Boyd Gaming Corporation

Good day and welcome to the Boyd Gaming second quarter 2020 earnings 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 touch-tone 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 Hirshberg, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone, and welcome to our second quarter 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 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 webcast at voidgaming.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. So with that, I would now like to turn the call over to Keith Smith. Keith?

Thanks, Josh, and good afternoon, everyone. Thanks for joining us today. A lot has changed for our company since our last call in April. It was only 90 days ago that all of our properties across the country were closed, and we did not have good visibility as to when we could reopen. But here we are 90 days later, and we have returned to business across the country. Over the course of six weeks, starting in late May, we successfully and safely reopened 26 properties in 10 states. This is a real tribute to the skill and leadership of our management teams across the country. I'm grateful to them for all of their hard work and dedication for getting our properties reopened in a safe manner. I also want to thank all of our team members who stuck with us through these very difficult times. When the time came to return to work, our team members were ready to answer the call. They worked hard to get our properties reopened in just a matter of days, dealing with many new safety and sanitation procedures, and they greeted our guests with as much enthusiasm and friendliness as ever. Thanks to the efforts of the entire Boyd team, the reopening of our properties has been a remarkable success. Since reopening, every one of our properties, except for the California and downtown Las Vegas, have produced positive EBITDA and free cash flow. And overall, we deliver gaming revenues within 11% of prior year levels for the month of June. We achieved these results while operating with significantly reduced casino capacities and limited amenities. As highlighted in our press release, our Midwest and South region achieved double-digit gains in EBITDA and significant margin improvement even in the face of declining revenues. In Las Vegas, our locals business was also able to grow EBITDA and greatly enhance margins despite declining revenues. The performance of our Las Vegas locals business was actually much stronger than the reported numbers show. Both the Orleans and Gold Coast generate a considerable amount of business from out-of-state visitors, and with tourism to Las Vegas remaining below pre-pandemic levels, it had an impact on the overall results of these two properties. When you factor out the softness in that segment of the business of these two properties, our locals customers, including at the Orleans and Gold Coast, performs similar to our Midwest and South customers with strong visitation trends from our higher worth customers and increased spend patterns across the valley. In downtown Las Vegas, the business model that has sustained us for over 40 years is presenting a temporary challenge. With the ongoing pandemic, many of our Hawaiian customers are hesitant to fly, particularly with a mandatory quarantine required upon their return. Combined with reductions in overall tourism to Las Vegas, we are seeing lower traffic counts throughout the downtown market. As a result, our downtown business is not performing at the same level as our other two segments right now. While the Cal was the only one of our 26 reopened properties that was not EBITDA positive during the reopening period, thanks to stronger results of the Fremont, our overall downtown operations will still break even on an EBITDA basis. Overall, we are off to a great start since reopening, thanks to a focused effort by the entire Boyd team and our ability to successfully adapt to the environment around us. And importantly, the solid trends we have seen across the country in May and June have continued into July. Beyond these positive financial trends, there are also encouraging trends within our customer base. While overall revenues are down, we are driving strong visitation among our high-value players in the average spend per visit and spend per admission are up significantly. In general, our core customers have not been deterred by social distancing measures, limited amenities, or the masking requirements. While we have seen a slight decrease in the percentage of customers from the 65 plus age segment as a result of the pandemic, there has been an increase in higher worth customers from our younger customer segments. In addition, we are seeing healthy growth in unrated place since reopening. Based on the trends we have seen since our properties have reopened, including trends in July, we believe that these levels of gaming activity are sustainable. While we are successfully driving profitable revenues throughout our operations, we are also successfully controlling expenses, building upon the significant long-term progress we had made prior to the pandemic. Since reopening, we have realized substantial new efficiencies in both marketing programs and SG&A. We have also been selective with our amenities, staying focused on high margin business to support higher worth play. As a result of these expense reductions and new efficiencies, we are now operating at significantly higher margins than we were before. We understand this is a fluid environment and that we will need to adapt as necessary, but we will not simply return to the old way of doing business. We have created a more efficient, highly focused, higher margin business, and we intend to keep that philosophy in place after this crisis is over. Just as we established a new model for our traditional business, we are also positioning ourselves for the interactive future of our industry. We do not see interactive gaming as a separate opportunity from our traditional business. Rather, we see it as another way to engage with our customers. By focusing on the convergence of all guest experiences, gaming and non-gaming, digital and traditional casinos, we are seeking to create a seamless, high-quality entertainment experience that stands out from the competition. The growth potential of this segment of the industry has been illustrated during the recent closures. Interactive gaming revenues have more than doubled in New Jersey so far this year, surpassing the $500 million mark year to date. And in Pennsylvania, they have approached $250 million over the same period. By some industry estimates, interactive gaming could become a $10 billion industry over the next five years. And thanks to our strategic partnership with FanDuel Group, we are confident in our ability to emerge as a leader in the industry. Today, our partnership with FanDuel includes retail sportsbooks at Seven Boyd Properties, mobile sports betting apps in Pennsylvania and Indiana, and a real money online gaming site in Pennsylvania. But this partnership will continue to grow as new opportunities become available in states such as Illinois. FanDuel currently operates in 47 states, is the nation's leader in both mobile sports betting and online casino gaming, and generates significantly more revenues than its closest competitor. And considering FanDuel's dominant position in this space, our strong strategic partnership, and our 5% equity stake in FanDuel, we are quite bullish on the value we have already created with this partnership and future growth opportunities available to us. In addition to this growing partnership with FanDuel, we took another step forward in our iGaming strategy last week with the launch of Stardust Social Casino, a free play online casino app. This social casino is the first of more iGaming ventures to come as we establish Stardust as a leading interactive gaming brand. In closing, there's no question that these are the most challenging times we have ever faced, but we have made exceptional progress over the last three months due to the incredible efforts of our team. While uncertainty clearly persists in today's environment, we are encouraged by the initial response to the reopening of our properties across the country. Customers have been very receptive to the new operating environment on our properties and the new safety protocols, and we are seeing strong visitation spend by our core customer segments. By reinventing how we do business in this new environment, we have established a new operating model capable of delivering higher margins. And through the expansion of our highly successful partnership with FanDuel Group and the launch of our Stardust branded social casino, we're taking steps towards establishing our company as a market leader in interactive gaming. These are extraordinary times, but we've been through crisis before, and each time we have emerged stronger and smarter, and I have no doubt we will do so again. Thank you. Now I'll turn the call over to Josh. Josh?