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A small EBITDA miss but not really relevant. Surpisingly, previously stable Downtown disappointed but how quickly the LV Locals market improves will be the main driver going forward.

 

 

BYD missed our EBITDA estimate by only $1.4 million but we were below the Street.  The big negative was Downtown Las Vegas which had been holding in nicely, but missed our Q1 estimate badly with EBITDA down 37%.  The positives were cash flow and debt paydown.  Going forward, all eyes are on the LV Locals market which is clearly getting less bad, although down 11% on a -32% comp is not exactly table pounding, but at least it wasn't a miss from expectations. 

 

 

"NOTES"

  

"We continue to be encouraged by improving trends in our business, which clearly reflect the signs of an emerging recovery. Our Las Vegas Locals market reported the best year-over-year comparison in nearly two years, and business levels are returning to normal seasonal patterns in this region. Given the positive developments in our business, combined with continued improvement in the national economy, we expect to generate year-over-year growth during the second half of 2010."

- Keith Smith, President and Chief Executive Officer of Boyd Gaming

HIGHLIGHTS FROM THE RELEASE

  • LV Locals: "While conditions remain challenging in the region, the fundamentals of our business are strengthening, and we saw sequential improvement in this region for the second straight quarter."
  • Downtown: "Results reflect lower ticket pricing and higher fuel costs associated with our Hawaiian charter operation, as well as lower Downtown visitor volumes."
  • Midwest & South: "Regional results were impacted by declines at our Louisiana properties as the market continues to normalize, partially offset by Adjusted EBITDA growth in Illinois and Indiana."
  • Borgata: "The decline was principally due to reductions in visitation caused by severe winter weather, which impacted the property repeatedly throughout the first quarter."

 

CONFERENCE CALL

  • Visitor volume has increased over the last 5-6 months in the locals Las Vegas markets. They expect that convention business will improve in the second half of the year
  • Will aggressively pursue M&A
    • Stations - continue to be interested in acquiring them
    • Also looking for additional acquisition opportunities that can create shareholder value
  • Expect a similar y-o-y decrease in EBITDA in 2Q2010 and a return to EBITDA growth in the 2H2010 in the Las Vegas locals market
  • Downtown was impacted by a combination of lower ticket prices and higher fuel prices which accounted for 1/3 of the decline.  Rest of it was due to Hawaiian economy and state gaming tax introduced in Hawaii
  • Level of growth they saw in LA during 08 & 09 wasn't sustainable and expect the declining revenues to continue through 3Q2010
  • Excluding weather, they think that Borgata's EBITDA would have been flat y-o-y
  • Believe they will return to overall growth in 2H2010
    • On an aggregate basis, not at every property
    • Apples to apples basis - not including Borgata
    • Yes, they mean EBITDA growth too
  • I don't understand why they are pumping up Borgata if they want to buy it on the cheap? hmmmm
  • Starting next quarter they will fully consolidate all of Borgata's revenues and expenses, and all BS items
    • Minority interest will also increase obviously
  • 6.5x was their leverage ratio at the end of the Q
  • Corporate expense this Q is a good run rate for the rest of the year
  • Interest expense: $125MM for the year plus Borgata's interest expense of $5-6MM per year.  Next year Borgata's interest expense will be impacted by refinancing of that facility
  • Maintenance: 55-60MM and Borgata's is 15-20MM for the year

 

Q&A

  • Weather impact was really only at Borgata $5-6MM
  • Florida - now that the tax rate has been lowered they are re-evaluating that market but still watching how it develops
  • Stations assets - at this point they will wait and see what the judges ruling will be before they move forward
  • Would they consider selling their interest in Borgata's along with MGM?
    • Will see what happens. Right now they will just wait and see and don't have any interest currently in selling their stake but will wait and see
  • Las Vegas locals market- what does it mean that they are seeing normalizing trends?
    • Historically the 1Q has been the best quarter for the market and for the first time in a while 1Q was better then 4Q - and hence the seasonality comment
    • Spend is still obviously down but is seeing an uptick in visitation - the first time in 2 years
  • Confident that Borgata will be able to compete going forward in the face of supply in PA
  • Lower visitor volumes Downtown?
    • Number of commercial airline visitors was definitely down y-o-y
    • In addition saw lower levels of traffic from street levels
    • Not driven by less local visitors
  • Business as usual vs. just increasing promotional environment at Borgata to deal with new supply and table games. Borgata reallocated costs across the property when slots came to PA initially.
  • New Jersey doesn't need new capacity to stimulate demand
  • They just have a simple right of first refusal for MGM's stake in Borgata... lol no they can't force a potential buyer to pay the same for BYD's stake
  • Opening City Center is impacting their Downtown properties as well as the historically low rates that are driving people to try to upgrade
    • Cooler crowd