Boyd Gaming Corp (BYD) 2013 Q4 法說會逐字稿

Good afternoon and welcome to the Boyd Gaming fourth-quarter 2013 earnings 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 this event is being recorded.

I would now like to turn the conference over to Josh Hirsberg, Senior Vice President and Chief Financial Officer.

Thank you, Amy. Good afternoon, everyone, and welcome to our fourth-quarter earnings conference call.

Joining me on the call this afternoon are Keith Smith, our President and Chief Executive Officer, and Paul Chakmak, our Executive Vice President and Chief Operating Officer.

Our comments today will include statements relating to our estimated future results and other market, business, and property trends 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. 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 as a result of certain risks and uncertainties including but not limited to those noted in our earnings release, our periodic reports, our other filings with the SEC.

During our call today we'll make reference to non-GAAP financial measures. For a complete reconciliation of historical non-GAAP to GAAP financial measures, please refer to our earnings press release and our Form 8-K furnished to the SEC today, and both of which are available in the investor section of our website at www.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, as a reminder, today's conference call is also being webcast live on our website at www.boydgaming.com and will be available for replay on the Investor Relations section of our website shortly after the completion of this call. I would now like to turn the call over to Keith Smith, our President and CEO. Keith?

Thanks, Josh, and good afternoon, everyone. Thanks for joining us here today.

For the fourth quarter of 2013 our wholly owned business performed in line with our expectations, despite some external challenges in December. But before reviewing our results for the quarter I would like to begin by summarizing where Boyd Gaming stands today, the progress we have made as a Company over the last year, and where we are going in the year ahead.

During 2013, we made great strides executing on our strategic plan, putting our Company in a much stronger operational and financial position than when the year began. From an operational perspective, we diligently focused on refining and adjusting our product, our marketing, and our amenities, keeping costs under control while delivering a compelling and competitive entertainment product to our customers.

A good example of this is our Penny Lane initiative. In early November we relaunched Penny Lane at our four Las Vegas locals properties, adding significantly more bonus opportunities for players under the tag line: more bonuses, more often. We then introduced Penny Lane for the first time in our downtown Las Vegas and our midwest and south operations. Penny Lane is now in place at 12 Boyd Gaming properties across the country and is having a positive impact on play across our business.

The adjustments and refinements we have made to our business have helped to us return to consistent and sustainable EBITDA growth in Las Vegas. While the landscape has been more challenging elsewhere, we are confident that we have the right strategy and amenities in place to successfully compete across the country.

We are making good progress on the financial front as well. During 2013, we eliminated more than $0.5 billion in debt. We reduced interest expense by more than $60 million annually, and our earliest debt maturity is now 2018. And at Peninsula we're now generating nearly $100 million a year in free cash flow. As a result of all of these efforts, we have improved our flexibility, allowing us to consider a number of potential growth opportunities that we believe will create significant value for our business and our investors in the years to come.

Boyd Gaming has always been focused on innovation, growth, and increasing long-term shareholder value. That commitment will continue. Acquisitions are a good example of that philosophy in action. And while the landscape of potential acquisitions is more limited now than in the past, we always keep our eyes open. As we demonstrated with the Peninsula Gaming and the IP, we know how to identify assets that are a good strategic fit, acquire them at attractive price, and successfully integrate them into our nationwide operations to create shareholder value.

But acquisitions are just one of many ways to pursue future growth. New developments are another. And we currently have two compelling opportunities in our long-term pipeline.

First in Northern California, our partnership with the Wilton Rancheria Tribe represents a significant potential growth opportunity, a project at an outstanding location with great access. Early stage design work is well underway, and the environmental impact statement scoping report was filed in early February. We continue to work with various federal, state, and local government agencies to move this project forward.

In South Florida our partnership with Sunrise Sports Entertainment puts us in a prime position to develop a gaming entertainment complex in one of the state's most visited locations. Florida lawmakers are now actively considering the expansion of casino gaming in key markets across the state, and we expect to have more clarity on this opportunity in the coming months.

When it comes to growth opportunities, we're not limiting ourselves to domestic markets. One interesting possibility is Japan where lawmakers are now considering legislation that would bring resort casinos to that country. Much of the attention so far has been focused on Tokyo and Osaka, but the opportunity in Japan could be much broader, including regional resorts in markets across the country.

We have started looking closely at the possibility of competing for one or more of those regional licenses. And recently I had the opportunity to travel to Japan to meet with various business and community leaders and introduce them to our Company and our capabilities. We've begun examining the landscape, establishing new relationships, and gaining a sense whether Japan would be a good fit for our Company and our growth strategy.

Expanding into new markets through new developments or acquisitions is just one facet of our growth strategy. From an organic standpoint there are still other opportunities to innovate, evolve, and expand our business. An example is our non-gaming product.

Amenities like restaurants, night life entertainment, and hotel rooms have been areas of significant growth for our industry in recent years. They provide an opportunity to speak to an expanded demographic and to strengthen relationships with our existing customer base. Accordingly, we are increasing our focus on enhancing and reinvigorating our non-gaming amenities across the country.

We also continue to refine and expand our player loyalty program. Starting this month we will begin the rollout of the BConnected program at the Peninsula properties. Once in place, BConnected will create a new opportunity to further cross-market our nationwide portfolio of properties to our customer base.

In addition, we plan to introduce Penny Lane at these new properties in the coming months. As we have demonstrated elsewhere, Penny Lane will give these properties yet another competitive advantage, a bonus-centric, high-quality slot product that resonates well with players.

Another compelling opportunity is online gaming. We took an important step forward in this regard in the fourth quarter. On November 26, we launched a real money online gaming operation in the state of New Jersey, our first such operation in the United States. And while it is early, we are extremely pleased with the progress we have made so far.

Through January, Borgata has established itself as a clear market leader with nearly one-third of the total market. This is a testament to both the quality of our online product and the power of the Borgata brand. It is important to note that the vast majority of our online customers to date have not been active Borgata customers. This is clear evidence that online gaming is complementary, not competitive to our land-based business. By delivering our product through a more familiar and convenient channel we are reaching entirely new customers and growing our overall business.

New Jersey is a good first step but will not be the last. A number of states across the country are considering online gaming as well, and as new opportunities emerge we will carefully consider each to determine which ones make strategic and economic sense for our Company.

As you can see, we've made great strides in 2013 executing on our strategy to strengthen our Company and our balance sheet, and to have a compelling portfolio of growth opportunities that we believe will pay off for our shareholders. Our future as a Company is bright, and I remain optimistic about our direction and our ability to create long-term shareholder value.

Before handing off the call to Paul, I would like to take a brief moment to review some changes we are making to our guidance practices. Josh will be providing more detail on our guidance in a few minutes, but wanted to first give you some color on the changes we are making and why we are making them.

First, we are discontinuing individual guidance for Borgata. We will instead provide guidance for total adjusted EBITDA after corporate expense, which will include our wholly owned properties and Borgata. We have grown significantly as a Company over the last several years, and while Borgata remains a significant and important portion of our business, it now accounts for a smaller portion of our overall results than in years past. As a result, it no longer makes sense to call out this property individually in our guidance. Our preference is to focus on overall operations nationwide, rather than the quarterly performance of an individual property.

Next, we are moving to our guidance. While we are furnishing first-quarter guidance today to ensure a smooth transition, we believe that annual guidance is a better fit for how we view our business from a long-term perspective. Thank you for your time today. I will now turn the call over to Paul. Paul?

Thanks, Keith. Hello, everybody.

As noted on our last call, October was a strong month across our operations. This positive trend continued about halfway into November before weakening. As we saw in previous quarters, spending and visitation declined among casual players. This trend was exacerbated by severe winter weather in December, which further reduced visitation in many markets outside of Nevada.

But there were bright spots, as well. Across the country business among our top-tier players is as strong as ever, and the recovery of our Las Vegas business continued.

Let's begin our review with the Las Vegas locals business. Our 6% EBITDA gain marked the fourth straight quarter of growth in this segment, thanks largely to the operating efficiencies we have built into our business. We reduced marketing spend by nearly $2 million during the quarter and improved operating margins by more than 120 basis points.

And we saw benefits throughout the quarter from the launch of an enhanced Penny Lane. Players have responded well to Penny Lane's new bonus features, with meaningful gains in both frequency and play among participating customers.

Non-gaming business also grew during the quarter, driven largely by strength in our hotel business. As Keith noted, non-gaming has been a promising area of growth throughout our business, and refining these amenities is a strategic priority both in Las Vegas and across the country.

2013 was an encouraging year of consistent growth for our locals business. EBITDA increased by nearly $9 million for the full year, an increase of almost 7% over 2012. And we expect growth to continue in 2014.

The fourth quarter was quite positive for our downtown business, as well as revenue and EBITDA growth resumed, which is largely the result of successful refinements throughout our business. The changes we made last year to our Hawaiian marketing programs are continuing to have a positive impact on business volumes. And our Hawaiian charter service is now running much more efficiently with improved yields. Like our Las Vegas locals business, downtown has shown encouraging strength so far in the first quarter and we remain optimistic about the direction of our downtown business in 2014.

As you have heard from others in recent weeks the fourth quarter was challenging for casino operators throughout the midwest and south. We were certainly no exception to that trend. EBITDA did increase year over year, but this was entirely the result of a one-time favorable property tax adjustment at Blue Chip. Consumers remain cautious throughout the region; while play from our top-tier customers was solid, we continue to experience declines in casual play at many of our midwest and south properties.

Winter weather has not helped the situation. As many of you know from personal experience, this has been one of the worst winters in decades. And we have contended with polar vortexes and near-record snowfalls. We've even seen ice storms on the Gulf Coast. This had a significant impact on our business throughout the region.

In December we estimate that severe weather reduced EBITDA by about $3 million from what we would have expected to see during a typical winter. Despite these challenges we remained vigilant in controlling costs and successfully mitigated a good portion of the revenue shortfall's impact to EBITDA during the quarter.

Once again our Delta Downs property in Southwest Louisiana was a notable bright spot in our operations. Delta Downs posted double-digit EBITDA growth in the fourth quarter and set all-time annual records for EBITDA, gaming revenue, and coin-in. Delta is clearly benefiting from an excellent location near the thriving Houston market. And it is outperforming the competition, which is a tribute to the Boyd Gaming brand proposition, a high-quality product at an attractive price, effective marketing, great service, and a comfortable environment for our guests.

In Atlantic City, consistent with our revised guidance, results were well below our original expectations. A number of factors were at work. The most significant was an unusually low hold percentage in December, which reduced EBITDA by $3.6 million. We estimate that winter weather cost Borgata another $1 million in December.

And we continue to feel the impact of higher property taxes, which reduced EBITDA by $2.1 million during the fourth quarter and $8.4 million for the full year. While we did receive favorable property tax ruling in October, that ruling is now being appealed by the city, and we must continue to pay taxes at a higher amount until that process is complete. However, we expect to reach a resolution by the end of the year.

While online gaming did not make a meaningful contribution to EBITDA in the fourth quarter, we are encouraged by the early performance of Borgata's real money online gaming product. Through the end of January, the Borgata and PartyPoker platform had a total market share of 43%. Borgata accounted for a 30% share by itself, which actually exceeded our land-based market share by more than 8 percentage points.

Notably, much of this business is coming from entirely new customers. To date, 85% of our online players have not had rated play at Borgata in the last two years. We are growing the Borgata database, creating an opportunity to market the property to customers we have not reached before.

Looking at the first quarter, weather continues to have a negative impact on Borgata's land-based business. We have also seen a significant up tick in the promotional activity throughout the Atlantic City market, although Borgata has not needed to match this increased spending.

Moving to the online business. We continue to make excellent progress expanding and refining our product during the first quarter. Our geo-location technology has been significantly improved, making it much easier for our New Jersey players to access the site.

In February, we launched our first 3G/4G mobile product for customers using Android devices. We expect to expand this technology to Apple devices, as well, in the near future, pending regulatory approval, which will mark the final step in our rollout of online and mobile platforms.

The addition of mobile products that can access cellular networks is a significant milestone for our online business. It means that customers can access Borgata online gaming from every corner of the state regardless of whether they have access to a Wi-Fi network. So while it is still early, we are making considerable progress and see the potential for significant growth in our online business throughout the year.

To recap, our operations continue moving in the right direction despite some external challenges. The refinements and innovations we are making to our core business are resonating with customers. Play among top-tier players remains strong.

We are successfully controlling costs without compromising the quality of our product. As a result, our Las Vegas segments have returned to consistent growth and we are confident our midwest and south business will improve as well in the months ahead.

Thanks for your time today, and now over to Josh.

Thanks, Paul.

During the fourth quarter, we continued to take advantage of favorable market conditions to reduce interest expense and extend maturities. In December we redeemed Borgata's 9.5% secured notes through 2015 with a $380 million term loan. The term loan matures in 2018 and is priced with a LIBOR spread of 5.75%. At current rates this refinancing reduces Borgata's interest expense by over $8 million annually, and given the amount of free cash flow this property is expected to generate, increases the amount of prepayable debt in the capital structure.

This past year was very busy for us in terms of both paying down and refinancing debt. In 2013 we repaid $525 million in debt and refinanced existing debt at Boyd, Peninsula, and Borgata. The net cash interest benefits from this activity represent over $60 million in annual interest savings.

In addition 2013 was the first full year of contribution from our Peninsula acquisition. Peninsula has expanded our free cash flow generation by approximately $100 million. Further contributing to our free cash flow is the sizable $1.1 billion tax loss carry-forward, which is valuable to our Company for at least the next decade, and on a present value basis represents at least $2 per share. The elimination of our federal tax burden on a cash basis is expected to contribute materially and directly to our free cash flow for years to come.

Our year-end debt and cash balances are disclosed in our earnings release. We had incremental availability at year end under our credit facilities of $268 million at Boyd, $27 million at Peninsula, and $17 million at Borgata. From a financial covenant perspective, Boyd secured leverage was approximately 4.2 times compared to a covenant of 5 times, and total leverage was approximately 6.5 times versus a covenant of 8.5 times. At Peninsula, total leverage was approximately 6.3 times compared to a covenant of 7 times. And Borgata's covenant EBITDA was $121.8 million, compared to a required minimum level of $110 million.

Our capital expenditures in the quarter were $37 million, including $2 million at Peninsula and $6 million at Borgata. For 2014 we are budgeting maintenance capital expenditures to be approximately $125 million on a consolidated basis. This amount includes approximately $15 million at Peninsula and $25 million at Borgata. In addition to our budget for maintenance capital, we expect the final phase of the Kansas Star expansion to cost approximately $20 million and be completed in early 2015.

Total annual depreciation expense is expected to range from $255 million to $260 million, with Boyd's level of depreciation approximating $130 million, Peninsula's depreciation about $72 million, and Borgata's depreciation around $55 million.

In terms of total annual interest expense, we expect on a consolidated basis approximately $300 million. This interest expense assumes a modest increase in LIBOR rates in 2014. Of this amount we expect Boyd's interest expense to be about $155 million, Peninsula's to be around $75 million, and Borgata's to be around $70 million.

Other items that might be of interest for 2014 modeling purposes include deferred rent, which should approximate 2013 levels at about $4 million for the year, pre-opening expense, which is estimated to be about $5 million for the year, and share-based compensation expense is expected to be about $16 million. Shares outstanding should approximate 110 million shares.

In terms of overall guidance, as noted in our release we expect wholly owned EBITDA after the deduction for corporate expense, and including the operating results from Peninsula and Borgata, to be in the range of $600 million to $630 million for the full year of 2014, and $140 million to $145 million for the first quarter.

This guidance incorporates the following assumptions. First, we do not expect weather to continue to be an issue beyond the impacts we have felt to date in the first quarter. We have included a negative impact of about $8 million to $10 million for the weather in our quarterly and annual guidance.

We expect Las Vegas locals to continue to show year-over-year growth in revenue and EBITDA similar to the levels we experienced in 2013. In our downtown segment we expect minimal EBITDA growth in 2014. In Boyd's midwest and south and Peninsula operations, we expect to show year-over-year growth on a quarterly basis beginning in the second half of this year. When thinking about this segment of our business you should also consider the benefit from the Blue Chip $9.3 million property tax adjustment that we received in the fourth quarter of 2013 that will not recur in 2014.

At Borgata for 2014 we expect the land-based business to generate EBITDA similar to 2013 levels, excluding the negative $5 million impact of hold and weather we experienced in December. Our Borgata guidance does not assume any benefits from a reduced property tax bill or material contribution from Borgata's online gaming business.

Finally in terms of corporate expense which is included in our EBITDA guidance, we expect about $55 million. This number is higher than 2013 levels because of several corporate initiatives we are undertaking. We do not expect this level of corporate expense to continue beyond 2014. In conclusion, we made great strides toward executing on our strategic plan, and we're in a stronger operational and financial position as we now head into the remainder of 2014.

Operator, that concludes our remarks, and we're now ready to take any questions.

(Operator Instructions)

Our first question comes from Felicia Hendrix at Barclays.

Hello, good afternoon, and Josh -- thanks for all the color.

Question for you on just the Las Vegas locals in the quarter. You posted flat revenue growth there. The market was up.

I'm wondering if the driver of your actual revenue performance was due to the changes in your marketing program. In other words, is your revenue decline mainly due to perhaps the decline in the less profitable players? Or is it something else?

No, I think as it relates to the market being up -- I take it, Felicia, you're taking that from the gaming control board abstracts that have come out? Is that your source?

Yes, and I know there's not always a correlation, so I understand that.

I think that's really probably the key driver, because the January numbers, as you know, just came out very recently. And it showed that correction.

There was probably a bit of a false positive, we believe, in the December number, which was up, given where New Year's Eve fell; what was recorded by certain companies, in maybe December versus January. That probably led to that.

I'm not sure there's a material change in the direction or the slope of the curve for the Las Vegas locals market. You probably have to have look at January and December sort of together to get a better feel for that.

Okay. Helpful. Thank you.

And have you guys seen any benefit -- the first quarter on the strip has been good, because of increased convention activity. Have you seen any benefit trickle through to the locals market?

We see it in particular, as my comments and Keith alluded to as well, on the non-gaming side. Our hotel business, we benefit from, with 5,000 rooms in Las Vegas, just like any of the other major players on the strip, and that's certainly a positive.

It will further be benefited in March. There's an awful lot going on in this town in March, a very good convention calendar that's been written about; and so we expect that sort of trend to continue for the entire quarter.

Great, thanks. Final housekeeping.

In your EBITDA guidance, are you including online gaming in there?

No, we're not, Felicia. We're assuming basically no contribution, positive or negative, from online gaming for the full year.

Okay, I'm sorry if you had said that already. I missed that. Thank you.

That's okay.

And the next question comes from Thomas Allen at Morgan Stanley.

Hello, guys. Thanks for providing the full-year guidance and the color around it.

Just digging a little further -- as you think about your regional Midwest, Peninsula, and South properties, what are you factoring in, in terms of same-store sales if you take out properties that are getting cannibalized? Thanks.

Well, I think as far as cannibalization is concerned, Thomas, we will be lapping the opening of a new competitor in the Shreveport market in the June timeframe. Beyond that there really won't be any other cannibalization as a result of new property openings until we get really deep into the year in the Lake Charles market.

So really what our comments are, as far as the Midwest and South are concerned, tied to what have been a lot of disruption from weather; Josh gave you a sense of what that cost us in the first quarter as he went through the guidance numbers. And then just a very marginal improvement over what was a relatively tough year in 2013.

Okay, thanks.

And then, just in terms of New Jersey and online gaming, you've been operating for around 3 months now. What's really surprised you the most since you begun? Thanks.

Thomas, I'm not sure there's been that many surprises. It's a new business to us. I think it's performing right now in line with our expectations. It's ramping up slowly, but it continues to ramp up nicely. The technology continues to improve.

So from our perspective, we're kind of right on track, and it's performing as we would have expected it to, 3 months into the process.

It seems, according to the (inaudible) numbers, it seems to have slowed a bit in February and maybe picked up a little bit in March. Is there anything that drove that?

No, we'll provide some commentary next week when the numbers for February come out. But until then, we won't be providing any commentary on those numbers.

Okay. Thank you.

Sure.

Our next question comes from Carlo Santarelli, Deutsche Bank.

Josh, if we could just -- you went through the guidance advice on a segment level. That was very helpful. I just wanted to clarify a few things.

Did you say in the 2014, $600 million to $630 million, weather was an $8 million to $10 million EBITDA impact?

Yes. That's what we felt to date so far in the first quarter. And that's really -- and to clarify, Carlo, it's really not just weather. It's weather impacts over normal weather that we would have seen last year.

So it's not just all weather. It's the excessive kind of bad weather increment, if you will.

Understood.

So first quarter, there will be basically $8 million to $10 million spread between Borgata, Peninsula, and Midwest, and South, I would assume.

That's right.

Okay. And then -- sorry, go ahead.

That's just in the first quarter.

Okay. And then if we look at the rest, and you extrapolate your comments on the locals market, looks like 6% to 7% EBITDA growth. Downtown you mentioned being flat.

And then when you look at the Midwest and South, the first half down; and then we're obviously looking at that $9 million nonrecurring in the fourth quarter. But on an apples to apples basis, off the $170 million number, do you guys think for the full year you could get close to that? For the segment?

Yes, I think -- I'm not sure what you're doing with the $9 million, but if you take the $9 million out, I think we have the opportunity to be close to that.

Yes, sorry, the $9 million was ex -- was $180 million, less the $9 million. That's where I was getting the $171 million from.

That makes sense. Thank you very much.

Sure.

(Operator Instructions)

Next question comes from Srihari Rajagopalan with UBS.

Hey, guys, how are you?

Josh, I was kind of curious to hear those comments about looking at the Japan. Maybe you can elaborate a little more on what you guys are looking to do there, and how you plan to finance that.

Sure. I think I should let the Japan expert, Keith, answer those questions, then we'll go from there.

I think it's a little early to try to figure out how we would finance it, just given where we are in the process, but Keith can give you kind of a bigger picture view of how we're thinking about Japan, Sri.

We continue to look for ways to grow the business, and clearly that's -- growth here in the states is somewhat limited; and growth in some of the Asian markets has been quite dramatic. And as Japan is talking about it, they're in the early stages.

Based on what I have learned, it's a multi-step process, and they're looking to pass maybe the first part of that middle of this year. And so we're investigating the opportunities, trying to understand, is it a good fit for us? Trying to meet people and decide whether that is an opportunity that we should take a serious look at.

So, as Josh said, it's very early in the process. We're in the exploratory phase, introducing our Company to Japanese companies and learning more about the process.

But we're probably pretty far away from worrying about how to finance it and what the structure of the deal may look like; and where that deal may be, whether it be Tokyo, Osaka, or one of the regional markets if they get approved and when they get approved. That's pretty far off in the future but we've started the process of looking in any case.

Fair enough.

And you noted the limited opportunities in regional bases. There are a couple of assets out there. Anything interesting from an acquisition perspective?

I would say that we continue to have opportunities for acquisition. I think they're fewer and harder to understand strategically how they make sense for us.

But we're always looking, and I think that there are opportunities. They just haven't gotten to the point where they make sense for us just yet.

But we'll look for ways to grow the Company and improve shareholder value, whether that's acquiring assets, potentially selling some assets as well, to the extent that it makes sense for our Company.

We've been a fairly aggressive acquirer of assets over the last several years. It has to fit into a very specific strategic plan. It's got to be the right market at the right price. We've got to do it for a reason.

We pay close attention to what's out there and what's available. If the right opportunity comes along, you will see us execute on it. But it's got to fit into the plan.

Yep.

Fair enough.

And one last one -- Atlantic City with one of the competitors shutting down, and possibly another casino being bought out. Your thoughts on that market, and where you see that stabilizing in 2014?

Well, the closing of the Atlanta club really had no impact on the Borgata. Those are not our customers. Those were never customers of the Borgata.

I think it probably helps some of the other properties to spread those customers there. So it really has no impact there, and therefore, doesn't impact the overall market.

The market has gotten somewhat competitive, as Paul alluded to, in the first quarter, as I think people are competing for those Atlantic club customers. I certainly hope that the market is stabilizing in terms of where it's at, and maybe we see a little bit of growth in the year ahead, and that we've kind of seen the worst of the decline.

And assuming Philadelphia's second license doesn't come up at some point. Thanks for taking my questions.

Sure.

Our next question comes from Thomas Allen at Morgan Stanley.

Hello, guys, just one follow-up.

So you talked just now and earlier about the potential of doing further acquisitions. Do you have any interest in selling properties? Because obviously one of your peers converted into an opco/propco structure. Any appetite for you guys selling real estate to them? Or even potentially topping them during an opco/propco flip? Thanks.

I think in terms of selling assets, it just depends on the specifics of a transaction. And so it's hard to comment generally, but we're certainly open to that, to the extent it makes strategic sense for us.

I think in terms of your question around, would we copy Pen, that's more of a strategic initiative that we're not going to comment on specifically. But I can just say generically that we're always, as I mentioned actually earlier, that we're always interested in growing the Company and looking for initiatives to create shareholder value.

And so it's not appropriate really for us to comment on specific strategic initiatives that we may or may not take. But just broadly, we're interested in acquiring assets. We've done that historically very successfully in a strategic fashion and created value with those acquisitions.

And to the extent somebody comes along and offers us a multiple that we think exceeds what our trading values are for that asset, then I think we have to consider it for the best interest of our shareholders.

Thank you.

The next question comes from Justin Sebastiano at Brean Capital.

Thanks, guys.

Josh, you mentioned you think there's fewer opportunities that make sense on the M&A front. Is that due to the multiples that perhaps the sellers are looking for? Or is it a market situation that maybe the markets that you guys are more particularly looking at, just there's nothing really coming to bear there? Could you maybe give us some thoughts on that?

Let me provide a little color on that, and we'll see if Josh has comments. But part of it I think is, we've grown in size as a Company, and we have expanded into the additional markets that we're in now. It makes it -- the opportunities for us are somewhat more limited.

Size and scale is important also, because it's just as difficult to run a small property as it is a large property. And so we look at the size of properties, the performance of properties. We like to buy assets that are more market-leading assets, not assets that are in the bottom tier of the market.

And once again, it's got to fit into an overall strategic plan that we have in place in terms of the quality of the asset, the market, and the price. So when you add all those things together, it just, I think, limits the pool.

I think we've proven to be a very prudent acquirer of assets. When we do acquire an asset, we're able to do good things with it. But we have our eyes open and we'll continue to look for things, but they do have to fit a profile.

So, Josh, you may want to --

No, I think you covered it, Keith.

Okay. And so, since acquiring Peninsula Gaming, would the IP -- would that have been something that you probably would have maybe passed on today, given your comments about size and scope of potential M&A activity?

I think we were looking at the IP, and we acquired the IP; it was in the low $30 million EBITDA range. We've driven it up significantly higher.

That is an asset that we would look at today -- something that produces $30 million-plus of EBITDA is clearly -- in an asset that is clearly number two in the Biloxi market, if by some standards not tied for number one. So it clearly is something we would look at today and we would look at in the future.

Okay. So is $30 million that threshold? Or is that just where the IP shook out?

I wouldn't take that as a threshold. That's just a specific comment with respect to the IP.

Okay, all right. Thanks.

This concludes our question and answer session. I would like to turn the conference back over to Josh Hirsberg for any closing remarks.

Thanks, Amy, and we appreciate you guys joining the call today. And if you have any follow-up questions, please feel free to reach out to the Company and we'll try to help you out. Thanks.

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