BYD 1Q2013 REPORT CARD

In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance

OVERALL

  • BETTER: BYD's focus on operating margins finally began to show dividends as they came in with a pretty handy beat.  There was even renewed optimism that Locals revenues may actually turn the corner in coming quarters.

BYD 1Q2013 REPORT CARD - BBB

LOCALS 

  • BETTER:  Operating efficiencies drove the higher than expected EBITDA.  BYD is cautiously optimistic going forward.  The Orleans, in particular, is doing well.  Spend per visitor in 1Q is flat.  March revenues improved dramatically from January/February or 'relatively flat' YoY. 
  • PREVIOUSLY: 
    • "We saw reasons for guarded optimism in this region later in the quarter, as business trends started to improve. The declines we saw in October to November moderated in December, and that positive trend has continued into the first quarter."
    • "Customer accounts are up. Spend per visitor is down."

MARKETING AND ADVERTISING EFFICIENCIES

  • BETTER:  They had solid traction on their marketing and advertising initiatives. EBITDA margins beat our expectations across the wholly owned portfolio
  • PREVIOUSLY: "We refined our marketing and advertising programs and made significant changes on our casino floor, and we began to see the benefits of this in the fourth quarter as visitation strengthened month-by-month across our Locals business. In 2013, we will continue looking for ways to improve our core business, not just in Nevada, but across our portfolio.

CONSUMER BEHAVIOR

  • BETTER:  Consumers are becoming used to higher payroll taxes but offsetting that were the tax refunds coming in, improvements in investment portfolios, and strengthening economic conditions across many regions
  • PREVIOUSLY: "As other companies in our industry have already reported, gaming customers   nationwide pulled back in the fourth quarter due largely to economic uncertainty surrounding the elections and the fiscal cliff. While we actively worked to mitigate the impacts of these trends on our business, they did affect our operations. These trends continued into the first quarter. Our customers are now adapting to the impact of higher payroll taxes that took effect January 1; continued uncertainty from Washington over federal spending and taxes is affecting consumer behavior as well."

VEGAS TRENDS 

  • SAME:  Unemployment has declined below 10% and the pace of jobs have been accelerating. The housing continues to be in recovery mode.
  • PREVIOUSLY: "We are encouraged by signs of continued improvement in the Southern Nevada economy. The unemployment rate has been declining in recent months and home prices rose substantially throughout 2012. Las Vegas is still far from the boom years, but the trend is in the right direction, and we believe we will see modest improvement throughout this business in 2013."

DOWNTOWN 

  • WORSE:  Business levels have been weak.  BYD is focused on improving operating margins and continues to be optimistic with the upcoming redevelopment of Downtown.
  • PREVIOUSLY: "Visitation remains solid, especially among our Hawaiian customer base, and we gained 250 basis points in market share from the third quarter to the fourth, further expanding our leading position in the Downtown market. We believe those positive trends will continue. Our Hawaiian business remains strong and we will benefit from the ongoing redevelopment of Downtown, which continues to drive new business, new visitors and new residents into the area."

KANSAS STAR 

  • SAME:  Marketing spend rose in the quarter compared with the abnormally low levels during its introductory period. BYD expects visitation to grow, particularly with the opening of a 6,000 room arena in late June.  Kansas Star remains on track to generate $100MM in annual EBITDA.
  • PREVIOUSLY: "Looking ahead to the first quarter, Kansas Star will be comparing to a strong introductory period, when it was able to generate robust visitation with very little marketing spend. That is obviously not sustainable and customer reinvestment has increased to more realistic levels. Winter weather has presented more of a challenge in the first quarter of 2013 as well. But we remain quite optimistic about Kansas Star's long-term potential and we expect that Kansas Star's margins will remain the highest in the Peninsula portfolio and project that the property will generate about $100 million in annual EBITDA going forward."