Q1 2021 Boyd Gaming Corp Earnings Call
Ladies and gentlemen, thank you for standing by the conference will begin shortly please continue to hold and thank you for your patience.
[music].
Good day and welcome to the Boyd gaming first quarter 2021 conference call all participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero.
After todays presentation, and there would be and opportunity to ask questions to ask a question. You May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two please.
Please note. This event is being recorded I would now like to turn the conference over to Josh Hirschberg Executive Vice President and Chief Financial Officer. Please go ahead.
Thank you Matt afternoon, everyone and welcome to our first 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 and our comments are as of today's date.
We undertake no obligation to update or revise and forward looking statements.
Actual results may differ materially from other projected forward looking statements.
And there are certain risks and uncertainties, including those disclosed in our filings with the SEC and may impact our results.
During our call today and 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, our form 8-K furnished to the SEC today.
Both of which are available and the investors section of our website for gaming Dot com.
We've not provided reconciliation for forward looking non-GAAP financial measures due to our inability for Jack special charges and certain expenses.
Today's call is also being webcast live and Boyd gaming Dot com and will be available for replay and the Investor Relations section of our website. Shortly after the completion of this call.
And we're now like to turn the call over to Keith Smith, Keith Thanks, Josh and good afternoon, everyone. Thank you for joining us our first quarter results reflect and exceptional performance by our company and our entire team is the momentum that began in the third quarter of last year continued throughout our business.
And our company wide basis, we achieved an all time EBITDA record of $292 $6 million well. This is up considerably from the prior year. We also exceeded our first quarter 2019 performance by more than 30% and surpassed our previous record by over 20%.
For the wide margins for the quarter were 38, 8%. This is nearly 200 basis points better than the first quarter of 2019, and 220 basis points higher than the previous record we set in the third quarter of 2020.
We also achieved new EBITDA records and each of our two largest operating segments.
And the Las Vegas local segment EBITDA exceeded our previous record by 11% and was up 22% over 2019 and <unk>.
When excluding the Orleans, which is heavily reliant on destination business. Our same store locals EBITDAR was up 46% from 2019 levels Apo.
Operating margins and our Las Vegas, local segment, where nearly 50% for the quarter 360 basis points higher than the record we set just two quarters ago.
And our Midwest and South region, EBITDAR grew nearly 40% over 2019, beating the previous record by almost 20%.
Segment margins were nearly 40% this quarter and overall gaming revenues were up more than 2% from 2019 levels.
And most important this operating segment. This operating strength was broad based as 15 of our 17 properties and this segment grew EBITDAR and a double digit pace over their 2019 performance.
Throughout the quarter strengthening consumer confidence limited entertainment options and our disciplined operating strategy all contributed to produce record results across our portfolio.
Starting in January and February business returned to the levels, we saw and the third quarter, but it was March where we really benefited from improving trends.
From February to March Daily rated play increased over 18% across all age and worth segments and was up nearly 25% and our 65 and up segment and <unk>.
Vaccinations continued rollout customers are clearly growing more comfortable with resuming their pre pandemic activities, including regular visits to our properties.
We also experienced an impressive increase and unrated play, which grew more than 33% on a comparable basis from February to March a reflection of a strengthening consumer confidence across the country.
The strong and ready to play is providing us the opportunity to grow our database as we leverage our enhanced tools and capabilities to identify high value unrated players on our gaming floors, and then enroll them into our B connected loyalty program in the first quarter, new player sign ups rose, 35% over the fourth quarter, but.
And the share increase and quantity. It is the quality of these guests that is far more impressive on and overall basis. The worth of our first quarter sign ups was over 50% higher and the first quarter of 2019.
And across the business the strong trends of March are continuing into April.
<unk> counts are running well ahead of the third and fourth quarters of 2020, and unrated play remains a very high levels.
While we are very encouraged by april's business trends as other entertainment options become increasingly available. We do expect on rate of play levels will normalize, but even as unrated play and normalizes. We are confident we can keep delivering strong performances as we pursue additional growth opportunities within our growing rated customer base.
One of these opportunities is the 65 and over segment, while we have seen strong growth from this demographic and the last several months. Many are still on the sidelines and as our country continues to make progress against the pandemic. We are confident that more of these guests will return to our properties as the year progresses.
We also see opportunities to grow our destination business, while business from local guest segments remains strong guest counts from destination travelers and remain well below pre pandemic levels.
The softness has been particularly noteworthy at the Orleans, which drives a significant amount of business from destination travelers is also impacted our downtown Las Vegas segment, where visitation from our core Hawaiian customers has been severely restrained by travel restrictions.
As COVID-19 vaccinations continue to rollout and restrictions lift we expect visitation among our weighted destination customers to improve.
We also expect to see improvements and midweek business as restrictions on conventions and meetings are eased and capacity limits are increased.
Over the last several weeks, we have started to see the first indications that this destination businesses returning.
Reservations have increased to their highest level and more than a year and our booking window is rapidly improving.
At the same time, we are experiencing growing demand for non gaming amenities. We are encouraged by the opportunity for growth on the non gaming side of the business and we will take a thoughtful and disciplined approach and reintroducing. These amenities, we remain committed to our disciplined operating strategy that has delivered outstanding results over the last several quarters.
On top of organic growth opportunities within our portfolio, we continue to make progress with our strategic growth initiatives.
For example, our interactive gaming presence and offerings continue to expand.
After introducing startup is our social casino brand last year. We've now entered the world of real money online gaming launched launching our first start us online casinos, and Pennsylvania, and New Jersey last week.
We're also excited by the performance and the ongoing potential for our partnership with <unk> group together, we have established market, leading sports betting products, and Pennsylvania, Illinois, Indiana, Iowa, and Mississippi with significant future opportunities yet to come and states like Ohio, Louisiana, Missouri and cash.
Kansas.
And with our recently announced partnership with the NFL Standalone brand will be significantly enhanced through its association is one of the league's official sports Wagering partners for this coming football season.
And it will have rights to include and game and postgame highlights directly into its sports book out further separating our partner from the competition and a crowded sports betting landscape.
We're also making good progress on the Wilton Rancheria tribe resort near Sacramento, California.
Construction is now underway on the Sky River Casino and the project is set to go vertical next month.
Pleasure of joining the tribal council community leaders and hundreds of tribal members for groundbreaking and early March. This was a true celebration by the entire Wilson community as they saw their vision of self sufficiency finally come to life.
We are proud to call. The Wilton tribe are friends and are honored to be their partners and this project. We look forward to joining them and opening the doors with Sky River Casino and the second half of 2022.
Before concluding.
I wanted to take a note to take note of our company's ongoing progress on our corporate social our corporate responsibility initiatives.
Last week, we were honored to be recognized as the highest rating gaming company and Forbes magazines listing of America's best employers for diversity.
We are a company that takes pride and promoting a welcoming culture for all team members being recognized by Forbes as a leader and workplace diversity is a great honor and reflects our ongoing efforts to create and support and environment, where team members feel valued and appreciated and.
We also released our company's first comprehensive environmental social and governance report last week.
And while our company has been committed to the principles of ESG for decades. This report is the first time, we have compiled this information and low single documents within this report you will see detailed data on the progress we are making to conserve natural resources reduce our carbon footprint enhance the lives of our team members build strong communities and promote good Corp.
And for governance.
We are pleased with our performance against key as ESG benchmarks to date and look forward to sharing our continued progress with you and the future.
In conclusion this was truly an outstanding quarter for our company our business model is allowing us to make the most of and improving environment by delivering exceptional EBITDAR growth and margin improvement throughout the portfolio.
Throughout the country, our property leaders are successfully maintaining higher margins and a disciplined operating philosophy as restrictions lift and visitation growth and we continue to make significant progress on our strategic initiatives.
Throughout all of this our team members have kept their commitment to delivering personal and memorable service to our guests that services, what makes Boyd gaming stand out from the competition and it will continue to draw customers back to our properties as the pandemic recovery continues.
To every Boyd gaming team member.
Together, we are achieving new heights, as a company and it is and honored to be part of such an incredible team. Thank.
Thank you for your time today I'd now like to turn the call over to Josh Josh.
Thanks Keith.
Before I provide comments on the quarter I want to point out and we are included in our 2019 results and the financial tables accompanying today's release.
We believe that 2019 as a more relevant comparison period for this year's results since our entire property portfolio was closed during the second half of March of last year.
Keith noted this was an incredible quarter for our company.
As you have seen from our results and the third and fourth quarter of last year, our operating strategy delivers on growing EBITDAR with enhanced margins and this was also the case in January and February.
January and February for very good months and resemble third quarter of last year in terms of business levels and margins.
Compared to 2019 revenues were down nearly 11% during the February year to date periods, while accompanying companywide EBITDAR after corporate expense rose, 34% and margins improved nearly 12 100 basis points.
The month of March was even stronger March benefited from our more efficient operating model for was enhanced by stronger revenues, particularly from higher margin unrated play and more.
<unk> revenues were down just 6% from 2019 levels for company wide EBITDA and EBITDAR margins after corporate expense approached 44%.
During the first quarter and guest counts and spanned both increased from the levels, we saw and the third and fourth quarter of last year we.
We saw improvements across all age and worth segments, including the 65 and over a cycle.
In terms of gaming revenues, our Midwest and South segment rose more than 2% from 2019, although in the Las Vegas locals segment gaming revenues were up approximately 4% from 2019.
In addition, we are experiencing increased demand for non gaming amenities and growing demand for hotel and capacity from both rated and unrated customers.
Looking forward. We believe there is continued opportunity to grow our business among operating segments of our database and have yet to fully return as well as destination business and we have the opportunity to build relationships with higher worth customers. We have added to our database during the last several quarters.
Our enhanced tools and capabilities combined with a more disciplined operating philosophy have allowed us to execute our business with much greater efficiency and this.
Philosophy, we will continue to be our focus is customer customer demand continues to return and we successfully selectively restore additional amenities.
We believe that our operating strategy is sustainable and we are confident that we can maintain a significantly more efficient business model over the long run.
Yes.
Touching on a few additional points from a quarter and <unk>.
Generated over $200 million and cash during the quarter for us.
<unk> and approximately $730 million of cash from our balance sheet at quarter end.
And we currently have no borrowings outstanding under our $1 billion revolving credit facility.
As we continue to grow out of this pandemic. We believe it is most prudent and prudent to maintain our financial flexibility with respect to our cash balances and our free cash flow.
In terms of our online business, we continue to be excited by the opportunity represented by sports and I and gaming.
And as we previously indicated we expect to generate over $20 million and EBITDAR from online this year and we're on track to achieve that result.
We believe our strategic partnership and equity stake and <unk> is the right approach generating positive cash flow and a highly promotional capital intensive and competitive landscape and.
And as more states legalize sports betting and <unk> leads the way as one of the long term winners in this space are 5% equity stake will only continue to grow and value for our shareholders.
We are also continuing to expand our online gaming presence under the startup brand and Leverages, our customer database and geographic distribution.
We just launched the startup, Brian and New Jersey, and Pennsylvania, and will continue to explore opportunities to expand and grow our capabilities and presence online for.
Particularly in the gaming space.
So in summary, this was a great quarter January and February were good March was exceptional and that strength is continuing into April.
Going forward, we will stay firmly committed to our operating strategy.
Moving increase EBITDAR as a result, and continued operating discipline and a tight focus on the right customer.
And finally, our strategic partnership with <unk>, and our online gaming business will be growing components for our business.
And that concludes our remarks, and we're now ready to take any questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the case, if it and anytime you question and that's been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Our first question will come from Joe Greff with J P. Morgan. Please go ahead.
Good afternoon, Keith good afternoon and Josh.
Sure.
First question I have for you is.
And I guess on the sustainability of margins, particularly in the Las Vegas locals segment.
50% EBITDA margins.
It is impressive to absolutely say the least.
As you think about further revenue recovery.
And do margins in that segment has to go down much further outside of mix associated with commodities like F&B.
Internally are you estimating higher normalized margins versus.
What you estimate the needs of last year, given what you've experienced year to date and and just to kind of get a sense of margins and in March and in April and the locals market.
I'm presuming you're above 50% that you reported for the quarter.
Where are you in in March and April is it something like 55% to give us a sense and then I have a follow up.
Wow.
I can have a follow up from that question Joe.
And I think the best way to think about margins from our perspective is that these margins are incredible.
And I think it's really unrealistic to expect.
And that certainly for the long term that we will be able to achieve those margins.
I think equally as unrealistic is that they are significantly below that I mean, we've we said kind of expecting only 2% or 300 basis points of margin improvement not realistic.
Either.
I think from the perspective and.
Individual segments, those broad statements really kind of continue to apply.
We do think that there is upside in our business from customers that haven't returned both in terms of those that are older and local customers and have a return but also.
The high value customers that are more destination oriented and customers and the business that will pick up from.
Meetings and conventions as more and more restrictions are alleviated and thank all of that is on account of the positive side of the ledger and I think from the perspective of the other side of the ledger, we have risk of.
And <unk>.
Of.
Non gaming amenities and other amenities coming online, while we expect to operate those differently than we have and the past and have higher margins and that more efficiency from those I think they will put pressure on our margins overall.
So I think it's been a good quarter I think a lot of good things came together and particular unrated play.
And I think we will continue to be focused on running a highly efficient and we're focused differentiated strategies and we ran pre COVID-19.
And Thats.
And look just to be clear and the margins that were achieved in Q1 should not be viewed as run rate margins.
I think cutting through everything Josh said, we expect to obviously do better than we were doing and 2019.
By a bunch, but Q1 Q1 margins should not be viewed as run rate everything came together strong revenue growth disciplined operating strategies and as we bring back more amenities is unrated play normalizes as other parts of the business normalize.
And Youll see margins dip below what we saw in Q1.
Great. That's helpful. And then my next question, which is net of unnecessarily and multiple part one like the first one.
Do you think you're more apt or likely to engage with growth through M&A.
And given where your equity valuation is why not take advantage of your stock.
As a currency and a complement same store recovery with accretive inorganic growth.
Yeah.
I would say that our approach to M&A hasnt changed over.
Over the last 12 months or the last six months, we look at it and a very disciplined way.
Whenever it is that we're looking at has to be strategic it has to be a reason to own it and it has to be accretive has to be of high quality assets has to move the needle for us from an EBIT dollar standpoint.
All those things still apply how we finance it.
Whether it be through equity or through that is completely different conversation and whether or not for us and whether or not we should own it and how we pay for it.
So we are.
And we're keeping our eyes open but more and.
Not for.
We're not escalating our involvement in the M&A landscape, just because of a higher stock price today.
Thank you very much.
Thanks, Jeff.
Our next question will come from Carlo Santarelli with Deutsche Bank. Please go ahead.
Hey, guys. Good afternoon, and thank you for taking my question Josh.
Josh.
And obviously in the low cost market in the quarter relative to kind of <unk> 19 margins up 1600, 1100, Midwest and South region.
And back on the three Q call you guys kind of talked about.
You had similar margin expansion in that period.
And as to what you dislike here relative to the three COVID-19, and and you talk about kind of achieving half of that was a safe place to be and I can't comment something along the lines of what Joe was asking that would imply about 800 basis points of expansion in the locals market 500, 600 basis points for expansion and in the Midwest and South.
Net.
Kudos.
More comfortable now after the model work not only through the <unk> and the one Keith strength, but also some of the choppy periods and the <unk>, where the top line performance wasn't as strong given some of the closures and some softer demand during that during that COVID-19 spike period.
Yes.
I think we definitely have confidence and our ability to execute on this strategy I think.
As each quarter passes.
We obviously get more and more comfortable with it but I think the other thing that happens is that and.
Every team member of the company is buying into it and.
And a growing way as well and I think that helps build a momentum around round us being disciplined and continuing to be focused on our strategy going forward.
And I think about kind of.
The margins overall I think we did talk about kind of being able to capture about half of those have for that the increases that we were seeing and what I generally look at kind of and try to back into the work that you and your peers do from an analyst perspective, and see where that number is.
And generally kind of 600 to 650 basis points for the company overall relative to 2019 levels and I think we feel really comfortable with those levels I'm not sure about commenting on the mix and where we get it from but I think overall I think the Canada.
And what we have communicated in the past is something we continue to believe in and I think that we are.
We're continuing to live through this pandemic and kind of get more and more comfortable with the passage of time, but we do have.
Challenges in front of US is as customers continue to come back and as we introduced new non gaming amenities or a slight non gaming amenity and each one of those is going to be a challenge for us and kind of the next.
Next one we have to kind of overcome so I think that's how we think about it but I think we feel very comfortable about accounts.
Kind of what's been said historically in terms of our ability to execute on the margin and what we expect to capture and I don't I don't think we're ready to kind of say that's going to improve dramatically from those levels or anything like that at this point.
Great and then obviously.
The first quarter and you guys articulated was kind of a payable of several different months right.
And when you think specifically about that 65 and older customer technology.
Vaccination rates in that age group are very high and I think.
North of 70% and potentially north of 80% at this point.
And you see any change in the behavior or I should say visitation of that customer is kind of we went through the first quarter and obviously now having both the kind of April.
You know more of that customer and can you kind of benchmark where that customer and today in terms of is it co location relative to kind of 2019 levels.
Hello.
And <unk>.
As we look and focus on that particular demographic.
They are their frequency is up and the last several months and their spend is up over 19 and the last several months.
I think there's probably a number of factors, maybe mostly driven by pent up demand they have not frequent at us they haven't been back to see us and a while and so.
How long does that last is that a new level of play for all of 'twenty. One is it for a couple of months I think those are some of the uncertainties I think Josh for trying to referred to when we talk about margins that we still have to work our way through but we're seeing.
We're seeing increasing numbers of them come back as we get through March and into April we're seeing what's getting better visitation or increase visitation increased levels of play and as a matter of when does it normalize.
And sorry Keith.
They were up relative to <unk> 19 in March and April.
Yes.
Yes, Okay, and then just lastly, Josh sorry, and any kind of color you could provide on capex plans for the balance of this year and and whether or not there will be any incremental capex with some things.
And perhaps or bringing back online.
The band.
Presents itself for certain other amenities.
Yes.
And we generally have thought about our capex plan for this year around $175 million and really that more backend loaded and front end loaded Q1, Capex was I think like $35 million and.
And so.
I think that.
We will we will backend load our capex and we will expand it as long as we continue to get comfortable with kind of the role kind of the roll through of the pandemic. If you will.
And we don't expect to be spending any more than that based on what we know today and I think thats consistent with what we said at the end of last year also.
Great. Thank you guys appreciate it.
Our next question will come from Barry Jonas with Truth Securities. Please go ahead.
Okay. Thanks very much.
Can we spend a minute talking about Boyd PE.
The leader and a couple of properties. Just curious is there any early engagement or funding trends you can share and timeline for the wider launch.
Yeah.
Yes, and so probably no specific data that we're prepared to share right. Now. We currently are launched or live in four states, Pennsylvania, Indiana, Ohio, and Nevada, we expect that.
We will be fully deployed throughout the company and all of our states and all of our properties over the next several quarters.
Definitely by the end of the year.
And it's going well I mean people are accessing and people are using it the numbers are growing but nothing.
In particular to highlight in terms of quantities right now.
Got it and then as you talk about sort of maybe more normalized run rate for margins or at least from the Q1 pace curious is that tied to any competitive.
The competitive actions around promotions or amenities that you're currently seeing now.
Okay.
And we can talk about margins and a lot of different ways clearly.
Revenues because of our discipline.
Operating structure that we've embraced revenues have the biggest impact on whether those margins continue to go up or stay the same or go down a little bit, but secondarily the intensity of the competitive landscape and the various jurisdictions will have an impact.
We have and we've seen some of the smaller competitors go back to their old playbook, we haven't and most of our markets Havent seen anything too significant except from smaller players, but yes that will that will have an impact adding back non gaming amenities will have some impact, but not as significant as things like revenue trends.
And.
And the competitive landscape those will have more significant impacts on future margin.
And I also think I mean, we got a big boost from non rated play in March and in particular, and so that's highly profitable revenue and given we're not marketing to that customer base and.
And so kind of how that particular segment of our customer trends is also relevant for the margin story.
Great. Thanks, so much and congrats on a great quarter.
Thanks, Tim.
Our next question will come from Thomas Allen with Morgan Stanley. Please go ahead.
Hi, Thanks.
So first quarter EBITDAR is typically about a quarter of the year.
Can you just talk about kind of what you see as the gives and takes of kind of being able to assist day in this I guess.
You did 293 of EBITDA and the first quarter.
For asset last party and Thomas.
Alright.
And like.
<unk> is typically a quarter of the year.
And then.
The question has there been around like can you should pay and margins, but my question is like can you sustain the absolute EBITDA you just said.
Yeah. So look I think the way to think about that is and the context of kind of what's been happening so far.
And so I think.
The performance in Q.
Q1 of this year as well as if you think about Q3 of last year, where we're generally very obviously good quarters. I think you have some ability to do obviously second quarter performance is going to be.
And generally positive as well and then I think the rest of the year gets to be difficult from a comp perspective Q4.
<unk> was softer due to demand.
Associated with Q4 of last year. So I think when you think about two.
2021, and the rest of 2021, and we're not giving guidance, obviously, but just kind of put in and the context of what's happened so far and the quarter. Since we've reopened you can kind of start to put in context, what kind of a reasonable level of performance going forward.
Sure.
So I don't I don't know if that helps or not but I don't think you can take obviously Q1 and multiply times four and get there.
So.
Okay.
And then a broader a broader topic.
And among lots of companies is.
A lack of labor and you're starting to see.
Wage inflation are you feeling.
Yes so.
Hiring team members is one of the bigger challenges we have today, whether it be here in Nevada or across the country unemployment has dropped and most locations, where we operate to significantly and below where the peak was last year and frankly and most of our markets close to where it was in 2019.
And yes getting team members is difficult and it is a challenge, but we've been able to work our way through it or are we seeing some wage inflation I would say we are seeing limited wage inflation.
So pockets here and pocket, there and not anything thats going to significantly alter the margin of the business.
Thank you.
Our next question will come from Steve <unk> with Stifel. Please go ahead.
Yes, Keith day, Josh and good afternoon. So.
You guys have talked a lot about the unrated play being up so much I think you said 33 percentage was up 33% and Thats pretty much continued into April.
Can you help us remind us what percentage of your casino business came from and.
Unrated play pre pandemic and then maybe what that looks like today and I guess, what I'm trying to get out here is just a sense of what type of impact there could be some of these non rated customers gravitate elsewhere elsewhere.
Other entertainment options come back online.
Yes look historically unrated play has been less than half our business.
Today, I think it's probably grown to be about half the business, but.
And that Zip code.
In terms of.
The.
The losses, I think not all unrated play is going to leave the building when there's other entertainment options I think that we think that and.
It is the slice of our business that's most at risk.
We typically when you talk about unrated play I think Keith was largely and referring to overall revenues.
Think that.
Of our rated play it represents about <unk> <unk>.
20% or so we generally track about 75% to 80% of our gaming revenues.
And so.
So.
And that make help contextualize, a little bit of a risk I think again we.
Don't expect the entire kind of unrated segment to be at risk because we have a core group of unrated customers that for.
And I should say and.
And since we don't know who they are.
For kind of level of performance and on rate and that typically is in there and our business.
Just been kind of extra.
Extra robust are robust and in March and in particular.
And then second question, you've talked a lot about the demand for certain non gaming amenities that continues to pick up and I and.
And I guess the question is how.
How do you guys balance bringing those.
And those assets back online versus knowing the potential margin dilution that could follow and.
Does that decision come down to the fear around potentially losing that customer to another competitor and in order to get those non gaming amenities and hopefully that makes sense.
Yes, I would say, adding back non gaming amenities is not a margin conversation, it's a business demand conversation and it's about providing the right level of product and service and amenities to our guests and so as guest counts grow.
The guests are looking for more options and they become more comfortable coming out and sitting and restaurants we.
We'll react to that.
In terms of opening more amenities and.
I think we've said a couple of times.
And amenity that looked and felt a certain way in 2019 may look and feel of different way today in terms of how we operate it and how we open it and so.
It's not purely a margin conversation it really is about how do we best support the customer and make sure that customer stays and loyal to us.
At the right reinvestment levels.
Okay.
Okay, great. Thanks, guys appreciate it.
Our next question will come from David Katz with Jefferies. Please go ahead.
Hi afternoon, everyone.
I wanted to just go back to the discussion about and.
And margins and amenities and particular, alright, when we think about what those the impact of those amenities on margin is it just a function of the structure of how those amenities.
You know operate and within the enterprise or is there some element of them being given away.
And that is a drag and I'm just looking for an extra layer of insight there.
Okay.
Yes, so I think so David the way I think about part of it is understanding who your customer is and who you are and who you're providing benefits to be in that particular.
Non gaming amenity, whether it's a restaurant or hotel. So you have to I think historically and.
And our I'll say I'll talk more and the present, we've gotten better at making sure that we understand who we want to provide say a comp or benefit to participate and that kind of.
<unk>.
That outlet if you will so.
And I think that as we go forward or as we execute the business today and as you think about who is in the building today, it's really a.
For.
Raleigh speaking as a high value customer that we've not that.
Has been is loyal and rated and we know who they are and translates into a high value to us and then the other set of customers and.
<unk> or lower rated customer that we're not marketing to the same degree that we were historically, so where are you kind of get off track or off rails as from the perspective of over reinvesting and customers that may not have the worse.
Or maybe unknown to you and and.
When you provide the direct mail all for the broad based off for the reinvestment all for sure whatever whatever it is and so I think it's a combination of what is what we're talking about and changing our behavior going forward. It's really a combination of two things, one just having better tools and analytics and capabilities.
From a marketing perspective to be able to understand who we're marketing to into a higher quality job of that.
And two is from our perspective.
And just philosophically understanding.
Kind of who we want to market to and who we want to be and kind of offer okay.
Offer these amenities too.
I think it's really a combination of two things and the second part really became more visible as coming from a closed physician and Reed reintroducing business post COVID-19 or post reopening and cover.
Got it and with respect to the rollout of Star dust.
That something we should think about and a sort of an earnings neutral fashion or is there some drag along with it or how would we what context should we look at the next year year and a half.
I think as you think about the rollout of the startups product and Pennsylvania, and New Jersey, it's baked into the.
20, plus million dollar estimate we've provided on kind of the online EBIT or for the year. So all of that is baked into that so yes.
It's already kind of included if you will and what we've talked about we don't have any real quote unquote investment or expense associated with that offer.
Understood. Thanks, Congrats great quarter.
You.
Our next question will come from Shaun Kelley with Bank of America. Please go ahead.
Hi, good afternoon, and thanks for all the color already.
Josh Josh and Keith I, just wanted to dig a little bit deeper on first of all just maybe more of a clarification on the on the <unk>.
Unrated play piece.
Just how much of that and your kind of own estimation is coming from and what are the drivers behind it how much of that is coming from stimulus.
Is it coming from tax refunds or timing of holidays and vacations just given the surge is probably a few things going on but kind of curious on what your insights are what your property manager of managers Youre talking about.
Yes look it's a great question. It's one we spend a lot of time talking about and all.
Obviously, given the fungible nature of money I don't think we really know clearly I think if you look at pent up demand from the older segment that we've talked about a couple of times has come out and bigger numbers in March and April you talk about the rollout of the vaccines people, becoming more comfortable being and large crowds strengthening consumer confidence.
And all of those things have come to play there are still limited entertainment options. So as more people are comfortable coming out because of vaccinations were still one of the few true entertainment options out there that people are comfortable with so I think it's all of those things.
Really don't have a <unk>.
Doug.
Definite are finite answer for you than that.
And if you if we sort of take a couple of buckets. If we think about the sort of remaining recovery on the destination side and then we think about the over 65 demographic and show some ability for that to recover and then we think about <unk>.
Versus this sort of surge and non rated play is there any way to estimate or are the first two buckets.
And our theres more than enough to sort of overcome sort of the surge you saw and the unrated play or do they balance each other out and just kind of trying to think about the magnitude of what's left versus what you. What you just saw.
Yes.
I think we would like to be able to quantify that the issue really is.
A black hole that you don't know about.
Around the our surrounding the unrated customer I do feel alive for I think we do believe and we can quantify the opportunities. We have versus 2019 are some prior period of customers that previously came that haven't come back. We can look at that and can understand what that is we can understand.
And where they're worth was what their age is whether their destination for local customers. We can understand all of that and understand that they arent and the building today, but we don't know with 100% certainty as to what degree all of those customers are going to come back or not I think what we what we the way I think about it and the way we.
We think about it as a company is that the reality is is there's a whole bunch of a younger demographic customers that haven't come back.
But the worst associated with those is not significant when you compare it to the <unk>.
And <unk> segments that are age tiers that are above that that haven't come back. There is a host I worked unrated customers, both local and destination that haven't come back there's guys that are.
Between whatever you consider a younger demographic and the oldest demographic that still haven't come back that fall in those categories too you've got opportunities with respect to meetings and conventions as as restrictions are lifted and will help drive efficiencies and midweek business, you've got opportunities with the unrated customer segments and.
We are signing up and learning about their work and learning about the opportunity and then you go okay, well how much of the run rate implied at risk and that that's the part you don't know whats your balancing again against and and rehab.
Thanks for tackling and Josh and then one last clarification would just be just for that to over 65 piece.
And just how much of that customer and I just wanted to clarify really.
Are you seeing the same customer.
Spending more and coming more frequently or are you seeing total dollars of the over 65 cohorts now on kind of March and April versus what you were seeing back in 2019, and just the same customer if they come back for total dollars are still down our total dollars themselves actually up.
Total dollars are up I believe its more customers and more spend.
And the aggregate for that age group.
That's right so.
So we're saying we got higher overall revenues are up and that segment with less customers.
And.
And so as a result.
And the customers and we are seeing the worst of them has improved.
Alright, so regardless of the metric that you look at going from whether its number of customers spend per customer total revenue by segment all of those are up.
When you compare to <unk>.
And of the trend from Q3 to Q4.
And now into Q1.
Understood Yes.
Yes, it does.
Understood. Thank you very much.
Yes.
Our next question will come from Chad Beynon with Macquarie. Please go ahead.
Hi, good afternoon, and thanks for taking my question.
Josh Keith about a year ago, you suspended the dividend, which was roughly $30 million a year from a payout standpoint.
Given the unknowns of COVID-19, and here we are about a year later, you're setting records youre talking about $200 million of free cash flow it doesn't seem like.
Their major.
Near term M&A or capex on the horizon. So how are you thinking about the return of the dividend if there's nothing else to use the net.
Cash flow thanks.
I think it's a conversation that is premature today go you may be able to see around corners, a quarter or two and in the future I guess, we're not.
Net.
We are confident of looking around those corners, yet and so the key for US today is maintaining financial flexibility as we continue to grow off this well we have had great success and by all means it was a fantastic quarter.
And.
We have to see how we continue to grow out of this pandemic and make sure nothing else nothing else happens and so financial flexibility is the key that's why there is.
$700 million of cash on the balance sheet and that will continue to be our focus.
And some really good use for.
Our cash or liquidity in the meantime, we're going to maintain flexibility.
Okay. Thanks, and then.
And on the growth side, there have been a few rfps and in the past I guess in the past year, and Virginia, and Chicago and a few other places and.
Now you have New York, and potentially Texas, Although just and early discussions kind of on People's radars. How are you thinking about throwing you had and the ring for for some of these ground up.
And I guess larger investment opportunities.
And if they do come up and the near term. Thank you.
So the way I think we think about it is really.
Just because we're generating a lot of free cash flow and doesn't mean, we're going to go out and spend it all I think from our perspective, we have to have confidence and the opportunity quite honestly and be able to feel comfortable that we can generate the returns. So I think there are opportunities that we have historically.
We've learned from them, we continue to watch it.
And interested in and then there's others that where we think it doesn't make sense for a company like ours, regardless of the success that we're having.
We just don't like the dynamics of the market our value or the.
Circumstances under which we're going to need to pursue that opportunity. So it all comes back to can we generate.
And the adequate return for the investment and.
And.
Yes.
Thank you.
We don't see that and we're not going to pursue it and I think thats the fundamental theme.
Thesis of how we think about opportunities and whether you want to talk about opportunities and.
Land based or land based development or any other aspect of our business.
And that's where we start the conversation I think.
Thanks, Josh great quarter guys.
Thank you.
Our next question will come from John Decree with Union Gaming. Please go ahead.
Hi, Keith Hi, Josh.
And.
Guys I think the capacity restrictions.
And the state and Nevada, Las Vegas, Youre going to be lifted to 80% and a couple of days from 50% wanted to get your take on any implications that has or that you think it might have either positive or negative.
For your business or the competitive landscape and then as a follow up and extrapolate that.
Any markets that you operate and where.
Improved capacity restrictions are eased capacity restrictions might be a benefit for you guys.
Sure So look I think that.
We've proven and Q1 and frankly last year were and indication that we don't necessarily need more capacity to generate strong results, having said that the lifting of capacity restrictions going to 80% here in Nevada, and then ultimately 100% is certainly incrementally.
Positive it's positive from a couple of factors certainly on big.
Large busy weekends, we can probably use some additional capacity mid week really not but it has the psychological effect.
Not only here locally, but I think across the U S and <unk>.
And the fact that Las Vegas has reopened and I think will drive more people to town across the country, we have varying degrees of capacity restrictions still in place and.
So as those get lifted.
Really as a matter of will it drive more customers do we need that capacity or are we doing fine and every market has its own dynamics. So there is not kind of a holistic answer I can give you other than lifting capacity restrictions and certainly incrementally positive if not only for psychological reasons and letting people know that we are back to normal.
Thanks, Keith and congratulations guys on a great quarter.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Josh Hirschberg for any closing remarks.
Thanks, Matt and thanks for everyone.
Joining the call today and we appreciate all the questions and if anyone needs to follow up for the company. Please feel free to reach out.
Thank you very much.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.