen H. Capp -- Executive Vice President & Chief Financial Officer
Yeah. Thanks, George. Thanks, Barry. Hey, good morning. 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 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 two 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 two 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.
George Papanier -- President & Chief Executive Officer
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.
Barry Jonas -- Truist Securities -- Analyst
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 pre-opening 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?
George Papanier -- President & Chief Executive Officer
So, I'm going to let Marc kind of give you the lay of land from a government perspective and then I might add some color to that. So, Marc?
Marc Crisafulli -- Executive Vice President, Government Relations & President, Rhode Island Operations
Thanks, George and thank you, Barry. Good morning. There are a couple of things 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.
George Papanier -- President & Chief Executive Officer
Yeah and 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.
Barry Jonas -- Truist Securities -- Analyst
Got it. And then just last one from 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.
George Papanier -- President & Chief Executive Officer
Sure. Well, each market has a little bit different nuance to it. Some people are less concerned about 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 it 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.
Barry Jonas -- Truist Securities -- Analyst
Great. Thank you so much for answering my questions, guys.
George Papanier -- President & Chief Executive Officer
Thanks a lot, Barry.
Operator
Our next question comes from the line of Brad Boyer of Stifel.
Brad Boyer -- Stifel -- Analyst
Yeah, thanks for taking the questions, guys, and for all the color this morning. 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, if it truly just kind of comes down to the numbers, so to speak, i.e. if a deal makes sense from a multiple acquisition perspective then it's something you would consider? Or are there any particular markets, jurisdictions what have you that are of particular interest today?
George Papanier -- President & Chief Executive Officer
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 markets. 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.
Brad Boyer -- Stifel -- Analyst
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 two big brands in Colorado and a nice, what I would call, a mid-tier [Phonetic] 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?
George Papanier -- President & Chief Executive Officer
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 merge 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.
Brad Boyer -- Stifel -- Analyst
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?
Stephen H. Capp -- Executive Vice President & Chief Financial Officer
Right. You mean for 2020?
Brad Boyer -- Stifel -- Analyst
Yes.
Stephen H. Capp -- Executive Vice President & Chief Financial Officer
Well, it's going to be minimal, actually. I don't a number for you, Brad, but look, 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 an -- 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 -- or 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. If this thing -- if we could pivot on COVID and then 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.
Brad Boyer -- Stifel -- Analyst
Okay. Thanks, guys. Appreciate all the color.
George Papanier -- President & Chief Executive Officer
Thanks, Brad.
Stephen H. Capp -- Executive Vice President & Chief Financial Officer
Thanks a lot, Brad.
Operator
Our next question comes from the line of John DeCree, Union Gaming.
John DeCree -- Union Gaming -- Analyst
Hey, good morning and thank you for taking my question. Steve, George, I wanted to ask about New England 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 getting 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 a post-COVID world will see that rationalization that's kind of taking hold in the U.S. at Rhode Island [Phonetic] and New England as well?
George Papanier -- President & Chief Executive Officer
Yeah. So, how are you doing, John? So yeah, 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 gatherings. 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 toward specific customers. So I think 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.
John DeCree -- Union Gaming -- Analyst
Thanks for that. That's a perfect segue into my follow-up question, which is probably mostly around where you see sustainability in 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.
George Papanier -- President & Chief Executive Officer
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 in 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.
John DeCree -- Union Gaming -- Analyst
Got it. Thanks, George, and good luck with that continued reopening.
George Papanier -- President & Chief Executive Officer
Thank you.
Stephen H. Capp -- Executive Vice President & Chief Financial Officer
Thanks, John.
Operator
[Operator Instructions] Our next question comes from the line of Chris Sinnott of Cowen.
Chris Sinnott -- Cowen -- Analyst
Good morning, everyone. Thanks for taking my question. Just one for 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 see a step backwards in terms of shutdowns, maybe what efficiencies have you found that could potentially adjust that $3 million or pressure it in the other direction? And how might that be factored into the liquidity outlook that you provided earlier? Thanks.
George Papanier -- President & Chief Executive Officer
Thanks, Chris. And Steve, I'll let you handle that.
Stephen H. Capp -- Executive Vice President & Chief Financial Officer
Chris, that $3 million, would you clarify that for me? Did you say $3 million per month?
Chris Sinnott -- Cowen -- Analyst
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.
Stephen H. Capp -- Executive Vice President & Chief Financial Officer
Yeah, listen, where we were at the outset of COVID was, obviously, exploratory in locking down expenses and we were kind of $7 million-ish, $8 million-ish, even $10 million-ish at that initial phase and as we got 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 that'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 whittled down number.
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 zero-revenue environment takes us well through 2021. That's kind of the math around all of that stuff. But yeah, yeah, 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-ish to $4 million-ish or so, that took a lot of introspection and a very sharp scalpel, if you will. But 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 feel pretty good about our ability to manage this business in difficult circumstances.
Chris Sinnott -- Cowen -- Analyst
That's helpful. Thank you, guys.
George Papanier -- President & Chief Executive Officer
Thanks, Chris.
Stephen H. Capp -- Executive Vice President & Chief Financial Officer
Yeah, sure. Thanks, Chris.
Operator
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.
George Papanier -- President & Chief Executive Officer
Well, thank you, operator. I want to thank you all for joining our call today. Hope you all enjoy the rest of your summer.
Operator
[Operator Closing Remarks]
Duration: 45 minutes
Call participants:
Craig L. Eaton -- Executive Vice President and General Counsel
George Papanier -- President & Chief Executive Officer
Marc Crisafulli -- Executive Vice President, Government Relations & President, Rhode Island Operations
Stephen H. Capp -- Executive Vice President & Chief Financial Officer
Barry Jonas -- Truist Securities -- Analyst
Brad Boyer -- Stifel -- Analyst
John DeCree -- Union Gaming -- Analyst
Chris Sinnott -- Cowen -- Analyst
