BYD 2Q 2013 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:  IN-LINE BUT BETTER THAN THE WHISPER

  • Despite an in-line to slightly below consensus quarter, BYD's tone and guidance was better than expected.  The company's exposure to Las Vegas and Atlantic City is looking more like an asset versus other regional gamers versus a 5 year liability.  

2Q GUIDANCE

  • SAME:  BYD reported wholly-owned EBITDA (post-corp) of $132.3MM, in-line with its $132-137MM guidance range.  Borgata excluding the property tax adjustment earned $32.1MM, higher than its $27-29MM guidance range.  

LV LOCALS

  • BETTER:  The biggest surprise of BYD's markets as EBITDA grew 12% on flat revenues.  Mgmt believes operating margins are sustainable and the future looks bright.
  • PREVIOUSLY:  
    • "Our themed slot initiatives and related marketing programs that we discussed on prior calls have been quite successful. Looking ahead, we are optimistic about our prospects in the second quarter, which got off to a good start at the Orleans with a festival celebrating the American Country Music Awards."
    • "On a spend per visitor basis, we're running about flat, so sort of an improvement over the declines we had seen prior."

DOWNTOWN LV

  • BETTER:  Changes to Hawaiian schedule and refined marketing programs led to operating efficiencies.  Mgmt also saw a pickup in traffic particularly on Fremont Street.
  • PREVIOUSLY:  "We are diligently focused on improving operating margins in this segment as well, and we're successful in mitigating the impact of lower revenues on the EBITDA line...Overall direction of our Downtown Las Vegas business remains encouraging. We continue to enjoy a great relationship with our Hawaiian customers, providing this business a solid foundation."

ECONOMIC CONDITIONS

  • BETTER:  While mgmt continues to be cautiously optimistic, they are seeing improvement in business trends. 
  • PREVIOUSLY:  "We are cautiously optimistic about the economic trends that have started to form late in the quarter and the overall direction of our business."

MIDWEST AND SOUTH

  • WORSE:  Ex IP, the segment would have reported flat EBITDA.  Iowa and Kansas were impacted by severe weather.      
  • PREVIOUSLY:  "We are optimistic that conditions should remain relatively healthy in our Midwest and South markets in the months ahead."

CALIFORNIA/SOUTH FLORIDA

  • SAME:  The surveys at Wilton Rancheria will take some time.  Believes that property can open in 2016.
  • PREVIOUSLY:  "We are well positioned take advantage of several significant long-term growth opportunities, including our agreements with the Wilton Rancheria tribe in Northern California and Sunrise Sports Entertainment in South Florida. Both of these partnerships could provide significant growth opportunities to our company in the next several years."

ONLINE GAMING PROSPECTS

  • SAME:  remain confident on being the 1st online gaming operator in New Jersey.  BYD is awaiting government approvals by the end of the year.
  • PREVIOUSLY:  "We're also quite optimistic about the potential of the emerging domestic online gaming market. We intend to be among the first to offer online gaming in the State of New Jersey and are confident that the Borgata brand will allow us to capture a substantial share of this lucrative market. We're evaluating the opportunity to offer online poker in Nevada as well and are determining the best way to enter what is shaping up to be a robust yet crowded market."

KANSAS STAR

  • MIXED:  Kansas Star achieved significant revenue growth (we believe 13% YoY) but also incurred much higher operating costs due to the opening of its new arena. 
  • PREVIOUSLY:  
    • "Marketing spend was unusually low during Kansas Star's introductory period in early 2012, and this quarter's results reflect more realistic customer reinvestment levels. We expect these trends to continue and visitation should grow further with the opening of our arena, capable of seating over 6,000 guests. This property continues to perform in line with our expectations and remains on track to generate about $100 million in EBITDA on an annual basis."
    • "Kansas Star today has 150-hotel rooms in total. We'll be increasing that to 300 in the next 18 months or so per our agreement with the state and our hotel operator."

MISSISSIPPI

  • WORSE:  Gulf Coast market (ex Delta Downs) has not grown.  The opening of the Golden Nuggest raised the promotional environment (though IP marketing expenses dropped).  IP was particularly weak on the slot side. 
  • PREVIOUSLY:  "I would tell you that the market is certainly, as we knew going in, a very, very competitive market. State of Mississippi issues numbers by sort region within the state and you have those handy. And the IP for us has been much more of an efficiency story than a revenue growth story, and we think as a result of that it has had a meaningful contribution to stock price and equity valuation, because we bought it at the right price and very much improved margins and EBITDA contribution at that property, and expect that to continue."

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