Boyd Gaming Corp (BYD) 2017 Q2 法說會逐字稿

Good afternoon, everyone, and welcome to the Boyd Gaming Second Quarter 2017 Conference Call. (Operator Instructions) Please also note that today's event is being recorded.

At this time, I'd like to turn the conference call over to Mr. Josh Hirsberg, Executive Vice President and Chief Financial Officer. Sir, please go ahead.

Thank you, Jamie. 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?

Good afternoon, everyone. Thanks for joining us today. In all, this was another solid quarter for our company, as strong performance has continued through our operations, enhancing our free cash flow and reinforcing our confidence in the long-term direction of our company. In Las Vegas, our Locals segment continued to perform at a high level. On a same-store basis, that is before including the benefit of our newly acquired properties, this segment delivered its highest second quarter revenues since 2009 and its strongest second quarter EBITDA since 2008. We also produced exceptional results at our new properties in Las Vegas, as we executed on both synergy and growth opportunities at all 3.

Our Downtown Las Vegas segment continued to perform well, despite temporary challenges associated with a hotel renovation project at the California. And a majority of our regional properties achieved year-over-year EBITDA growth, including strong results throughout the upper Midwest. This operational strength is bolstering our free cash flow, allowing us to reinvest in our business, maintain our focus on deleveraging and commence our capital return program with our first share repurchases and dividend payments in nearly a decade.

And given the ongoing strength of our Las Vegas Locals business, the stability we are seeing in our regional markets, the various growth and efficiency initiatives we have underway and the trends we're experiencing in July, we are confident that this positive direction will continue. Let me provide some additional color on each of our segments.

In our Las Vegas Locals segment, we continue to fire on all cylinders in the second quarter, with EBITDA growth and margin improvement at every single property. Even before including the contributions of our 3 newest properties, our Las Vegas Locals segment achieved its strongest second quarter results in nearly 10 years. Once again, same-store EBITDA grew at a double-digit pace as we improved operating margins by more than 330 basis points. This marks our ninth straight quarter of EBITDA growth and margin improvement in this segment. Since that first -- since that streak first began, we have improved operating margins by more than 650 basis points across our Locals business. And given our business improvement and marketing initiatives now underway, we are confident there is further room for growth.

At the same time, we continue to benefit from ongoing strength in the regional economy. Visitation in Las Vegas is running near an all-time high. Market-wide room occupancy is nearly 90% through June, the highest level we've seen since 2008. Consumer spending continues to rise with taxable sales at record levels. Total employment has reached a new record and is up nearly 4% in the last 12 months, ranking us second among the nation's 30 largest metropolitan areas in terms of current job growth. This job growth has been broad based, with notable gains in just about every sector, including an 18% increase in construction employment year-over-year. That is 10,000 new construction jobs in the last 12 months alone. Sustained job creation is contributing to significant wage growth as well, with average wages up nearly 4% in the trailing 12 months.

As a result of the strong regional economy, we continue to see positive trends unfold throughout our Locals segment. And our management teams are taking full advantage of these positive trends, driving improved results throughout our operations. On the gaming side, we continue to generate more profitable revenues, thanks to the ongoing improvements we have made to our marketing programs. And on the nongaming side, we are delivering strong results as well. We're seeing solid gains in cash room rates at our hotels and increased profitability in our food and beverage operations as a result of the investments we have made over the last several years. While the legacy properties are performing exceptionally well, we are seeing equally strong results at our 3 newest properties: Aliante, Cannery and Eastside Cannery. When we acquired these properties last year, we noted that there were both synergy and growth opportunities at all 3, and we are delivering on that potential. We are driving profitable revenues, removing costs and leveraging our size and scale to produce double-digit EBITDA gains for the second consecutive quarter.

And during the quarter, we improved operating margins by more than 400 basis points across these new assets. We are extremely pleased with the performance of these acquisitions. They are producing solid returns for our company and we remain on track to achieve our EBITDA target of $62 million for these new assets in 2017.

Moving to Downtown Las Vegas. Long-term growth trends remain firmly in place in this market as well. While segment EBITDA was down during the quarter, this was directly attributable to our room remodel project at the California. Before this work began in June, our Downtown segment was on track to produce results in line with last year's near-record performance. Business from our Hawaiian customer segments remained strong, and we continue to see increases in unrated play, a reflection of the 2-year streak of consistent gaming revenue growth throughout the downtown market. But by the time the quarter came to an end, these positives have been offset by greater-than-expected disruption from our hotel. This disruption resulted from certain building infrastructure issues that required us to remove an entire 300-room hotel tower from service as opposed to removing it in phases. As a result, room inventory at the California was reduced by nearly 40% in June. We expect this construction disruption will continue to impact our results of Downtown until this project is complete early in the fourth quarter. Once this project is complete, we expect this segment to return to growth. The downtown market continues to grow and expand. And we believe that new projects now underway throughout the downtown area will serve as catalysts for future growth.

Moving outside of Nevada, a majority of our regional properties achieved year-over-year growth, though this was offset by softness in some of our Louisiana markets. As we've seen for some time, localized economic weakness continues to affect Amelia Belle and Evangeline Downs. These communities are dependent on the oil production industry and the persistent weakness in oil prices is having a significant impact on our customer base at those properties. At Delta Downs, the new hotel tower is performing in line with our expectations. Demand for rooms on weekends remains very strong, and we are successfully attracting higher-value gaming customers and producing meaningful incremental gaming revenue.

Cash room sales were up year-over-year with a 30% increase in cash room rates during the second quarter. However, these strong results were offset by softness in other segments of the business due to heightened promotional activity in the Lake Charles market. This softness has been most notable during our mid-week periods, primarily within our day trip and lower worth segments. Late in the quarter, we began the process of refining of our marketing programs and operations at Delta, with the goal of improving revenue and profitability, and the early results are encouraging.

We have a great management team in place at Delta Downs, and I have every confidence in their ability to improve results and successfully deliver in the long-term investment we have made in this property. Elsewhere in the segment, results were strong. Near New Orleans, in Kenner, Louisiana, Treasure Chest posted its best second quarter revenue and EBITDA results since 2008, delivering EBITDA growth for the 10th time in the last 11 quarters. In Biloxi, the IP reported stabilized EBITDA for the second straight quarter, following the anniversary of the new competition in this market. Kansas Star showed sequential improvement over the first quarter, delivering results in line with last year's performance.

Into the north, we saw solid results throughout the upper Midwest. In Iowa, our 2 Diamond Jo properties each delivered EBITDA growth while gaining market share. In Illinois, the Par-A-Dice team continued to do a good job of managing the business in the face of a steady growth in video gaming across the state. Despite growing competition from VGTs, the Par-A-Dice team is successfully keeping costs in line with current business levels and achieved their second straight quarter of stable EBITDA performance.

To the east in Indiana, Blue Chip continued a 12-quarter streak of EBITDA growth. Blue Chip has also gained market share for 12 of the last 13 quarters now, a testament to our strong competitive position in the Northwest Indiana market.

So in all, we are pleased with the overall performance of our operations during the second quarter. Our Las Vegas Locals business continues to perform at a high level. Our newly acquired properties are performing well and the majority of our Midwest and South properties are delivering steady EBITDA growth and margin improvement. Looking at our results on a company-wide basis, this solid quarterly performance was masked somewhat by elevated corporate expense. This increase in corporate expense is associated with the business improvement, marketing and technology initiatives we have discussed previously. These initiatives ramped up significantly during the second quarter. In the long term, these initiatives are important investments in the future growth of our business and they are key to achieving additional margin improvements of 250 to 300 basis points over the next 2 to 3 years.

In addition to identifying and executing new opportunities to grow profitable revenues and enhance margins, we continue to look for ways to grow our business through acquisitions and new developments. One such opportunity is our partnership with the Wilton Rancheria Tribe in Northern California. As you may have seen recently, the tribe has successfully negotiated a gaming compact with the Governor of California. If ratified by the state legislature, this compact would allow the tribe to develop and operate a casino in Elk Grove, about 15 miles southeast of Sacramento.

We anticipate the legislature will consider this compact soon after it reconvenes on August 21. And beyond this project, we continue to look for new growth opportunities. However, in the meantime, our free cash flow continues to strengthen. And we will continue to put that free cash flow to work by deleveraging our balance sheet, remaining on track to achieve our leverage goal of 4x to 5x EBITDA, while continuing to reinvest in our business and return capital to our shareholders.

In all, we remain pleased with the progress of our company as we continue to execute on our strategy of creating long-term value for our shareholders. Thank you for your time this afternoon. I'll now turn the call over to Josh. Josh?

Thank you, Keith. During the second quarter, we reached a key milestone, commencing the capital return program for the first time in nearly a decade. Today, we have repurchased nearly 600,000 shares at an average price of $25.18. Additionally, on June 5 -- July 15, we paid our first quarterly dividend since June 2008. Our dividend payment was $0.05 per share, representing a cash distribution to shareholders of approximately $5.7 million. Our share repurchase authorization currently has approximately $77 million remaining, and we expect to fully utilize this authorization over the next 12 to 18 months. We will be measured in the execution of our share repurchase program, as we believe we will continue to have opportunities to growth through new developments and acquisitions.

During the quarter, we also invested approximately $39 million in our properties, including maintenance capital and nongaming investments. In June, we received a payment of $36 million from MGM Resorts, representing our share of Borgata's property tax settlement with Atlantic City. This is the final payment we expect to receive related to the Borgata sale.

During the quarter, we incurred increased corporate expense related to the many initiatives we have underway within the company. As we've noted before, we are making investments in new personnel, technology and marketing as we step up our capabilities to handle back-of-house support functions, creating improved analytics and enhance our ability to invest our marketing dollars with greater impact and effectiveness.

We are only in the early innings of benefiting from these investments, and we are already seeing contributions from these efforts, including in this most recent quarter. But there's much more opportunity available to us. There are inefficiencies natural to this transition and, as a result, we expect corporate expense will remain elevated through the end of this year. In the long term, these initiatives are part of how we achieve additional margin improvements. As we have previously stated, our goal is 250 to 350 basis points of margin improvement over the next 2 to 3 years. These investments are integral to achieving that goal and do not change our trajectory or what we expect to achieve.

In addition to utilizing our free cash flow to return capital to shareholders and invest in our business, we continue to focus on deleveraging. We repaid approximately $74 million in debt during the quarter, bringing total debt reduction to $92 million so far this year. We continue to make progress deleveraging the balance sheet and expect to be within our leverage target of 4x to 5x EBITDA in 2018.

And finally, in terms of guidance, as noted in our release, we are reaffirming our previously provided EBITDA guidance of $585 million to $605 million. And all of this was another good quarter for our company. Our Las Vegas Locals business continues to grow EBITDA at a healthy pace and our acquisitions are performing well. Positive trends are continuing in Downtown Las Vegas, despite temporary disruption at the California. Our Midwest and South operations continue to report stabilized results, with growth at a majority of our regional properties. Solid growth continues throughout our operations, enhancing our free cash flow and creating long-term value for our shareholders.

Jamie, that concludes our remarks. We're now ready to take any questions.

(Operator Instructions) Our first question today comes from Carlo Santarelli from Deutsche Bank.

If you guys -- when you kind of dissect what's going on in the Locals business, especially in the quarter as you kind of ramp up Aliante and Cannery, and Keith, appreciating that you said that the $62 million for the year was on track. What do you guys see as the trajectory of those 2 assets? Just using some of the data points that you provided, it looks as though that portfolio right now, or those 3 assets, running at margins that are maybe 400 to 450 basis points below your same-store footprint. How do you foresee the path of getting them up to kind of same-store level margins? And if perhaps there's a chance you could exceed them on a go-forward basis?

Carlo, I'll take the first shot at it and then Keith can jump in, if he wants to, hopefully, add to my comments. I think that when we think about the reasoning behind our acquisitions of those assets, it was partly because of growth in the markets that they represent, but also opportunities to create synergies from those assets being within the umbrella of Boyd Gaming. And that is really the opportunity that we have with respect to what your question's about, which is improving margins. Those initial synergies we've stated are going to come over throughout this year. They're not all at one time. We got some of them at the time we closed and then we continued to benefit from the opportunity to take synergies out throughout this year and some will come even later this year. But I think that, in terms of getting those assets to the margins that represent the rest of our portfolio in Las Vegas, that will remain an opportunity beyond the first year for us. And that's really part of what we see as the opportunity to grow beyond 2017. We've set our goals for when we acquired these assets, and including with respect to Aliante, we set goals for several years out. And that's what contributes to our ability to get there in conjunction with also the growth in that market, really.

Yes. As Josh, I think, articulated very well, when we bought these properties, we were looking at 2 things: very strong growth in the North Las Vegas market, growing faster than the rest of Las Vegas; and low margins at those properties. They were not being run as efficiently as we are, and so we've made great progress on starting the process of improving their margins. We're -- they're clearly not up to our legacy property margins at this point, but they're well underway. But they're still playing catch-up. It'll take us a little bit longer to get there. We've dialed in a lot of synergies, but there's more to go. We have implemented marketing programs, but there is more to go. As Josh said, Aliante is really a future play. I think the trajectory this year is great. We feel very comfortable with where it's headed and we feel very comfortable with the projections we've put out there a couple of years in the future and feel comfortable we will make those.

Great. That's really helpful. And just Josh, I know that you gave kind of the in-the-quarter maintenance project, CapEx. I believe you guys had previously talked about project CapEx for the year with some of the Delta Downs spend and some of the nongaming of around $40 million with maintenance CapEx kind of in the $100 million to $110 million ranges. Are those -- both of those numbers still accurate?

Yes. I think if we look at kind of what the maintenance number we've spent so far this year, maintenance is really at about $50 million. So that's obviously around right of about $100 million for maintenance. And we've largely completed the nongaming amenities -- initiatives that we've had, which were around $25 million, and then we just had a little residual related to Delta Downs that finished up in the first quarter, which is like $5 million to $7 million, if I remember correctly. So I still feel pretty good about the $150 million number for the year.

The $150 million all-in for project plus maintenance.

Exactly.

And California spend within that?

Yes. Absolutely. And you've pointed out really well, Carlo. The maintenance piece is $100 million and there's a -- the incremental piece related to nongaming amenities and Delta Downs spillover.

And maybe, just to be clear. The change in process at the California didn't really increase the scope or cost of the project. It changed the process by which the rooms were being renovated.

Right. So just to get a little bit more clarity on that. You guys, on the first quarter call, I believe, you'd said, like 50% of the rooms were done. But within those 50%, you were able to basically take out a little bit of inventory at a time, do your work and move on. And now you're saying, with this 300-room block, the work that was being done basically caused you to have to cordon off the entire 300 rooms?

I think if we go back and look, I think what we probably said was we were going to be starting this project in the second quarter because we hadn't started the project as of our last call. The project did start right around the 1st of June, and that's when we discovered we had to just change the process by which we were taking them out of service. So there was nothing taken out of service, really, before the 1st of June.

Our next question comes from Joe Greff from JPMorgan.

I have similar questions, let me ask somewhat differently. With respect to the California, you indicated that the Downtown Las Vegas segment would have achieved EBITDA in line with last year, implying that, aside from this renovation impact, implying that the EBITDA impact was $1.7 million, which is largely in month 3 of the second quarter. So are you telling us it's going to be a similar monthly EBITDA run rate impact until the early fall? Can you help us understand what the EBITDA impact is from here?

Good question, Joe. Well, I would not expect it to be as significant as it was in June. What we're going to do is take the rooms out of service now, but we will try to get them back on in a phased approach. So you wouldn't see the order of magnitude that you saw that impact -- that was attributable to just that 1 month of June. But we will be faced with some significant impacts early in the third quarter until we get further into the project.

So I'm going to provide the answer in a different way, which is, while we had to take the tower all out at the same time to do some infrastructure work, the rooms will come back in on a phased approach. And so the biggest impact is -- was June and probably July and then it will start to phase down. And look, we're certainly looking for ways to mitigate that decline, but...

But I think -- Keith made mention of this in his remarks. We expect that once those rooms come back on that we would expect growth to return to the downtown market in the fourth quarter.

Okay. And do you want to sort of quantify the renovation impact for the year and maybe you don't want to get into the timing of it between June 3Q and the 4Q, but is it something inside 10% of what downtown did in EBITDA last year, so something inside of $5 million?

Sure. I just -- I don't think we -- I don't think it's that order of magnitude, but I think it is. We haven't really -- to be honest, we haven't kind of quantified it for Q3 yet. I think we feel like we understand where these assets will end up for the year. So -- but it's not $5 million, Joe.

And then you may have -- forgive me if you answered it. But with respect to corporate expenses being elevated, can you help quantify what the run rate should be in the next couple of quarters as we think about next year and beyond? Is there any of that incremental corporate expense that runs off, and we kind of go back to maybe a normalized level, or are these permanent, the sort of $18 million-or-so quarterly run rate?

Look, your question has lot of dimensions to it. I think there's a natural inefficiency of where we're at right now, where we have incurred a lot of overhead at the corporate entity and have yet to really fully reap the benefit of the efficiencies that we expect to get from having this corporate infrastructure, whether it be the people we're hiring, the technology we're deploying or the analytics and capabilities that we're building. So part of this is, we're not really seeing the full benefits of the investments that we're making, and we will continue to kind of work to build these capabilities over the rest of this year. So right now, as what I would expect is corporate expense was around $18 million for Q2. That's probably a good assumption for Q3 and Q4 for right now. And then what will happen, as we expect to go into next year and the following years, we will start to create more and more efficiencies at the corporate level and we will start to see efficiencies at the property as well.

Okay. All right. That's directionally helpful. So when I think about your reaffirmation of your prior annual EBITDA guidance. For you guys to come closer to the high end of the range, more things have to go right than before, given elevated corporate and the sort of introduction of renovation impact at Downtown Las Vegas. So is sort of midpoint still very doable? Or in your minds and how you're thinking about things, is it more lower half of that range doable given some of the things that you've talked about today?

I think, Joe, we're still comfortable with guidance in the mid- to upper end of the range. And so I wouldn't be thinking low to mid-, I'd still be still thinking mid- to upper. We feel good about the direction of the business. We feel good about the trends we're seeing in July and we feel good about the guidance in the mid- to upper end.

Our next question comes from Steve Wieczynski from Stifel.

So it's basically 1 question, but there's going to be 2 parts to it, and it's all around the B Connected program. Just want to gauge in terms of -- can you help us understand maybe what you've seen in terms of new sign-ups. Obviously, mostly in the Locals market there in Vegas, but I guess around the rest of the country as well. I don't know if you'll be able to answer the second part of this question, but what kind of activity have you seen inside the program, meaning, somebody elevating from Ruby to Sapphire, Sapphire to Emerald? And I guess, what I'm trying to get at here is, are you starting to see play level to accelerate, more trips to allow somebody to move through your program a little bit quicker. Does that make sense?

Sure. So in terms of kind of the new members' sign-ups, it's not a number that I have at my fingertips. When we look at the database and we look at some of the relevant metrics and we look at rated guest counts during the course of a quarter and we look at frequency and we look at ADT, average daily theoretical, and those types of numbers, what we see is very good strength, especially here in Las Vegas in the mid- and upper tiers. We see similar trends in Downtown Las Vegas, growth in ADT at the mid- and upper tiers. We also see good growth importantly in unrated segment. And as I've said a number of times, the unrated segment was kind of the first business to disappear and some of the last business to come back. And when we look through the Midwest, once again, strength in the mid- and upper tiers in frequency and guest counts and the ADT. In the South, same thing. We see good guest count growth in terms of frequency and visitation and ADT. Not quite as strong of unrated play growth in the South. Now most of this growth -- literally, all this growth is coming at our mid- and upper tiers, not at the lower tiers. We're seeing declines at the Ruby level at our lower tier, but that is part of kind of strategically how we're changing our marketing programs and how we're refocusing our efforts. And so we're not at all concerned by the decline in the Ruby tiers. And we're very pleased with the growth in the mid- and upper tiers.

Our next question comes from David Katz from Telsey Group.

I wanted to just follow that up, because I think it's along the same lines of a comment I think I've heard Josh make before, where the Las Vegas Valley is growing nicely but the rate of growth, and correct me if I'm misstating it, but the rate of growth in gaming play has not, in the Locals market, matched the rate of growth in the overall Las Vegas economy. Can you comment on that? And is that related to the answer you just gave to the prior question? Do you sort of see anything within your play levels that indicates any change in that?

Look, I think, as we look at our business, there are a couple of things going on. First and foremost, you're right. The growth in gaming revenue, we've said for a while, has been slower to grow than we anticipated, given the strength in the economy here in Las Vegas. I think part of that is simply a change in how consumers are spending their money. We are seeing good growth in nongaming revenues and nongaming profitability. Part of it, for us, I can't speak to our competitors, is a change in focus. And so we're seeing revenues falling away out of our lower end segment. But we're okay with that, and we're focused on more profitable play at the higher ends. And it's all part of these efforts we're making to refine our marketing programs, install new technology to allow us to focus our investments more wisely on these customers. And so we're not overinvesting, which means we're not overincenting people. And so there's a natural decline in gaming revenues as a result of this transition. We'll eventually cycle through this sometime next year and get to a more apples-and-apples comparison. But for now, our focus is on profitability, not so much gaming revenue growth.

Perfect. And I wanted to ask one other area, which is you've started to repurchase shares. Can you talk about the process that you go through in deciding the timing and magnitude of those? And then presumably, the board would have the ability to approve additional share repurchases at some point in the future. If you could just talk about when that might be now that you've stepped out onto the steep and slippery slope of share repurchases that companies go through.

Well, a couple of things. You're right, the board can always authorize additional share repurchases. We have almost $80 million left in terms of our existing authorization. I think in Josh's prepared remarks, he indicated we'd expect that to last another 12 to 18 months. And which point, we would, depending on what's going on in our life and everything else, go back to the board and reload that authorization. And so that maybe gives you a time frame as to how we're thinking about it. In terms of our executing it, I would just think of it as opportunistically. We're balancing share repurchases with reinvesting in our business. We're continuing to deleverage to make sure we hit our leverage targets of between 4x and 5x next year and looking out for opportunities to grow the business through new acquisitions or new developments. And so, as we kind of balance all of that, it informs how and when and where we buy back shares. I think we're very pleased with our execution to date, buying back almost 600 -- or approximately 600,000 shares. And we'll just kind of see where it goes going forward.

Our next question comes from Harry Curtis from Nomura.

Just a quick follow-up on that question. Josh, in the next 12 to 18 months, is there anything that would keep you from spending the rest of the authorization if there were an opportunistic fall in the shares, all at the same time, I mean?

What's all going to happen at the same time, the fall in the shares and what else, Harry?

Well, what I'm trying to get at it is do you have any philosophical objection if the share price for whatever reason were to decline significantly to exercise the full authorization pretty quickly over a short period of time?

Yes. I don't think it would be that you would see us -- it's very difficult to predict the future, but I would say that it's not likely that we would come in one day within a month or a very short period of timing have executed the full share repurchase program. I think we will be opportunistic and we will, I think, Keith stated it pretty well, we're going to kind of be balanced in terms of where we can get the best return. If we had -- just because there is a development opportunity that's available, just because there's an acquisition opportunity that's available. If we don't feel like we can get the return from that, then it doesn't makes sense to go out and do it. If on the other hand -- and we will continue to do what we've been doing, which is buying back shares and returning capital in the form of a dividend. If on the other hand we believe we have opportunities to grow, and we can do that in a way that generates a return that is good for shareholders for the long term, you'll see us do that.

It's hard to answer the question in a vacuum because the decision gets made given everything that's happening on any given day or week. And if there is a dislocation in the share price, we would certainly look at it and determine where we're at with respect to all the other conversations that are always going on within a company like ours and determine kind of what the right level to buy back is, but...

I think another consideration would be what is causing that dislocation and where is our leverage and factoring all that in with the opportunities we have. So I hope all that can give you a framework of how we might go about thinking about it.

Yes. I think that we'll cross that bridge when we get to it, if we get to it. Versus the last 3 to 6 months, your comments about seeking an appropriate development or acquisition for growth, has your appetite changed in the last 3 to 6 months? Or is it about the same today as it was then?

No, our appetite is the same. We continue to be interested in growing our company. I think over the years, we've proven we are a pretty disciplined acquirer of assets. We have a fairly strict set of rules or guidelines that we pay attention to, as we look at assets in terms of size of assets, quality of assets, markets, those types of things. So we're always looking, but we tend to be pretty disciplined with respect to pulling the trigger.

Our next question comes from Shaun Kelley from Bank of America.

Just sort of one high-level question for you. But obviously, this year, the last kind of 9 months have been. When we look at the Las Vegas Locals segment, there's a lot going on with the integrations of Aliante and Cannery. When we sort of go back to theoreticals and then more of a steady-state next year, what do you think in kind of the current environment the right flow-through ratio is in the Las Vegas Locals business in terms of how much revenue do you think you can see flowing through to EBITDA or profit on sort of a normalized basis?

Yes. I think, look, I think we have been able to -- I guess, I understand how it might be difficult to kind of see what's going on underneath those numbers in terms of our legacy business. But in our legacy business, we continue to deliver good flow-through with the revenue growth that we are seeking. So -- by that, I mean, we are focused on driving profitable revenues. So we're not focused on trying to grow at necessarily the same pace as the market, and we may or we may not do that from quarter-to-quarter. But as we refocus on making sure we are being astute about how we deploy our marketing dollars, operate as efficiently as we can, not only from the initiatives that we're doing now, but the operators doing a really good job of managing the costs across the spectrum, we're getting a very good mark flow-through with respect to our same-store Las Vegas Locals business. And we've said before, we generally think of that business as kind of 65% to 70% flow-through. And I would say that continues to be where we see that business performing.

Our next question comes from Thomas Allen from Morgan Stanley.

Just a couple of property-specific question. Just on the Iowa properties, they were very strong in the quarter, kind of what's happening there, and is it sustainable?

I don't think there's anything unique happening at those properties. I just think it's strong management teams executing the business plans. I think it's some of the enhanced marketing tools and analytics that we're bringing to bear and just good strong management on a day-to-day basis. So there's nothing special about those markets. They're not necessarily growing at double-digit rates or anything like that. The numbers come out monthly, it's just under good strong management.

Okay. And then Par-A-Dice, how -- there were some articles out about doing some layoffs there. I mean, how are you thinking about kind of the fundamentals around that property?

I think we -- first of all, I mean, I find it interesting that you lay off 18 people in a business that employs over 1,000 -- or it's newsworthy. Or a company lays off 18 people and company that employs over 20,000 team members and makes the news, but -- so be it. I think we see that as stable. Once again, we've had 2 quarters in a row of kind of stable EBITDA. Revenues continue to decline, but we have found ways to kind of offset those revenue declines. As you look at Par-A-Dice and you look at the concentration of VGTs in and around Par-A-Dice, it's the highest in the state. And so we have very significant impact as a result of that. But the management team there is doing a great job kind of offsetting that. And the only adjustment was just a normal adjustment, nothing out of the ordinary.

Our next question comes from Chad Beynon from Macquarie.

Great. Just one from me with respect to the California. I know we've talked about it at length here. But since you know all of your players and you're bringing them in from Hawaii and most of these players are well rated for a long time. Is there a way where you could just divert them to one of your other properties downtown? Or maybe bring them out to one of your new assets in the locals market? Or does that just not meet kind of the customer preference. So anything there to kind of showcase to them some of your other properties?

Sure. It's a very logical question. And we have done some of that. We run very high occupancies at other hotels. And so the opportunity is who are we displacing and those types of things. In some cases, they really want to be downtown because of the ability to walk between properties and visit with their friends that are in the area. So they don't want to go in other places. And so we -- just literally, if you think about the room count we have in Las Vegas, we just lost 300 rooms. And while we can move the Hawaiian somewhere else, we don't have 300 empty rooms on a weekend to simply fill in. And so we've done a little bit of that, but the logical place is the Fremont and Main Street. But those properties run 100% on weekends. And so you couldn't displace them there. Aliante isn't too far away, but Aliante runs very full on weekends also. So it's a logical question. We're doing a little bit of that to the extent we have spare rooms. But we just don't have a lot of spare rooms and inventory during the peak periods on weekends when Hawaiians want to be there.

Right. And we're being a little bit reactionary because obviously we didn't know we were going to be taking out all of these rooms at one time. So it's a little bit of a fire drill that the operating guys are having to deal with.

And our next question comes from Adam Trivison from Gabelli & Company.

During the quarter, some assets traded in the Locals and Downtown market. Just wondering if you guys looked at the deal? And I guess, more broadly, just trying to gauge your willingness to increase exposure to Las Vegas Valley through an acquisition, although I know there aren't a lot of opportunities?

Yes. I think you should think about it in the terms of we look at just about everything that is available and is out there. And as I said a little bit earlier in the Q&A, we're pretty disciplined about what we execute on and the quality of the assets have to be good quality or we have -- has to be in a market we're not otherwise in. And we've looked at several assets on the Strip that have traded in the recent past and just haven't felt like they were right for us. So yes, we've looked at these things. We'd certainly be interested in increasing our exposure here in Las Vegas for the right assets. And I think if those -- that right asset or those rights assets came along, you would see us execute on that. But the fact that we didn't take advantage of the last transaction just says that you should assume we looked at it. It didn't meet our thresholds for a variety of reasons.

Okay, great. That's helpful. And then, I guess, secondly, regarding Blue Chip. I guess, you should have new supply opening up in South Bend early next year. Just want to get your thoughts on any potential impacts to Blue Chip?

Yes. Look, we're certainly kind of actually awaiting to see what happens with that new competition when it opens, how it opens, exactly what they have. Our team is paying attention to it. We have a great business there. The team is doing a great job, as evidenced by the long streak of quarterly EBITDA improvements we've seen at the property. Look, South Bend is a market for us and we'll be prepared to fight it out and see what happens. We don't have any predictions as to what's going to happen, but we're certainly aware of it and certainly paying attention to it and certainly preparing for it.

And ladies and gentlemen, at this time, we've reached the end of today's question-and-answer session. I'd like to turn the conference call back over to Mr. Hirsberg for any closing remarks.

Thanks, Jamie, and thanks to each of you for joining the call today. If you have any follow-up questions, feel free to reach out to the company. Have a good rest of the evening.

And ladies and gentlemen, with that, we'll conclude today's conference call. We do thank you for joining. You may now disconnect your telephone lines.