Borgata disappointing (in part to 1x online startup expenses) but overall at the top of guidance. 2014 guidance looks in line. Upcoming catalysts include big refi, Borgata property tax resolution (likely favorable and material), and less bad regional gaming revs.
CONF CALL
Core Operations
- Cutting expenses in light of flat revenue environment
- Recent Southern Nevada data points support stronger revenue outlook - job add, house price appreciation...within increased consumer confidence gaming spend should increase
- Penny Lane rolled out to 15 properties with full roll out by end of the summer
- B-Connected rolled out to all markets
- Non-gaming amenities revitalization
- Severe winter weather negatively impacted $10-$12M
- Real Money On Line - Borgata brand capturing 1/3rd of NJ online revenue
- Opportunities to expand land based operations -- looking at Northern California and South Florida
- BS is strong and making progress, delevering and paid down $55M in Q1, estimated will save $80M in interest expense
- $1.1B Federal loss carry forward
- Use FCF to reduce debt
- LT shareholder value - organic, on line, acquisitions. Will consider all opportunities and consider all options seriously.
Operating Results
- Total Property Margins nearly unchanged YoY
- Weather impacted results by $10-12M
Las Vegas Locals
- YoY comps more difficult but strength in destination business and core operations
- 1Q maintained market share with flat reinvestment
- Actively refining non-gaming amenities Gold Coast and Orleans room renovations, Sun Coast rooms later this year; Gold Coast meeting rooms this summer -
Downtown Las Vegas
- Capturing more walk-in traffic from Fremont Street
- Higher yields on Hawaiian business
Midwest/South
- ex weather Q1 2014 would have been closer to Q1 2013
- modest YoY EBITDA growth will occur in 2H14
- B-Connected launched last few weeks in Louisiana, complete portfolio rollout by end of summer
- Also launching Penny Lane
- Kansas Star - phase 2 started = 150 rooms, double room count and $20M in non-gaming space (meeting, banquet space and equestrian facilities)
East
- Borgata operating loss due to 40" of snow
- Philly impacted by 57" of snow vs. 8" in 2013
- $2.5M higher utilities
- $1.5M higher property taxes
On Line Gaming
- lead NJ market since launch, combined market share = 40%
- invested heavily in marketing and advertising - $2M from non-recurring one-time expenses
- enhancing game content options
- net-teller, prepaid service
Financial
- reduced debt by $55M
- available credit of $300M at Boyd, $35M Peninsula, and $20M Borgata
- Boyd secured leverage 4.2x secured vs. 5x covenant
- Total leverage 6.7x vs. 8.5x covenant
- Peninsula 6.3x vs 7x covenant
- Borgata had $114M of covenant EBITDA
- CapEx $18M during Q1 including: $2M Borgata & $6M at Peninsula
- Full year capex: $120M maintenance plus $20M expansion at Kansas Star
Q2 EBITDA Outlook
- Las Vegas Local: in line
- Downtown: in line
- Borgata exceed prior year
- Other US - YoY EBITDA declines similar to Q1 absent negative EBITDA weather impacts
- 3Q anniversary Shreveport and IL VLT competition
Full Year Outlook
- Las Vegas Locals: 2014 EBITDA growth should be similar to EBITDA growth 2013 vs. 2012.
- Downtown: comparable
- Midwest/South/Peninsula: YoY growth in 2H 2014, $9.3m property tax adjustment at Blue Chip from Q4 in 2013 and not 2014
- Borgata: even with 2013 results, not assuming any impact from property tax, but does consider ($3.5M) on line gaming loss in Q1
- Recent trends: less optimistic about top end of guidance, therefore lower top end of guidance of EBITDA from $630M to $620M
Q & A
- Guidance: which segment drove cut to high end - all segments, across all aspects of business, not one specific segment. Expect all segments to do better in Q3 and Q4.
- How balancing investing for long-term vs. near-term earnings - loss in Q1 driven by start-up and launch advertising costs.
- What seeing right now in regional landscape in April, specifically Kansas -- level of revenues at Kansas Star were down less than prior months, permanent casino opened just over one year ago to strong demand and visitation, thus after plateau, this is the reset/steady state operating environment. Kansas Star is ~50% of all GGR in Kansas. Expect uplift from add'l hotel rooms and meeting space.
- Thus far in April - echo market commentary...slow because of tax-filing and Easter weekend. Still looking for business uplift in May and June.
- Midwest/South Segment Q2 declines similar to Q1 ex weather of $6M
- Comps getting easier - what gives you confidence regarding 2H growth - Q3 and Q4 2013 was real degradation beyond normal seasonal slowdown, weakness in lower end consumer in 2013 and not expect add'l and repeat weakness in 2014. While cautious thus far in April, some properties doing better than forecast.
- Las Vegas customer behavior - frequency is down, daily actual is up in Locals Segment and has been for past two years.
- Board emphasis on shareholder value - takes many different forms, takes time to analyze and vet over short term and long term, makes correct for long term
- Borgata tax appeal - no estimate when appeal will run course
