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spk08: Good afternoon and welcome to the Boyd Gaming fourth 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 telephone keypad. 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 and CFO. Please go ahead.
spk03: Thank you, operator. Good afternoon, everyone, and welcome to our fourth 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 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'll 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. So with that, I would now like to turn the call over to Keith Smith. Keith.
spk09: Thanks, Josh, and good afternoon, everyone. Thank you for joining us. Our fourth quarter was another display of the more efficient and focused operating model we have established across our nationwide operations. as we set a new fourth quarter margin record of 33.1%. This is the second consecutive quarter that we've achieved record margins across our business, clearly demonstrating the sustainability of this more efficient operating model. Our fourth quarter results also demonstrate the continued strength of our core local customers. Business from our local customers remain resilient in our Las Vegas local segments and across the Midwest and South as well. At the same time, we continue to make great progress in realizing the growth potential of online gaming. Our EBITDA from mobile sports betting continues to grow, and we expect to see further gains this year as we prepare to launch our first iCasino offering. I will discuss our online progress in more detail in a few minutes, but first, let's review our operating performance. Nationwide, the majority of our properties that were open for the entire fourth quarter delivered EBITDA growth with nine properties setting fourth quarter EBITDA records. In the Midwest and South, we again achieved record EBITDA and margins despite temporary closures of Paradise in mid-November, Valley Forge in early December, and increased operating restrictions in many markets. Excluding these two closed properties, EBITDA and our other Midwest and South properties rose 10% from last year, with combined operating margins increasing over 650 basis points. Results were particularly strong in the south as our seven properties in Louisiana and Mississippi grew EBITDA by more than 19% and improved margins by more than 1,100 basis points, a remarkable performance considering the impacts of two hurricanes on our Gulf Coast properties in October. To the west in Nevada, our Las Vegas local segment also delivered exceptional margin improvement, increasing almost 1,100 basis points to a record 43.5%. While local zebra tar was down slightly from last year's record levels, this was due entirely to softness at the Orleans. Unlike the rest of our local's portfolio, the Orleans is heavily dependent on destination and group business generated by its 1,900-room hotel and its meeting and event space. As a result, this property has been more significantly impacted by declines in tourism to Las Vegas. Excluding the Orleans and our closed properties, Our core locals portfolio achieved EBITDA growth of nearly 13% in the fourth quarter, while margins improved nearly 1,300 basis points to 46.3%. This performance illustrates the continued strength of our core local customers, as well as the increased profitability of that business segment. Even at the Orleans, gaming revenues from our local players were up 14% during the quarter, capped by record results over the New Year's holiday weekend. As we move into the new year, we are increasingly optimistic about the prospects for our business. Starting in late December and continuing over the first six weeks of the new year, we have seen encouraging trends in both Las Vegas and the Midwest and South. At the same time, operating restrictions are being eased across the country and the deployment of vaccines is accelerating. All of this bodes well for our future outlook. Additionally, we expect to see increasing benefits more ongoing marketing, analytical, and technology initiatives. While we are very pleased with the results from these initiatives so far, our work is continuing. We are currently partnering with Aristocrat Technologies to roll out a new cashless digital wallet called Boyd Pay. After launches in Indiana and Ohio, we have begun a field trial in Nevada and anticipate adding locations in Kansas, Louisiana, and Pennsylvania by the end of the first quarter subject to regulatory approvals. Over the course of this year, BoydPay will become a true digital experience, a cashless wallet available on smartphones used to pay for everything we offer in our properties nationwide. Longer term, this digital wallet will have functionality beyond the walls of our properties as we work to integrate the BoydPay digital wallet into our online products. This integration will allow us to create a seamless experience for our guests between digital gaming experiences and our traditional properties, creating the opportunity to stay engaged with our customers wherever they choose to play with us. The integration of our traditional and digital products is one of the many reasons we are excited about the long-term growth potential of our online gaming business. While it is still early, we are already generating solid returns from our online business. For the full year 2020, online gaming contributed more than $10 million in EBITDA to our company-wide results, predominantly from our share of FanDuel's mobile sports operation in Pennsylvania, Illinois, Indiana, and Iowa. This year, we anticipate our online business will generate over $20 million in EBITDA for the full year, including expected contributions from our soon-to-be-launched Stardust iCasino in Pennsylvania. Looking beyond this year, We see further potential from online gaming with lawmakers in Louisiana, Kansas, Missouri, and Ohio all expected to consider retail and mobile sports betting legislation in their upcoming sessions. Online gaming is clearly a compelling growth opportunity for our industry and our company. By partnering with a proven market leader like FanDuel to pursue these opportunities, we are generating immediate and growing profits from digital gaming today while maintaining flexibility to explore the many opportunities available to us to ensure that we are well positioned for the future. Next, I'm pleased to report that we're making good progress toward the expansion of our geographic presence into Northern California as we prepare to break ground on the Wilton Rancheria Resort in the next several weeks. With its location off a major highway just south of Sacramento, this resort will be the closest Class III casino to downtown Sacramento in the South Bay Area positioning us for a strong start after its scheduled opening in the second half of 2022. We are excited for the opportunity to start bringing the tribe's vision to life, allowing our partners and friends to finally realize their long-awaited goal of self-sufficiency. Across the country, our company is making great progress, but we know that many are still struggling as a result of the COVID pandemic, and we are doing our part to help. When the pandemic forced Paradise and Valley Forge to close their doors, we did not want these temporary closures to cause financial hardship for our team members during the holiday season. And so we extended full pay and benefits to every Illinois and Pennsylvania team member for the duration of the closures, just as we did for our Delta Dom's team members after Hurricane Laura temporarily closed that property last summer. At the same time, we continue to assist our communities through our support of charities that are helping vulnerable populations severely impacted by the pandemic. These COVID relief initiatives continue to be a priority for our company. We know these are difficult times for many, and we remain committed as ever to supporting our communities and our team members. In conclusion, as we begin a new year, I am pleased with what our teams have been able to accomplish during 2020 in an extremely challenging environment. And I am confident about what lies ahead. We are demonstrating the sustainability of our more efficient operating model, consistently delivering record margins across our business. Our core customers remain resilient in Las Vegas and across the regional operations, and we are seeing encouraging trends across the country over the first six weeks of the new year. And we continue to make excellent progress capitalizing on the digital future of our industry, building a robust and growing mobile sports and iGaming presence across the country. 2020 was a challenging year, but also one of significant progress for our company. And we know that this would not have been possible without the hard work of our team members across the country. Over the last several calls, I've spoken frequently about a more efficient and focused operating model. It is our team members who make this model work. Throughout the country, they have successfully adapted to a more efficient way of doing business while continuing to deliver exceptional and memorable guest service. I want to thank every member of the Boyd Gaming team for all that they do for our company and for our customers each and every day. Together, I'm confident that we will achieve continued success in 2021 as we apply the lessons and experiences of the past year to drive continued growth. Thank you for your time today. I'll now turn the call over to Josh. Josh?
spk03: Thanks, Keith. For obvious reasons, we are happy to close the books and move beyond 2020. On the other hand, 2020 has created exciting opportunities for our company for this year and the future. Our operating teams are focused on delivering higher margins, utilizing a more efficient business model. Leveraging many of the initiatives, technologies, and capabilities that were started pre-COVID in combination with a marketing philosophy focused on higher value customers will continue to lead to improved profitability and cash flow for our company. EBITDA in the second half of 2020 actually increased from the second half of 2019, despite a revenue decline of more than 20%, a hesitancy on behalf of some of our better customers to return, no EBITDA contributions from our downtown business, closed properties, and operating restrictions throughout the portfolio. Pretty remarkable. And combining our success of driving improved margins With the recent trends in our customer base, we are encouraged for 2021. As Keith mentioned, we believe our ability to deliver higher margins is sustainable, and our operating teams are committed to the continued achievement of this throughout our company. We're also well positioned to take advantage of online sports betting and iGaming, generating profits today in what is and will likely continue to be a highly promotional, capital-intensive and competitive landscape. Our 5% equity ownership in FanDuel also provides participation in the broader rollout of sports betting. As more states legalize and FanDuel leads the way as one of the long-term winners in online sports, our equity stake will only continue to grow in value for our shareholders. Separately, we're excited to introduce our own Stardust-branded iCasino product this coming April. As we move forward, we will continue to evolve our online strategy to ensure that we are well positioned for the long-term opportunity that is represented by sports betting and iGaming in our industry. Finally, we also emerged from 2020 with a strong balance sheet. We have no debt maturities until 2023, no outstandings under our billion dollar credit facility, and a cash balance of over $500 million. So as we begin 2021, we are confident in our ability to continue to deliver improved margins, and we are encouraged by recent consumer trends. Our online business will continue to be a focus for us, growing and creating value for our shareholders as more markets are legalized and we introduce our Stardust iCasino product. Operator, that concludes our remarks, and we are now ready to take any questions from the audience.
spk08: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. 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. And our first question comes from Carlo Santorelli of Deutsche Bank. Please go ahead.
spk06: Hey, Keith and Josh. Thanks for taking my questions. Just for starters, guys, Keith, you talked about your introductory remarks kind of the middle of December through the present, really seeing things starting to pick up, not only in the locals market, but your regional markets. As you think about what's driving that outside of kind of confidence around vaccine progress or probably specifically, you know, starting to see some of the numbers, cases and things kind of go down, thankfully, as well as kind of stimulus and stuff rolling out. Have you guys gotten a sense based on who that customer is that's coming in the door? Maybe what is it that's specifically driving that and how you're thinking about, you know, as we move through the year, we should expect to see some more benefits from obviously less cases and seeing that older customer come back or if it's more of a stimulus than kind of younger demographic or what is it exactly you started to see in December that changed?
spk09: Sure. Good question. I think you've summarized it well in terms of today what is driving those customers in the door. I think it is the rollout of the vaccine and confidence that there's light at the end of the tunnel and There is a certain amount of weariness with the shutdowns and the increased cases that occurred later in the fourth quarter and people wanting to get out and start starting to live life normally again. Clearly, there is some stimulus in the results that we're seeing as we move into the new year. But basically, it's the same customer. It's the younger demographic. It's the higher worth segment. the nature of the customers coming in the door hasn't changed much over the last six months. Our more senior population still hasn't shown up yet. And so that's a great benefit for the future once they get vaccinated and are more comfortable coming out and participating and joining us in our operations. So not much change in the overall kind of nature of the customer or the type of the customer younger still spending at a higher level. and just greater frequency in Q4 and moving into January and February, frankly, than we saw in Q3.
spk06: Good. Thank you, Keith. That's helpful. And then this one's a little bit more specific, I guess, but if I look at your results just in kind of the income statement categorization of revenue and expenses, the other revenue line was up significantly year over year, as well as the other expense, and both were up tremendously on a sequential level, but the other profit line was kind of down. I believe that line is primarily retail and other entertainment offerings at the properties. Is there anything else that's running through there that seems to be driving that? I guess the $57 million of revenue is up significantly year over year, which –
spk09: seems you know unusual given some of the restrictions that are in place and everything else at this point so i was just wondering if there's something in that bucket that's that that is is driving kind of the the outperformance sure it is in the other revenue line item the 57 million you mentioned included in that is online gaming revenue and that's what's driving it higher with without that, that number would be down, much like the other numbers in gaming and rooms and food and beverage. So that's what's driving that number.
spk03: Yeah, so just to add a little bit of detail, Carlo, is we also in that number, basically, you know, our relationship with FanDuel requires us to be obligated for the taxes associated with the revenues. So, you know, we get the tax payment from FanDuel, it counts as revenue for us and then shows up as expense. And that's what you're seeing also. And other is the, effectively the taxes, a portion of the taxes that we are paying on behalf of our relationship with FanDuel. And then in the other expense line item, there's the offset to that revenue in the form of the tax expense on online. If you took all that out, it would look very similar to Q3 or prior year.
spk06: Okay, and Josh, sorry, are you then just recording that on an annual basis then, meaning you're getting through it up in the fourth quarter for the entirety of the year? Because the jump from 3Q to 4Q just from a revenue perspective implies FanDuel's revenues are massive in the fourth quarter. That's where I was going with it.
spk03: Yeah, no, it's not a catch-up. It's basically a reflection of kind of, you know, the business's picking up in that time period. They're effectively a pass-through.
spk09: Carlo, it is kind of the peak sports season with NFL and college football. And you're right. FanDuel's revenues were massive. They were the benefit of that.
spk06: Okay. Guys, thanks. That's super helpful. I appreciate it. Thank you both.
spk08: The next question comes from Steve Wysozinski of Stiefel. Please go ahead.
spk10: Hey guys, good afternoon. So, so Josh or Keith, I don't know if we can keep going with the Carlos line of questioning there, but so if we're kind of thinking about that line moving forward is, is the fourth quarter run rate, you know, a pretty good run rate there, or are you kind of saying given, you know, obviously all the, you know, the high profile sporting events, we should bring that number down a little bit, if that makes sense.
spk09: I think the way to think about it, first of all, as we all know, sports betting is extremely seasonal with Q4 and early Q1 probably being the bulk of it. We focus in on, frankly, EBITDA. So when you think about, if you're trying to think about our online business, as we said, we generated north of 10 million EBITDA in 2020 and we'll generate north of 20 in the year we're in today. But it is lumpy. It is not consistent or even throughout the year. It's based on the sports season.
spk03: Yeah, I don't think you can take Q4. Another way to say what Keith just said, you can't take Q4 and annualize it.
spk10: Okay, that's what I was getting at. It makes sense. And then, Josh, normally this would be a call where you guys are giving guidance for the year, and obviously we understand that. why you're not providing guidance at this point, given the current backdrop. But is there a way for us to understand how you're thinking about the business this year without explicitly giving guidance? And I guess what I mean is, I would assume at this point, you guys have modeled out multiple scenarios in terms of what 21 could look like. And just wondering, what are some of the key items that you guys are watching? And I would assume most of it's tied to the virus and vaccinations and stuff like that. But Any other color that would help us kind of think about what could get you to a higher end or a lower end of those potential ranges would be helpful?
spk03: Yeah, so I don't know if I'm going to be able to help you much because you're right, we don't feel comfortable giving much guidance at this point. And I'd ask Keith to jump in if he has any other views on this. I generally think of it as, you know, the customers that we have been seeing, and Keith described this early on, really going from Q3 to Q4 and into the first six weeks of 2021, the cadre of customers has been largely the same. And I think to the upside would be just a larger participation from that older demographic that we really haven't seen. You know, we have a higher value demographics across all ages, but certainly among the older age group, we have less participation than we have had historically. And so I think with the passage of time, people feeling more comfortable, it's certainly understandable that we're not seeing that today, but we expect that will grow over time. And anybody's guess as to when that will happen is anybody's guess, but the reality is we expect that to improve over time. and get the benefit of that. I think to some of the earlier points people were making and asking questions about, we have a healthy younger demographic as well and we understand that there's limited entertainment options and some of it may be driven by some of the payments that are being made from the government at this point, but that in our mind is largely the unrated segment. And so from our perspective, it's a continued focus on that rated customer, that higher value customer, that higher worth customer to us, and just continuing to grow that business over time as they feel more and more comfortable to come out. That's how we, I think, big picture think about our business.
spk09: Yes, Steve, if you're asking about kind of how we view the drivers of the business over the next 12 months or so, it really is the passage of time and the success of the rollout of the vaccine and how quickly customers get comfortable with that and start to come out in bigger numbers, the easing of restrictions throughout the U.S. and throughout the portfolio, the lowering of case counts generally, once again, in each of the markets where we operate because the case counts themselves get widely reported and it's a psychological impact on people. And then, you know, here in Nevada, the overall recovery on the Strip, which will really impact our downtown business, and as we talked about, will help support the strength of our locals' business at the Orleans. So those are the drivers. Exactly the timing of all of those and how they roll out and how quickly people respond to them, obviously, is the big unknown. But those are the key things we think about as we think about 2021.
spk03: And then the last piece I think I would add to it as I think more about it is, I think we feel really good about the core business that we have today and the core set of customers that we have. We have a good business today that can potentially get better, as both Keith and I are alluding to, as with the passage of time and the improvement of overall conditions and confidence.
spk10: Okay. That's great, Keller. Thanks, guys. Appreciate it.
spk13: Sure.
spk08: The next question comes from Barry Jonas of Truth Securities. Please go ahead.
spk05: Hey, guys. Wanted to ask about Void Pay. Can you talk a little bit about the CapEx requirements and how do you think about ROI here?
spk09: So with respect to Void Pay, I would say that from the CapEx standpoint, it was not a significant lift. It's nothing that you would hear us call out if we were detailing out CapEx in a given quarter. We're leveraging up some technology that exists with products we've already bought from ATI and simply deploying them. And so the ROI will be very strong because there's very little invested in it, a lot of sweat equity, a lot of efforts by the two IT teams and by our property peoples to roll it out. And it is early. We don't have a lot of data under our belt at this point, but we think it'll be a great addition to kind of the overall suite of offerings we have and another way for us to stay engaged with our customers.
spk04: Got it. And is the intent to link this up to FanDuel's offerings at some point, or would this more just be your Stardust offerings?
spk09: We haven't engaged in that conversation with our partners at FanDuel, but that's certainly something that is an opportunity for us to engage in that conversation with them. We're focused on today's rollout, but we certainly have great hopes for expanding it far and wide, as they say.
spk03: The product has the capability to include a suite of products that could include FanDuel if that's how each party wanted to move forward.
spk04: Great, and then just wanted to ask about Nevada in terms of any views on the state potentially moving to remote registration for sports betting, and then also any thoughts on iGaming at some point getting legalized in the state?
spk09: No real specific commentary on either of those topics. It is part of the online world, which is, I think, is important to our industry. It's part of, you know, something that we embrace as a company. Remote registration and sports betting is important in other states. And, you know, online iCasino is important and is a growing part of the business. So I think overall, we're supportive of the online business. And, you know, each state operates differently. Each state has its own dynamics, certainly here in Nevada. You know, the strip operates differently from the local operator, so we all have slightly different interests in this. But overall, the growth of online is important. It is a way for us to leverage up a new customer and introduce a new customer to our business, so we're supportive.
spk13: Great. Thank you so much.
spk07: The next question comes from Joe Greff of J.P. Morgan.
spk08: Please go ahead.
spk14: Good afternoon, guys. Keith, you spent a decent amount of time talking about the sustainability of some of the margin-enhancing initiatives that you undertook last year. I guess as we're thinking about sort of near-term and this year, given, I guess, the encouraging comments you had about the first six weeks of this year and sort of maybe a consumer or a customer mix that's not dissimilar from what you saw in the 3Q and 4Q, would you say your turn the the property level margins in the locals in Midwest and South or this quarter or more akin to the three queues in the fork you made it has to be directionally that just because you don't have you know properties that were closed that are open but we'd love to hear your thoughts on that you look at the q3 margins and you look at the q4 margins across the board while records in many cases we're not as strong as q3
spk09: That was purely a revenue issue. So if you kind of look at the detail, expenses actually went down. And so the margins in Q4 were driven down a little bit by declines in revenues. To the extent we see a rebound in revenues in Q1 and throughout the year, we're very comfortable with our expense structure and the level of expenses and the control we have over them. And so, yes, we'd expect margins to be, you know, whether it's Q3 levels or between Q4 and Q3, But clearly, as revenues go up, we expect to see them exceed Q4 levels as we move throughout the year. And one of the things I probably should have said when I was talking about the first six weeks of the year is we are very excited about the trends through the first six weeks until this last weekend, where the bulk of the country has frozen in the grip of this ice storm. So that's going to take a little steam off of it. But other than that, we're still pretty excited about the first six weeks of the year.
spk14: Great. And Josh, you may have said this or I missed it, but did you talk about where you think corporate expense and CapEx for 21 shakes out for you guys? And if you can give a 4Q CapEx, that would help. Thanks.
spk03: Sure. You didn't miss it. I didn't say it. So I'd say fourth quarter CapEx had a few one-time items in it related to Wilton as well as kind of the... you know, the repair work related to the hurricane that impacted Delta Downs that we haven't been fully reimbursed for from the insurance company. So if you kind of take those items out, you know, our kind of run rate maintenance capital or capital in Q4 was about $33, $34 million. All those other items you add back in, our total capex in Q4 would have been about $70 million. So there was quite a bit related to Delta Downs. in that number. And so for the full year, we'll end up at $175 million. I'd say for 2021, you know, we're going to be especially careful deploying capital just given the environment that we're in. I would say assuming that things stay good and there are really kind of no issues as we move throughout the year, people can generally think of us as spending $150 to $170 million. of capital. But again, all of that is really dependent on kind of how the year kind of progresses as we go through month by month. And I would say, you know, kind of this will tend to be a little bit more back-end loaded than kind of spread evenly. I think from a corporate expense perspective, I think we are comfortable kind of talking about that for 2021. at this point. And let me just kind of look through something real quick here. You know, we, I think we're kind of in this kind of 73 to $75 million range for 2021 is a good place to be for corporate expense based on what we know today.
spk14: Great. And then just to follow up to that Delta down commentary, what's the anticipated or the amount that you would get back under insurance receivable?
spk03: Yeah, we'll be getting it all back. It's just a delay between when we submit it and the insurance companies reimburse us for it. So it's just a timing issue, really. Got it.
spk14: And the amount then is how much at Delta Downs related to that?
spk03: It's about, I don't have the exact number in front of me, but it's like $15 to $20 million in Q4, just the Q4 amount. And then there was about $20 million, and then the rest was related to Wilton.
spk14: Got it. So $15 to $20 million in the Q4, you said $20 million related to Wilton, or I think I cut you off there. Yeah, Wilton.
spk03: Yeah, I'm sorry. Yeah, you got it.
spk14: Great.
spk03: Thanks, guys. Just to repeat the – okay. Thank you.
spk08: The next question comes from Sean Kelly of Bank of America. Please go ahead.
spk01: Hi. Good afternoon, everybody. Josh, maybe just to stick with the last line and sort of working through some of the corporate items, could you just remind us on – as we move through 21 on sort of leverage targets and maybe cash flow prioritization, as well as any related NOL balance that you guys have at this stage, and just how should we think about kind of what you're targeting and where we'll be? Because I imagine, especially with this higher margin profile, the business should be throwing off quite a substantial amount of cash.
spk03: That's right, Sean. So first the easy one, the NOL balance at year end is estimated at 2020 was estimated to be about $560 million or so. Given the uncertainty in the business, I don't think we're comfortable kind of giving leverage guidance per se because of, you know, if I give you leverage then you'll know if it died generally. But what I would say is that kind of leading in toward the end of 2019, our leverage targets were toward the low end of kind of four times leverage, four to four and a half times and closer to the four times leverage. And I would say if the business were to stay at these current levels, we'll essentially be at those levels by the end of this year. And again, I'm not trying to provide guidance or anything like that, but I'm saying that we need the business to kind of stick to stay its current course, and if it does, we would be on track to be at the leverage levels of very near four times that we had set for ourselves in 2019. So hopefully that helps people think about the business.
spk01: That's great. And then maybe to change gears and go back to kind of the customer profile for a moment, Obviously, a lot of discussion and kind of wondering about when the older demographic is going to come back. But I'm wondering if just over the last few months, Josh, you had a chance to do any deeper digging on this younger demographic that we've seen? Because I think there's also this question about when other entertainment alternatives present themselves, like how sticky that customer may be. What are your insights or any thoughts from any customer work that you've done?
spk09: Yeah, Sean, this is Keith. You know, that's always a difficult question to answer is how sticky is that customer going to be? I think the good news is we've had that younger customer visiting us now for, you know, six or eight months through the course of this pandemic that they've been, you know, coming out and participating. And so we've had quite a while to secure their loyalty and have them get comfortable with us. So I think we feel very good and are confident about the ability to, you know, maintain a good share of their wallet. Will we maintain 100%? share of their wallet that we have today once other entertainment options open? Probably not. I think that would, you know, kind of be foolish to expect we would maintain 100%, but we feel good about, you know, maintaining that customer and having them continue to participate with us. And when you think about continuing to get that new customer, that younger demographic, and then we get the older customer that comes out as the vaccines roll out and they become more comfortable, you know, the setup for 2021 could be, you know, quite nice as we move through the course of the year, assuming vaccines roll out as expected and case counts continue to decline. You know, 2021 could look very good.
spk03: Sean, the other thing that I would add to that is I think you really, the question around the younger demographic I think has to be looked at really with the perspective of, you know, we have the rated younger demographic who's really, been a segment in our business that's been growing for really in 2019, you know, pre-COVID. So that trend largely continued once we reopened. That's a rated customer. That's a customer we know as a result of them being rated. And they're really not spending or behaving any differently than they did kind of pre-COVID. I think the unknown is the unrated segment, and that's the ones we're trying to sign up and build more loyalty with that Keith spoke about. And there's a segment of those that are probably in our building because of the stimulus payments or because they don't have anything else to do because of limited entertainment options. And those would be the slice of our younger demographic that may be at risk. But there is a slice of the younger demographic that is rated, that we know well, and that is not performing any differently than they did pre-COVID. So we would expect them to continue to perform at these levels and continue to be loyal customers of ours, even when stimulus goes away or other entertainment options present themselves.
spk01: Really helpful. Thank you both.
spk03: Sure.
spk08: The next question comes from Chad Baynon of Macquarie. Please go ahead.
spk11: Hi, afternoon. Thanks for taking my question. Josh, Keith, wanted to ask about the cow, downtown properties, understanding that it's difficult for Hawaiian customers to get there now and most people don't want to travel. But do you have any sense of how the back half bookings may look or if it's just going to be a short booking window? And then a similar question on the Orleans, if you have a sense of what the future looks I guess sports or event schedule could look like given that that's a big driver of that property. Thanks.
spk09: Sure. So when you think about downtown properties, you know, the downtown properties generally, whether it be ours or just the downtown market generally is really driven by visitation of Las Vegas. And so, you know, for decades, the statistic is generally half the people visiting Las Vegas visit downtown. And so we need the overall visitation to Las Vegas to recover. You know, and I think in the fourth quarter, visitation to Las Vegas was less than half of what it was in the prior year. So that's kind of the first driver for the Cal and the Fremont and Main Street. The second driver is the Hawaiian market, unique to our properties. And, you know, up until probably now, Hawaii's been in a pretty tight lockdown. And I don't see that changing in the near term. You know, we're not currently flying our charter. It'll be a number of months before we start that back up. So clearly I think the rebound in Hawaii business will be second half of the year, and the rebound in just general visitation to Las Vegas I think is also second half of the year. The cadence of that is unknown, but I don't see much of a change in the trajectory of that business over the next three to six months. As it relates to the Orleans restrictions, the governor announced last week the easing of some restrictions those did include restrictions for properties like the orleans arena where we can now have up to 20 percent of our capacity and attendance for you know sporting events and so we're working on that as we sit here today um to get approvals to be able to do that they eased meeting an event restrictions and so now we can start to expand that business that will take a little while to come back because everything had been cancelled but you know the signals are good and we're able to start rebuilding that business because of those in terms of booking windows I mean the booking windows frankly today are anywhere from zero to a couple of days and historically they've been you know two weeks to a month or better. And so I don't see that booking window expanding in the near future. You know, occupancies across the portfolio, not just here in Nevada, but generally across the business are half or so of what they were last year. So the hotel side of the business is still a tough, tough business.
spk11: Great. Thanks. And then regarding traditional U.S. bricks and mortar M&A, has your appetite changed lately, just given the improvement in your core business, given that you might be in a better position than some of your regional peers? And if so, what's your latest thinking in terms of on balance sheet versus incorporating a REIT to help the financing? Thanks.
spk09: Look, I think as we sit here today that we are very much focused on sustaining the positive momentum we've built in our operations over the last six months and sustaining this new operating model. And as Josh alluded to when he talked about CapEx, we're committed to maintaining financial flexibility while we're in this period of uncertainty. It was only a month or so ago both our Paradise and Valley Forge properties were closed, and we certainly don't expect that to happen going forward. But sitting here a year ago, I didn't expect to have a number of properties closed up either. And so I think we're being cautious in watching the landscape. But once again, we're focused on our existing model and focused on remaining flexible with respect to our financial capabilities. And we'll just see where we go from there.
spk11: Thanks, Keith. Appreciate it.
spk09: Sure.
spk08: The next question comes from David Katz of Jefferies. Please go ahead.
spk12: Hi. Afternoon. Thanks for taking my question. You've covered a lot of detail. I wanted to just go back and look at the digital strategy holistically, right, between the relationship with FanDuel, iGaming, et cetera. Is there anything that you can share data-wise in terms of its impact, benefit, or, you know, positive or negative, on the land-based business as you can see it so far. It's a question that comes up a lot as to whether it's a substitute, a benefit, or generally neutral.
spk09: Yeah, I don't think we're in a position today to go into any specific detail with respect to that. We don't see the online betting, the mobile betting, or the iCasino betting as a detriment or cannibalizing the business at all. It is, I think, at worst neutral based on some of the high-level information we have. But overall, we believe it's additive in terms of creating new customers and having those customers visit our properties and just having other people to speak to to try and generate new business from. But we don't have any specific data here with us today to speak to that.
spk12: And with respect to FanDuel, the structure that you have in place, obviously it's different from what most others have. It appears to be sort of working for you at least economically at this stage. Can you see yourself evolving that strategy at some point where you own more assets, control more technology, etc.? ?
spk09: It is a great relationship. FanDuel has been a great partner and obviously it's been a very successful relationship as noted in our comments about producing $10 million in EBITDA last year and north of 20 this year. Probably one of the few companies actually making money in sports betting today. We do have the flexibility to kind of evolve our overall online strategy and you know, we will see where it goes in the future. But we certainly have the ability to determine whether we continue to, you know, operate through FanDuel, once again, they've been a great partner and everything's wonderful, or whether, you know, how it evolves in the future. So really nothing else to comment on.
spk12: Got it. Okay.
spk13: Thank you very much. Appreciate it.
spk08: We have time for one more question, and that will come from David Hargraves of Stiefel. Please go ahead.
spk02: Hi. Thank you very much for taking my question. So Wilton's going to break ground shortly, and I'm just wondering what the financing plans look like for that. I hadn't seen anything announced. Will this be done with an advance?
spk03: I'm sorry. Dave, your last part of your question broke up. Will this be done with what?
spk02: I'm wondering if you'll be working initially with just capital advances from Boyd or whether we should be looking for a financing in the market for Wilkins?
spk03: We would expect to have third-party financing in place when we start to build the project.
spk02: Okay. And then you have a couple of bond issues that are going to be callable in 2021, and the market is white-hot right now. So I'm just wondering how you're thinking about the puts and takes of – of doing those, possibly calling some of the bonds and doing refis. It looks like the arithmetic is very favorable.
spk03: Yeah, I think for some of the bonds it's favorable, for some it's a push. But I think from our perspective, you know, we will be opportunistic with respect to refinancing those bonds when they become callable. I think the benefit that our capital structure has is over the next, This year and next year, over the next basically two years, we have the ability to refinance our balance sheet, and that gives us a lot of flexibility and optionality to kind of create the optimal structure that we want in a very favorable current environment. So we're going to weigh all of that and kind of figure out where we want to end up.
spk02: Could I squeeze in one last one? Did you pay down any debt during the quarter? Do your leverage targets factor in a rent adjustment?
spk03: Oh, yeah, we've been, we're generating a lot of free cash flow. I don't know how much, I don't have it in front of me how much we actually pay down in Q4. But, well, I shouldn't say, we haven't been paying down debt. We've been building cash, rather. And so that's basically what's happened. And I would say that, you know, effectively, we have less debt today than we did as of June 30 and I think even as of year end 2019 when you kind of factor in all that cash. But I don't have all that in front of me. But basically we've been deleveraging, generating free cash flow from around June 1st when all of our properties reopened and that amount of cash has been accelerating over the second half of the year.
spk02: And the leverage target in the low fours, was that Lee suggested or was that just conventional?
spk03: Oh, that's conventional. That's a good point. And it's not meant to be guidance because we're not giving guidance, but I just said in the context of where we were kind of coming in until the end of 2019, to the extent that the business stayed like it was today, we would be at a very similar point in time, a very similar point of leverage, sorry.
spk02: Thanks very much for squeezing in. Have a good afternoon.
spk03: Yep. Thanks, Dave. Okay.
spk08: This concludes our question and answer session. I would like to turn the conference back over to Josh Herzberg for any closing remarks.
spk03: Thank you, Andrea. And thank you, everyone, for joining today. And if you have any further questions, feel free to reach out to the company.
spk08: The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.
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