Boyd Gaming Corporation

Good afternoon and welcome to the Boyd Gaming first quarter 2020 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Josh Hirschberg, Executive Vice President, Chief Financial Officer. Please go ahead.

Thank you, Grant. Good afternoon, everyone, and welcome to our first quarter conference call. First and most importantly, I hope each of you, your family, and friends are all safe, doing well, and staying healthy. 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 8K, furnished to the SEC today, and both of which are available in the investor section of our website 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. Today's call is also being webcast live at voidgaming.com and will be available for replay in the investor relations section of our website shortly after the completion of this call. Before I turn the call over to Keith, I want to point out that the release we issued today reports our preliminary first quarter results. as our accounting team and external auditors are continuing to complete required impairment reviews. Should their work result in any impairment charges and associated tax implications, you will see that report reported in our 10-Q filing for the first quarter. It is important to note the continuing review for potential impairments will not impact the operational results we are reporting today. So with that, I would like now to turn the call over to Keith Smith.

Keith. Thanks, Josh. Good afternoon, everyone. I hope that everyone's staying safe during these extremely difficult times. It is times like these that remind us what is truly important in life, our health, our families, and our friends. The financial damage of COVID-19 can and will be repaired over time. The same cannot be said of life's loss to this tragedy. The human cost of COVID-19 has been terrible, but it could have been far worse. Over the last six weeks, the freeze in non-essential businesses across the country has allowed our communities to start flattening the curve, saving countless lives. While the mandated closure of our properties was a necessary part of the broader effort to stop COVID-19, the impact to our company, our team members, and our communities has been significant. Before the crisis began in March, our company was on track to report strong first quarter results, opening the year with two consecutive months of solid growth across the country. Prior to the closures, our Las Vegas local segment was well on its way to posting its 20th straight quarter of EBITDA growth, with year-to-date revenue, EBITDA, and margin improvement across our Southern Nevada properties. Our downtown Las Vegas business was poised for another record quarter. And we saw strong performances across our Midwest and South properties with 13 of our 17 properties producing double-digit EBITDA growth through the first two months of the year. During this period, all but one of our regional properties boasted year-over-year growth in both revenue and EBITDA. Then came March, and the COVID-19 outbreak transformed our business and the communities we operate in. In response to state orders aimed at preventing the spread of COVID-19, Void Gaming closed every one of our 29 properties across the country over a six-day period from March 12th through March 18th. In the initial days following these closures, our first priorities were providing support to our team members and our communities. Our properties donated tens of thousands of pounds of food in cities across the country, and we contributed significant quantities of gloves and masks to first responders and hospitals. We also supported our team members across the country, providing a full month of pay and benefits while their properties were closed. At first, these closures were meant to be short-lived, but as the full extent of the crisis became apparent, stay-at-home orders were extended across the country. Today, six weeks after the closures began, all of our properties across the country remain closed to the public, and reopening dates remain uncertain. The results we reported today show the significant impact of these closures on our business. In order to assure our company is able to navigate through this crisis and resume operations in a strong position, we have made some difficult but necessary decisions. Our executive and management teams have taken significant pay cuts, and our board of directors agreed to suspend their compensation. We have halted all non-essential spending. All major capital projects have been suspended, as were our quarterly dividend payments and share repurchase activities. But by far the most difficult decision was placing most of our team members on furlough status in mid-April. This was the hardest choice we've ever made as a company. We care deeply about the well-being of our team members, and we postponed this decision as long as we could. But without any clear visibility on when we would be able to reopen our business, this was a decision we had to make. We recognize the impact these furloughs have on our team members, and we have tried to mitigate this impact by continuing to provide benefits coverage. All furloughed team members who are enrolled in our benefits program will remain covered through June 30th at no cost to the team member. And thanks to the approval of stimulus payments and enhanced unemployment benefits by Congress last month, our team members and our communities will receive much needed support to help them through these difficult times. As of today, we do not know when we will be permitted to resume operations and bring our team members back to work. It is likely that each of our 10 states will reopen on a different timeline, each with their own specific health and safety guidelines. We are currently working with state and local officials across the country to gain a better understanding of when we will be able to reopen and what reopening may look like. And while we do not have clear visibility regarding opening dates, based on the actions we have taken to reduce expenses and strengthen our cash reserves, as well as the work we have done in recent years to strengthen our balance sheet, We are confident we have sufficient liquidity to sustain our company until we can reopen our doors once again. Once the reopening process begins, protecting the health and safety of our team members and customers will be our utmost priority. And the safety protocols we put into place will meet or exceed the standards set forth by local, state, and federal health officials. As we look ahead and prepare for a return to business, We believe we will benefit from a business model that is largely focused on local and regional visitation. Across our nationwide portfolio, the majority of our business comes from local customers. We are not reliant on destination or convention business for success. As a result, as operations resume, we believe our local customer base will position us to lead the recovery of our industry. While these are certainly unprecedented times, we know that they will come to an end and we look forward to the start of the recovery. Before I turn the call over to Josh, I want to take a moment to recognize our team members, who I know have been significantly impacted by this crisis. While our properties may be closed, you are still part of the Boyd team, and we look forward to bringing you back to work as soon as we can. To those team members who have remained on the job throughout these closures, thank you for your hard work in keeping your property safe and secure. Your dedication and efforts will help us reopen quickly when the time comes. To our customers, we look forward to welcoming you back when it is safe to do so. I know that many of you will be looking for entertainment when stay-at-home orders finally end, and we look forward to hosting you again as much as you look forward to visiting us. And finally, we want to recognize the first responders and medical personnel who have been on the front lines of this fight. You have worked countless hours and put your health and well-being at risk to save lives and protect our communities during this pandemic. I know I speak for everyone at this company in thanking you for your incredible service. You're an inspiration to all of us. Thank you for your time. I'll now turn the call over to Josh.

Thanks, Keith. Over the last several years, we have had a focused effort to strengthen our balance sheet through deleveraging and managing the company to achieve increased size, scale, and geographic diversification. Thanks to these efforts, we have been able to respond to this crisis from a strong financial position. As we manage our business through these challenging times, we have taken several steps to ensure we are able to preserve the strength of our company throughout the closure period and during the reopening of our properties. Keith mentioned some of the important decisions we have made thus far. We have aggressively reduced expenses across the enterprise. including making the difficult decision to furlough most of our property and corporate team members in mid-April. Our executive leadership team and the remaining property and corporate management teams have all taken significant salary reductions, and our board has agreed to forego their compensation. In terms of capital expenditures, all major capital projects have been suspended, and we have reduced our expected CapEx spend to approximately $45 million for the remaining nine months of the year. During the first quarter prior to our closures, we repurchased 683,000 shares for a total investment of about $11 million of our stock. Since those repurchases, we have halted our capital return programs and in March suspended both our share repurchase program and our quarterly dividend. As a result of these combined efforts, we have significantly reduced our monthly cash requirements. positioning the company to successfully weather this crisis and be prepared for the resumption of our business. Our current monthly cash requirement is approximately $60 million per month. Our available cash at the end of March was $831 million, including $670 million we drew on our revolving credit facility in March. Based on our current cash requirements, our cash balances provide us sufficient resources during these challenging times. Now that we have reinforced our financial foundation, we have turned our focus on planning for reopening our business, reengaging our team members, and serving our customers and communities. We look forward to providing more details about our reopening plans in the weeks to come. Grant, that concludes our prepared remarks, and we're now ready to take any questions from the participants.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. Our first question will come from Carlos Santorelli with Deutsche Bank. Please go ahead.

Hey, guys. Good afternoon. Good evening. Thank you for the comments and your remarks. Acknowledging, you know, this is a fluid situation in terms of when things will open, how things will open, et cetera. To the best of your abilities at this time, and with respect, Josh, obviously to the fact that you just noted that you would kind of give us some outlines in the next few weeks as you put plans in place, how do you guys foresee, maybe based on your conversations with regulators to date, what social distancing in your properties, on a blanket perspective, obviously each state could be different, could look like, and maybe what some of the steps are that you guys will take to make your properties as efficient as they can be with a likely hard to quantify demand curve as we look out over the next few months and quarters.

Sure, Carl. I'll take a shot at that and see if I can address your question. I think each state will, as you said, handle it differently, but I think most of the conversations are centered around social distancing, limiting whether it's a number of people in restaurants, whether it's every other slot machine or every third slot machine, if you will, whether the number of people at a 21 table or a crafts table. I think you have to think of it as limited capacity or limited access into the building. social distancing at bars and, you know, anywhere else where people gather. And so, you know, we will have, I think initially fewer people in the building. And I say initially, because I think as time goes on and we see where this virus goes and what type of vaccines and other immunizations come forward, you know, that will change. And so how we open this, this properties or these properties will, probably not be how they look in the long term. But there will be restricted access or restricted capacity across the board. In terms of kind of running an efficient business, you know, I reflect back to the crisis in 08. And, you know, in 08 and 09, I think what a lot of people forget is we didn't have a real drop in demand. You know, we had about 90% of the people in the building that we had prior to the crisis in 08, they were spending about half as much money. And so in 08 and 09, we had to re-engineer the business to deal with that. Today, we actually have a closed business and there's nobody in it. So the ability to re-engineer it is much greater and much easier to do and to start to figure out how do you run a business that maybe initially looks like 50 or 60% capacity. with different staff, with different cleaning protocols, you know, and how does all that work. So we will and have worked through much of that and we understand how we will kind of rebuild going forward when we're allowed to reopen and it will look different. But, you know, I stress that we're, I think, all certainly hopeful that, you know, this isn't a permanent situation as much as it is an evolving situation and that as, you know, the world, gets our arms around this COVID-19 issue that we will return to normal, whether that's later this year or into next year.

That's helpful, Keith. Thank you very much. And then, Josh, just one housekeeping item. You said $45 million of maintenance capital expenditures through year-end. I'm assuming that number stays static regardless of when properties open. But also, what was the 1Q spending?

The first quarter spend was about $48 million. Great. Thank you very much.

Sure.

Our next question will come from Joe Greff with J.P. Morgan. Please go ahead.

Good afternoon, guys. Following up on sort of how do you think about opening up type of questions, In markets like the Las Vegas locals in downtown Las Vegas, where you guys have multiple properties, how are you thinking about the phasing of opening properties there? What type of properties do you open first, which later? And kind of what you said before, Keith, about having maybe fewer people in the building and taking into account social distancing measures, does that suggest that because you have sort of a hampering of revenue-generating input that maybe makes sense to open up multiple properties at once? How are you thinking about it? I know it's quite early at this juncture.

Right. So good question. Look, as you think about our Las Vegas local segment, each of the properties is in a very distinct part of town and has a very distinct customer base. And so I would see us opening most, if not all of them, as soon as we're allowed to open them. And because they're all, once again, have a different, largely a different customer base. And so I don't see a phasing. Same thing as I think, you know, out of state, obviously they're all in different markets. And so we would open those as we're allowed. You know, downtown, with the three properties downtown, dealing largely to the Hawaiian market and then to crowds on Fremont Street, I think that business is going to look different. And we'll have to wait and see. how kind of inbound tourism from Hawaii looks. And we'll have to see, you know, how the Fremont Street experience and how crowds on Fremont Street experience are allowed to develop. And so that business sitting here today is a little tougher to think through how it opens up.

Great. Thank you very much, Keith. And then, Josh, you mentioned in your prepared comments that your monthly cash requirements total about $50 million per month. I could do the math, 45 divided by nine for CapEx is five million. How do you allocate the other 55 million between property, corporate, cash interest, and maybe other sources of cash use?

Yeah, so I guess, let me think about how to answer that. The kind of the operating expenses and corporate expense level, when you kind of combined all of those, They run probably, I don't know, it's probably about $20 million a month or so, I would say, a little bit more than that maybe. Rent is around $8.5 to $9 million. Interest expense, kind of, is a little bit all over the place just because of the timing associated when we make payments and stuff like that, but it averages about $16 to $17 million a month. And then you know the CapEx, and that's really about it. So I'm doing this a little bit from memory, but those are generally kind of big-picture numbers. Excellent. That's all for me. Thanks, guys.

Sure.

Our next question will come from Steve Wojcicki with Stevel. Please go ahead.

Hey, good afternoon, guys. So Josh obviously gave the monthly cash burn number, and we obviously appreciate that. But maybe a different way to kind of ask that question is more around have you guys thought about what your cost structure could look like as we get back into a normal operating environment, meaning some of the costs that you have stripped out at this point so far Is there a way for us to understand how much of those costs could be permanent down the road?

Yes, Steve, this is Keith. As I said in response to a question from Carlo earlier, we are looking and have done a lot of work around kind of reengineering the business, knowing that when we reopen on day one, we're simply not going to have – it's not going to look like it did when we closed it down in March. And so – I don't think we're in a position to kind of go into permanent cost reductions or what that's going to look like. But suffice to say, we've done a lot of work around it. We understand what that can look like. And we'll just have to see how we open. And we'll take it from there. But nothing really to report today.

Okay, gotcha. And then can you help us think about how you're thinking about – the promotional environment, you know, as assets eventually start to reopen? And I guess the question here is, how are you thinking about, you know, what it's going to cost to get customers back in the door? And then secondly, do you think, you know, we could, you know, you guys could have to enter some kind of promotional war, you know, down the road in order to get customers back, you know, back into your properties?

Well, I certainly hope not. I think as we, you know, as we ended the As we were shutting down this business, I think we generally had a fairly tame promotional environment across the country, and we certainly hope when we reopen that it remains the same. Having said that, I do believe that there will be some level of pent-up demand once these stay-at-home orders are lifted and we are allowed to reopen and welcome customers back in the door. I think in some markets that we may have more demand than we have capacity in the building or than we're allowed to have in the building. So obviously hard to tell, but we as a company don't plan on going out there and instituting a marketing war simply to get people in the building. I think there will be good pent-up demand once we are able to reopen. People are at home. needing to get out. You see it across the country. You see it on TV every day. People are looking for an escape, and once again, I think when we reopen, we will be part of that escape.

Okay, great. Thanks, guys. Appreciate it.

Our next question will come from David Kass with Jefferies. Please go ahead.

Hi. Afternoon, everyone. Thanks for taking my question, and good to hear from you. uh i wanted to ask about um the the degree to which you might be opportunistic for all of this and it may be you know not at the top of the list of thoughts we have but you know could there be circumstances where you know there would be m a opportunities that you know come about out of this and maybe that's a bit later on but have you given any thought to whether you would look to be opportunistic on the back end of this?

I think your comment is right. Right now it is not kind of in the front of mind. We are focused now on how do we reopen. We're focused now on health and safety and sanitation protocols and making sure we reopen with a very efficient business and producing as much EBITDA as we can. You know, as always, if opportunities happen to present themselves, we'll just see where it goes. But that is not our focus right now. Our focus is on getting these businesses reopened, operating as efficiently as we can, you know, and kind of maintaining the strength of the company that we've built over the last several years.

Got it. And if I can just follow up with respect to when we think about the Vegas Valley in total. And what you aptly cite is what would be unevenness potentially across the valley. And if we could accept the notion that the strip maybe ramps up more slowly than more localized properties, I would certainly welcome your input on that point. But can the locals markets start to ramp up you know, without a, you know, productive, right, a flourishing Las Vegas Strip? How do those two kind of functions, you know, how do you envision those kind of rolling out as best as you can?

Well, look, I don't want to talk for the Strip operators, but, you know, roughly 20% of visitation coming into Las Vegas is international visitation. Very little, if any, of that shows up in our buildings. And so we don't have to worry about that in terms of the type of visitation coming into our buildings. I think that if you look back at 08 and 09 once again, and you look at the recovery from that point in time or from that period of time, there was this expectation that the rebound on the strip would fuel the rebound on the locals market. And it really never did. I mean, I think we all kept waiting for the health of the strip to trickle into the locals market. And, you know, it took years. It took years for that to show up. So I'm not sure there's a direct correlation there like we thought there was back in 08. I do think the Las Vegas locals market will be healthy. It's got a large percentage of our business, our retirees that live here. And those retirees didn't have a job before they started, don't have a job now. They still have their income. And so it's going to think that there will be, because we will have reduced capacity, there will be good demand for the product. It's not going to look like it did when we closed in March, but we won't be offering the same product that we closed with in March.

Got it. You know, I appreciate that we're all sort of answering questions with less complete sets of information than normal. So thank you for, thanks for the answers.

Sure, sure.

Our next question will come from Harry Curtis with Instanet. Please go ahead.

Hi, Keith and Josh. I wanted to follow up on the pace of openings or the departmental openings. It's probably useful to understand other than the casino floor what your most productive businesses are that you probably want to open pretty early. Is it likely to be one or two restaurants? Are you going to to the extent that you have salon or spa services, hotels, what sort of sense of urgency do you have to reopen those? And maybe I'll start there.

I think as you think about reopening a local's property, given my comment earlier that most of our customers are local and drive to us, having restaurants and bars open will be important. The number, the quantity, which ones, you know, high-end restaurants, mid-tier restaurants, you know, which of those do you open? It will all be capacity-driven, and, you know, each property and each operator will have different issues given what their buildings look like and what type of restaurants they have, but those will be important to service the customers. You know, hotels are profitable for us, But it will depend on demand. And that is unknown. We have small hotels in most of our properties. We have a couple large hotels, 1,000 rooms at the IP and 1,900 rooms at the Orleans. I don't suspect we'll be opening all those hotel rooms initially because I don't think there will be quite that demand there. But we will take that kind of on a case-by-case basis based on the demand for the product.

Thank you. And Josh, I had a quick one for you. Based on your cash burn, you've got probably more liquidity than most of your peers, even the larger cap names, which is quite commendable. I think probably it's worth exploring what alternative sources of liquidity that you have, if it's needed. We hope it's not. other than the high yield and the equity markets. Maybe you could speak to the opportunity that you have in the secured debt markets, and not that you need to look now, but should the need arise.

Yeah, Harry, I think, you know, we do benefit from plenty of opportunity to think about and explore the different options we have as a company to kind of continue to strengthen our balance sheet and put more cash on the balance sheet if that's what we think is necessary in this environment. And I think, as we've always said before, it was really important for our company to maintain a lot of flexibility and optionality for the unknown. And I think we're in a situation where optionality and flexibility how to make the company have a much stronger position, obviously have a lot of alternatives to consider. And, you know, we're fortunate that we have a supportive bank group. We have what I believe to be very good relationships with our long-term investors. We have relationships with those long-term equity and credit investors. And I think, you know, we've seen that come through with the calls that we've gotten to consider alternatives. Without going into specifics, I think we have a lot of flexibility, we have a lot of optionality, and I think we have the room to make those decisions and not be under pressure to do something that we will regret down the road. And I think we will use that in this environment of uncertainty, whether it's with respect to reopenings or the duration or the recurrence of the virus potentially. So that's how I would think about it today.

All right. I will leave it at that. Let's hope it's not needed. Thanks. Thanks, Eric.

Our next question will come from Jared Shojan with Wolf Research. Please go ahead.

Hi. Good afternoon, everybody. Thanks for taking my question. Josh, I realize this is a tough question to answer, but I'm going to hopefully get you to take a stab at it. Once casinos begin to reopen, can you just talk about what capacity level you think you need to be at in order to be cash flow neutral? And I guess maybe a different way to ask that, too, is what percentage of your operating costs will be fixed once you open back up?

Yeah, so you're right. It's a very hypothetical question. I think what we are working through now and trying to make sure that we understand fully is the business is gonna look a lot different. It's gonna look a lot different in terms of all of the social distancing and the constraints that we are put on to make sure that we are responsible with respect to reopening. But I would say also in that regard, the amenities that we offer, whether it's not offering a buffet or offering buffets, whether it's a limited restaurant product, whether it's limited hotel product, The margins of the business will be very much different than it was when it was a fully operating, I shouldn't say margins, the expense structure of the business will be very different than it was when we were prior to the virus. And I think that could work to offset many of the extra costs we need to deploy for sanitizing the buildings or doing some of these extra steps that we need to take. So I don't think it, I think that, I can't say that with confidence that Day one, we will be cash flow positive, but I think it doesn't take much to be cash flow positive. And we will be, you can bet, we will be very focused on only running the businesses to generate and get there as quickly as possible.

That's helpful. Thank you. And then just somewhat of a longer term question on corporate expense. Once you're back to 100% capacity at your casinos, whether that's a year from now, two years from now, who knows, but Do you think you need to go back to the $86 million level that you were guiding to this year on corporate expense, or do you think you've learned some things through this crisis and ways to be more nimble on corporate costs going forward?

Well, first of all, I think we're continuing to learn as a result of this crisis. It gives us a very unique opportunity. As awful and terrible as the crisis is, the reality is it does give us an opportunity to really look at what is important for the business going forward, where our priorities need to be, where we want to put our emphasis going forward. So I do think that corporate expense will be less. I don't know how much less. I mean, we've got, you know, all kinds of scenarios that we're thinking through and still working through. And as soon as we can get the business open, kind of at a stabilized level, we'll be able to give you guys some indication of that. But we're not ready to do that, obviously, now. But I do think it will be less.

Okay. Thank you very much.

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

Hi, thank you so much. So Josh, just getting back to the liquidity questions, would you be willing to sell real estate if you got to that point?

Well,

I would say that I think our philosophy on selling real estate is fairly well understood. I think that that's not our preference. But one thing we've consistently said, and I alluded to it really in a probably kind of obtuse way with Harry, which is we have a lot of options. And we have always maintained that optionality is important to the company. It would not be at the top of the list. It would probably be on the list and then more toward the bottom of the list, is what I would say. But we are nowhere near the situation where we have to consider something like that, to be clear.

Yeah, okay, great. That's helpful. And I'm going to just switch gears and ask you an iGaming question, if that's okay. So, you know, in the first quarter, Valley Forge did have a strong first quarter with the iCasino up and running. So just wondering if you guys, where do you think that business could eventually get to and if you would expect more states to approve iGaming or maybe accelerate the approval? I know a lot of people have talked about that to fill in the gaps from the lost tax gaming revenues and then also just how are the economics there different from sports betting for you?

Sure. So, look, I think you've seen a big increase in iGaming in Pennsylvania, kind of both from the launch of our product in late January to where it was in February to kind of where it is and what I'll call this, you know, kind of post-COVID-19 world with all the land-based casinos shut. I think the revenue run rate, when the numbers come out, you'll see is about 60% higher today, 6-0% higher today than it was when everything was open, and customer acquisitions are up quite significantly. I think you will see other states take a look at this. There were some conversations that had been happening prior to the shutdown, and states looked to fill budget deficits. I think you will see a lot of states start to have more serious conversations about this, especially those states that have already adopted sports betting. iGaming is kind of part of a digital strategy that we've been deploying over the course of the last couple of years, starting with sports betting and now online casino gaming. And we expect to continue to participate in that as this rolls out across the country. So the economics are different than they are in sports betting. I think we're not in a position to kind of get into those details now, but they are different. But it is a profitable business for us.

Kate, thank you for that. And just one quick housekeeping. Have you guys ever said, or maybe you could say now, what percentage of your customer base is older than 60?

I don't think we have disclosed that in the past. Yeah.

We don't have that relationship, but something we could get.

Okay, I mean, I'm obviously wondering for, you know, obvious reasons, right? I mean, just in terms of that class of folks being, you know, more vulnerable and just trying to extrapolate the kind of traffic that might be coming to the casinos in the future. So, okay, thank you.

Sure, thanks, Alicia.

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

Thank you. There was a question for on corporate costs, but are there opportunities to permanently remove any operating costs once things go back to normal? Or I guess is there maybe an opportunity to accelerate any margin efficiency initiatives through all this?

Well, I do think there are opportunities to restructure, re-engineer the business, much like we've done over the last several years. Knowing that we will not be opening with a full complement of amenities and having a full load of table games and slot machines, then we have to be smart about how we open. We have to be able to take costs out of the business. I said earlier that the teams have been hard at work working on that, frankly, over the last month since we shut the business down. I think we've made great progress in understanding how we can operate differently, i.e. at a lower cost structure more efficiently going forward in this new world. So we'll have to wait and see when we open in terms of how successful we are and what it means to margins, but we're confident that there are and can be some permanent shifts in the cost structure as we move forward in life.

Great. And then can you maybe give a status on the Wilton Rancheria project? I mean, I'm just curious how quickly that could pick up again and what you need to see to go there.

I'm going to defer to Josh. Basically, nothing is happening kind of as we speak because we're at a point in time where we need to arrange for financing for the project. You know, we have GMP in place and we have bids and we have plans and we were at a point in time right as this crisis hit, right as this pandemic hit, to go to the market. And so there's not much we can do until that market reopens. But Josh?

Yeah, I think Keith described it pretty well. I think we were getting closer to being able to go to the market for financing. We were close to finalizing the GMP. Some final details to be able to start to really put some kind of effort into kind of formulating financing and go forward. It was just that this happened and has put a pause on everything for the time being. But it remains a very good project long term, not only as a manager, but for the tribe as well. And so we're very interested in helping the tribe be successful. But obviously we have to get beyond this.

Got it. And then last question, even if it's qualitatively, I'm just curious, given the current state of the business, what sort of things are embedded in that 45 million CapEx guidance for the remainder of the year?

It's largely, you know, things continue to break even though there's nothing in there. And so we've made some assumptions over No people are in there, so it's basically an assumption of what's gonna be needed to keep the buildings ready to go, and that's about it. Nothing beyond that, no kind of expansion of capital or expansion projects or anything like that. I would just call it core base maintenance to have the buildings ready to go.

Yeah, think of mechanical, electrical, life safety systems, all of which, you know, have various lives and, you know, we're coming due for upgrades or replacements throughout the course of the year. We need to continue on with those regardless of whether or not anybody's in the building. Televisors.

Understood. Thanks so much, guys.

Sure. Our next question will come from Thomas Allen with Morgan Stanley. Please go ahead.

Hey, good afternoon. I'm just thinking specifically on the Midwest and South region. Are there certain properties or property types you expect to recover quicker and ones that you think will take longer? Thanks.

Well, I think there are probably not probably there are certain properties that, you know, have more of a local market i.e., that the customer base is closer to that property. Take an IP, for example, with 1,000 hotel rooms. Part of the success of that property is filling those 1,000 hotel rooms and having people come into the Biloxi market. So that one may recover a little slower than some other properties, like maybe a Delta Downs that really is a drive-in, come and stay there. We have a few hotel rooms, but certainly not a lot of hotel rooms. or a treasure chest, which is truly a local's market. People live within 10 or 15 minutes, generally, of the building. So as you kind of go through, or a paradise, or a blue chip in northwest Indiana, many of those have very, very local markets. We have a couple, once again, where they come from further away, or they have IPZO and out-of-state property with a large hotel base. That would be

probably a little slower to recover a couple thanks keith and then just on the local last biggest locals market um it was obviously significantly hit during the financial crisis more than most of the regional markets can you just help us compare and contrast how it is today yeah so i think i i don't think the comparison is really that direct to be honest i think in fact it's almost

the opposite in many ways when you think about it. The strip recovered more quickly than the locals business did because it had a wider population pool and visitor pool to attract from. It was a business that had a lot of incremental amenities and all of those things really aren't what's relevant today in the sense that you know, people aren't going to necessarily want to travel, and so a local, more regional customer is going to probably be more comfortable with that initially. All the non-gaming amenities will be, where we have less kind of contribution from that, you know, will probably not be allowed in a significant way as we initially open. I think also in terms of just the level of recovery. To me, it seems like people are wanting to get back to a normalized life. They want to get back to what they viewed as normal before the coronavirus. And generally, to the extent that we are prudent about how we open, prudent about how we allow folks to interact with our business, that can happen fairly quickly. And then lastly, I think that The whole situation is different as Keith mentioned earlier in one of the earlier questions or remarks. It was at that time, we had a lot of people in the building. It was a spend issue. This time, it's almost reverse of that. I don't know that we will necessarily have a spend issue, but we're starting from a place where there's going to be no one in the building going to limited people in the building to hopefully more people. I think those are the compare and contrast points that are relevant. And I think beyond that, you really have to say, while many of us were here when the recession, the financial crisis happened and we learned a lot from it, there are a lot of things that are very different that while you think you may be prepared for this, you're really not. It happened a lot quicker and it's a lot different. And so I think those are the factors that I would kind of put out in front of people to think about.

Thank you.

We have time for one more question, and it will come from Sean Kelly with Bank of America. Please go ahead.

Hi, good afternoon, everyone. Thank you for taking my question. You know, maybe just two quick ones. First would be for the reopening and, you know, probably in the spirit of the last question a little bit. What we're understanding is that there's going to be sort of clusters of states that work together to kind of try and get reopened, given that people obviously are fluid and move across borders often. Are there any particular markets or states that you guys are watching, just particularly for your portfolio, that you think are going to be either first to go or you're getting some signals you think will be important to watch just as we're starting to kind of track this ourselves?

Yeah, so we're having very good constructive dialogues with state leadership in each of the 10 states where we operate. And a handful of those states are reopening other parts of their businesses and their communities this week, next week, whether you think about Mississippi or Ohio's talking about it. None of them have talked about opening casinos in the next couple of weeks. But they're all talking about the opening of casinos at some point in the future, which is a good sign that we are in the dialogue. We're in the conversation. We're an important part of many of these, if not all of these economies, whether you think of, obviously, Nevada or Mississippi or Missouri or Kansas or Iowa. And so good dialogue is going on. I think we will see them open at their own pace. You know, I'm certainly hopeful that, you know, many of them are open by late May. And then as you look to early June, many more are open. And so the fact we're having good conversations, there's no, you know, it is fluid as the comment was used earlier. It has been used a lot. But there are good conversations happening. And, you know, once again, if you think about late May, early June, I'm hopeful that many of our, not all, but many of our properties will be open.

Great. Thanks for the clarity, Keith. And then second question, it's a bit specific, but obviously I think we're all very focused on demand, but there is some supply growth in the downtown market slated for late this year into next. Can you just give us a quick update for those of us who haven't traveled obviously recently? How's construction proceeding on some of those projects that are in that market?

it postponed or what's the activity level out there right now and kind of any any idea of how how some of those projects may be impacted by what's going on so to project specific downtown Las Vegas the downtown Grand which is the addition of about 500 hotel rooms you know that one had been enclosed it was ready to was supposed to open in July I don't really have any insight on that but I My guess is it was continuing because it was largely complete. Derek Stevens, the other big project that is right across from the Cal and on Fremont Street, they have topped it off. I think they're maybe taking the outside elevators down. And so that is continuing to move ahead. I don't know the opening date. I think it's maybe pushed into next year at this point, but they are continuing to make progress on that project. You know, and once again, there are still a number of other big projects going on in Las Vegas, whether you look at Resorts World or the Convention Center or Legion Stadium. There are still things going on in town. There's still economic activity happening across the valley here. But downtown, once again, the Derek Stevens Project, which is a big one, is still moving forward.

Great. Thanks for that, Keith. That's all for me.

Yep. This concludes our question and answer session. I'd like to turn the conference back over to Josh Hirshberg, Executive Vice President, Chief Financial Officer, for any closing remarks.

Thank you, Grant, and thank you, everyone, for joining the call today. Again, from Board Gaming, we wish that all of you remain healthy and stay safe. And to the extent that you have more mundane questions that you want to follow up with about the company or our results, please feel free to reach out to us. Thanks.

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