• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Here


    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Less bad and better are not the same thing...

"We saw both stabilization and improvement in our business, as we reported the smallest declines in revenues and EBITDA since the third quarter of 2009. We are encouraged by our results so far in October, and expect fourth-quarter comparisons will be the best of the year. As conditions improve, we remain focused on deleveraging our balance sheet and controlling costs, ensuring we will be well-positioned to capitalize on the opportunities presented by a recovering economy."

- Keith Smith, President and Chief Executive Officer of Boyd Gaming


  • Las Vegas Locals: "As expected, we saw trends similar to the second quarter, as consumers remained cautious with discretionary spending. However, in actual dollars, the Adjusted EBITDA decline matches the smallest quarterly gap in the last two years. Although spend-per-visit was lower, visitation to our Las Vegas Locals properties remained strong."
    • "Strong" is a relative term... i.e. not getting worse from already terrible levels.
  • Downtown: "Results reflect lower spend-per-visit, combined with lower ticket prices and increased fuel costs associated with our Hawaiian charter business. There is evidence of a strengthening recovery in Hawaii's tourism economy, which bodes well for our Hawaiian visitation."
  • Midwest and South: "The region delivered the best revenue and EBITDA comparisons so far this year, as our Louisiana properties made considerable progress toward closing the gap on their strong 2009 results. In addition, we maintained or increased market share at all six properties in the region."
    • Less bad is good... but they did say that things would actually be better at some point in the second half
  • Borgata: "Slot win was nearly flat during the quarter, compared to a 9% decline overall in the market, and hotel occupancy rose slightly year-over-year. However, these positive trends were offset by unusually lucky play by table game customers during the quarter, which decreased our hold percentage to below historical levels."


  • "Positive trends they have experienced in the third quarter have continued into the 4th"
  • It appears as if Las Vegas is beginning to recover
    • Increased visitation to Vegas
    • Growth in retail sales (July)
    • Gaming win rose 21% in August and slot win grew 13.2% in August and the locals market also grew in the month
    • Convention visitation increased
  • Thinks that there is a perception that the locals Las Vegas market will only improve when job growth and housing prices increase.  But they believe that consumer confidence is more important to increased spend. Total employment have been stable despite increases in the unemployment rate...
    • Per our math, consumer confidence is irrelevant and housing prices and unemployment are all that matters
  • Deleveraging is their highest priority
  • Actively examining opportunities to refinance their debt and extend maturities
  • Will only pursue deals that give an attractive return to shareholders
  • Will continue to look for ways to operate more efficiently
  • Have had positive comparisons in October so far in the Las Vegas locals markets for revenue and EBITDA.
    • Believe that that will have increased spend per visitor going forward
  • Estimate that they increased their market share in the Las Vegas market by 1%
  • Encouraging signals in Downtown
    • gained market share
    • experienced the lowest decline
    • Hawaiian economy is strengthening and will eventually lead to a revenue improvement at their properties
    • Rated spend increased slightly
  • Midwest and south
    • Occupancy increased
    • Market share increased
  • Borgata positives:
    • Slot win was nearly positive
    • Occupancy at Borgata and Waterclub was over 96% - 1% better than last year
    • Table hold impacted them by $9MM
  • Leverage ratio was 6.9x - covenant remains at 7.25x in the next quarter and expect to remain in compliance
  • Pre-opening expense relates to Echelon
  • Increase in interest expense is due to refinancing at Borgata and a $2MM debt write-off retirement of old facility.
    • Expect interest expense there to be $22MM in 4Q
  • Expect tax rate to be approx. the same next quarter
  • Borgata made a $240MM to its owners - they received $145MM in total distributions (included: $10MM consent fee and $40MM reimbursement of expenses)
    • Property reduced debt by $28MM since financing was completed


  • Positive comps in October so far in the Las Vegas locals markets for revenue and EBITDA
  • Why did they pass on Borgata?
    • have other opportunities and are focused on deleveraging their balance. Not interested at that price.
  • Capitalized interest at Borgata? Capex was $4.5mm of maintenance and there was no capitalized interest
  • What was the EBITDA impact of the low hold at Borgata? $8MM (All flows through ex. taxes)
  • Still interested in making an acquisition in the Las Vegas locals market?
    • Yes - at the right price
  • How long will Borgata remain consolidated for?
    • Only if there are changes in the JV agreement - so expect it to remain consolidated for some time.
    • Once a deal is reached between a potential buyer and MGM - as long as there is no change in the JV agreement they will continue to consolidate Borgata. They are unlikely to approve any changes in the JV.
  • Capex in the quarter:
    • Maintenance capital of $7MM
    • Given the current environment, the numbers for 2010 are good for 2011. Going through their 2011 budgeting process now.
    • Don't feel the need to spend any more right now
  • Perspective on Revel opening in AC?
    • Thinks there is plenty of capacity and any new capacity would just add competition
  • Any interest in selling their stake in Borgata?
    • The only current decision point they have right now is the right of first refusal
  • Borgata table play: No material change in mix of play. Haven't changed their credit policy. The market in AC has gotten more promotional but they haven't participated.
    • Table drop decline 10% YoY
  • Will likely start the Borgata room remodel sometime in 2011.
  • Refinancing will occur between now and next year when it goes current.  Are having ongoing discussions with the banks.
  • Do they think that STN's re-emergence from BK and change of hands in M Resorts will impact the promotional environment?
    • they don't compete with M
    • STN's has been more promotional since re-emerging
  • 3Q in Nevada is the weakest quarter. When you combine low volumes with fixed costs, you get margin compressions.  Aren't going to ignore STN's renewed efforts, will be as competitive as they need to be.
  • Doesn't see the impact of the election impacting their results
  • Why has the hold at Borgata been low all year?  Just bad luck
  • Boyd's corporate tax rate is 35% and Borgata's is 9%
  • Plans for Florida updates? none