BYD 1Q 2014 - EARNINGS PREP

Consensus estimates, management guidance and commentary, and questions for management in preparation for the earnings release/call tomorrow.

 

 

1Q14 CONSENSUS

  • EBITDA:  $145 million
  • Revenues: $713 million
  • EPS: $0.01

1Q14 GUIDANCE

  • EBITDA:  $140-145m
    • Includes $8-10m negative due to adverse weather

QUESTIONS FOR MANAGEMENT

  • Outlook for I-gaming and I-poker
    • Any headway in making payment processing more fluid and convenient for users? 
  • Promotional environment:  regional markets and LV Locals
  • Initiatives to improve operating margins
  • How much incremental dollars is Penny Lane bringing onto the slot floors?  Will there be other slot refresh initiatives this year? 
  •  What else can be done to narrow the win per slot gap versus the competition?
  • Par-A-Dice struggled in Q1.  Other than adverse weather, anything else going on there?
  • Are you concerned with the topline growth at Kansas Star before the final expansion is complete in early 2015?
  • Borgata continues to positively stand out in the highly competitive AC market. Why?
  • Options for creating shareholder value: REIT conversion, selling assets to REIT
  • April trends indicated soft from PENN and PNK. Thoughts?
  • Any update on Borgata property rebate?

 

RECENT MANAGEMENT COMMENTARY

LV Locals: 

  • 2014:  YoY growth in revenue and EBITDA similar to the levels BYD experienced in 2013.

Penny Lane:

  • Penny Lane is now in place at 12 Boyd Gaming properties across the country, and that it's having a positive impact on play across our business.

Development projects:

  • Wilton Rancheria - Early-stage design work is well underway and the Environmental Impact Statement Scoping Report was filed in early February. 
  • Sunrise Sports Entertainment - Florida lawmakers are now actively considering the expansion of casino gaming in key markets across the state and BYD expect to have more clarity on this opportunity in the coming months.

Business Trends:

  • Spending and visitation declined among casual players.
  • Consumers remained cautious throughout the region while play from top-tier customers was solid

NJ I-gaming:

  • Basically no contribution, positive or negative, from online gaming for the full-year.
  • While it is early, we are extremely pleased with the progress we have made so far.
  • Through January, Borgata has established itself as a clear market leader with nearly one-third of the total market.

Non-gaming spending:

  • Hotel rooms will further be benefited in March. There is an awful lot going on in this town in March, a very good convention calendar that's been written about.

Downtown:

  • Minimal EBITDA growth in 2014
  • Successful refinement throughout our business. The changes BYD made last year to the Hawaiian marketing programs are continuing to have a positive impact on business volumes.  And BYD's Hawaiian charter service is now running much more efficiently with improved yields.
  • Downtown has shown encouraging strength so far in the first quarter, and remain optimistic about the direction of our Downtown business in 2014.

Midwest/South/Peninsula:

  • Year-over-year growth on a quarterly basis, beginning in the second half of this year.

Borgata:

  • 2014 EBITDA similar to 2013 excluding the negative $5 million impact of low hold and weather we experienced in December.
  • Looking at 1Q, weather continued to have a negative impact on Borgata's land-based business.  Have seen a significant uptick in the promotional activity throughout the Atlantic City market, although Borgata has not needed to match this increased spending.

Delta Downs:

  • Delta Downs is clearly benefiting from an excellent location near the thriving Houston market and it is outperforming the competition.

IP:

  • BYD acquired the IP in the low-$30 million EBITDA range and have driven it up significantly higher... is clearly an asset that is clearly number two in the Biloxi market, if by some standards not tied for number one.

AC property tax ruling:

  • Continue to feel the impact of higher property taxes which reduced EBITDA by $2.1 million during the fourth quarter and $8.4 million for the full-year.  While BYD did receive favorable property tax ruling in October, that ruling is now being appealed by the city and BYD must continue to pay taxes at a higher amount until that process is complete.  Expect to reach a resolution by the end of the year.

Cannibalization:

  • Will be lapping the opening of new competitor in the Shreveport market in the June time frame. Beyond that, there really won't be any other cannibalization as a result of new property openings until Lake Charles market. 

2014 capex:

  • Budgeting maintenance capital expenditures to be approximately $125 million on a consolidated basis. This amount includes approximately $15 million at Peninsula and $25 million at Borgata. 
  • In addition to maintenance capital, expect the final phase of the Kansas Star expansion to cost approximately $20 million and be completed in early 2015

2014 non-operating items:

  • Corp expense:  $55m
    • This number is higher than 2013 levels because of several corporate initiatives BYD is undertaking.  Do not expect this level of corporate expense to continue beyond 2014.
  • Total D&A:  $255-260m
    • Boyd:  $130m
    • Peninsula:  $72m
    • Borgata:  $55m
  • Interest expense:  $300m (assumes modest increase in 2014 LIBOR)
  • Deferred rent: $4m
  • Pre-opening expense: $5m
  • Share-based compensation: $16m
  • Shares out: 110m

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more