PROVIDENCE, R.I. (WPRI) – The bitter fight between Rhode Island’s two largest gambling companies is taking a bite out of business, their third-quarter earnings reports revealed Thursday.
Casino operator Twin River Worldwide Holdings has spent months jockeying with gaming technology company IGT over a lucrative $1 billion, 20-year contract to operate the state’s gambling systems.
The battle appears to be affecting the finances of the two companies — albeit to different degrees.
Twin River, already facing fierce regional competition from the new Encore Boston Harbor casino in Massachusetts, reported a 57% decline in its third-quarter profit compared to the same three-month period in 2018, coming in at $6.9 million.
Twin River President and CEO George Papanier alluded to the negative influence the Massachusetts casino is having on the company.
“While we experienced the anticipated short-term impacts of new competition at our Twin River Casino Hotel in the quarter, we continue to reap the benefits of our disciplined [merger and acquisition] strategy, with Dover Downs and Tiverton both performing extremely well this quarter,” he said in a statement.
The profit decline comes despite a 17% increase in Twin River’s revenue, as the company has successfully grown overall sales – thanks largely to acquisitions of other casinos, notably Dover Downs in Delaware.
Beyond the regional competition, however, is evidence of what’s happening as a result of the local battle. Tucked into the company’s earnings report is a note about the “expenses incurred associated with the campaign to create an open bid process for the Rhode Island Lottery Contract.”
Twin River since June has mounted an aggressive public campaign against a proposed 20-year contract extension between the state and IGT, calling on lawmakers to put the contract through a competitive bidding process and award it to them instead.
But it’s tough to know exactly how much the company has spent. The costs are baked into a $541,000 expense line entitled “other,” which includes other expenditures including storm-related repair, a pension audit payment and “the Rhode Island State Police investigation into a tenant at the Lincoln property and an employee of the company.”
As Target 12 reported earlier this year, state police are investigating a Twin River executive who was involved in the casino’s food and beverage operations.
IGT is likewise spending a notable amount of money on the campaign to protect its Rhode Island interests, although the cost isn’t having a major effect on the global company’s financial performance.
IGT reported profit for the three-month period ended Sept. 30 more than doubled to $103 million compared the same period in 2018. The Italy-based company, with a large corporate office in Providence, nonetheless noted its North America operating income fell 15% to $51 million partly due to “expenses related to Rhode Island contract extension.”
IGT shares soared on the results, jumping over 23% to $15.93 in New York Stock Exchange trading Thursday. (Twin River, whose shares finished the day $24.28, issued its earnings report after the market closed.)
State lawmakers are currently considering whether to approve the proposed contract extension with IGT, formerly known as GTECH, which has operated the state Lottery since 1993.
Twin River, meanwhile, operates the two state-owned casinos in Lincoln and Tiverton, and is looking to expand its book of business at the same time it faces the competition from Boston.
Stifel analyst Brad Boyer issued a report Wednesday lowering his current and out-year revenue estimates for Twin River “to reflect a greater than previously anticipated competitive impact from the recently opened Encore Boston Harbor.”
In a call with investors Thursday night, Papanier was nonetheless bullish that the casino would start to recapture business lost to Boston after the end of the year.
“We will continue to see lift there and recovery of market share,” he said.
In Rhode Island, the question of whether Twin River will be successful in winning the state’s gaming contract away from IGT will have to wait until 2020, as lawmakers have signaled no decision will be made this year.