Good day, and welcome to the Boyd Gaming Third Quarter 2019 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Josh Hirsberg, Executive VP and Chief Financial Officer. Please go ahead, sir..

Thank you, Joe. Good afternoon, everyone, and welcome to our third quarter earnings conference call. Joining me on the call this afternoon is Keith Smith, our President and Chief Executive Officer. Our comments today will include statements that are forward-looking statements within the Private Securities Litigation Reform Act.

All forward-looking statements in our comments are as of today's date, and we undertake no obligation to update or revise the forward-looking statements. Actual results may differ materially from those projected in any forward-looking statement.

There are certain risks and uncertainties, including those disclosed in our filings with the SEC that may impact our results. During our call today, we will make reference to non-GAAP financial measures.

For a complete reconciliation of historical non-GAAP to GAAP financial measures, please refer to our earnings press release and our Form 8-K furnished to the SEC today and both of which are available in the Investors section of our Web site at boydgaming.com.

We do not provide a reconciliation of forward-looking non-GAAP financial measures, due to our inability to project special charges and certain expenses. Finally, today's call is also being webcast live at boydgaming.com, and will be available for replay in the Investor Relations section of our Web site shortly after the completion of this call.

I'd now like to turn the call over to Keith Smith.

Keith?.

Thanks, Josh. Good afternoon, everyone. In the third quarter, our nationwide portfolio continued to generate solid results for our shareholders. On a same-store basis, we achieved our 9th consecutive quarter of EBITDAR growth. This was also our 5th straight year of quarterly margin improvement.

These results were led by our Las Vegas local segment which posted another strong performance achieving its highest third quarter EBITDAR since 2005. In downtown Las Vegas, we set an EBITDAR record for the fourth straight quarter. And in our Midwest and South segment, our five newest properties had another excellent quarter.

On a combined basis, these properties EBITDAR nearly 6%, and operating margins improved over 200 basis points. Across the country, we're continuing to improve our operating performances, while further deleveraging our balance sheet and strengthening our financial foundation.

During the quarter, we reduced total leverage below 5x achieving the top-end of our long-term leverage target. At the same time, we're making great progress enhancing our entertainment offerings through the expansion sports betting across our regional portfolio.

Together with our partners at FanDuel, we opened sports books at our four Boyd Gaming properties in the Midwest, introduced a market leading mobile app in Pennsylvania. As we've seen before, this amenity is successfully driving new business and new customers across our regional properties.

In all, it was a quarter of notable achievements by our leadership teams across the country. Let's walk through each of their accomplishments in a bit more detail. Starting with our Nevada operations; our Las Vegas locals business delivered the strongest revenue and EBITDAR growth we've seen so far this year.

Economic strength and growing visitation help drive continued growth in gaming revenues. We also saw double-digit gains in our hotel revenues with strong improvements in room occupancy and rate across the segment.

Thanks to ongoing operational and marketing refinements virtually all of our incremental revenue flowed through to the bottom-line resulting in the 18th consecutive quarter of EBITDAR growth in our local segment. Operating margins in our Las Vegas locals region improved nearly 130 basis points, surpassing 30% for the fourth straight quarter.

Over the last 12 months, our Las Vegas locals operating margin is more than 32% up nearly 600 basis points over the last three years on a same-store basis. Revenue growth and EBITDAR, were broad-based across the local segment. The Orleans posted an all time record third quarter performance with solid gains in both gaming and hotel revenues.

Gold Coast performed well maintaining its strong gains from last year despite significant investments in competitive properties. In North Las Vegas, Aliante set a third quarter EBITDAR record continuing the long-term trend of strong quarterly results at this product.

And we achieved EBITDAR growth of nearly 20% in our Boulder strip operations as we continued to make excellent progress leveraging the combined operation of Sam's Town and Eastside Cannery. By positioning and marketing these neighboring properties as complimentary experiences, we are successfully driving solid growth across both assets.

Throughout the local segment, our operating teams continue to do an excellent job finding ways to drive profitable revenue growth and enhance operating margins. We're also benefiting from a healthy Southern Nevada economy. Long-term population growth continues throughout the Las Vegas Valley.

Southern Nevada is adding jobs in virtually every sector led by strong gains in leisure and hospitality, financial activities and construction with more than $13 billion in major construction projects now underway across the Valley, the outlook for construction employment is particularly bright.

Total unemployment has fallen to 4% and the local labor force is expanding about twice the national average. Average weekly wages are up 2.3% over the last 12 months, while taxable sales have risen more than 7% over the same period.

In terms of visitation to Las Vegas, over the last year, passenger counts in McCarran airport reached an all time high of nearly 51 million passengers up 2.6% over the prior year and convention business is at a near record, 6.6 million over the last 12 months.

Southern Nevada's economy remains on solid ground giving us confidence in the future of our locals business. The picture is equally encouraging in downtown Las Vegas where we achieved our fourth record EBITDAR performance in a row, even in the face of disruption from nearby construction projects.

Our downtown operations are benefiting from the ongoing strength in our Hawaiian customer segments as well as accelerating growth in visitation throughout the downtown market.

The California delivered a particularly strong performance as the property continues to generate excellent returns from its recent renovations with a completely updated room product redesigned casino space and new dining options, the Cal is a more attractive destination than ever before and that is driving strong growth in visitation resulting in record third quarter revenues, EBITDAR and margins at the property.

The Fremont also had a strong performance falling just shy of last year's third quarter EBITDAR record. Visitation of the downtown area has been growing at a strong pace this year in the Fremont central location on Fremont Street makes it a prime beneficiary of this growing pedestrian traffic.

Looking ahead, new investments in downtown Las Vegas give us continued optimism for the future. A $30 million upgrade of the Fremont Street experience video canopy remains on track for completion by New Year's Eve.

Once complete, this upgrade will significantly enhance and re-energize the Fremont Street experience giving Las Vegas tourists and residents a compelling new reason to visit downtown Las Vegas. At the same time, much needed hotel inventory will soon be coming online.

By the end of next year, two new properties now under development will add more than 1300 hotel rooms to the downtown area. Another two projects are now in the planning stages accounting for another 700 rooms.

In all, more than 2000 rooms could be added in downtown Las Vegas over the next two years, expanding the areas hotel capacity by nearly 30% and providing the entire market with a substantial lift in visitation. The outlook is bright for downtown Las Vegas and we are well positioned to continue participating in this market's growth.

Moving outside of Nevada, we continue to deliver strong results at our newly acquired properties in the Midwest and South segment. On a combined basis, these new properties achieved EBITDAR growth nearly 6% and improved operating margins by more than 200 basis points.

Once again, proving our ability to significantly enhance and improve the performance of newly acquired assets. At Valley Forge near Philadelphia, we continue to produce exceptional results with an all time record, quarterly EBITDAR and margin.

We have made great progress for finding and expanding the operations of Valley Forge over the last year, realizing the significant potential and made this asset an attractive acquisition opportunity for us. To the Western Missouri, the two Ameristar properties delivered solid results in margin improvement.

And in Ohio, Belterra Park had another strong performance setting a third quarter EBITDAR record, as the property continues to implement new efficiencies and expand margins. Moving to our same-store regional operations.

The shortfall in EBITDAR was attributable to a pair of name storms that made landfall on the Gulf Coast over the summer, severely impacting our Southern operations. In mid-July, Hurricane Barry forced the closure of three of our Louisiana properties over a weekend, Treasure Chest, Evangeline Downs and Amelia Belt.

And while Delta Downs in the IP remained open, both properties were significantly impacted by customer cancellations ahead of the storm. Six weeks later, tropical storm Imelda caused flooding throughout the Southeast Texas and Southwest Louisiana severely impacting visitation to Delta Downs.

The impact of visitation has persisted into October as flood damaged the main highway out of Houston appears to be deterring some Texas residents from making trips to Southwest Louisiana. Absent the impact from these storms our same-store results would have been slightly ahead of last year's strong performance.

Across both our regional and Nevada markets, conditions remain healthy and our consumers continue to visit and spend at level similar to what we have experienced all year long. At the same, we continue to make good progress executing companywide initiatives that will position us for future growth.

For example, we further expanded the reach of our nationwide player loyalty program in the third quarter, fully integrating the Ameristar and Belterra properties into B Connected Network.

This expansion will allow us to more effectively drive business between these four properties and the rest of our nationwide portfolio, while further enhancing the competitiveness and appeal of the Ameristar and Belterra properties.

We're also making good progress implementing new marketing and analytical capabilities throughout our operations, supplying our marketing and operations teams with powerful new tools to continue driving profitable revenue growth and margin improvement.

And through our growing partnership with the FanDuel group, we are enhancing our properties and expanding our customer base through the addition of sports betting amenities across our regional operations. In late July, we launched our first mobile sports betting partnership, introducing the FanDuel betting app in the state of Pennsylvania.

A little over a month later, we opened FanDuel sports books and four board gaming properties in the Midwest, Blue Chip, Diamond Jo Dubuque, Diamond Jo Worth and Belterra resort. While it is still early, we are pleased with what we've seen so far.

In Pennsylvania, the FanDuel mobile app has already taken a commanding market lead accounting for just over half the state sports betting market in September. And in Iowa and Indiana our new sports books are helping expand our customer base, driving an influx of new customers and increasing visitor traffic at each of these properties.

Similar to what we've previously seen in Pennsylvania and Mississippi. And there is more to come just hours ago, FanDuel launched its mobile betting app in the state of Indiana. Based on their performance in the States like Pennsylvania, New Jersey, we are quite optimistic about the prospects in Indiana.

While we continue to enhance our existing properties, we're also working to further expand our nationwide presence as we continue making progress on the Wilton Rancheria project near Sacramento, California. Earlier this month, the Wilton tribe celebrated a significant milestone when a federal court dismissed a key legal challenge to this project.

We share the tribe's excitement for the potential of this resort as the closest game and resort to both Sacramento in the South Bay area. The Wilton resort will be ideally positioned to capture a significant share of the Northern California gaming market.

We are confident it will allow the Wilson tribe to finally achieve its vision of self sufficiency and it will represent a significant new growth opportunity for our company in the coming years. So, in conclusion, the third quarter was another quarter of accomplishments for our company.

Thanks to the skill of our operating teams and the ongoing strength of our consumer, our nationwide portfolio is performing well. While we experienced some challenges with weather in the South, we continued to grow same-store revenues, EBITDAR and margins, once again demonstrating the strategic value of geographic diversification.

The augmented same-store growth with strong performances at our five newest properties, while continued EBITDAR gains and margin improvement across these new assets. Our portfolio is generating substantial free cash flow and we are committed to taking a disciplined and balanced approach in how we allocate that capital for our shareholders.

A core component of this approach is achieving our long-term leverage target of 4x to 5x EBITDA and we are making excellent progress in this regard. During the third quarter, we successfully reduced total leverage below 5x and we are focused on reducing leverage below the mid-point of this target range next year.

Achieving and maintaining our long-term leverage target is a priority and we will continue to balance debt repayment with selective reinvestments in our core business and returning capital to shareholders. We will remain disciplined and prudent in the allocation of our capital.

While we believe there are attractive future opportunities to invest in our existing business, we will do so only when these investments offer an appropriate return.

Our company is in an excellent position for the future and we remain committed to leveraging our free cash flow to execute a well-balanced approach to creating long-term shareholder value. Thank you for your time today. I'll now turn the call over to Josh..

Thanks Keith. Our operating teams delivered another solid performance during the third quarter continuing to grow same-store revenue, EBITDAR and margins despite weather impacts to our Southern properties. And our recent acquisitions are performing well with the integration of these properties on track.

In terms of items from the quarter, leverage at quarter end was 4.8x debt to EBITDA and leased adjusted leverage was 5.2x. During the quarter, we reduced debt by $104 million and year-to-date by $180 million. Capital expenditures during the quarter were $41 million bringing year-to-date investment to approximately $167 million.

Corporate expense was lower in the third quarter driven by the timing of certain expenses. We expect corporate expense for full year 2019 to be approximately $85 million. Through the first nine months of this year, we have paid $21 million in dividends and repurchased $28 million in shares at an average price of $25.81 per share.

We did not purchase a meaningful number of shares during the third quarter. In terms of our master lease rent coverage for the assets governed by the lease for the LTM period was 1.9x. As Keith mentioned, we are focused on reducing leverage to below the midpoint of our target range of 4x to 5x EBITDA. We expect to reach this level next year.

Currently, we are focusing our free cash flow and deleveraging our balance sheet. Once we achieve our leverage goals, we'll use our free cash flow to pursue the highest returning investments, whether those projects reinvesting in our business, or returning capital to shareholders. Now, turning our attention to the guidance.

As noted in our release, we are reaffirming our full year EBITDAR guidance of $885 million to $910 million. Expectations for the year should take into consideration the third quarter weather impact of several million dollars. With that, Chuck, that concludes our remarks. We're now ready to take any questions from the audience..

We will now begin the question-and-answer session today. [Operator Instructions] Our first question will come from Joe Greff with JPMorgan. Please go ahead..

Good afternoon guys. My first set of questions relate to your performance in the Las Vegas locals market. Given where your revenue growth and flow through performances, were in the quarter, I'm presuming you're going to tell us that, that the market is fairly rational. The question isn't that exactly.

But, can you talk about what you see as a sustainable top-line growth rate in the locals market, given the macro factors that you highlighted? And then, the one thing that stood out to us obviously was the flow through performance in the 3Q, is that something that you think is sustainable given some of the marketing refinements that you've made in that segment? And then, my last question related to the locals market is, at the end of September, you're competitor across the street from you guys at Gold Coast, obviously invested in some Asian product offerings.

Can you talk about the impacts that you've seen, I guess more recently, in this month? Thank you..

So, maybe starting with your last question, in terms of the competition across the street, they've been open for going on six months, any impact that I think we were generally going to feel, we've already felt. And as we talked about in our prepared remarks, the third quarter at the Gold Coast was a good quarter.

We had picked up significant gains last year when they were closed and we were able to maintain those gains and we haven't seen any significant customer defections so to speak. And opening a new Asian restaurant isn't going to, I think have a significant impact on us. So, nothing really to report there.

And in your prior assumption of the market being rational, I think is generally correct outside of that competitor across from the Gold Coast who continues to be have an elevated level of promotion coming out of that property, but the rest of the market has returned to some degree in normalcy. You're right.

We had great flow through during the quarter, I think that's just a function of the team's continued focus on efficiencies and leveraging up the tools.

We've talked about this over the last couple of years about implementing new tools, new marketing tools, new analytical capabilities, giving the team more things to work with and just doing an overall better job, focusing our revenue growth on profitable customers, not just driving revenue growth.

And so, I'm not going to kind of go out and make a prediction on future revenue growth, but I think we're very pleased with the quarter results. We're very pleased with the Las Vegas economy and the metrics that we're seeing.

And there's nothing that we're seeing in early October that would change our view on the performance that we've seen this quarter -- this past quarter..

Great. Thank you.

And then, just a quick follow-up, Josh, at the very end, you slipped in there some sort of impact from weather in the 3Q down South? I was hoping you could be a little bit more specific on maybe quantifying that amount and specifically we were referring to on a revenue or in an EBITDA basis?.

Sure. So, I made a couple of comments to help you with our view of how the year will end up. I think generally we kind of understand where the consensus for the year is and we suggested that you should take into account weather which was several million dollars and several to us means in EBITDA, several means more than a couple, a couple means two.

So, several probably means $3 million or $4 million just walking you through the math there, Joe. And then, just a reference, where we think corporate expense will end up as well.

So short answer to your questions, we think weather was about $3 million to $4 million of EBITDA and that was an impact that we think should be taken in consideration for the year because we just really don't have the time to make it back up..

Great. Thank you so much..

Yes..

Our next question will come from Felicia Hendrix with Barclays. Please go ahead..

Hi. Thanks a lot. Just switching gears for a minute. And this is for both Keith and Josh, because I think you both may look at this from different angles.

But just wondering, given the recent asset sales by MGM, I'm wondering if you sense any change in the industry among potential sellers of assets? In other words, do you sense or anticipate M&A getting more expensive and I know those were strip assets and the Bellagio -- is the Bellagio, but everything gets calibrated from a certain point.

So, I'm just wondering if you anticipate those new comps having an impact for the industry overall.

And along those lines, if you think you could get higher multiples for your assets, particularly if there are certain REITs looking to diversify, does that change your view on your current real estate portfolio?.

This is Josh. Felicia. I think from our perspective, we've been pretty transparent on our current views on owning real estate. I think from our perspective, the MGM transaction, especially as it relates to Bellagio reflects Bellagio in terms of the quality of asset that it is.

And not only the quality of assets it is, but also being on the Las Vegas strip. So, kind of short answer to the question is, it doesn't really change our view.

In fact, I would say that, given where we are in the cycle, we are more cautious about incurring leverage, whether it be real kind of traditional leverage or leverage associated with leases that we think ultimately could impact the business going forward in the event there were a slowdown of any sort.

Unless you want to add anything to that?.

Felicia, this is Keith.

I think Josh said it, well, nothing has really changed our views and it's certainly possible that other sellers will look at the prices that were paid for the assets have traded recently and have higher expectations, but doesn't really impact us, doesn't impact our view on owning our own real estate and the strategic value within presents to continue to own it..

Okay. That's helpful. And Josh, just getting back to your guidance and taking into consideration the weather impact in the quarter. And you had said, think about it this way, that you can't make it up, you kind of didn't change your range.

So, what gets you to that high-end of the range?.

Yes. Really, I think it would be difficult to get to the high-end of the range. I think the context that we were trying to provide folks is that when we provided guidance at the beginning of the year, it was really to try to focus people on the direction of where we thought the business was headed.

And now that we have a little bit better information around, obviously, the more recent impact, we feel like folks who kind of take where consensus was and adjusted for the weather impact, which was $3 million to $4 million to make sure that they get corporate expense right.

But, the underlying business, still feels pretty good from a consumer perspective and from an overall health and that is a comment about really all of our segments of our business..

Okay. Helpful. Thank you..

Sure..

The next question will come from David Katz with Jefferies. Please go ahead..

Hi. Afternoon, gentlemen.

I wanted to just look forward a little bit and I know you may not be ready to start guiding in the out years, but if you can just talk qualitatively about issues we should be contemplating for CapEx as we think about your cash generation going into '20 and beyond there? What should we be contemplating?.

Yes. So, David, first a caveat, that we are just now going through our budgeting process. So, we will give guidance for CapEx and other things once we announce our fourth quarter results.

But I would generally think of us as a company that pretty much, we've had CapEx of around, we guided about 180 this year, plus or minus, I think with the new assets that we've required. The 180 to 200 is what people should probably be thinking about for us for 2020.

Again, we have to kind of get through our process, but that's kind of in the neighborhood. And I think that's what -- that's it. To the extent that, we achieve our leverage targets and then we have an opportunity to evaluate other projects relative to returning capital to shareholders, then we'll have to find projects that justify those investments.

Otherwise, we'll be returning capital in the form of dividends or share repurchases. But, we haven't really truly defined or identified opportunities to make those kinds of investments until we get closer to our leverage target..

So, I want to make sure I understood, 180 to 200 neighborhood for this year is as good a benchmark as any going forward just based on what we have so far or are….

Yes. That's fine..

Okay. I just wanted to be clear about that. And then, I wanted to ask about, you may offered some commentary about the sports betting.

How realistic, is it for us, to think about within the next, 12 months, 24 months, what period of time before we can be sitting down and actually modeling some sports betting, revenues and profits that'll move the needle for Boyd..

Well, I think when it comes to that, it's probably the late next year. We're still in the very early innings, no pun intended of this whole thing. And as it rolls out and so waiting for it to settle in and seeing the financial impact to the company. It'll take you another year..

Got it. Okay. That's it for me. Thank you..

Thanks David..

The next question will come from Carlo Santarelli of Deutsche Bank. Please go ahead..

Hey guys. Good afternoon. I'm just, if you guys could just kind of discuss a little bit the thought process as you guys have kind of gone from being relatively steady in terms of share repurchases activity throughout much of 2018.

And then, obviously into the first quarter of this year and kind of the decision factors that went into pivoting more towards a debt reduction not that there's any objection to that on my end.

But, just kind of what you're seeing, if there is anything you're seeing that's leading you to be, what most would consider a little bit more defensive of the balance sheet or what some of the other motivating factors are?.

I'll take the first pass and then Keith, if you want to add anything. I don't think it is definitely not anything that we're seeing in our business or anything that we're actually seeing in the economies that we operate in.

I think we feel like where we are in the cycle being alone in a cycle, we don't know, when it will end, but we feel at some point there will be an end to it. And therefore, we think it's prudent to be lower levered than where we are today.

And it's strictly that we recognize that kind of using free cash flow to de-leverage business is not the best economic decision, but we think it's the best decision from the perspective of positioning the company for a slowdown that will happen at some point in the future and getting our house in order with respect to that.

And then moving on to kind of the next chapter, which as we've talked about before and other uses of our free cash flow..

Yes, look. I think it's important to hear what Josh said, which is we're not seeing any trends in the business that give us any reason to pause or have a second thought as to where the business is headed. The results, the trends in early October, or what we've seen all year long. And so, we feel very good about the business.

We've talked about having a leveraged level in the 4x to 5x times range for a while now we just are now kind of sub-five and so we're in that range. So instead of may be being mid fours, we feel like we'll be a little bit below mid fours. It's not a significant change. Maybe it's a subtle change to say we'll be below 4.5.

But as you said, we're late in a very, very long economic cycle. And we just want to make sure we're well positioned to continue to produce strong results going forward and feel like having a little lower leverage is probably prudent. That's all..

Great. Thank you, guys..

I was going to just add one other comment that might help folks understand. I think assuming the environment stays as it is today, I think being, achieving that level of leverage is a level we're comfortable with. But, once we achieve that level, I think we will evaluate where the world is and economy is in our businesses.

But I think all else being equal and reflective of where we are today kind of being below four and a half times is, is where the company wants to be and where we want to run our business..

Great. And then Josh, one thing that could help to a small degree, but obviously it's something you guys would anticipate over time would be some of the funding that you've already provided for will. And if I'm not mistaken, that number, you know, presumably by the time things are up and running is kind of in the $80 million to $90 million range.

Do you have any sense of when it's reasonable to think you recoup that?.

Yes. I don't think we can provide good color on that yet until we get a little bit further in terms of understanding the financing and the financing environment that will approach the market with, but, but that is an opportunity for us. You're right..

Okay, great. And then, just one if I could, just some housekeeping. Obviously, within the guidance, I think consensus coming into tonight was somewhere in the range of 897. Obviously, you guys guided eight 885 to 910.

If we think about that 897 and then obviously adjust for the 3Q result and the weather impact, that is kind of the number that you're saying is, is in the ballpark of where people's heads should be, correct? Like i.e., consensus prior to less the hurricane and storm impacts that you guys experienced in the quarter is kind of the ballpark..

That's right. I think you're reading what we're saying correctly adjust for the weather, which is $3 million to $4 million, take in consideration corporate expense and whatever other changes that you have, needed a model in from Q3 and you should be close to where we view a reasonable number for us for full year..

All right. Thank you very much guys..

Thank you..

The next question will come from Barry Jonas with SunTrust. Please go ahead..

Hey, thanks guys. And just following up on that point, I think previously we were talking corporate 88 to 90. Now you're thinking 85, just curious if that's timing or the reduction is really more part of your margin enhancement initiatives..

Yes. So, I think the 85 number is really a reflection of trying to manage the expenses down and obviously we'll continue to do that. It's not kind of the 85 number, we don't view going back up to 89 or 90.

And, so we feel like we've got kind of some good controls on corporate expense and we'll continue to look for ways to kind of reduce it further over time..

Understood. Then just touching on the locals market, very solid flow through solid results.

Just curious, if you have any sense about market share for the quarter, I know historically you've sort of said at times you'll underperform the market, but wondering if, that's changing any early color where maybe your market share might have been?.

So, I think if you look at most the last three months, the numbers for Nevada are only out through August. If you look at those numbers on a last three months basis or let's say on a last 12 months basis, we're generally maintaining markings from our market share, both on a 3-month to 12-month basis, maybe growing at a tad.

But think of it as maintaining our market share with a growing market. So, I think we're pretty pleased with how we're performing..

Got it.

And last one for me, how is Boyd going to be impacted by these Flutter, Stars group merger?.

So, look, at the end of the day, I think positive for Boyd in terms of -- we always viewed having the FanDuel brand owned by Flutter's, having a very strong partnership there and having a larger, stronger organization there. I think it's just all upside to Boyd, gives us access to just more capabilities and more brands and it was more of everything.

So, I think it's not, it's a big positive and I congratulate the Flutter team on getting that deal done and it's all upside for us..

Great. Thanks a lot guys..

Our next question will come from Steven Wieczynsk with Stifel. Please go ahead..

Hey, good afternoon guys.

So, Josh or Keith, I guess, as we look into 2020, and I'm not going to try to sit here and can any guidance said to you guys, but, as you look at your asset portfolio, are there any markets that, we might need to watch that could be impacted because of whether it's new competition or competitors you think could potentially ramp up, promotional spending because of property improvements or anything like that?.

In terms of 2020, not really. Not that we can think of..

Okay, perfect.

And then, Keith, I know in terms of a normal weather day, you talked about some of your key gaming metrics are pretty much where you guys would expect them to be, whether that's unrated player visitation or length of stay, anything like that, but have any of those metrics actually improved or gotten a little bit stronger from where were six months ago? And then, maybe also talk about, where B connected as at this point in terms of how signups kind of ramped over the past couple of months as well..

Yes. So, I didn't have the data on B connected signups, so I can't speak to that. As I said in my prepared remarks that, we now have B connected rolled out in all of our properties with the exception of Valley Forge. And so, we're pleased with having -- getting to that point kind of within a year after owning those assets.

And that just allows us to do a better job of marketing and cross-marketing the entire portfolio. Look in terms of quarterly trends, I don't know that I have a lot of good data in front of me be able to speak to that. In Las Vegas you're talking about a summer quarter in, so the seasonality that business takes hold.

And so, I'm looking, I don't really have anything I can speak to regarding that question, so I'm not sure I can be helpful right now..

Okay. Got you. Thanks guys. Appreciate it..

Sure. Thanks, Steve..

The next question will come from Harry Curtis with Instinet. Please go ahead..

Good evening, guys. Quick follow-up on your comments on leverage.

I guess my question is, once you achieve 4x to 4.5x, is there a reasonable probability that if that happens in the next 12 months and we're 12 months closer to a recession, that you decide to move that to sub-4? I guess that it all goes back to my essential question is, if 4x to 4.5x is okay, then why not 3x particularly given the influence of logarithmic traders on any balance sheet that is still leveraged it even at 4x..

Yes. It's a good question Harry. I think we struggle with it, because ultimately, we feel the right level for the company is kind of between that 4x and 4.5x level given where the economy is today.

I alluded to that even once we achieve that level, we'll have to evaluate where the world is and if it is where it is today, then I think we're comfortable being there and continuing to run the business with capital investment potentially and share repurchases and dividends.

I think to the extent that we're in a place where the world, isn't as healthy as it is today, then we'll have to reevaluate it.

But I think we have a real hard time seeing the justification for leverage, let's say 3.5x or 3x, it just seems kind of, I'm generally a conservative person, but I think that that kind of takes it to a little bit of an extreme, but, I think that's all we can tell you is how we're thinking about it today.

And hopefully that gives folks some context around it..

Okay. That's fair enough. And you do have a pretty substantial bond that becomes callable in May.

What do you think is the most likely way to deal with that? Do you think you refinance most of that or are you going to take some of that down and I'm just trying to get a sense of how much your interest savings could come down, once that gets refinanced?.

Yes. So, look, I think, first of all, our nearest maturity is 2021 with our credit facility and we have plenty of availability under that credit facility. We have over $600 million. So, we have plenty of access to capital as a company.

I think in terms of the 2023 maturity and it's callable today and its [dips] [ph] down again, I think in May, to an attractive level. So, we will evaluate that.

We evaluate it quite honestly every day and I would expect us to refinance it once we got a -- received certain regulatory approvals and got all approvals in place and assuming the market was kind of continue to be favorable for us. So, I would expect to refinance it any time from now until that kind of step down as long as the markets cooperate..

Last question.

The CapEx for 2020, how much of that is maintenance as opposed to investment in a project that is actually going to be ROIC positive? What I'm trying to get a sense of in 2020 is what are your biggest growth engine EBITDA growth engines?.

Yes. So, I think the capital that we kind of put in the $180 million to $200 million numbers, we generally think of it as kind of small road capital that's kind of not worth calling out or segregating. And then largely maintenance capital.

To the extent we got to the point where as we mentioned before, we achieve our leverage targets, then I think you could potentially, again, assuming they can, the project would generate an adequate return. You could see us, announce modestly larger projects.

But, we have to get to a level and they have to be able to generate a return that's competitive with the returning capital shareholders and we would have to go through that process.

So, the way we think about growing going forward, quite honestly, is organic growth, operating our businesses more efficiently because we still believe we have opportunities to do that as well as continuing to integrate the acquisitions that we made towards the end of ‘18 that still have opportunities for us going into 2020.

And then, of course, sports betting and things of that nature. But generally, I think it is continuing to operate our existing business more efficiently over time is really what we're most focused on..

So, I'm just wondering if your property managers are agitate -- I mean, they're always agitating for money. But, are there projects that you really are close to -- maybe getting a, a shovel in the ground that have higher returns that like adding hotel rooms, that could be, quite accretive within the next say 18 months..

Yes. This is Keith. Look, with the large portfolio, we're always kind of analyzing where we think, organic growth could come from and what those type of expansions may look like, what those dollars may look like.

We haven't prioritized them yet and haven't really done a thorough ROI analysis so that we can rank them and make sure we do the most profitable projects first. And so, it's just kind of a premature conversation for us..

Okay. Very good. Always trying to think ahead. Thanks very much guys..

Thanks, Harry. The next question will come from Thomas Allen with Morgan Stanley. Please go ahead..

Hey, good afternoon. So, two questions for me. The first, Keith in your prepared remarks you highlighted how the locals market revenue and EBITDAR growth accelerated in a quarter versus your prior quarters. Just anything driving that.

And should we expect anything, are you expecting continued to accelerate like this level of acceleration and growth? And second question, on downtown, was the circuit disruption worse or better than feared and any kind of thoughts on the outlook there? Thank you..

Yes. The downtown, I think the circuit disruption, like it's always tough to know if it's better or worse than your predicted. Certainly not better than we predicted. I'm not sure it's worse either.

It is construction, disruption, I mean the roads are very narrow and clogged and the team did a great job, as we continue to produce record results down there, because we did produce record results, it's hard to say that the disruption was terrible, but there's certainly disruption. The roads are narrow. It's hard to get to the California.

It's very hard to get to Main Street station. And so, the walk traffic we used to get is pretty much eliminated. But the teams did a great job. So, I guess the short answer is probably what we expected. With respect to the acceleration in growth in the locals market, I think it's a function of just the management teams.

The leadership team is doing a better job. I think some of the tools we've put in place over the last year beginning to take hold, seeing good productivity out of the high-end of the database. We saw a good visitation in the locals market higher than we've seen in Q1 and Q2 and good ADT.

So, yes, I think it just -- it was just a good performance by the leadership teams. There's nothing in particular that I can call out that's special during the quarter..

Thanks.

What's ADT?.

Average daily theoretical..

Okay, perfect. Thank you. That's all I got..

Thanks Thomas..

Our next question will come from Shaun Kelley with Bank of America. Please go ahead..

Hi, good afternoon. Just most of my questions have been asked and answered. Just two small ones. First of all, obviously the early results at a sports betting out of Pennsylvania were really encouraging for FanDuel in particular.

Keith, I think in the past you've talked a lot about sort of the traffic driving element of what sports betting can mean to Boyd's properties.

But, now we're starting to see some fairly strong results, at least in places that have an internet presence or an online presence Can you remind us or give us some sense of how the market access agreement works? Do you guys get some sort of revenue share in, the overall play level that occurs, kind of across that market or sort of baseline economics.

I appreciate it, probably, there's some contract specifics you don't want to get into, but just directionally help us understand a little bit better how Boyd participates here..

Yes. So, from an online perspective, and I will say that the deals in the different States are, can be different for a variety of reasons. And so, there's not a standard platform that exists or a standard contract that exists. In PA in particular, we do share in the top-line based on what I'll call a net revenue approach.

So, we do get a piece of that from the online business. And then once again we get -- the different economics for the land-based business in PA. Those economics are different in Indiana and Iowa for the land-based business.

And so, for a variety of reasons, the deals are somewhat different, but we do share in the revenue stream, we share in the success of that business..

Great.

And to be clear, that's both for iGaming and for sports betting correct?.

I was referring specifically to sports betting in my comments, not referring to an online casino product that was specific to sports betting because we haven't launched in PA an online casino product..

Okay. Got it. Is that something you can tell us whether or not as in the offing? I mean, I would assume so..

I cannot divulge where we are at in that process..

Fair enough. The other question is just a technical one. Josh just in the kind of adjustments that you have to get kind of your bridge back to adjusted earnings or the EBITDA piece.

You have roughly $5 million to sort of just typical pre-opening and other related expenses that numbers come down a lot year-on-year, but just, is that, can you just directionally say, is that merger related expenses or is that related to Wilton or just what, kind of what do you have left because there's not too much going on in the development side right now..

I think about half of it is Wilton related. In the past, it's been larger, and, in the past, I mean over the last year, largely due to the acquisitions that we executed around Valley Forge and the Pinnacle assets. So that's kind of what's running through there..

Got it. So maybe a little bit residual of that and then Wilton for the rest..

Yes. It's interesting. We've done the acquisitions, but there's purchase price accounting and other transaction related expenses that come in later kind of even within the last year or within the year of the transaction, they kind of still hit that line item to kind of clean it up a little bit and then then it's done.

And then, essentially all you have in there is any kind of typical recurring small write downs at a property or something that are not meaningful. But the bigger item will definitely be the Wilton project..

Okay, great. That's it for you guys. Thank you very much..

Thanks..

The next question will come from Chad Beynon with Macquarie. Please go ahead..

Hi. Good afternoon. Thanks for taking my question. A number of companies that we speak to have pointed out the wage inflation growth sounds like it's more impactful on the coast and we can see this in the BLS data, but wanted to ask is, with respect to your Midwest and South segment.

Absent floods for the quarter, you said that the business, was roughly flat. Is wage inflation low enough in that market or in those markets that if you're seeing essentially flat revenue, you won't have kind of negative flow through in the fourth quarter and in 2020 just trying to get a sense of where expenses are? Thanks..

Yes. No, I think that's probably a fair analysis. Well, there's limited pockets of wage inflation. There's nothing that's significantly impacting the business. Frankly, the bigger issue we have is simply finding enough employees to fill all the openings that we have at each and every one of our properties with extremely low unemployment.

It's not a wage issue, it's a body issue, trying to find people to fill those, fill those jobs is the bigger issue for us. And so, yes, it's not a concern..

Got you. Okay. Thanks. And then, in Vegas, everyone's pretty excited about the 2020, convention calendar with ConAg, the NFL draft. You obviously have a Legionnaire opening up, some of the more stripper operators have talked about RevPAR predictions.

With your 2000 rooms at Orleans and you guys benefiting in a quarter like this, could you see a meaningful up tick in 2020, if the tourism demand is as strong as some projected to be? Or is it just not that big of a piece to kind of move the needle at that property? Thanks..

Well, certainly, if the strip fills up and is able to leverage their rates, we will do better at the Orleans and frankly, at the Gold Coast, which is probably the same distance off of the strip, maybe actually a little closer to the strip than the Orleans.

And so, you've got 700 rooms at the Gold Coast and with 1900 hotel rooms at the Orleans with some great convention space. We actually just expanded the convention space there a little bit. So, yes, if, there's a robust convention calendar and the strip goes up, we will see the benefit of that at the Orleans and to a lesser extent at the Gold Coast..

Thank you very much..

The next question will come from Joe Stauff with Susquehanna. Please go ahead..

Thank you. Most of my questions have been answered obviously, but I just, you had mentioned in your comments basically that some of the floods in particular were preventing some of Texas traffic from going to your casinos.

Do you have a line of sight on maybe when that could clear up? Is that a function in nature or is that, like a army Corps of engineers? What's the right way to think about that?.

So, specifically the issue is outside of the Houston, which is, on I10 is it feeds into Louisiana feeds in the Lake Charles market. So, it impacts specifically Delta downs. There is a bridge there, four lanes each way, so a total of eight lanes. I think two separate bridges. One of those bridges was hit by a barge that got broke loose.

They have closed that one bridge and so, the eight lanes of traffic are reduced to four lanes of traffic across one bridge. You can assume for yourself kind of the impact of reducing eight lanes of a very busy highway to four lanes. The best public information that exists is that that will be -- those repairs will be completed end of Q1.

And if you wanted to look it up, it's the San Jacinto bridge outside of Houston..

Okay. Thanks very much..

Our next question will come from John DeCree with Union Gaming. Please go ahead..

Hey guys, thanks for all the color so far. Just one for me, wanted to talk about the revenue picture in the locals in downtown segments, again. I was wondering if you could give us a little bit more color about the composition of that growth.

I think you've mentioned it was broad based in the press release, but if there's any highlights in non-gaming slots or tables where you're maybe seeing a pickup in some of that revenue, anything of notable strength or out performance across those segments?.

Yes. So, John, thanks for the question. Keith may have some a little bit better information than I on this, but generally what we've been able to see is, is a couple of confluence of -- a couple of different factors.

Number one is a strong, just a stronger kind of non-game, because a consumer willing to spend more on non-gaming both in terms of F&B as well as hotel. So, we've got a consumer that's naturally providing some demand in that regard that is helping us drive that aspect of the business.

Secondly, I think we've gotten better and better at how we execute on yielding our hotel rooms, so we're putting in those rooms, whether they be a gaming customer or cash paying customer. And so, our yield management tools and our analytics around that have improved overtime.

And we've seen some pretty good performance in terms of drivers of revenue and EBITDA from in particular the hotel business. And also, kind of as we execute better and better on the non-gaming side away from hotels like in the F&B part of our business.

So, I think it's -- on the one hand it's driven by the demand of the consumer and how they're willing to spend money. And this is -- and then on the other by the capabilities that we are building and enhancing, and I think really, we're seeing it in different, really across our portfolio. It's not one pocket of kind of demand..

Yes. Look, I think as you look at a split between let's say gaming and non-gaming, on the gaming side, remember that our business is mostly driven by slots. That is the lion share of our gaming revenue. So, most of the growth is coming from slots.

Although if you look at percentages year-over-year, the growth in table games and the growth in slots are not that far apart. So, you're seeing good growth in both elements of the business. But from a pure dollar standpoint, it's mostly coming out of slots. I'm not talking specifically about locals.

You look on the non-gaming side, as I said, big, big increases in rooms, occupancy and rates. And we also saw a good pickup in food and beverage, which is driven by more people in the building and obviously more people in the hotel.

As you look downtown, similar comments, were mostly a slot-oriented business and so that's where the lion's share of the growth in gaming revenue came from. But, we also saw good growth out of the rooms in the food side of that business also. So, it's about as probably as much as coverage I have..

That's helpful. I appreciate it. That's all for me. Thank you..

We have time for one more question and that question will come from Ricardo Chinchilla with Deutsche Bank. Please go ahead..

Hey guys, thanks for taking my question.

So, with regards to the proceeds from the Wilton Rancheria, 35 million, how much do you guys anticipate to get after the refinance gets done and how much afterwards, if you could give us like a cadence of the proceeds?.

Yes. I appreciate the question. We just really don't know at this point. It will be depending on, we're just not far enough into the financing to be able to provide color on that.

And so, as we kind of make progress, maybe get a little bit further along, we can provide some color on that as to maybe the cadence of when we would expect to get those funds back.

But right now, we just really don't have any kind of indication of that until we get closer to actually pulling the trigger on the financing, which will probably be some time either later this year or first quarter next year..

Perfect. But the proceeds from the land that you probably will get after that finance and the odd area is the one that is, it's to be defined..

I just don't really, I don't think we really know. I mean we spend about $35 million on the land. I think it was, the rest had been advances to get it to the point of being ready for financing and construction activity.

And so, once we get the financing in place, I assume there's a possibility we could get some of the proceeds out on, when we close on that financing and the rest through the operations of the facility. But I just don't know the breakdown of that mix yet..

Perfect. Thank you so much..

Yes. Thank you..

This concludes our question-and-answer session. I would like to turn the conference back over to Josh Hirsberg for any closing remarks. Please go ahead, sir..

Thank you, Chuck. And we appreciate everyone dialing in today and asking some really good questions. If there is any follow-up, we're available to try to help you answer those questions and give you our perspective. Thanks. And have a good day..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..