Eldorado Resorts' (ERI) CEO Gary Carano on Q2 2016 Results - Earnings Call Transcript

| About: Eldorado Resorts, (ERI)

Eldorado Resorts, Inc. (NASDAQ:ERI)

Q2 2016 Earnings Conference Call

August 4, 2016 4:30 PM ET

Executives

Joe Jaffoni – Investor Relations

Gary Carano – Chairman and Chief Executive Officer

Tom Reeg – President

Analysts

Chad Beynon – Macquarie

Susan Berliner – JPMorgan

David Hartrich – Stifel

Operator

Good day and welcome to the Eldorado Resorts Second Quarter Results Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Joe Jaffoni. Please go ahead, sir.

Joe Jaffoni

Thank you, Erik. Good afternoon, everyone, and welcome to Eldorado Resorts’ 2016 second quarter conference call. Joining us today from the company are Chairman and CEO, Gary Carano; and President and Chief Financial Officer, Tom Reeg.

On today’s call, we’ll review the company’s second quarter financial results and progress against key strategic priorities for 2016. We will then open the call for participants for questions. This afternoon, Eldorado Resorts issued a press release announcing its second quarter financial results for the period ended June 30, 2016. The result is now available in the Investor Relations section of the company’s website at www.eldoradoresorts.com.

Before we get started, I’d like to remind everyone that this call is being recorded and a webcast replay will be available for 90 days, the details of which are included in today’s press release.

During our call, we may make certain forward-looking statements about the company’s performance. Such forward-looking statements are not guarantees of future performance and therefore one should not place undue reliance on them. Forward-looking statements are also subject to the inherent risks and uncertainties that could cause actual results to differ materially from those expressed.

For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements, you should refer to the cautionary statements contained in our press release, as well as the risk factors contained in the company’s filings with the Securities and Exchange Commission. Eldorado Resorts undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after the call.

Also during today’s call, the company may discuss non-GAAP financial measures, as defined by SEC Regulation G. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between the non-GAAP financial measure and the comparable GAAP financial measure can be found on the company’s website at www.eldoradoresorts.com, by selecting the press release regarding the company’s 2016 second quarter financial results.

As always that’s enough for now [ph] and thanks everyone for your patience with that. And at this time, it’s my pleasure to turn the call over to the company’s Chairman and CEO, Gary Carano. Gary?

Gary Carano

Thanks, Joe. And welcome everyone joining us today on this afternoon’s second quarter conference call and webcast. This afternoon, we reported total second quarter net revenues of $231.3 million, essentially flat year-over-year, and adjusted EBITDA of $46.7 million, up 2.1%, driven by a 50 basis point increase in our adjusted EBITDA margin to 20.2%.

The second quarter represents a fifth consecutive quarter we have grown adjusted EBITDA. Looking at the first half of the year, adjusted EBITDA is up 8.3% to $85 million on flat revenue as our adjusted EBITDA margin improved 140 basis points to 19.1%. We had some properties specific impacts including a softer whole percentage in Shreveport and construction disruption at Presque Isle that impacted the quarter.

Overall, as others have reported, May and June were softer much for us particularly in Ohio, Pennsylvania and Louisiana. We’re happy to report that July recovered nicely and Tom will speak to that later. Our property level and corporate management teams continue to do an excellent job in implementing our operating disciplines and corporate cultures across our portfolio.

But first I want to focus on our execution of the Reno Tri-Properties and the ongoing opportunity we have to grow EBITDA here. It is clear to us that Reno offers the biggest lever for growth to Eldorado from the standpoint of the depth and quality of our assets, our knowledge of the market and the positive economic backdrop in the region. Eldorado’s Reno Tri-Properties are emerging as a tremendous success story since our acquisition in late 2015.

Revenue at these properties is up over 8% in the first half of the year, while adjusted EBITDA is up nearly 38%. Our operating margin in the first half of the year was 19.1% compared to 15% in the first half of last year. Beyond this solid progress, we are making with the integration operation and enhancement of these assets; there are many positive economic factors that point to a long-term growth cycle in Reno.

In July alone monthly scheduled air seats capacity was up 5.3%, airlines continue to add new direct flights from feeder markets including Southwest, three new direct flights daily from Oakland to Reno in June, two new direct flights from Los Angeles International also added in June, and later this month JetBlue is adding non-stop flights between Long Beach and Reno. Later this year Delta will begin non-stop flights between their hub in Atlanta and Reno.

Overall the number of direct flights to Reno continued to grow very nicely. Beyond air traffic, there are several other indicators of sustainable growth in the Reno market including over 20 companies that relocated their operations in Reno just in 2015 representing companies in the manufacturing, back office, distribution and data center investors.

Of course, Tesla is an important piece, but others are following. According to the local economic arm, the most likely scenario is over – for over 50,000 jobs to be added to Reno market over the next five year period beginning of 2016. With the leading assets in downtown Reno, we are favorably positioned to capture more than just our fair share of this coming growth.

To further grow our position in the market, we are reviewing a range of facility enhancement initiatives that will continue to elevate our players’ experience. We plan to begin room renovations at all three Reno properties this fall and have already started upgrading some non-gaming amenities including the Midway at the Circus Circus and the Race and Sports Book at the Silver Legacy.

Of course with every facility enhancement projects we undertake our focus is on generating an attractive return. And once our plan is finalized we’re very excited to be able to be sharing that with you shortly.

Turning to Scioto Downs, it’s been a strong and ongoing success story for Eldorado and we continue to grow our market share there as we benefit from our recent enhancements that we’ve made to the property. Our Brew Brothers restaurant, a microbrewery, continues to be a tremendous draw for the property and its directly benefiting our slot play as it is attracts new players to the property daily.

Scioto second smoking patio opened on time and on budget on June 30th and as with the first smoking patio the units here have performed our fourth slot average nicely in the month since we’ve been opened. Across both smoking patios, we now have more than 200 ELTs installed. Also our construction on our 118-room Hampton Inn Hotel remains on schedule to open up in the fourth quarter, probably in November.

At Presque Isle Downs in Erie, we opened up a spectacular Brew Brothers also in May to very favorable player reaction. There was major construction disruption in the second quarter as we closed the Clubhouse Restaurant to make way for the Brew Brothers and also access to the restaurant was impaired for much of the quarter until we opened up a brand new escalator that gets directly from the casino floor to the entrance of the Brew Brothers on the mezzanine level. We are very excited with the transformation of this property that we’ve undertaken over the last two years since our ownership.

At Mountaineer, the smoking ban reached its one year anniversary on July 1 of this year. It was a difficult year for us. And looking back at last year’s third quarter, unfortunately we have another difficult comparison in this quarter as well. We continue to implement improvements at the property to increase efficiencies and drive performance. We’re continuing to review every option to reduce costs and to drive profitable revenue including the addition of more slot machines in the smoking patio possibly and by implementing a completely new revised casino marketing and promotional program.

Recently, we appointed my brother Gregg Carano, as our General Manager at the property and we are very confident with Gregg’s experience and success in implementing our hands on operating style, so this will help us immediately at the Mountaineer property. Overall, we continue to be very excited about our prospects for the year, as we are executing a multiple strategies to generate revenue and adjusted EBITDA growth and to lower our debt and leverage.

Let me now turn the call over to Tom now, if you will expand on some of these additional opportunities, as well, provide some detailed insights on the second quarter financial performance and additional details on our balance sheet and capital structure, before we open up the call to question and answers. Tom?

Tom Reeg

Thanks Gary. As Gary said, I am going to dive a little deeper with you and then take you through some housekeeping items, as is our custom, since we closed the Reno transaction, the numbers that we present to you, in the press release and the numbers that I speak to you are apples to apples, as if we own all of the Reno assets for each period, this year and last year. So Reno was a very – had a very strong quarter, despite weak table game hold in Reno cost was about a $1 million in the quarter. And we were still up 32% versus the prior year.

Eldorado had its best second quarter, since the second quarter of 2007. Silver Legacy had its best second quarter, since the second quarter of 2006. We don’t have the comparable quarterly information from Circus Circus, but I can assure it is their best second quarter about as far as the eye can see, so very strong quarter, volumes were up across the Board.

Cleaning was up 6% – over 6% despite a decline in Circus Circus, as we had run off some unprofitable video poker play versus last year’s period. Table Drop was up 12%, RevPOR was up over 20%. So all of our indicators in Reno are extremely strong and continued into July we had a very strong fourth of July weekend, that set us up well for the entire month and for the third quarter.

So we are very excited about where Reno has – what Reno has achieved and where it is moving, going forward. At Scioto, as we moved to the non-Reno properties, we were like others that we’ve seen report on May and June showed softness that we were not anticipating some markets more than others. Scioto was soft in May and June so you are seeing an EBITDA increase of 3% whereas in past quarters we have been up, mid-to high single digits.

Brew Brothers performed nicely, non-gaming revenue up 8.5% in the quarter. And as Gary said the second smoking patio opened at the essentially the beginning of this current quarter. And we expect that to bolster our results going forward. And then we’ve got the hotel that will come online in the fourth quarter. So we think that Scioto is set up well, but it did soften with the market in the May June time frame.

Presque Isle had a little bit of that May, June softness, but really was more related to the construction/disruption from Brew Brothers, EBITDA was about flat, revenue was down a little bit. The Brew Brothers opened on May 4, but access to it was impaired, virtually the entire quarter. The escalator opened at the end of June and to giving you an idea into July Presque had a very strong July with the construction/disruption behind it. If you look at just the first 28 days of July, so eliminating the last weekend, which is a favorable calendar impact. Presque Isle EBITDA was up about 5% versus the previous July. Obviously for the full month it was up and that is an EBITDA number was up, better than that for the full month, with the last weekend included.

Shreveport is a bit of a puzzle, in terms of what happened in that market, that market slowed markedly in May and June you saw it in the quarterly numbers reported by the State hold in Shreveport cost is better than $0.5 million. Really holding Reno, Shreveport and the construction impact at Presque cost us about $2 million in EBITDA during the quarter.

But Shreveport was soft and seemingly fought back in July. July in the same 28 day period to take up the calendar impact, revenue was flat and EBITDA was up over 10%. So again with the last weekend of the quarter, July was very strong for us. And that was against the comp, last year where revenue was up 6.5% and EBITDA was up 22%.

So we had a very difficult July comp and beat it pretty handily this year, despite coming off of May and June that we’re quite soft. So to be perfectly candid, I know we often get asked what is happening with [indiscernible] transwire people coming, why are people not coming. We have about the last 20 months of Shreveport has kind of been flat to low single-digit revenue growth for us and well into double digit EBITDA growth.

And May and June were significant revenue declines and EBITDA decline. So as we said here today, we don’t know whether July is the trend that we should be paying attention to or May and June. There is nothing in that macro environment that would explain that, because oil was – energy prices were actually recovering in the May, June time frame. So we are a bit puzzled by what happened there in May and June, but July has been quite strong.

Now as Gary said continue to be a challenge, if you look at the 12 month post-smoking ban, our best quarter post the ban was the first quarter of that we experienced it, which is the quarter we are comping against now. So we have another relatively tough comp that as tough as it has been. But then we would expect it to stabilize, transit improved somewhat since the smoking ban anniversary but still reflect that last year’s quarter was not, didn’t receive the full impact.

But our expectation is as we stabilize toward the end of this quarter and build into the end of the year and 2017, we should be stabilizing and starting to build back that business a bit. If your turn to our balance sheet and liquidity, we’ve told you for quite some time our leverage target was – is below five times. We are happy to report that as of the end of the second quarter, our gross leverage number was 4.9 times.

We paid down over $38 million of debt in the quarter, almost $74 million for the year. At the end of the quarter there was about $22 million outstanding on the revolver. At the pace we are going, we’d expect the revolver to be paid off completely by the end of the year.

In this current quarter we make a $13 million interest payment on our bonds. So our rates are paid down, should slow a little bit this quarter, but we would still expect to be paying down some. CapEx was $11.7 million in the quarter, we continue to think $50 million for the year, is a good number. And our cost savings programs that we implemented in the MTR acquisition continues to flow through. We continue to believe that cost savings at Reno should run in the mid-single digit millions of dollars. And we just started realizing those in the third quarter, as the freeze rolled off post to the MGM transaction.

So we expect to see further momentum on the cost side as well. We feel good about the direction our margins are heading. And if you look at the Reno acquisition, recall that we paid just under $130 million for the MGM Reno assets last November, which was about 7.2 times trailing EBITDA. And based on our pace to the first seven months of the year, we think that multiple will be in the four times range in the first year post-acquisition. So that’s really been a home run for us.

We continue to look for the next opportunity, as we’ve said before, we feel good about the organic growth that’s built into our portfolio. So we don’t feel, we need to rush out and do something, but we are in a position to continue to grow when the right deal comes along. So we feel very good about the first half of the year and think we’re set up well to finish the year strong, as well.

And with that I will turn it back to the operator for the questions.

Question-and-Answer Session

Operator

[Operator Instructions] Take our first question from Chad Beynon with Macquarie.

Chad Beynon

Hi good afternoon, thanks for taking my questions.

Gary Carano

Hi, Chad.

Tom Reeg

Hi, Chad.

Chad Beynon

Hi Tom, Gary, thanks for the color on the properties that was really helpful, lot of good detail and congrats on the pace of the acquisition that is pretty impressive. Wanted to focus on that, just on the top line. Tom you gave the volumes on a revenue side, on the slot play and the table drop, which both exceeded the Reno/Sparks market for the quarter and we would expect for that be the case going forward.

Could you help us think about how many basis points or what your goal is in terms of out performance above the average that you should be able to attain, based on your inventory in the market, based on your understanding of the players? Just maybe some more color around, how you see the gaming environment in Reno in the back half of the year, as you complete the consolidation? Thanks.

Gary Carano

Yes, so we’re as you noted we’ve been outpacing the broader market numbers for quite some time. And what we’re finding as we have moved to generate more revenue out of rooms, the people that are willing to pay higher room rates tend to be better spenders everywhere in the property. They’ve got bigger gambling budgets, they spend more in all of the food and beverage outlets. And that is displacing customers that were coming to these properties a year-ago at much lower rate. And those customers are dispersing throughout the market. So you have a situation where effectively we’re replacing lower value customers with higher value customers. And those – the lower value customers that are displaced are scattered throughout the market. So that’s helping us to continue to outpace what we see in the market.

And if you look at downtown versus suburban room rates in Reno we’ve gotten a lot more on the room rate side than the rest of the market, which you might expect, given our market position in terms of market share at this point. And so some of our peers are not getting that lift and I think that’s because a lot of the lift now is still the tourist play from the Bay area and it’s the local business that’s on the comp as Tesla and others, continue develop.

So we think that everybody in the market is going to continue to do well. We have the benefit right now, of it being driven by tourists, ultimately that’s going to flip where we think we’ll continue to benefit. But those that have a higher rate of – well those are going to benefit a little more than us, when that happenes.

Chad Beynon

Okay thanks. And Gary at the beginning of your prepared remarks you talked about the plan to renovate these three hotels. In Reno and you said that you would share with us shortly, but I’m going to be a little greedy here. And maybe ask what do you need to see to make these decisions. I mean is it really just a business decision based on what you’re currently doing in the market. Is it a decision that’s going to be compared against other opportunities from a return standpoint, maybe M&A or somewhere else in the market? What’s behind the timing of when you would complete your decision?

Gary Carano

I can share that. We’re very excited about the process we’re in right now with the design and almost to final budget numbers for the entire room renovations that we have to do at Circus Reno and some 600 rooms at Eldorado Reno and touching all of the bathrooms that related. That will be a probably into fourth quarter of next year and maybe even to the first quarter of 2018. As you recall, Reno is a very seasonal market, so we do not want to be under construction and take those rooms off the market, during our high season anywhere from Memorial Day through Labor Day.

So there’s not question we’re moving ahead with the projects and file design right now. It’s just a matter of getting those final numbers done and then we anticipate being under construction and remodeling those rooms in the fourth quarter of this year and into the first quarter of next year for sure.

Chad Beynon

Great thanks. And then one more just moving onto Scioto could you give us maybe some metrics around what type of performance you were seeing with the additional VLTs on the smoking patio?

Gary Carano

So that’s just open, we’ve got one month of performance there and what we were expecting was the old patio, which was, I mean old is a good description of it versus the new one. We thought that that business would shift from the old patio to the new patio. The game – the non-smoking games on the gaming floor do about a $190 a day in win. The old patio was doing $446 a day on average year-to-date. Since we opened the new patio, the old patio is about the same and the new patio did in the low 300s win per day.

So in total our smoking machines are doing just about double what the non-smoking machines do with now 200 of them opened instead we got about 80 before.

Tom Reeg

It also shows the creates a habit that casino players did comfortable on areas in the original smoking patio is comfortable. But as compared to the new smoking patio at Scioto Downs once they experience that it will win them over, it just takes a matter of time for players to move from their favorite machines.

Gary Carano

Keep in mind that 30 days worth of [indiscernible].

Chad Beynon

Right, okay. Thank you very much and congrats on your achievements.

Gary Carano

Thank you.

Tom Reeg

Thank you.

Operator

[Operator Instructions] And we will go next to Susan Berliner with JPMorgan.

Susan Berliner

Hi, Good afternoon.

Gary Carano

Hi, Sue.

Tom Reeg

Hi, Sue.

Susan Berliner

So I guess I wanted to start with, I know you talked about Shreveport doing better in July and obviously Reno’s doing quite well. Can you talk about the performance in Scioto and Presque in July after having a soft May and June?

Gary Carano

Yes, Scioto the May, June performance bled into July it was not much different. Presque when we got through the construction disruption they said the first 28 days of July where you can take out the calendar impact since you’ve got four of each day. EBITDA was up about 5% at Presque. So for the full month EBITDA was obviously up significantly more than that since you gain a weekend day. So Presque and Shreveport bulk turn from May and June Scioto continue to kind of bump along.

Susan Berliner

Okay. And then I guess with regards to Mountaineer I know you talked about smoking band still being an impact. Can you talk about the market I’m assuming it’s still pretty challenged? And I guess where do you think you’ll bottom out in this property because I think you – in the past about you bottom out maybe in kind of the $20 million range.

Tom Reeg

What I’ve said before is we did $21 million last year, we thought we would trough this year in the high teens and that we could ultimately build it back to $21 million once we’re through the end of 2017. I think challenge is a very polite word for that market. It’s been tough for us it seems as if we’re going to trough if we were high teens before we’re something above $15 million but not something you would call high teens in terms of a trough.

And I think getting back to last year’s number as we sit here today probably looks a little optimistic but getting back to in the neighborhood of that 20 number still seems achievable but that still work in progress, we’ve just changed the management team out there. We think there is some things that we can do to improve results. But there is things we’ve been doing since we took this place over and to be perfectly frank they haven’t worked.

So we’re going to keep at it. We think a lot of – the bulk of the difficult comps are in our rearview mirror and certainly will be after this quarter. But it’s a tough market there’s not a natural population base around that asset. So as we’ve talked about before Sue it’s really about getting the expense structure and the property footprint in the right shape to reflect the level of business that we’re able to attract.

Susan Berliner

And is the smoking patio how is that doing?

Gary Carano

That’s doing well. The relation between the smoking and nonsmoking machines is not terribly dissimilar to what you see at Scioto except there are more smoking machines at Mountaineer but the degradation in the nonsmoking machines is beyond what we were anticipating, which is what has lead to a shortfall versus what we are expecting. But keep in mind, we’re talking order of magnitude – we’re going to be off of our prior expectations by $1 million or $2 million in a company that approaching $180 million of EBITDA. We’re really at the point now where what happens from here going forward is likely to be immaterial to the greater company.

Susan Berliner

Understand. And then my last question. I was wondering if you could elaborate a little bit on next opportunities and maybe talk about the M&A environment and what you are seeing is there more competition with now than there was three or six months ago?

Gary Carano

I would say the atmosphere is fairly stable, there is – you should always assume we’re looking at something or we could be looking at something there then nothing that was attractive enough for us to pull the trigger. But we’re not lamenting a lack of opportunities, we’re really just waiting for the right one. And as I said, a number of times over these calls and investor meetings, we feel good about our earning trajectory of our existing portfolio for at least the next 12 months likely longer. So we’re not – we’re not scrambling to find the next one. When we find something and bring it to you – we’re going to be proud that this is the right deal for us not just this is the next deal for us.

Susan Berliner

Great. Thank you very much.

Operator

And we’ll go next to [indiscernible] with Stifel.

Unidentified Analyst

Hi. I was wondering for that $50 million number that you cited for CapEx for the full year. How much of that is growth and would you mind breaking out by what you have spend and intend to spend on the restaurants on the smoking patio and then other projects.

Gary Carano

Let’s do the breakdown of all the individual stuff offline.

Unidentified Analyst

Okay.

Gary Carano

We’ve got about $35 million of maintenance CapEx, about $5 million per property. About $15 million of growth CapEx heavily weighted to Reno. The conversion of the Clubhouse Restaurant in Presque Isle and the second smoking patio at Scioto would really be the only projects outside of Reno in that $50 million of growth CapEx.

Unidentified Analyst

Okay. Thanks. And one more, what are you seeing in terms of return on invested spot capital are your plans for slot purchases basically in line with prior year or – increased, decreased?

Gary Carano

Of our maintenance capital roughly half of that $5 million per property every year spend on slot purchases. And that’s been our buying strategy for far back as I can remember. And it has not changed and there is – we have – we’ve over allocated to some properties where we thought we might not have been updating as quickly as we thought, we should. And based on those results there is nothing that suggest, we need to change our mind in terms of accelerating our slot capital.

Unidentified Analyst

All right, thanks guys.

Operator

And we have a follow-up question from Chad Beynon with Macquarie.

Chad Beynon

Hi, thank you. Yes, just wanted to go back to Reno, I know the other week we heard that the Safari conference was coming back to town after being out for a couple of years and I know that used to be the biggest, it’s now one of the biggest in the city, understanding that you’re more reliant on the tourist coming over to the hill. Could you maybe quantify if this is a meaningful driver of rest bar or gaming revenues during the period when that conference comes to town?

Gary Carano

Chad, this is Gary. Absolutely the Safari Club is a true city-wide convention and it comes in – I’m not sure when it comes in late January or early February, but obviously in Reno that is a great piece of business in a shoulder season it’s not on Super Bowl weekend like it has been in the past in Las Vegas and absolutely bringing people from all over the world coming to Reno paying great room rates and not only are they great gamblers, but also they love to enjoy their time in Reno.

So it’s absolutely a great piece of business and we – the Executive Director of Safari Club is an ex, our Executive Director Sales of Silver Legacy. So our properties downtown even though we’re not the headquarter hotel, get a sizable room bar because it is such a large city like convention all the large properties in Reno have room bar, it’s a great piece of business.

Chad Beynon

And do you think this result was just because it had been in town in prior years or is there a greater emphasis from the group to bring conventions back in town given they’re air lift that you’ve talked about and given the upgrade of facilities in and around the city.

Gary Carano

I think the combination of all of the increased air service, the new cooperation with all of the casinos that help to communication with all the casinos and the convention authority in Reno is very positive. I think that Safari Club have been here in the past and knowing what that – Safari Club coming to Reno is a big fish in a small pond versus going to Las Vegas where they’re one of many conventions in that hotel in Las Vegas, they get treated a much differently in Reno as compared to they do in Vegas. So I think its all of the above, that the experience in Reno for that size of convention is very special for them.

Chad Beynon

Okay, thanks. That’s great news.

Gary Carano

Thank you, Chad.

Operator

And our next question is from David Hartrich with Stifel.

David Hartrich

Hi. So the improvements in Reno have been really impressive. I was wondering if you could talk a little bit about database growth and if you are seeing new sign ups and I’m wondering if there’s any metric that might tie that in with the new plant that’s going in and if you’re starting to actual see evidence that that’s where the traction is coming from or if it’s something else?

Gary Carano

Yes. What I would – I don’t have specific database numbers in front of me, but I’d start by saying all of the growth CapEx that we’re planning in Reno is coming that what’s happening in Reno this year versus last year is really us running these three properties as one its not physical changing.

And in terms of what we’re seeing in database sign up – giving you specific number since I don’t have them in front of me. Circus Circus had really no casino marketing program to speak out. And its level of repeat business was dramatically lower than any casino that we had encountered and the value of the customers in its database were extraordinarily low. And what we’re seeing – the largest moment we’re seeing in terms of signing up is at Circus by higher value customer than they’ve seen in the past.

So that’s a property where we are really excited about the opportunities we have there because it’s almost as if it’s a blank slate, it really – I doubt that it’s kind of with the world’s largest Chuck E. Cheese until we took it over where it was kind of an arcade with 1,600 rooms attached to it. And now we’re starting to bring in more traditional casino play and it’s flowing through very nicely through the properties.

Tom Reeg

And we have the opportunity because Reno is basically sold out almost every weekend of the year. We the opportunity to move those customers that shut out at the Eldorado Silver Legacy we get to market to them with one database of all three properties, market them to have a casino related room or a complementary room in Circus Circus where in the past we’ve been shut out but there was two properties on weekend. So we get pick our picks on weekends at Circus where they had no casino players in the hotel.

David Hartrich

But if I’m hearing you correctly it sounds like you’re describing low hanging fruit rather than a rising tide so perhaps the growth is all still ahead of you.

Gary Carano

Yes, I think – it’s really kind of – as you know the bulk of the business here is weekend business and everybody is pretty full and really just thematically what we’ve done is we’ve taken our full property walked off the bottom, call it 15% or 20% of it, and replaced it with much higher value customers. They are not necessarily new sign up, they are just a better mix of people that were filling our property with every weekend.

Tom Reeg

And with the to be released exciting projects news that we’ll talk about what we’ve plan doing with the non-gaming amenities that the three properties that will only help attract more locals to our properties and like you say with the increased growth and population we should give our fair share if not more with what we plan on doing from a project standpoint with the three properties.

David Hartrich

Got you. I guess its good news obviously that the Endeca License didn’t get renewed for Lawrence County. What’s your understanding of what happens to that license now, is it tied to that location, is there an appeals process. Can somebody else apply for the license or do you think it might? What are the chances it actually gets canceled.

Gary Carano

The chances of the license getting canceled, say, are pretty close to zero. But the odds of the license moving out of Lawrence County to somewhere else in the state are pretty close to 100%. Now we would certainly expect some sort of last guess effort from the equity and Endeca try to appeal the ruling but as with any gaming commission the courts are highly deferential to anything that they do. So the odds of that license resurfacing in Lawrence County are quite low in our estimation.

David Hartrich

Got you. And I guess – has there been any formal resolution to efforts to tax replay in Ohio and Pennsylvania or is that still ongoing on some level?

Gary Carano

It’s still ongoing somewhere, but there doesn’t seem to be any momentum in either jurisdiction

David Hartrich

Got it, thank you so much.

Gary Carano

Yes. Thanks, David.

Operator

[Operator Instructions] And with no questions in the queue, I’ll turn it back to Mr. Carano for any additional remarks.

Gary Carano

Always like to thanks everybody for joining us today. And I look forward to our next opportunity to be in front of you for our third quarter results. And look forward to having a great visit to our properties. Thank you very much and have a great weekend.

Operator

This concludes today’s call. Thank you for your participation. You may now disconnect.

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