Great Canadian beats EBITDA expectations and blows away margins on better expense control.



"Our third quarter results provide further evidence of how our various expense reduction initiatives have created both a significant and sustainable improvement in the efficiency of our operations.  Our quarterly EBITDA and EBITDA as a percentage of revenues are both very impressive, despite continued revenue challenges.  I’m also pleased by our three major redevelopments, all of which reached their initial phases of completion on-time and on-budget."




  • EBITDA margins should improve even more when the economy begins to recover
  • River Rock's had a difficult hold comparison from 3Q08 (24.8%)
  • Slot handle was particularly weak at Boulevard and View Royal (despite the addition of new slots)
  • Initial Canada Line impact on River Rock appears positive - as seen by the sequentially better results from 2Q09
  • On Nov 19th GC will complete the remaining redevelopment at River Rock and should help revenues (atrium reopening, connecting sky bridge)
  • At View Royal they will increase their marketing so that people will be aware of the redevelopment and the new slot product
  • At Boulevard they will remodel the slot floor
  • Now that most of the cost control measures are complete they are beginning to focus on increasing revenues
  • While expenses will grow when revenues begin to increase they should still experience better flow through which will benefit EBITDA margins



  • Quite confident that a substantial part of their cost reductions are permanent in nature.  Think that the current cost structure is appropriate for the current revenue environment.  If revenues increase then costs will also increase, but margins will increase as well. If revenues get worse, they will look for more cuts
  • Too early to raise the margin guidance range of 29-34%
  • Why is the decline in slot handle worse at Boulevard vs River Rock?
    • Partly from Villa impact, partly from demographics near Boulevard (more "blue collar-ish" and more retirees)
    • River Rock has more high end play, Canada Line helped
  • Stupid question on mix impact from Canada Line
  • Have cost cuts impacted revenues at all?
    • No
  • #1 job next year is focusing on marketing
    • Expect positive ROI on marketing...doesn't everyone?
    • They are not increasing their marketing expenses - just trying to market smarter...glad he clarified, I was getting nervous
  • Excluding River Rock, there has been some drop off in visitation as well as spend per patron.  Hopefully that ongoing product refresh will help
  • Paid down the R/C to $22MM in October, expect that they will continue to delever through 4Q09 and should pay down R/C by Q12010.
  • Once they delever, what will they use cash for?
    • Biggest priority is keeping their eye on the ball and working on the newly opened expansions
    • Nice answer Milt... much better than restarting projects
  • Use of leased slots at Nova Scotia?
    • In BC the BCLC buys all the slots vs. in Nova Scotia they are responsible for slot capex
    • By leased they mean getting some hot participation titles (I guess they aren't familiar with those in Canada)
  • Why is McFadden complaining about deeper cost cuts? It's called guiding conservatively... That's how you get paid - set conservative expectations and beat them
  • Can they hit 40% margins if the revenue environment improves?
    • NC... just do the math....
  • Georgian Downs saw some good results for the first 2-3 weeks and since then has dropped off a little.  I guess we'll have to wait and see
  • Refresh and layout change?
    • River Rock will get some new slots - they haven't had any new product since 2004.  The refresh will take them to 1,000 from 850.  No real disruption
    • At Nova Scotia they increased theatre seating by 35%
  • Historically what has a slot refresh done for them?
    • They haven't done something on this scale before
    • I personally this is a stupid question - it makes your product more competitive and gets rid of the least productive product on your floor. Some of the stuff they are removing does as little as $50/day in win
  • Katz is asking if they are going to look at any distressed opportunities given their strong balance sheet....
    • If it's a great deal they would have to think about it.  Not out there looking to make an acquisition just for the sake of it
    • Haven't seen anything so far, but wouldn't say that the pickings are slim.  Can't name names - because if they signed a confidentiality agreement ... Sounds like they are looking at some stuff - I liked Milt's answer better
  • Until the skywalk is open they won't really know the full benefit of the Canada Line, since today you have to "jaywalk" to get to River Rock.   Marketing department is "working fervorishly" to tap that customer base
  • Maintenance capex is very low - $5MM or so plus $3MM left to spend at Georgian Downs
  • Deferred projects will remain deferred until they see the macro economy stop deteriorating, and while things aren't as bad as they were earlier, things haven't "stabilized" yet.  Likely that the deferred projects will stay deferred in 2010
  • Saw a very clear increase in slot coin in and visitation since the opening of the Canada Line which has been sustained through today

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