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Boyd Gaming Corp
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Good afternoon, and welcome to the Boyd Gaming's Second Quarter 2019 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today's event is being recorded.
I would now like to turn the conference over to Josh Hirsberg, Executive Vice President and Chief Financial Officer. Please go ahead, sir.
Thank you, Rocco. Good afternoon, everyone, and welcome to our second quarter earnings conference call. Joining me on the call this afternoon is Keith Smith, our President and Chief Executive Officer.
Our comments today will include statements that are forward-looking statements within the Private Securities Litigation Reform Act. All forward-looking statements in our comments are as of today's date, and we undertake no obligation to update or revise the forward-looking statements. Actual results may differ materially from those projected in any forward-looking statement. There are certain risks and uncertainties, including those disclosed in our filings with the SEC that may impact our results.
During our call today, we will make reference to non-GAAP financial measures. For a complete reconciliation of historical non-GAAP to GAAP financial measures, please refer to our earnings press release and our Form 8-K furnished to the SEC today and both of which are available in the Investors section of our 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.
Finally, today's call is also being webcast live at boydgaming.com, and will be available for replay in the Investor Relations section of our website shortly after the completion of this call.
I'd now like to turn the call over to Keith Smith. Keith?
Thanks, Josh. Good afternoon, everyone. During the second quarter or diversified national portfolio continue to yield positive results for our shareholders, as we delivered same-store revenue, EBITDAR and margin growth in every segment of our business. While the pace of our same-store growth did moderate from prior quarters, this is primarily due to difficulty comparisons to a record performance at the Orleans last year, as well as softness in several markets in Louisiana. However, these issues were more than offset by strong performances elsewhere in our business, demonstrating the strategic value of geographic diversification.
On a same-store basis, we delivered record results in Downtown, Las Vegas and solid growth throughout the remainder of our Las Vegas and regional properties. Our customers remain healthy. Our geographically diversified portfolio is performing well and our operating teams continued to successfully enhance margins throughout our business. And, as I'll discuss in a few minutes, we are successfully executing on strategic initiatives that position us for continued growth into the future.
On an overall basis, our second quarter results were significantly enhanced by strong performances at our five newly acquired properties. Through focused efforts to drive profitable revenues and efficiencies at these properties, we grew combined EBITDAR more than 7% over their prior year standalone results, while improving our operating margins more than 150 basis points.
In Missouri, Ameristar Kansas City and Ameristar St. Charles each grew EBITDAR at a double-digit pace compared to last year's standalone results, with EBITDAR at St. Charles reaching its highest levels in eight years. At our Belterra properties, EBITDAR at Belterra Resort in Southern Indiana declined slightly, due to the impact of new competition in the Louisville market.
While in Ohio, Belterra Park achieved the best quality revenue and EBITDAR performance in its history. And in Pennsylvania, Valley Forge achieved a record second quarter EBITDAR performance, boosted by strong growth in slot volumes and contributions from FanDuel sports book that opened in March.
In all, these new properties are off to an astounding start under our leadership, as our operational approach delivered growth above their solid standalone performances last year. Once again, we are demonstrating our ability to successfully integrate acquisitions and immediately drive improved performance.
While the addition of our new assets accounted for much of the year-over-year increase at our Midwest and South regional results, we also continued to drive same-store growth, as this segment achieved its fifth consecutive quarter of same-store EBITDAR gains. As I mentioned earlier, segment results were impacted by a weaker quarter in Louisiana. This was primarily due to softness across the southwestern part of the state, where last year's results benefited from hurricane recovery work throughout the area. Elsewhere in our Midwest and South region, results were quite encouraging, with solid performances throughout the remaining properties in this segment.
In Indiana, Blue Chip had another solid quarter of revenue and EBITDAR gains as it continues to outperform the Northwest Indiana market, thanks to its market leading amenities and skills operating team. In Iowa, both of our Diamond Jo properties delivered revenue and EBITDAR growth for the quarter.
On the Gulf Coast, the IP achieved its ninth straight quarter of EBITDAR gains, as more efficient and effective marketing programs continue to drive growth. And to the west, we were particularly pleased with our performance at Kansas Star, as operational and marketing refinements drove solid growth in visitation, revenues and EBITDAR during the quarter.
In Nevada, our Las Vegas Locals business produced its higher second quarter EBITDAR since 2005, as continued gains in revenues and operating margins drove our 17th straight quarter of EBITDAR improvement. While long-term growth continues across our local segment, these gains were partially offset by a challenging quarter at the Orleans.
Resulted properties were impacted by unusually low hold during the quarter as well as a difficult comparison to last year when a major event at the Orleans helped drive record results at the property. The Orleans did not have the benefit of that event this year. After adjusting for these one-time items at the Orleans, EBITDAR was up 4.5% at our local segment as the balance of our local properties continue to deliver solid results.
At the Gold Coast, we again posted solid revenue and EBITDAR gains. At the Eastside Cannery, we saw considerable improvement over the first quarter as operational adjustments reversed the negative trends we saw in Q1. And Aliante's positive trajectory continued in the quarter, thanks to more effective marketing initiatives and a strong management team, we're making the most of strong residential and commercial growth throughout North Las Vegas.
And while growth has been particularly strong in North Las Vegas, positive economic trends are continuing throughout Southern Nevada. The Las Vegas Valley is the third fastest growing metropolitan area in the country according to the latest estimates from the Census Bureau.
Job growth and wage growth are both outpacing the national average with the local economy adding more than 21,000 jobs over the trailing 12 months. Taxable sales have grown more than 7%, and tourism to our community continues to grow driven by strong convention business and record passenger counts during through McCarran Airport. The strength of the Southern Nevada economy is also benefiting our Downtown Las Vegas operations, as we achieved record results in our Downtown segment during the second quarter.
All three of our Downtown properties set new second quarter EBITDAR records with strong business volumes and visitation across our operations. Business from both the Hawaiian customers and unrated players was up significantly during the quarter, the clear indication that we are benefiting from growth throughout the Downtown market. While we are encouraged by the health of Downtown Las Vegas, we continue to anticipate construction disruption from the circa project adjacent to the California and Main Street Station. This disruption will likely have an impact on our results in the coming quarters and is included in our current guidance. But in the long-term, we are confident that circa will be a significant positive for the entire market when it opens late next year drawing more visitors than ever to Downtown Las Vegas.
In all, our nationwide portfolio continues to perform well and we are confident in our ability to continue growing through further operational refinements and strategic initiatives. The expansion of our B Connected programs to our new properties is a good example of a growth initiative is helping drive stronger results. Another promising initiative is the ongoing expansion of sports betting across the country. At the IP, Sam's Town Tunica and Valley Forge, our new sports books are drawing through new and younger customers through our doors. And there's more to come over the next coming months.
Just days ago, FanDuel launched its mobile sports betting app in the state of Pennsylvania, marking the first digital gaming partnership between our companies. Our retail on-premise sports betting presence will also expand in the coming weeks. By early September, FanDuel will open sports book at Blue Chip, Belterra Resort, Diamond Jo Dubuque and Diamond Jo Worth.
Based on what we've achieved so far in Mississippi and Pennsylvania, we are optimistic our partnership with FanDuel will continue to contribute to growth in visitation and revenues across our regional operations, while further expanding our customer base. We also see future growth potential from the Wilton Rancheria tribal resort project near Sacramento. Once complete, this resort will be exceptionally well positioned to serve the Northern California market, located just south of Sacramento along Highway 99, a major freeway in the area, the Wilton property with the closest casino to more than 5.5 million people from Sacramento to the Bay Area. This resort and the revenue stream it will generate will be a historic step forward for the Wilton Rancheria Tribe and its quest for self-sufficiency, and it will be significant growth opportunity for our company as well.
Beyond these growth initiatives, acquisitions will also continue to be a core component of our long-term growth strategy. Over the last eight years, we have acquired 15 separate assets in seven separate transactions and all have performed at or above our initial expectations.
As we've demonstrated yet again in the second quarter, we have a proven track record of identifying and executing transactions that create value, successfully integrating and operating these new assets and taking full advantage of their potential. As we consider future growth initiatives, we will remain disciplined and prudent and how we deploy our capital always acting in the best interest of our shareholders in creating long-term value.
So in conclusion, we remain pleased with our continued long-term progress as a company. We continue to deliver broad-based top and bottom line growth throughout our same-store operations. We are achieving great results at our newly acquired properties. We are successfully executing on marketing and operational initiatives to further grow and diversify our business. We are further capitalizing on our partnership with FanDuel, leveraging the nationwide expansion sports betting to drive new visitation and new customers to our properties.
We continue to deploy our extended free cash flow to pursue a balanced approach to value creation. We remained focused on achieving our long-term leverage target of four to five times EBITDA, while returning a portion of our capital to shareholders through dividends and share repurchases. And we will keep executing, a proven growth strategy of disciplined capital investment in our business, including reinvestments in our existing properties and strategic acquisitions. Our strategy is sound fundamentals of our business are strong and remain confident in the direction of our company.
Thank you for your time. Now I would like to turn the call over to Josh.
Thank you, Keith. Our operating teams delivered another solid performance during the second quarter. With all segments showing year-over-year improvements in revenue, EBITDAR and margin. Our recent acquisitions are performing in line with our expectations and the integration of these properties is going extremely well.
As Keith noted, our rate of same-store growth during the quarter was below the pace we have seen over the last several quarters, due to challenges at the Orleans, Casino and in the Louisiana market. However, given the favorable underlying customer trends in our business, and the positive economic climate in the markets in which we operate, we remain comfortable with our guidance.
As noted in our release, we are reaffirming our full-year EBITDAR guidance after corporate expense of $885 million to $910 million. Providing a few more specifics about the quarter, leverage at quarter end was about five times debt-to-EBITDA and lease adjusted average was 5.4 times. Our target leverage is four to five times EBITDA, and we expect to approach the midpoint of this range by year end. We reduced debt by $43 million in the quarter and by $75 million year-to-date.
Through, the first six months of this year, we have paid $13 million in dividends and repurchased $28 million in shares at an average price of $25.82 per share. We will continue to be measured in the execution of our share repurchase program. Consistent with our past practice, we will use our free cash flow to pursue the highest returning projects, whether those are reinvesting in our business, strategically growing our company, or returning capital to shareholders all balanced with a continued focus on delivering our balance sheet.
Capital expenditures during the quarter were $37 million bringing year-to-date investment to approximately $126 million. We now expect capital spending for this year to be approximately $180 million slightly higher than our previous guidance of $160 million. Our quarter end debt and cash balances were provided in our earnings release.
Finally, in terms of our master lease rent coverage for the assets governed by the lease for the LTM period was 1.92 times. Without Rocco that concludes our prepared remarks and we're now ready to take any questions.
Absolutely, sir. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Carlo Santarelli of Deutsche Bank. Please go ahead.
Hey, guys. Thank you. Keith, you talked a little bit about the Orleans and the impact that it had and you mentioned that ex that the difficult comp NXD event that you had there last year same-store EBITDAR was up 4.5%. I just wanted to clarify is that ex Orleans altogether, or are you including Orleans but normalizing for the event and hold impact?
Great question. It includes the Orleans normalized for the hold issue.
Understood. Okay. Thanks. And then both of you spoke a little bit about some of the challenges in New Orleans obviously July has seemingly gone off to a little bit of tough start with some of the weather there obviously the storms. I believe at least two of your properties were closed for a period of time. Could you talk a little bit about how we should think about not only Louisiana, but Mississippi as well for a kind of the July and how that relates to the 3Q period?
Well, you're right. Actually three of our properties were closed for a weekend Friday, Saturday, Sunday Treasure Chest, Amelia Belle and Evangeline Downs all for different reasons, but all related to hurricane Barry. It had additional effects frankly on the IP as people who would go from New Orleans market over to the Gulf Coast for weekend vacation, didn't travel and also had some effect over in the southwestern part of Delta because of the Houston market after last year's event kind of stayed home and stayed away from the area. So it had a much broader effect now was one weekend out of the month, one weekend out of the quarter. These are very localized markets, and so I think it's too early to predict any impact on the quarter. It obviously will have an impact on the month of July, but it's too early to predict an impact on the quarter.
Understood. And then if I could just one last one. You guys laid our here the contributions in the period from the four legacy Pinnacle assets that you acquired in mid-October of last year, which is also kind of framing the context of the same-store, but obviously with Valley Forge in the 2Q this year, and not there last year and Lattner kind of sprinkled in a little bit last year and there this year. If you were to exclude those two is it safe to assume that the balance of the legacy Boyd portfolio saw margin expansion in EBITDAR growth as well?
We did see same-store EBITDAR growth and we saw same-store margin improvement as well when you take out the contribution from the acquisitions in both periods.
So Carlo, our same-store commentary in our prepared remarks excluded the five properties and Lattner is such a small piece of it but it excluded Valley Forge and the four PNK properties we acquired.
And exclude the Lattner as well.
Yes, exclude the Lattner. So the numbers we quoted in our prepared remarks were...
Were ex everything all six assets effectively?
Yes.
Yes, correct.
Perfect. Okay. Thank you guys;
Thank you.
You're welcome.
And our next question today comes from Thomas Allen of Morgan Stanley. Please go ahead.
You made some comments about potential future M&A. Just in terms of that topic, how does it feel like how active does the M&A market feel right now? And how willing are you to take on incremental leverage here at this point in the cycle to do deals? Thanks.
You're right I think we've probably made a comment on M&A on every call for a number of years as we continued to view ourselves as a growth company and look for ways to expand and once again as we have kind of a proven track record in acquisitions. As always anything we look at will be disciplined in terms of what price we pay making sure we can provide the right return to our shareholders and making sure it fits in the portfolio. There is a reason to acquire it. I think we are flexible in terms of looking at our leverage going up to acquire the right asset in the right market as long as we see it coming down very quickly.
We'll not let our leverage go up without a way to see it coming down very quickly. We are cognizant of the fact that we are long or late in this economic cycle, it's been going on for quite a while and so we will have a little bit sensitivity to looking at acquisitions today than we probably did four or five years ago acknowledging where we are at in the cycle. But we're still looking how active is the market. It's hard to tell it feels a little quiet to me right now. But you never know what's going to happen tomorrow.
Thank you. And then just two questions on Downtown. Obviously, you highlighted that is going to be more of headwinds but you've been growing EBITDAR in that segment about 5% in the first half of this year. Like do you still expect it to grow in the second half of the year? And there is instant talk about you guys expanding in Downtown kind of where are you there now? Thank you.
So I will say that will continue to grow in the second half of the year? Yes, it will continue to grow just not at the same pace as it did in the first half, because of what we expect to be an impact from the circuit development as it grows vertical. There is just that much more construction traffic in the area it's hard for people to get to our buildings and that's two out of the three of our assets are back there. So I think growth will slow in the second half Downtown. In terms of the Fremont, once again we have owned a piece of land behind the Fremont for a couple of decades if not longer.
We've looked at using that piece of land to expand the Fremont any number of times. We're looking at it again currently because quite frankly the Fremont just has a great, great business going on there with record or near record EBITDA almost every quarter and so the question becomes, is there a way efficiently and effectively at the right price to expand their property and get her turn on that investment. No decision has been made still something that we're looking at but those are kind of the dynamics surrounding the Fremont.
Helpful. Thank you.
You're welcome.
And our next question today comes from Joe Greff of JPMorgan. Please go ahead.
Hey, guys. Can you just talk about the promotional environment in the Las Vegas Locals market in the 2Q? I guess, I'm approaching this question from the point of view that we've heard I guess makes signal different points during the 2Q? And how does it feel now versus different point in the 3Q, particularly as you have a couple of your competitors properties that are ramping up relatively new product offerings?
Yes look the promotional environment I think in the local market is pretty transparent. It's out there in the paper and on TV every day and if you're looking at it, I think he would say that in the months of May and June in particular was a little elevated given some of the point multipliers that were being offered some of the more expensive promotional giveaways and that you're seeing when you compared it to the year-ago Q2. April didn't seem that way, July thus far I mean we are four weeks into July, July is virtually over doesn't feel quite as aggressive, but certainly May and June were a little elevated in the market just once again knowing what was out there.
Okay, great. And then Josh corporate expense came in lower than what we had anticipated. Was there anything timing wise or one-time in nature there? And how you are thinking of the full year in corporate expense?
Yeah. So I think we did a really good job of managing corporate expense in quarter two, if you kind look at the trends from even last year they would suggest Q3 would be a little bit higher and Q4 maybe even a little bit higher than that. But I think we are trending slightly below kind of what I feel is an estimate out there of about $90 million. So, I think it will be kind of in that $88 million to $90 million range, not materially different at this time.
Okay, great. And just going back to your earlier response Keith on M&A. How would you assess the risk criteria for evaluating M&A for Las Vegas repairs versus more traditional Midwest or Southeast regional casino?
I guess I can provide a more generic answer because typically it is a little property specific given the quality of the property of what you're looking at, you may assign a different risk profile to it.
Look Las Vegas is still a very strong market. I think it has a great future ahead of it. And therefore it has stable regulatory and tax environment. And so from a risk standpoint -- a risk perspective, I put acquisitions in Las Vegas financially at a lower risk profile even though it's a much more competitive market.
In many of the other states as we've seen you are subject to massive gaming expansion bills, like happened in Illinois, that can impact the landscape very quickly and changes to your regulations in other states that can impact you competitively, but generally hasn't happened here in Las Vegas so.
I think the only other thing that I would add to a consideration for ours is just how important or strategic is the asset relative to the valuation and does that necessarily mean we're going to have to pursue it in a opco/propco structure because I think to the extent it has an opco component to it. I think we will pursue that if it makes sense, but that's another kind of consideration for us and how much exposure we want to have to that type of capital structure, if you will, or that form of financing as we consider acquisitions going forward.
Thank you.
And our next question today comes from David Katz with Jeffries. Please go ahead.
Hi, afternoon everyone. Josh I wanted to just go back to the last part of the very last sentence to your last answer which was around the mix of opco and propco. How do you think about what your tolerance for exposure to that court I would be? Do you have a notional spirit and mind, or is the answer as it is too many other things it really depends?
I would like to give you clarity but I think it really just depends on the opportunity that's presented. And look I think we've been pretty transparent around how we think about it and we think of it as a form of financing clearly and we think of it as a substitute for reissuing equity ourselves.
And so, to the extent that we are going to go out and do a project, I think we evaluate the return characteristics based on whether we would have to use our equity or not to pursue that opportunity. And so it really is going to be specific to the opportunity as to whether it warrants that kind of financing or not and in that mix goes back to everything Keith said and everything we've said historically around as we evaluate acquisition which is how strategic is it? How much free cash flow we're going -- the amount of free cash flow we're going to generate and the value that we can ultimately create from that opportunity? And so I don't think we have a specific kind of target for opco exposure? But those of the kinds of things that we would factor in if we had a specific opportunity.
Right. And if I may since it's been a while what would be the circumstances or the boundaries around which Boyd would be interested in being on the Las Vegas Strip at this point?
Well, I think we'd look at it like all acquisitions. We have said in the past on prior calls that we certainly would like to get back on the Las Vegas Strip with an asset at some point in our future. It doesn't drive us. We don't think about a day and night. We keep our eyes open for opportunities. We'll evaluate it like any other opportunity, the right asset at the right price.
I said earlier we have great confidence in the strength of the Las Vegas market, both short-term and long-term and so we'd like to be there, but you won't see us do anything stupid and once again being a little late in the economic cycle will be sensitive to whatever it is that we do knowing -- not knowing what the future is going to look like.
And the only other comment that I would add that we talk about quite a bit is that I don't think we feel like we need acquisitions to grow our business. We continue to have significant opportunities and just in terms of operating our business more efficiently and focusing on that aspect of the opportunity for our company going forward. And then as an acquisition that is purely opportunistic comes our way that fits our criteria, then that's when we'll be interested in it. Otherwise, we are fine, kind of, tending to our own business.
Got it. Thank you very much.
Our next question today comes from Felicia Hendrix of Barclays. Please go ahead.
Hi. Thanks a lot. Keith, in your responses to M&A recently, not just on this call, but recently, you've talked about the economic cycle and where we are in terms of potential risk factor with M&A, but as we think about your business today it doesn’t seem like your consumer is reflecting any kind of economic sensitivity. So just -- and I know they are two separate things, but to get to your consumer in particular, I mean, I think your results speak for themselves, but are you seeing any sensitivity in any particular -- like any buckets or sensitivity anywhere?
I know third question. I think that from a consumer standpoint, I think, you used the term consumer -- our consumer remains healthy. They are acting normally. I don't see the business decelerating in the near-term. I don't see it accelerating either. I mean, it's more of the same as we look at the first three or four weeks of July across the portfolio. You see generally the same trends, we have been saying for a while. So the consumer remains healthy.
As you -- we think about acquisitions and we think about providing a return to our shareholders over a longer period of time, which is sensitive to levering up when the expansionary cycle that we are in or the economic cycle we are in -- could be winding down a little bit. We are continuing to be focused on hitting a lower profile at as Josh said between 4 times and 5 times. And so we're trying to balance that with the other things that we need to do to continue to grow the company.
So we do have flexibility and remain flexible in terms of seeing that leverage go up. As I said in my earlier comments as long as we can see it come back down in a rather short amount of time. So we'll remain flexible. We're -- I don't thing in the past we have that any great opportunities slipped through our fingers and we're not going to do that in the future either.
That makes sense. And just switching gears to your same-store sales and you explained why that was kind of slower, but if I look at the flow-through it was still good. Just you've talked about the initiatives and the step that you've done in the past kind of keep that flow-through in a strong place, but it's been consistent over time and you don't really seem to significantly anniversary that. So are there some new initiatives that you are doing, or some things that you are reinforcing? Can just talk about that for a minute?
Yes, look I think it's become part of our everyday culture more so than it has in the past to find ways to continue to drive flow-through reduced margins or I'm sorry – improve margins reduce costs. We continued rollout new tools in the marketing side or on the analytic side that allow us to look at the customer differently, talk to the customer differently. Some of these things are fully baked in. Some of them are just rolling out. So I think we continue to benefit from there are more and more initiatives that we uncover and I think we do have more to go. It's it gets harder every month or every quarter to continue to find that next initiative that is going to drive more margin, but the team is focused on it and I'm confident that there is more out there.
Great. And then quickly Josh, quickly what is specifically driving your higher CapEx?
From the 160 to the 180 number?
Yes, yes.
It’s primarily -- last year we actually spend about 160 and we were going to trying to manage that level again despite the acquisitions and I think we're finding that -- we need to spend a little bit more money. And so I expect it to be kind of in that 180 neighborhood as we go through time, but that largely what we are -- that's largely the driver of it.
Okay, so it's just more the acquisitions. And then just as far as the synergies that you set out those are all on track?
Yes, absolutely. I would say we feel very comfortable with the synergies and also what's been great about the acquisitions as the teams that are now part of board are really been very consistent with our culture and it's been great to have them contribute to our organization as well and so there's been a lot of great collaboration and it's really been very seamless. And so not only have we benefited from synergies, but there has just been overall kind of one plus one equals more than two in this case because of the collaboration between everyone.
Great. Thanks so much.
And our next question comes from Jared Shojaian of Wolfe Research. Please go ahead.
Hi. Good afternoon, everybody. Thanks for taking my question. With respect to the weather impact in Louisiana you mentioned it's too early to predict any sort of impact. So I guess, my question is how did you think about that in terms of your guidance for the full year? And is it fair to say that you would have raised guidance without the weather impact is it that big of an impact, or is it not that big of a needle mover?
Yes, Jared, this is Josh. It would not be big enough to raise guidance. We try to give guidance from the beginning of the year that we feel like we can accommodate some ups and downs that are naturally going to occur throughout the year and so that would be just something that we unknowingly built in because of our allowance for things to not always go right and that’s what gives us the opportunity when we kind of hit some bumps in the road to continue to kind of set an expectation that we can meet from the beginning of the year. So that’s all it is really.
Got it. Thank you. And the just switching gears here on the sport betting site. Can you give us some sense as to what you're seeing from a numbers perspective with gaming revenue and non-gaming revenue in markets where sports betting has gone live versus where it was previously, or may be versus some of your other markets?
So we're not in a position really to talk through that in detail. As we look at sports betting, what I call the vertical if you will itself of sports betting for our properties in Mississippi and Valley Forge, the profit is nice and it's incremental but it's really about the incremental traffic that it drives into the building that supports the casino whether it be table games or slots, it supports the restaurants and support other parts of the building, and once again we've seen good traction, we've seen good foot traffic from the three operations that we've opened thus far. Obviously our Mississippi operation was open last August we have more experience with. And once again we're just seeing good traffic in the Valley Forge when it opened in March saw the same thing, good traffic. So it's really about traffic generation for us.
Got it. Thank you very much.
And our next question today comes from Harry Curtis of Instinet. Please go ahead.
Hi guys. I think that there is a little life left in this horse. So I want to beat this horse to death on the issue of acquisitions. I'm sure you are enthusiastic about that. The question is, if you set aside price for a strip asset, can you walk us through the strategic reasons it might be appealing and maybe we went to your -- into your thoughts -- the fact that while -- Keith you said that it is lower risk, but the fact is that that strip assets are to some degree have higher cyclical risk, and then -- and do you think that your loyalty program, your network outside of Vegas is now broad enough to support ownership of a strip property without having to rely too heavily on third-party booking engines?
So look setting price aside everything is easy, but as we think about why our property on a strip, beside the fact that once again we have tremendous confidence in the long-term future of the strip when you think about the Raider stadium, you think about more rooms coming into the market, you think about the expansion of the convention center, there's just the growth in the community, we have great confidence.
One of the successes we've had over the last I don't know year, 18 months and that continues to build for us is cross-property play. Is becoming a larger and larger part of our marketing effort with this expanded portfolio as you highlighted, and so I think that absolutely helps support property on the strip.
Right now we're able to put those folks whether it's in our Downtown properties or many of them go to the Orleans, very few of them end up out of the Sun Coast because it's too far out of town, but I think having a property in the strip, we could support many of the room nights in there with cross-property play, because many people want to be on the strip that's just what their desire is.
But between that and just confidence, yes, strip assets tend to be a little pricier. You have to have a long-term view; you have to have a strategic rationale. So I think once again we’ll be careful, we’ll be thoughtful. We've had opportunities to look at strip assets in the past, haven't executed on anything and will continue to be very prudent about what it is we do with any opportunity that comes up.
Thank you. And my follow-up question goes back to the Locals, the growth in Locals revenues, really from 30,000 feet. It was interesting in the first quarter, the growth rate was roughly 3% and that did decelerate a bit to under 1%. And I'm interested in your thoughts as to why it was a bit more subdued in the second quarter?
It's a fair question. I think one of the things that happen clearly that impacts is the calendar shift when you look at holidays and those types of things. Outside of that when you look at the quarter, the second quarter generally, April was a -- felt a little soft, because of the calendar shift, May felt pretty normal and June felt maybe on the soft side and said another way not up to our expectations.
My comments earlier, the first four weeks of July, looking pretty normal, so was it just a soft quarter? Is it just a soft month outside of the calendar change? That's how we’re looking at it at this point, we're not reading any more into it, we're not picking up natural huge deceleration of the business of any sort.
Once again because as we look at July, it’s feeling pretty normal to us. We're heading back to volume increases that we would have expected talking about calendar changes from March to April specifically for the Easter.
Okay. All right, great. Well, look forward to the second half. Thank you very much.
You’re welcome.
And our next question today comes from Barry Jonas of SunTrust. Please go ahead.
Thanks. May be just following up some of the strip commentary, I think the Locals GGR historically correlated fairly high with the strip. I'd love to get your thoughts qualitatively how do you think your Locals businesses with the strip and if you see that correlation strengthening or weakening from here?
I'll just make an initial comment Barry and then I think see if Keith wants to add anything because he is obviously been here a little bit longer than I have. But I think that -- it's just an anecdote. When the recession occurred and strip came back, we kept expecting that our business was going to come back pretty shortly thereafter basically on the premise that a lot of our customers are either supply the strip in terms of being having a vendor supplier relationship or employed by the strip operators.
And that correlation did not hold up and we have seen other period of time even as the recession kind of became further in the rearview mirror where the Locals business continued to perform well and the strip business had its own set of issues. So I'm not so sure that there is much of a correlation although kind of leading up to the recession, I think everybody would have thought there would have more of a significant correlation. Keith, I don't know if you want to add anything to that?
No I think that's right. Look, there is a limited correlation as it relates to room rates because to a large extent, the Orleans can trade off to the room rates on the strip, but there isn't as a direct of a correlation in today's world as there used to be prerecession.
Great. And then you just had a question about Illinois gaming expansion, bill was passed recently. How should we think about the potential impact to your casinos and Lattner?
So with respect -- I'll take the last one first. It’s easier. With respect to Lattner or a slight route, it’s all good news, they are able to add slick slot machine, so you get to go from five to six. So as a percentage base, it's a pretty big increase. So we'll benefit that business kind of across the state.
As relates to the rest of the bill which was what I just referred to as a pretty massive expansion with multiple new casinos across the state. I would tell you it depends on what actually happens and who jumps in to build a casino and where they build it places like Danville or Waukegan or Rockford. We’re in the southern part of the state. I think is too early to tell. I don't think we have any risk given that 18 and 24 months because nothing will happen that quickly and then the longer-term risk is clearly depended on where it's built and the quality of the operation that somebody builds and operates. So I wish I could give you better answer. I think it's just too early to start to try and predict that.
Would you consider participating either in a new build or also an expansion of your existing facilities?
Yes, so we generally don't comment on projects that we may or may not be looking at in any state. So I'll just avoid that.
Fair enough. Thanks a lot guys.
Thanks Barry.
And our next question comes from Shaun Kelley of Bank of America. Please go ahead.
Hi, everyone. I think all of my questions have been asked and answered. Thank you very much.
Thanks Shaun.
And our next question comes from John DeCree of Union Gaming. Please go ahead.
Hi Keith. Hi Josh. I think I have two more for you not on M&A, but wanted to circle back. Some of the comments Keith I think you made on the consumers in one of the prior questions about no changes. I was wondering if you could elaborate a bit on that. Can you talk about Downtown seeing nice uptake in unrated play? Was curious how the database tears were doing outside of Las Vegas in the regional markets if you're seeing anything notable on rate of play in those markets or the higher in tears of the database any additional color would be helpful.
Sure. So as we think about or as we look at the database generally, some maybe global comments. So visitation is across all of our operating segments whether it's here in Nevada or across the Midwest and South regions. Spend is up in all of our operating segments. Those statistics are particularly strong in the higher work segments which is very good to see for us because when we relaunched our B Connected program in August of last year, one of the focuses was reinforcing the higher end play and trying to do a better job with that customer and it seems to be working as once again those tiers are going a little higher than the lower tiers.
We do see unrated coin and growing pretty consistently across once again all of our operating segments whether it's here, whether it out-of-state. Whether you're talking 14 quarters or 15 quarters you're talking several years of continued growth and unrated coin in. And once as I said earlier, we're seeing good kind of cross property across market play from our customers. So it's kind of a broad snapshot from 30,000 feet of what were seeing out of the database from our existing consumers.
Appreciate the additional color. That's helpful. One more, I think going back to some of your earlier prepared remarks, if I remember the number you had given I think combined EBITDAR of your new acquired properties was up 7% on a same-store basis, and I think you noted about 150 basis points of margin at those properties, if I remember correctly from earlier the call.
Was just wondering if some of that stuff is the synergies that it stayed at those properties or some of it is operational improvements, and I guess really at a high level anything that may have surprised you as you’ve kind of get through integrating those properties and kind of how you see the upside, particularly on the margin front at those new acquired properties if you roll up your sleeves and kind of do what you do?
Yeah. So I think you do remember the numbers correctly 7% and 150 basis points. I think it is a combination of synergies, which we’ve extracted a lot of, but we are not fully done because those things take a while. Operational improvements based on kind of our style of operating and how we kind of look at the customer and market of the customer and do those types of things. I think it is the integration of those properties into B Connected, which occurred at the first of the year.
I think it is the quality of the management teams and how seamlessly they integrated into the company. Josh talked a little bit about that earlier. That has helped drive all of that. So, we feel really good about that. And the other same comments generally hold true for Valley Forge also not just the PMK properties, and so we feel very good about all five of those acquisitions and how they are fitting in.
Have we extracted the majority of the synergies? Have we extracted the majority of the margin increases we can expect? Hard to predict right now. Do I think there's a little bit more margin? I do. I don't know if there's a lot more margin to come out of those properties. But I do think there is a little bit more margin. They are admittedly very well run properties under the prior ownership, and we have been very happy that we've been able to grow them.
Great. Appreciate the additional color and commentary. Thanks, Keith.
Sure.
And our next question is a follow-up from Joe Greff of JPMorgan. Please go ahead.
At this point, all my questions have been addressed. Thanks.
Thank you, Joe.
And our next question comes from David Hargreaves of Stifel. Please go ahead.
Hey, everyone. I'd love to get an update on Wilton number one.
Okay, Dave. This is Josh. At this point, we're continuing to work through all of the components to be ready for approaching the market for both construction and financing, so our expectation is that sometime later this year certainly no later than first of next year that we would be in a place to do that.
And then we're expecting kind of an 18 to 20-month construction period, and then it would open and be very successful. And so, that's basically where we are. We are kind of just going through the process to kind of be ready to launch.
When you talk about organic growth opportunities, I would think you guys have some good ones in Louisiana, and I'm just wondering if you are getting close to wanted to take advantage of those, if we should expect anything in the near future?
Well, I don't think we are prepared to make any announcements right now, and as always, I think the company has made an announcement. When we have something to announce, we would really telegraph it ahead of time. So, let me grill everything I wants to say. I think we have good opportunities in Louisiana in a number of locations, including at our treasures just facility that grow on land, but there are other opportunities we have in that state.
And there’s other opportunities organically throughout the portfolio to grow the business make investments in existing assets and to get good ROIs on those investments. The key for us is making sure that if we're going to move forward with something like that, whatever that is, whatever can a growth opportunity exist that we ensure that that ROI happens.
Just like when we build out the delta hotel a few years ago that property has benefited from that EBITDA stronger there as a result of that, and so we use that as an example making sure that we get an ROI from those projects.
Right. Just to clarify where I'm going with that. If I tell people that we like Boyd, because we think Boyd has opportunities outside of turning to financial engineering to find growth. You wouldn't say I'm misguided and saying there is significant opportunities in Louisiana?
I couldn't hear what you say?
No, I don't think you would be significantly misguided to say that there are opportunities organically that we control that we don't need to resort to financial engineering to simply improve earnings or EBITDA or somehow raise our stock price. We have lots of opportunities to continue to grow the business.
Could that be that is one of your strong points? Lastly, would you talk about any trends in slot refreshment if you are going to be spending more or less going forward on replacing machines?
Yeah. I think we're at a pretty leveled stage, and so I wouldn't expect more, and I wouldn't expect less, even though our operating guys ask me every week for more. They never ask me for less. They always ask me for more. But, it's steady as goes. It's been that way for a couple of years, and will continue to hold the line on slot capital at its current level.
I don't want to monopolize things. But if I could ask one more on the way out I would love to get your thoughts on player development. I think there is a trend towards spending less, on player development. I'd like to hear your thoughts on, if it's necessary going forward or not?
Well, I think player development is just one part of an overall marketing program. So I don't think you can look at it in isolation or in a vacuum. And talk about should you spend more or less in that particular segment of marketing.
It depends on everything else that you're doing. And kind of where you're at, when you say player development, how deep you are into it. And what it all means. So, I'm not sure I can provide a very good answer to your question, except to say, its just one part of a broader marketing platform.
All right, well, thank you very much for your answers.
You're welcome.
And ladies and gentlemen, we have time for one more question. And today's last question comes from Brian McGill of Telsey. Please go ahead.
Good afternoon. Thanks for taking my question. I just had a quick question on sports betting. How is your arrangement with FanDuel work in the sensitive? I'm an existing FanDuel customer in Pennsylvania. And I play on the mobile device. Do you see any benefit from that in terms of revenue? And how does it work in the other states, I guess going forward?
Right, so there is a, there is a formula so to speak, as to how all that works. Yes. We do benefit if one of our existing customers goes online. And there is a mechanism to track all of this. So that, we don't kind of, lose wallet from that customer or lose the benefit of the customer.
All these things, get negotiated before the launch happens. Each state a little bit different, given the dynamics in the state, so it's not a template that can be kind of rubber stamp it roll it out.
Each day is kind of a separate conversation to make sure that, both parties, both Boyd and FanDuel are treated fairly in the process. And once again as FanDuel has access to those customers, remember we have access to eight million FanDuel customers that we get to market to on a regular basis.
So, you do get to see their database. You benefit from that?
Absolutely.
And you would I mean is that plan just coming through FanDuel, you see a piece of that as well. So that in theory could be somewhat significant?
Could be.
Okay, awesome. Thank you.
You're welcome.
And this concludes the question-and-answer session. I would like to turn the conference back over to Josh Hirsberg, for any closing comments.
Thank you, Rocco. And thank you all for joining today and participating. And if you have any follow-up questions, feel free to reach out to the company. Have a good rest of your day.
Thank you, sir. And thank you all for attending today's presentation. You may now disconnect your lines. And have a wonderful day.