Q1 2024 Mohegan Gaming & Entertainment Earnings Call

Participants

Carol K. Anderson; Senior VP & CFO; Mohegan Gaming & Entertainment

Joffre Wells; Corporate Treasurer; Mohegan Gaming & Entertainment

Raymond Pineault; President & CEO; Mohegan Gaming & Entertainment

Thayne D. Hutchins; Member of Management Board; Mohegan Gaming & Entertainment

David Levine; VP; MidOcean Partners LLP

David Richard Hargreaves; Research Analyst; Stifel, Nicolaus & Company, Incorporated, Research Division

Dennis Farrell

James Forristall Kayler; MD; BofA Securities, Research Division

Luis Ricardo Chinchilla; Research Analyst; Deutsche Bank AG, Research Division

Presentation

Operator

Greetings, and welcome to Mohegan's First Quarter 2024 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded.
It is now my pleasure to introduce Thayne Hutchins, Treasurer for Mohegan Tribe. Thank you. You may begin.

Thayne D. Hutchins

Thank you, Doug. Good morning, everyone, and thank you for participating in our call. Joining me today are Ray Pineault, our CEO; Carol Anderson, our CFO; and Joffre Wells, our President of Capital Markets, Investor Relations and Corporate Treasurer. Jody Madigan, our COO, is currently in Korea, will not be on today's call.
Speaking of Korea, the Mohegan Council and the Management Board would like to thank the Mohegan team members for all their efforts in helping bring Mohegan INSPIRE project to fruition. As many of you are aware, Mohegan INSPIRE held its soft opening on November 30 and the casino opened on February 3. The feedback received thus far has been overwhelmingly positive. The property is truly spectacular and beyond expectations and we look forward to the additional amenities the property will have to offer as they come online. And being this is Carol's last call, on behalf of the Board, I'd just like to say thank you so much, Carol, for everything, and you will be dearly missed.
And with that, I will turn the call over to Joffre.

Joffre Wells

Thank you, Thayne, and good morning. I would like to remind everyone that our comments today may contain forward-looking statements made under the safe harbor provisions of the federal securities laws, and actual results may differ materially from any predictions contained in these statements. In addition, our comments may also refer to non-GAAP financial measures. A reconciliation of these measures to corresponding GAAP financial measures can be found in our press release, which is available on our website under the Investor Relations section.
On today's call, Ray will provide some opening remarks, then turn the call over to Carol to provide the financial review, then we will open up the call for questions. Also, as a reminder, the earnings release and supplemental earnings deck for the quarter ended December 31, 2023, were posted on our website earlier today.
And with that, I will now turn the call over to Ray.

Raymond Pineault

Thank you, Joffre. Good morning, everyone and thank you for joining our fiscal 2024 first quarter earnings call.
Before we dive into our operating results, we have some exciting updates to share with you about Mohegan INSPIRE. To understand the magnitude of what we've accomplished, you really have to see Mohegan INSPIRE to believe it. To that end, we've put together an amazing video to showcase all the hard work that itself transform Mohegan INSPIRE from concept to reality.
Hopefully, you've joined via webcast, so you can watch the video, which will also be available in the webcast replay link.
With that, I'll ask our operator Doug to begin the video. Please enjoy.
(presentation)

Raymond Pineault

Thank you, Doug. Mohegan INSPIRE truly epitomizes the unique experience that can only be found in our properties. It starts with our amazing family of team members whose care and attention to detail, bring our properties to life to help create authentic and memorable moments for our guests.
Mohegan INSPIRE is our first flagship property outside of North America and is in an absolute category killer when you contemplate all the offerings it introduces to South Korea and the region. We're very intentional when we design the concept to have a balanced mix of gaming and non-gaming amenities. We believe Mohegan INSPIRE will be an important geographic and revenue diversifier as it allows us to share Mohegan's legacy and spirit with the world. When we soft opened at November 30, we knew it would be important to start things off with a bang, by demonstrating our ability to host world-class events like the Melon Music Awards, which drew over 12,000 attendees and the 50th annual USO Korea Six Star Salute gala event.
These co-branded events have drawn millions of viewers on social media and television which has significantly increased our visibility and brand recognition in the region. We continue to drive arena activation by developing our entertainment mix with a range of programming, which now includes hosting the World Table Tennis Championship event from March 27 to 31, in addition to increasingly packed calendar for 2024. When you factor in our MICE facilities, which include the largest configurable ballroom space in South Korea, and capacity to host up to 3,000 person receptions as well as our other features like Aurora Digital Street, the Splash Bay Indoor Water Park.
We built a space that truly is a creative dream, invites guests to create unforgettable social media experiences that will further activate our brand recognition to make Mohegan INSPIRE a repeatable and sought-after experience. This property is one of the most comprehensive integrated resorts in the world. And during the first calendar quarter of 2024, our retail offerings in the Mohegan INSPIRE Mall and additional food and beverage outlets will complement our existing programming, which we believe will enable us to capture more of the regional and staycation market share.
The video we share highlighted only a fraction of what's ahead and during the second calendar quarter of 2024, we expect additional food and beverage and retail to open along with the digital art museum, which will be among the largest in South Korea, and indoor children's playground Discovery Park and an innovative food hall concept. We hope you enjoyed the update on Mohegan INSPIRE. And as we announced yesterday evening, our grand opening will be March 5, 2024, with our partners in dignitaries that will include concert by Maroon 5 on March 8 and 9.
Now turning to our digital operations. We continue to see tremendous growth supported by our data-driven focus, which enables us to create greater player segmentation to generate higher revenue and more targeted engagement. Mohegan Digital Connecticut's online net casino gaming win was $49.3 million in the first quarter compared to $34.7 million in the prior year, an increase of approximately 42%.
In Canada, registrations on our digital platform increased 40% over the prior year and gross gaming revenue increased more than 100% for the same period. The monthly average revenue per user continues to out flow the Ontario market. Our digital business is performing extremely well, and we're encouraged by the continued growth and adjusted EBITDA was $16.5 million for the period, an increase of $9.2 million from the prior year. As a final comment on digital, we're excited to announce that we expect commencement of our digital operations in Pennsylvania by the end of this calendar quarter.
Turning to New York. We believe that the prime location of our proposed project with the Solo VF group makes it superior to others due to its easy access via the FDR Drive and Grand Central Station. We plan to offer a unique blend of luxury amenities, extensive green space and an innovative rewards program that supports local businesses, all while offering significant affordable housing and employment opportunities for local community.
Finally, we have identified a candidate to become Carol successor and are concluding the formal arrangements and overall timing. Pending finalization, we anticipate a gardening leave period for the candidate and will provide additional information as soon as we are able.
And now I'd like to turn it over to Carol.

Carol K. Anderson

Thank you, Ray, and good morning, everyone. On a consolidated basis, net revenues of $425.2 million increased 4.6% and adjusted EBITDA of $79 million decreased 21.8% year-over-year. While our consolidated quarterly adjusted EBITDA results are down compared with the prior year, there were a number of contributing factors, including the opening of Mohegan INSPIRE, which as is typical with a new property will go through an initial ramp-up period. Mohegan INSPIRE's results are reflected in our management development and other segments.
As mentioned on our previous call, Niagara Resort operating results are impacted by noncontrolling interest adjustments which resulted in a reduction in Mohegan's share of the profits this year, but not in the prior year. Lastly, a few of our properties experienced lower table hold than anticipated in the period.
At Mohegan Sun in Connecticut, first quarter net revenues of $228.4 million decreased $11 million or 4.6% from the prior year, primarily due to a decrease of $11.5 million or 7.3% in gaming revenues as a result of lower volumes and table hold. Non-gaming revenues increased $544,000 or 0.7% over the prior year, primarily driven by increased food and tenant revenues, but partially offset by lower hotel and beverage revenues. The quarterly ADR of $151 and occupancy of 95%, while strong, were down slightly from the prior year.
During the quarter, the Mohegan Sun Arena hosted Dave Matthews Band, Pentatonix, Transiberian Orchestra and a 3-day Cirque Dreams show. Later this month, we will host a comedian, Rife who will perform in 5 sold-out events.
The Connecticut property generated adjusted EBITDA of $58.1 million and an adjusted EBITDA margin of 25.4%. Normalized for table hold, adjusted EBITDA would have been $61 million and adjusted EBITDA margin would have been 26.4% down 3.4 million and 93 basis points, respectively, from the prior year period.
At Mohegan, Pennsylvania, net revenues of $59 million decreased $733,000 or 1.2% from the prior year. The decrease was primarily attributed to lower gaming volumes and was partially offset by strong non-gaming growth. Non-gaming revenues increased 14.9%, driven by higher food, beverage and hotel revenues. Adjusted EBITDA was $10.4 million with an adjusted EBITDA margin of 17.5%.
At the Niagara Resorts, net revenues of $74.2 million were basically flat compared with the prior year. Gaming revenues, which are net of gaming taxes were $46.8 million, a decrease of 11% due to lower table volumes and table hold. Non-gaming revenues of $27.4 million, however, increased 27.7% over the prior year primarily attributed to strong food and beverage sales and increased revenues from our programming of the OLG Stage, which doubled its arena performances in the quarter from 17 to 34 year-over-year.
Niagara Resorts adjusted EBITDA was $4.9 million for the quarter, with an adjusted EBITDA margin of 6.6%. As mentioned previously, Niagara Resorts financial results now include noncontrolling interest adjustments related to our equity partners 40% ownership of the operating entity. Before the effect of that noncontrolling interest and normalized for table hold, adjusted EBITDA would have been $11 million with an adjusted EBITDA margin of 14% and which would have been $653,000 and 175 basis points unfavorable with the prior year period, respectively.
At ilani in Washington, net revenues increased 11.9% from the prior year. Gaming revenues grew 10.7%, benefiting from increased slot volumes during the period. Non-gaming revenues grew 20.2%, driven by hotel revenues and strong growth in food and beverage sales.
In Atlantic City Resorts Casino hotel net revenues were flat to the prior year. Gaming volumes were mixed with slot handle increasing by 11.1% compared with the prior year and table drop down 13%. Non-gaming revenues increased 3.2%, driven by higher food, beverage and hotel revenues.
At Mohegan Casino Las Vegas, net revenues were down $1 million or 12% compared with the prior year primarily due to unfavorable table hold, while adjusted EBITDA loss of $277,000 was down $1.3 million from the prior year. Normalized for table hold, adjusted EBITDA would have been 12 -- sorry, $2.9 million for the period, up $2.2 million from the prior year.
On the balance sheet, at quarter end, cash and cash equivalents totaled $226.4 million. Total debt including capital leases and excluding unamortized debt issuance costs and discounts was $3.34 billion, up $69.6 million from $3.27 billion in the September quarter. The increase primarily relates to financing activity for the development of Mohegan INSPIRE.
During the period, borrowings under our corporate revolver also increased by $39 million, largely due to the timing of a $33 million bond interest payment, but we also made a voluntary paydown of $33 million on the Niagara credit facility. The total leverage ratio under the Mohegan credit agreement was 4.93x, which was largely unchanged from the end of the September 2023 quarter. We had $117 million drawn under our $263 million corporate revolver and after factoring in outstanding letters of credit, we had approximately $125 million available for borrowing. From a cash flow perspective, distributions to the Tribe totaled $14 million for the quarter and capital expenditures totaled $76.9 million with the majority related to development costs of Mohegan INSPIRE.
Lastly, I would like to mention that Raymond Lin, our Chief Legal Officer, has been named the next Chairperson of our Environmental, Social and Governance Committee. Ray has served on the Executive Council of the ESG Committee since he joined Mohegan and is committed to furthering our ESG initiatives.
Now we'll open up the call for questions. I'll turn things over to Doug, our operator.

Question and Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Ricardo Chinchilla with Deutsche Bank.

Luis Ricardo Chinchilla

Actually inspired me to ask my first question. I was hoping if you could help us with some housekeeping items at the property there? Perhaps how much cash is sitting there at INSPIRE, any guidance you can provide on cash that you would need for the asset expected maintenance CapEx there? And how much left is there to expand, including CapEx that has been incurred but not paid?

Raymond Pineault

So Ricardo, I would say this, we wouldn't give you guidance on how much cash is on hand, but I would say this is that based on where we are currently in the project based on the reserves that we have, we have anticipation that Mohegan will have to put no additional cash into the project moving forward. That it has sufficient cash and will generate sufficient cash flow in the future to be self-sustaining.
As far as CapEx, the property is brand new. We are still finishing up some minor repairs and there's some additional projects that we want to complete there. But we do not anticipate a large CapEx spend in INSPIRE in the first fiscal year of operations. And then, I'm sorry, what was the third part of your question?

Luis Ricardo Chinchilla

I was hoping you could help us with how much CapEx is left to spend there given that you guys are still going through the opening pauses. I mean maybe there's some payments that have not closed during the quarter as you have the guarantees and those sort of closing costs.

Raymond Pineault

Yes. So Ricardo, obviously, we're in the final stages of working with our contractor on closing out bills for all remaining work. As I've already stated, we have sufficient money on hand to handle everything that we anticipate in the final billing. When you have projects of this size, obviously, there's going to be a negotiation and discussion. I do not anticipate that we'll actually have this completed in this -- in the current fiscal quarter that will end and it will go into the next fiscal quarter before we have a finalization of that. But I will say we have sufficient cash on hand to complete all of the work that we anticipate the contractor to send us billing for.

Luis Ricardo Chinchilla

Turning to the Connecticut property. We saw lower growth and lower margins versus the prior year. Just wanted to check that there is no structural change in the table or gaming that would imply a lower hold going forward? And also if you could comment on your margin expectations for the property going forward, given that we have seen a lot of inflationary pressures that would be very helpful.

Raymond Pineault

I'll certainly let, Carol here in building the margin part of that. I mean, we have our expectations. I'll let Carol answer that. There is no structural changes in Connecticut. Gaming is cyclical, unfortunately and you have these periods of time. I would say that the quarter is down from the prior year.
One of the impacts is at the quarter year-over-year is actually down from that because we held high in the first quarter of last year. There's no structural changes impacting that. It's just that it's gaming. And a few high-end guests can certainly have an impact on moving that a percentage point here or there, depending on their activity and the wins for the quarter. So nothing structurally has changed. I'm confident as long as we can continue to get our volume long term, the math is the math, and we'll continue to get our fair share of hold and table games.

Carol K. Anderson

And then, Ricardo, just to follow up on the margin point. I think we're still in that mid -- call it, mid-20s EBITDA margin range for the Connecticut property, as you know, from the walk that we provided in the supplemental earnings deck, still a little bit down from where we've historically trended from an overall table hold perspective, but still feels like we're in that mid-20s range.

Luis Ricardo Chinchilla

My last question is if you could comment on your strategy towards refinancing of the secured notes and early thoughts on how you guys are going -- are thinking about the refinancing of the credit facility at Korea?

Carol K. Anderson

Absolutely. 2 great questions. We are continuing to have a number of conversations with our U.S. banking advisers in terms of how we might think about addressing the secured notes. And so those activities will continue and is certainly something that's very top of mind, not just for the Mohegan organization, but also for my successor. Similarly, from a Korea perspective, a number of our executive team, including Joffre and myself, were recently visiting with our Korea counterpart, and are having similar conversations with our key financing of partners and advisers in the Korean market as well.

Operator

Our next question comes from the line of James Kayler with Bank of America.

James Forristall Kayler

This might be unfair because it's so early, but can you give us any color on the opening of the casino INSPIRE. I know you've been -- I know you just opened this past weekend. Just curious like how the opening was relative to expectations?

Raymond Pineault

So James, I would say this, right? obviously, we did a soft opening in November 30, which was really exciting, and then we opened the casino on February 3. The unfortunate part is because of the way the process works in Korea. We didn't know we were going to have our license until a very short period of time before that. We were unable to do any advertising, quite honestly, until 2 days before the opening. We are exceedingly exciting about having these additional amenities, including the gaming coming on, and we're confident in the overall performance of the property, but there was no marketing or advertising or word that could be spread into just a couple of days before hand. So 3, 4 days in, 5 days in, it's way too short to even give any sort of guidance on overall opening.

James Forristall Kayler

That makes sense. We look forward to the next call when you guys have a little more -- a little more -- I guess just one follow-up on Connecticut. I understand kind of the hold component. I'm just curious overall, if you sort of characterize the competitive environment versus your sort of direct competitor across the way, but then like what you're seeing out of competitors in Massachusetts and New York. Sort of what the East Coast competitive environment feels like?

Raymond Pineault

Quite honestly, when we look at the overall Northeast market and we look at theoretical and we look at gaming trips, essentially flat across the organization. Some properties down just slightly, some up slightly. I think the overall competitive environment has actually been rational, which I hope that it remains that way, whether it be New York, Massachusetts, Rhode Island or our competitor across the river. The overall market seems to be stabilized and holding steady and rational marketing spend going on across the region. So certainly hoping it stays that way and we can all flourish and benefit from that.

James Forristall Kayler

And just a couple of housekeeping like cash flow things. Can you disclose what the ilani management fee was, I guess, in the quarter and annualized?

Raymond Pineault

The ilani management fee is reported directly in management development and other. I believe if I'm correct, you'd have to extract it from that. We don't give exact guidance on that. That will continue till almost the very end of July.

James Forristall Kayler

And then just, I guess, 2 other CapEx themes. Can you give us just a sense for what you're thinking about aside from Korea or like maybe you could break it out, but just sort of maintenance CapEx for the core portfolio and then expected distributions to the Tribe this year?

Carol K. Anderson

So from a maintenance CapEx perspective, largely in line with historical, just note that due to some timing differences, you'll see a slight swing from Connecticut spend perspective as we're continuing to work through things like supply chain and whatnot, but largely in the $30 million maintenance CapEx range for the restricted group. I am sorry, James, what was the other part of your question?

James Forristall Kayler

Travel distributions.

Carol K. Anderson

Yes. Right. So that will follow similar cadence in, call it, the low -- low to mid-$70 million range would be our anticipation for a full fiscal year under the credit agreement. It started at $70 million in 2021 with a 2% annual inflator. So I think we're now in year 2 or year 3 of the 2% annual increase on that.

Operator

Our next question comes from the line of David Levine with MidOcean Partners.

David Levine

First one, just on the revolver. Can you explain again why the revolver was drawn. I think on the last call, you said you wouldn't need any more funding for Korea. I just want to make sure it wasn't funding to Korea and why exactly you needed to draw the revolver?

Carol K. Anderson

Sure. That's largely timing, David, relative to a $33 million bond coupon payment that took place in the quarter. But that was not -- that was not in relation to any funding for Korea. We concluded those funding activities in the September quarter.

David Levine

I see. So -- so this Q1 is a larger bond interest payment quarter?

Carol K. Anderson

Correct. That's what swung the revolver draw. Yes.

David Levine

Okay. But you also said you paid down the Niagara credit facility, you said...

Carol K. Anderson

That's correct.

David Levine

Was that used with just cash flow -- I would assume, just with cash flow?

Carol K. Anderson

Directly from Niagara's cash flow, yes.

David Levine

I see. Okay. So you use it directly from Niagara's cash flow. Okay. And then just on the margin side, even with hold in Connecticut, you would have still been down close to 100 bps on margin on a year-over-year basis. Is that just even with -- even if you had better hold, and you still -- is it just gaming volume that was down, so you're having a deleveraging effect? Or is there something you're not doing on the cost side necessarily or didn't do that you think you can do going forward? Just kind of additional color on the Connecticut on the margins because even with the whole commentary, they would still be down.

Raymond Pineault

Yes. You're absolutely right, David. And quite honestly, volumes in Connecticut were down slightly, not significantly. We do anticipate inching that back up. Some is our goal. Quite honestly, on the margins, there are always labor pressures as well as pressures on pricing, which we adjust and work with on a regular basis to make sure that we're standing in line to maintain our margins. So I don't think it's an overall systematic problem, but they were down slightly on their gaming volumes, it has an impact overall on the margins.

David Levine

Okay. And then in Pennsylvania, obviously, smaller EBITDA dollars, but margins were down pretty good there and revenues were kind of flattish year-over-year. Is that -- is that just a mix thing? Because you mentioned there was more non-gaming revenues were up and gaming was down. Is it a mix thing? Because you've had pretty good Pennsylvania margins, and this is the first quarter where they just kind of really stepped down.

Carol K. Anderson

Yes. You've nailed it, David. It's largely the gaming, non-gaming mix at Pennsylvania.

David Levine

Okay. And then yes, just -- yes, on the EBITDA, the way you guys broke it out, obviously, the headline sounded down a lot more than the restricted group, but is there a way to break out like how much in ramp-up cost Korea was? I mean I saw your advertising G&A stepped up in the quarter pretty significantly, I think, $16 million. Was that mostly related to Korea, just an advertising step-up of $16 million? And was the Mohegan -- does the management develop another drag, was that mostly Korea? I'm just trying to think through like how much of a drag Korea was?

Carol K. Anderson

Yes. So the key component is that you're trying to do the walk until last year, INSPIRE opening expenses, and it's a mix of things from an opening perspective, not just advertising but ramping up the operating staff with the hotel go live as well. So EBITDA bridge there, it's right around $11 million of the impact that you see within MVNO. The other primary component of MVNO that's where ilani and resorts reside as well as some other smaller management and development agreements that we have.
So yes, the predominance of your MVNO swing is INSPIRE opening expenses. And then the Niagara noncontrolling interest impact just under $3.5 million and then an amalgamation of hold impact at Niagara, Connecticut, and Las Vegas is what contributed to the remainder of that year-over-year shift from a consolidated adjusted EBITDA perspective.
And I think we walked through some of that in a bit more detail with a bit more precision within the earnings release segment components. But if you have any questions on that, feel free to reach out.

David Levine

Yes. Do you guys think going forward -- I mean just on Korea, what kind of more disclosure will get like in the coming quarters? Like will you break it out as its own segment or will it be grouped together? Will we get kind of KPIs? Or is that going to come later? Just kind of curious how you guys thinking about reporting it going forward?

Carol K. Anderson

Yes, it's like you've been sitting in on our accounting meetings. From a segment disclosure perspective, right, with March being the first full fiscal quarter of components of the property operating, it is something that we are evaluating, not just from a technical segment reporting perspective, but also similar walks along the lines that we do for the other operating properties, so we can provide some better visibility in terms of their operating results.

David Levine

And then just a couple more, sorry. Just back on the revolver, do you anticipate that's something you'll be able to pay down as timing flips just?

Carol K. Anderson

I mean we -- yes, David, correct, right, from a prioritization perspective, we're still very focused on paying debt. So I would anticipate any free cash flow outside of normal needs for CapEx, interest, et cetera, would be prioritized towards that debt paydown.

David Levine

And then on Niagara, obviously, there's the noncontrolling interest. But then even without the noncontrolling interest, margins would have been down a decent chunk. And you're saying that's almost all hold. That is the reason why margins would be down so much?

Carol K. Anderson

Significant component of it is table hold. There's some volume impact, but you add back the NCI and you normalize for table hold, I think we gave that walk in the release as well. But when you do all that math together, it's predominantly those 2 factors, NCI and table hold.

David Levine

And in terms of just -- I just wanted to understand the free cash flow dynamics in Niagara. You had a decent actual amount of CapEx this quarter. But how do you think of CapEx in Niagara. And is the right way to think of cash interest there like mid-single-digit millions of cash interest in Niagara?

Carol K. Anderson

So we haven't previously given any guidance from a Niagara CapEx perspective. And then in terms of the interest rate, look, we'll do a similar thing in Niagara, to some extent, prioritizing excess cash to pay down debt is there. But I think we've given enough information in terms of how the interest rate structure works on the Niagara facilities to be able to sort of ballpark what that might look like going forward.

David Levine

Sorry, I just had one more question. On getting the hype out on Korea and just advertising, what are you guys doing in terms of China and the Chinese market kind of spread the word. They'll make up the largest majority of foreign visitors and gaming volume, as you guys have kind of laid out. So how are you kind of attacking that piece to it?

Raymond Pineault

We really appreciate it. And obviously, Chinese -- the Chinese market is one of the markets that we're tackling along with the staycation market within South Korea, the dual passport holders within South Korea, along with the foreign nationals that actually live in South Korea, Taiwan, Japan. So we have a very broad reaching marketing and advertising strategy that the team is executing upon now. We've been working through various medias and various platforms and various individuals in multiple countries since the opening -- prior to the opening in November. The plan for execution on the gaming side of it, as I said, was only able to be begun the execution towards the end of last week. So we -- the team there is working on executing their strategy. They've begun doing so now, and we're confident we'll be able to attack each of these markets.

David Levine

Okay. But nothing specifically different for the Chinese market?

Raymond Pineault

Well, obviously, you have to keep the Chinese market differently because you cannot advertise gaming directly in China. So obviously, we've geared our strategy around that, whether it's through individuals, whether it's through platforms, whether it's through advertising. We have a specific strategy for attacking that and making sure we stay in compliance with the laws at government and regulators. So yes, we do have a plan, and we do understand it, and we understand the regulations that we have to work around.

Operator

Our next question comes from the line of Dennis Farrell with Sumitomo.

Dennis Farrell

Congratulations, team and the Tribe. I know you've historically built really high-quality assets, but getting a 5-star on the hotel and the video looks incredible. So I can't wait to go see the asset at some point. In regards to the property, I was just wondering from a strategy perspective, how do you think about the mix of revenue and cash flows from non-gaming and gaming over time?

Raymond Pineault

Dennis, thanks for the question. I really appreciate it. I mean we've talked about this before. Unlike the North American properties that are predominantly towards the gaming side, 78% or higher. This property will lean much more towards a 50-50 split between gaming and non-gaming. When all the amenities are up and running, including the arena or in Splash Bay, in the retail, in the F&B, the outside park that will be coming along, the museum, all these amenities that will be operating, we do anticipate a mix much closer to 50-50.

Dennis Farrell

That's helpful. And then, what -- how do you think about margins on each side of that. Well, I'm assuming, I guess, it depends on volumes on the gaming side, but.

Raymond Pineault

I think you answered your own question, Dennis. So thank you for the question, right? We're going to evaluate this as volumes go along, and we'll make adjustments as needed if needed. And we're quite honestly, we're 4 days into ramp. So we have a good of a period to go to get to normalization. And I don't think you'll see that for at least the next 12 to 18 months.

Dennis Farrell

And then in regards to -- I know historically, the retail is obviously a big driver in Asia. There's been historically Las Vegas Sands has talked about, always trying to monetize -- thinking about monetize Singapore's retail component. I was wondering just the scale of the mall shopping there. Is there an opportunity maybe to partner with a REIT to monetize that at some point in the sale-leaseback transaction and potentially also to do something with the 5-star hotel.

Raymond Pineault

So again, great questions. We're 3 months into total operations. We have the ramp stage to move forward. I would say that ultimately, we make recommendations to the trial, what's in the best interest of 13 generations to come, and that's what they're always focused on. If that opportunity makes the most sense to the Tribe, we will present them to it, and they will make a decision on whether they want to move in that direction or not to make that determination now would be way too early 3 months into starting.

Dennis Farrell

Right. I mean there is -- like legally, you have the option to do that like you can monetize. There's no...

Raymond Pineault

We can explore those options.

Dennis Farrell

And then secondly, moving back domestically. I mean, to me, the real surprise and continues to be a pleasant surprise, is the digital side of the business and just kind of from the numbers I ran, it seems that, that pretty much fully almost -- fully offset on a restricted group basis, cash flow -- the cash flow decline. So as we think about the digital business going forward -- how do you think about the TAM of that market in Connecticut? And how do you think about margins over time as the acquisition cost of your customer base with the state kind of ramp up?

Raymond Pineault

So I would say that if you want to do some analysis on your own, and we've kind of looked -- that you can look at the overall digital marketing size of New Jersey and look at the total population and total income and that should probably bring you to some reasonable expectation of where we can land in Connecticut. It's a similar market, obviously, a larger population less revenue per -- income per person. So we believe strongly that still has a ways to go on its ramp as well. It continues to grow, continues to perform well, and we're very excited about the business overall. It continues to improve every month. And we anticipate that ramp will honestly continue.

Dennis Farrell

And then I guess from a -- I guess from that perspective, I mean, I guess, you mentioned it briefly, but like what inning do you think we're in there? Do you think we're like in the third or fourth inning in rating? I'm just trying to -- on the revenue side.

Raymond Pineault

That's a great question. I mean there's so many analogies that aren't not applicable because you think about New Jersey that ramped for 10 years, but they had COVID and it went crazy for a year. You've had Michigan that has had year-over-year growth, and that has not stopped as yet. To give you an exact -- I love the sports analogy by the way, I'm big sports fan. But to say if I'm in the third inning or fourth inning or -- I don't think we're at the seventh inning, if you want to use that analogy, but to say the third or fourth or fifth, it's hard to say, but I say that we truly believe we have more ramp to go, and we'll continue to see this business grow and flourish.

Dennis Farrell

And the last one on that is how about cross marketing. I mean are you seeing any benefits from that yet as you pick up new customers throughout the state and giving them a stay at the property in Connecticut? How does that -- how are you dealing with that?

Raymond Pineault

So I think I said this perhaps on our last call, if I hadn't, I will say so now. The biggest marketing event for digital was the Bruce Springsteen Concert by far. It was their best marketing event. We continue to look to how we utilize our bricks-and-mortar art assets here, which we will also do in Pennsylvania, and we're working on in Niagara, to use those assets as a driver to bring our guests and gain a greater share of wallet from the guests that participate in both.

Operator

Our next question comes from the line of David Hargreaves with Barclays.

David Richard Hargreaves

I apologize if this was already asked. But for the digital EBITDA increase, the $9.2 million, how much of that was due to the onetime accounting adjustment, if any?

Carol K. Anderson

So in the prior year, it did not have the impact of the later fiscal year cumulative adjustment. So there is some element, I think it was Q2 or Q3. Q2 cumulative adjustment. But if you had the retro all of it back, there would have been some modest component of it there. I think what you're trying to sort of figure out is like, okay, how do we figure out what the digital run rate is. I think one of the reasons that we point to the revenue growth is it tells a cleaner story from that perspective in terms of how nicely the digital business is ramping. Yes, (inaudible) to last that cumulative adjustment.

David Richard Hargreaves

There's a little bit of seasonal noise, I think. Would you say that this was in line with your expectations on the EBITDA side, it exceeded line.

Raymond Pineault

I would say that our performance in the first quarter actually exceeded our expectations as well and it continues to outperform expectations, and we hope that, that can continue, we truly believe that it can. The digital team is doing an outstanding job of using their assets to enhance that product. So it's a great start for us, quite honestly, but I still believe we have a ways to go.

David Richard Hargreaves

And previously, I think you guys had said that the cost per day of operations for Korea would be analogous to Connecticut. And now that you've got a little bit of operating experience, I'm just wondering if that was the case and if you expect it to be the case going forward.

Raymond Pineault

I don't think we've ever said that because I don't think they are analogous. They have similar amenities, but there are different operating models and different labor models and different overall cost structures. Obviously, we're 90 days in, but we're 4 days in of a casino operation, so that's still got to settle in. Obviously, look for the quarters going ahead. But even that, with the ramp period, it's going to settle in, it's going to take a little time for that to happen.

David Richard Hargreaves

Are you seeing any reaction from Paradise to your opening in terms of the way they're reaching out to customers? Are they being more aggressive in response to your opening if it's detectable?

Raymond Pineault

Frankly, the first week that we opened, we did notice that there was a little elevation in their marketing and reinvestment spend. Our team there is obviously in contact with them. They've been in contact with us. I can tell you that they're nervous about our property overall. If you could compare the 2, I do think, and I said it in my remarks, we are the category killer. And if I were them, I would be nervous as well. But I think that you've known us long enough that we don't get in that game of chasing Fool's money. So we will continue to be disciplined and run our operations appropriately.

David Richard Hargreaves

What are you charging for use of the water park? And do you have to be in the hotel to use it right now?

Raymond Pineault

The water park is something that we're working on. It's probably it's hard for me to give you an answer on that right now as we continue to look at the amenity and its appropriate utilization. We have some future plans for it, but I don't think now would be the time to actually give you guidance on that.

David Richard Hargreaves

All right. Fair enough. Congrats on the opening and good luck.

Operator

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Raymond Pineault

Thank you, Doug. As you can tell, we are extremely excited about the opening of Mohegan INSPIRE and the additional amenities that will continue to come online in the ensuing months. This is a historic milestone for Mohegan and we look forward to the benefits the property will provide. Thank you again to all our team members for their hard work and dedication. Thank you for joining today's call, and I hope everyone has a nice day.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.