© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon and welcome to Boyd Gaming Fourth Quarter 2017 Conference Call. All participants will be in a 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, Executive Vice President and Chief Financial Officer. Please go ahead.
Thank you, Anita. Good afternoon, everyone, and welcome to our fourth 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 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 would now like to turn the call over to Keith Smith. Keith.
Thanks, Josh. Good afternoon everyone. As you saw from our press release earlier this afternoon, we delivered a record fourth quarter performance which was an appropriate conclusion to a great year for our Company. Our success in the fourth quarter and throughout 2017 was not simply the result of a strong economy, throughout the Company the strategic initiatives we have been focused on for last several years are paying off.
Our marketing requirements are driving growth in gaming revenues and greater efficiency in our marketing spend. Our improved technologies and analytical tools allowing for better decision making and our shared services infrastructure is delivering new efficiencies in our business. As a result, our core operations are achieving strong flow through on revenue growth and steadily improving operating margins.
And in our newly acquired properties in Las Vegas, we are successfully realizing synergies and growth opportunities delivering a strong return on investments for these acquisitions. Thanks to the successful execution of our strategic initiatives and the overall health of the U.S. economy, every segment of our business delivered revenue growth, EBITDA growth and margin improvement during the fourth quarter.
As we saw all year, our strongest results once again came from Las Vegas locals business, with revenue growth at double-digit EBITDA gains at every major locals property. This was the 11th straight quarter of EBITDA growth in our local segment. It was also our 6th straight quarter of double-digit EBITDA gains and was the strongest fourth quarter revenue, EBITDA and margin performance from our locals business in 10 years.
While our legacy properties continued their long-term growth trajectory. Our newly acquired properties Aliante, Cannery in Eastside Cannery, also continue to grow EBITDA at a double-digit pace for the quarter, beating our guidance of $60 million to $62 million EBITDA for these properties in 2017.
As we look ahead to the first quarter, we are confident that growth trends will continue across the local segment, as key economic metrics continue to be positive. Southern Nevada's population continues to grow, total employment has reached an all time high of nearly one million jobs up more than 3% year-over-year. Unemployment has fallen below 5%.
Average weekly wages have reached record levels, up 4.5% over the trailing 12 months. Home values are up more than 10% over the last 12 months, one of the fastest growth rates in the nation.
And to-date more than $7 billion of projects are now underway on Las Vegas strip alone, including Resorts World, Greater Stadium and the expansion of Las Vegas convention center and there is much more to follow as new projects continue to be added to Southern Nevada’s new pipelines of future development.
Construction led the way of local job growth in 2017 with nearly 11,000 new jobs, a year-over-year increase of more than 18%. There are now nearly 70,000 construction jobs almost twice as many is that our low point in 2012.
As new projects pick up steam, thousands of additional construction jobs will be created and once these projects are complete, each project will support thousands of permanent jobs in turn boosting our local economy for years to come. These solid growth trends are non-isolated to our locals operations as we continue to see growth throughout Downtown, Las Vegas as well.
Our Downtown segment delivered near double-digit EBITDA growth during the fourth quarter despite of an increase in fuel costs at our Hawaiian charter service. We saw continued increases in unrated play, reflection of a healthy Downtown market that is steadily growing for more than four years now.
Play from our Hawaiian guests continues to grow as well and we are seeing returns from our recent investments at the California, since our enhancements of our room product to over 25% increase in cash room rates of the fourth quarter well ahead of the mid single-digit increase for the broader Downtown market. In all, it was another great quarter for our Nevada operations.
And outside of Nevada, our regional properties reported their best quarter of the year. Our operational and market refinements supported by healthy economic conditions in most of our regional markets, helped drive strongest quarter results of the year in our Midwest and South segment with increases in revenue, EBITDA and operating margins.
This growth would have an even stronger had it not been for the weekend closures of the IT and Treasure Chest in early October due to Hurricane Nate as well as a one-time $2.9 million of profit tax benefit that was included in last year’s EBITDA results.
The majority of our regional properties achieved year-over-year EBITDA growth led by record fourth quarter results of Kansas Star and Delta Downs. In Kansas, results were strong with record revenue and EBITDA for the quarter in Kansas Star.
The property delivered solid growth in both rooms rated and unrated revenue with increased visitation and spend for visit for greater players. The Kansas Star management team continues to do a great job leveraging the properties high quality amenities and marketing programs to attract visitors from throughout the region.
In Louisiana, several factors contributed to double-digit EBITDA growth and record net revenues and EBITDA in Delta Downs in the fourth quarter. First, our expanded hotels is performing well, driving increased visitation to the properties. Additionally, the refinements we made to Delta Downs’ marketing program earlier this year which were starting to show results before Hurricane Harvey this summer have continue to gain traction and the entire St. Charles market appears to be recovering from the impact of Hurricane Harvey.
We are also encouraged by the result of Illinois with the Paradise management team delivered a fourth straight quarter of EBITDA growth despite continued pressure for VGTs. Looking ahead to the first quarter, while we remained optimistic about the long-term direction of our regional business, results over the first six weeks of the year have been affected by severe weather throughout our regional markets.
We are also beginning to see an impact from the opening of new travel competitor in South Bend, Indiana just to the East of Blue Chip. This new competitor has been open for less than four weeks, so it is still too early to the determine the full extent of this impact with severe winter weather throughout most of that period, it is hard to discern between the effective weather versus new competition in Blue Chip’s January and February results.
While there will clearly be some challenges of Blue Chip this year. We remain confident in the properties’ long-term competitive position as the reasons leading gaming entertainment destination. So on all the fourth quarter was another exceptional performance for our operating teams across the country.
And I have confidence that growth will continue. We expect continued return from our investments and marketing technologies and infrastructure, as well as our ongoing initiatives to achieve greater efficiencies throughout the Company. We believe these initiatives will continue to drive profitable revenue and further EBITDA gains.
Beyond our core operations, we also expect to benefit from our expanding pipeline of new growth opportunities. Most immediate of the pending acquisitions of Ameristar St. Charles, Ameristar Kansas City, Belterra Resort, Belterra Park and Valley Forge, all of which remain on-track to close in the second half of this year.
In the longer term, we also continue to move toward the start construction of the tribal gaming resort in Sacramento California. Last month, the Department of Interior formally recorded its approval of the Wilton Rancheria Tribe compact for State of California, one of the last remaining steps before construction begins.
When all of these growth opportunities are successfully realized Boyd Gaming will operate 30 properties across 11 states, we will expand our reach in the Philadelphia, St. Louise, Kansas City, Cincinnati, Sacramento and the San Francisco Bay area gaming access to more than 15 million potential customers.
This geographic expansion of our nationwide portfolio will create benefits beyond the financial contributions of the six new casino properties. We will gain new opportunities across market or destination properties to new customers, driving incremental growth in markets like Las Vegas. By expanding our scale and geographic footprint, we will be in a stronger position than ever to capitalize in emerging growth opportunities in our industry. The good example is potential legalization of sports betting across the U.S.
We operate one of the most geographically diversified portfolios in our industry and we have extensive sports betting experience and infrastructure hear in Nevada. As a result, we are confident, we will be able quickly establish a market leading sports betting presence in new states across country should the Supreme Court rule in favor of expanded sports betting.
Also, we will soon have the opportunity enter the future online gaming market in Pennsylvania. Thanks to our pending acquisition of Valley Forge. As you know, we have proven track record of success in this area. At Borgata, we consistently led New Jersey’s online gaming industry for more than two years. We know what it takes to succeed in online gaming and we look forward to putting an expertise experience to work in Pennsylvania and potentially in other states across the country.
Each of the many growth opportunities in our pipeline including acquisitions, new developments and new forms of gaming as the potential to generate significant returns in the future supplementing organic growth throughout our operations and driving further growth in EBITDA and free cash flow and we will continue to put our free cash flow to work in several key ways.
We will continue to pay down debt and deleverage of balance sheet with a focus on achieving our long-term leverage target of four to five times EBITDA. We will continue to strategically invest in our business through acquisitions, new developments and property enhancements. And we will continue to return capital to our shareholders through regular dividend payments and share repurchases.
This balanced approach create an exceptional long-term value for our shareholders in 2017 and I’m confident we will continue to build on that track record of success in the coming year.
Thank you for your time today. I will now turn the call over to Josh. Josh.
Thanks, Keith. 2017 was another successful year for us, punctuated by record fourth quarter results. We generated over $280 million of free cash flow in 2017, and used our free cash flow to reduce debt by $162 million, make one-time land purchases of the Orleans related to our Wilton project of $78 million and distributed $43 million to our shareholders in the form of dividends and the share repurchases.
In December, we announced the acquisitions of Valley Forge and Four Pinnacle assets. Transactions that we expect to enhance our free cash flow by more than $60 million. Also 2017 represented the first full-year of ownership of Aliante and the Cannery properties and as Keith mentioned, we exceeded the expectations we set for these assets when we announced those transactions.
Our quarter end debt and cash balances were provided in our earnings release. During the quarter, we paid our quarterly dividend of $0.05 per share and repurchased approximately $10 million of stock. For the year, we repurchased over $1.2 million at an average price of $26.69. We have approximately $60 million remaining under our share repurchase authorization and expect to utilize this authorization over the next 12 months.
Our capital allocation decisions are based on creating long-term value for our shareholders balanced with the focus on achieving our long-term leverage target of four to five times EBITDA. At year-end, our leverage excluding cash on the balance sheet was 5.25 times. As a result of the recently passed Tax Reform Act, our future Federal tax rate decreased from 35% to 21%, reducing our deferred tax liability. Our 2017 tax provision is net of a $60.1 million tax benefit due to the reduction of deferred tax liabilities.
In terms of capital expenditures, during the quarter we invested $29 million. For the full-year, we invested a $148 million in capital excluding the one-time land purchases. In terms of 2018 guidance for line items that maybe of interest. Capital expenditures for 2018 are expected to be about $150 million. Annual depreciation expense is expected to be about $220 million.
We expect annual interest expense to be approximately $175 million to $180 million, with our cash interest expense approximating $168 million. This interest expense reflects the current forward curve for LIBOR and assumes no refinancings of our current outstanding debt balances or financing activity related to our pending acquisitions.
We expect about $76 million in corporate expense, which is included in the full-year EBITDA guidance for 2018. Other income statement items includes deferred rent, which is estimated to be about $1 million for the year, preopening expense, which is estimated to be about $15 million for the year, and share based compensation is expected to be about $20 million.
We expect an effective tax rate of approximately 28% representing a blend of the lower Federal tax rate of 21% and the state tax rate where we operate. Remember, however, from a cash perspective, we are not currently a cash tax payer for Federal Income Tax purposes because of our NOLs. Our NOL balance at year-end was approximately $525 million, and as a result of the recent Tax Reform Act, we expect our NOL balance to last a couple of years longer than it would have under the previous tax law.
As noted in our release, we expect full-year 2018 adjusted EBITDA to be in the range of $600 million to $620 million. This guidance includes a $12 million to $15 million EBITDA impact on Blue Chip from new competition in South Bend, Indiana. In addition, this guidance and other numbers I provided for 2018 do not include expected results from the acquisition of Pinnacle’s four asset or Valley Forge. We continue to expect these two transactions to each close in the second half of this year.
Anita, that concludes our remarks and we are now ready to take any questions from folks on the call.
Thank you. We will now begin the question-and-answer session. [Operator Instructions]. First question today comes from Carlo Santarelli with Deutsche Bank. Please go ahead.
Hey guys, good afternoon. Josh, you obviously talked about the $12 million to $15 million Blue Chip impact, I think the property does like $160 million of gross gaming revenue. Could you talk a little bit about from a percentage perspective how much of that 12 to 15 represents of 2017 EBITDA?
Carlo as you know we don’t write that out individually for our properties specific information, so I won't be able to answer that question, but $12 million to $15 million is a pretty significant impact to the asset based on the fact that South Bend market is or not one of the top kind of five feeder markets certainly in the top 10 feeder markets to this asset so important source of customers for the asset.
Okay. Understood. You guys weaver to add that back which I know is not appropriate, but if we looked at your guidance and said okay the $12 million to $15 million impact you are looking at a low end of like 612 which only implies about 3% year-over-year guidance and when we think about obviously the growth inherent in your Las Vegas locals and Downtown market as well as the margin improvement story, I see corporate expense kind of stay that of flattish level year-over-year, but if you think about kind of those tailwinds, it does appear like 3% EBITDA growth would be relatively easy to achieve, is there something else that’s being missed in there?
No other than I think you are taking the low end of the guidance and in the 12 to 15 wherever you choose that I think we gave our range of 600 to 620 and we expect to be in that range and so I think more probably - well certainly a low end analysis would lead to the numbers you suggested using that mid-point or a high end of the range would lead to a different number. So I think we are not suggesting that 600 is our bogie. We are suggesting the ranges as our bogie and it’s been adjusted to factor in the $12 million to $15 million impact.
Okay. Understood. Maybe I could just ask a little bit differently. Do you feel like the low end is overly conservative would that be how the disappointing result in your view?
I think it wouldn’t be disappointing, but I think we also have to take into account that we have had we are also slow start primarily in the Midwest and South through the weather. I would say the rest of our business if you could reverse the effect of weather our businesses are as largely performing as maybe described or implied by 2017 results.
Downtown continues to perform well, Las Vegas continues to perform well and for the most part, most of our regional assets continue to perform well. Despite the fact of the weather, but we can’t really ignore that and we can’t ignore the impact of Blue Chip. But I think we feel good about the underlying dynamics of what is going on in our business and the customers trends in our business, you just what have in these impacts.
Understood. Thank you.
The next question comes from Joe Greff with JP Morgan. Please go ahead.
Hello everybody. With respect to your 2018 outlook. Can you talk about how you are seeing growth in the Las Vegas locals market? Just, a net revenue perspective and EBITDA growth perspective? I presume that’s going to be the best or has to be the fastest growing component of your segment EBITDA?
Joe, the first part of your question broke-up. Are you asking what is our outlook for growth and revenues for Las Vegas locals? Was that your question?
That is correct yes.
So look, I think from what we are seeing in the Las Vegas locals business, I think we continue to believe that the underlying foundation of the economy here in Las Vegas is good and continues to strengthen. I think our business and the prices for the comments from the perspective of instruction employment, general housing prices, it’s just everything that’s going on the economy kind of continues to point at a positive direction.
I think if we look at our business coming out of 2017, I generally think at this point. We will suggest our 2018 trends are going to be very similar to 2017, while not necessarily picking up a lot in terms of momentum continuing to be healthy in terms of year-over-year growth. Similar to what we have seen in growth year-over-year for 2017.
I think that’s what underlies our basic assumptions in terms of what we are expecting for 2018 from the locals business. We don’t really see much in terms of anything that could be an impediment to that growth and we are not suggesting that the momentum is picking up at this point, it’s just more of the same, but out of healthy pace.
Would you expect down Las Vegas to grow at a faster growth rate in the locals market?
Joe, this is Keith, I don’t think there is anything that is happening Downtown that would indicate that once again the trajectory is going to change in terms of what we are seeing Downtown. We have a healthy business Downtown, there is visitation that continues, I don’t see a change dramatically one way or the other.
I will caution you that as you look at market numbers for Downtown Las Vegas, you know lucky drag that is included in the Downtown market numbers. And so to the extent that there are no longer reporting gaming revenue down there you will see is decline in the overall market that will not indicate the decline in our business, it’s a fact that there is one of those reporting entity. So you should be cautious of that going forward. But there is nothing that’s going to change kind of the current trajectory I think of the Downtown business.
Great thanks and then just kind of going back to the Blue Chip impact and I know it’s been a large sample size in less than four weeks. Are you basically straight lining the impact over the last three to four weeks for the balance of the year or do you make certain assumption that it gets worse or better just the $12 million to $15 million negative impact?
So the $12 million to $15 million negative impact is just - our assumption of the full-year impact from that operation. What we have seen in the first four weeks, and kind of as you indicated four weeks certainly doesn't make a trend.
We really can't discern positive or negative, because there have been several weekends with very, very bad weather and those weekends where the weather has been bad, the impact has been more dramatic on the weekends where weather has been good, the impact has been frankly very muted.
And so, when you take four weekend until which had bad weather to which had good weather and you would have to jump all there, once again two were really significantly impacted two weren’t, it's tough to say what is going to happen. So 12 to 15 is just our estimate for the year and it does not come from the first month of competition.
It's really reflect just our internal analysis of an experience with market. Yes, exactly. The one other thing Joe I would point out is, I think what we have shown through our performance in the fourth quarter and throughout this year is that we are bringing a lot more flow through from the revenue that we are getting in the Las Vegas Locals market.
And so while we seen kind of 4% to 5% kind of market growth in 2017, I think that's generally what we would expect to see in 2018 and we would expect to see continued kind a flow through from that number. And so we have generally put out there kind of 70% flow through from Las Vegas locals and I have to say that's what we continue to believe occurs based on that growth in the locals market.
Thank you.
The next question comes from Felicia Hendrix with Barclays. Please go ahead.
Hi good afternoon. Thank you. Josh if you could just stay on just second, because I might be a little confused and maybe others. So when we look at your guidance, your EBITDA guidance. And let's just talk about the mid-point. The mid-point is calling for 2.4% growth year-over-year. So Las Vegas locals as you said before that you would expect the top-line to be flat but perhaps should get kind of some better flow through so did you just say kind of similar EBITDA growth from the locals that you have got this year. Did I hear that right?
Yes. So I think let me, Yes, I'll short circuit this part of the conversation. I think if you look at consensus estimates for what we can tell is for Las Vegas locals, no problem. And Western South no problem. The adjustments really are around the Midwest and South due to Blue Chip.
And you just said Downtown Las Vegas no problem, Downtown no problem and Midwest and Southeast is too high.
Right because of Blue Chip.
Because the Blue Chip right, okay. Great. And then also with the weather that you have seen in January, did you guys kind of circle that through your outlook for Midwest and South as well or do you just kind of assume that kind of gets off throughout the year?
We assume that we are able to overcome that, but that's why we have a range to reflect that if we are not able to then we might be in a different point of the range and where we think we would be today. But our expectation is that a leadership of that segment will be able to overcome the softness that we have seen related to the weather.
Keith commented earlier around Blue Chip are encouraging, just generally because of the fact that when we haven't had weather impacts in many parts of our business, we have seen really good performance in those businesses. So the underlying business, the underlying consumer trend all of that continues to stay intact for us.
And the weather is as everybody watch is not a small issue, I mean when you look at our Paradise operation in 18 days in February alone we have had nine snow days versus one last year, in the [indiscernible] we have had 10 snow days versus zero last year, Blue Chip, we have had 13 snow days versus three last year. And so it is quite significant to the overall business not to be under estimated.
Yes, I know that makes sense. And then just speaking with Blue Chip I mean you guys have been through this before situations we have new competition. So what have you done when you doing at that property to ensure that your own customer, your own traffic days sticky - I understand that people might did cutting off some of your source market, but I missing that you guys have thoughts about this for a while, so can you maybe help us understand some things that you have done at that property?
Well, when we did it was frankly starting a year ago wasn’t anything that we did this year and it was just making sure that we were touching our customers and that they knew that we appreciated them and trying to make sure that they stay more to the brand. We have a great property with great amenities. We have pretty team members who have great customers who have been going there for year.
And so we have just made sure that were spending the appropriate mode of time and effort. We haven’t ramped up marketing, we are not reinvesting more heavily. We just made sure that we were doing all the right things by our customers and giving them a great experience. It’s nothing that started today, it’s an effort that we ramped up a year ago to make sure that they know that we appreciated them.
And last thing on Blue Chip is just with the $12 million to $15 million impact that you guys have talked off about, can you just help us understand from like a flow through perspective like how we should be thinking about the detrimental margins, so can you help us kind of back into how you are thinking about revenues?
Yes. I think we want to try to stay away from that right now, but I will tell you that it’s…
Felicia its hard, because you know whether we compete on a revenue side or whether we just see the revenue go away and try and to minimize the expense is hard to determine how we are going to compete it, it depends on how the year flows. We could end up buying some business and therefore the flow through will be different then if we don’t buy the business.
So to give you away a revenue decline and an estimate of flow through, this really in the game would be kind of give you a false indication of where we thought it would go. I mean we have done some work we think it’s $12 million to $15 million and I think that’s the best information we can give you at this point.
Okay. Just you guys have been very good over the past few years of kind of sticking to your philosophy of not throwing good money after bad when you say you might buy some revenues we are not moving from that strategy, right?
We do not intend to move from that strategy, nope.
Okay. Great. Thanks.
Thank you.
The next question comes from Steve Wieczynski from Stifel. Please go ahead.
Hey guys good afternoon. So Josh can you maybe help us to think about margins for the local segment for the year? You guys have done a great job of kind of growing that margin by 150 to 200 basis points a year for the last couple of years but I guess what we are wondering as how do you view that margin expansion opportunity in 2018 especially as you kind of talked about more of a flattish revenue environment?
Well look, I think as we think about our business just generally and this is not a specific comment in Las Vegas is really across all of our segments. I think we continue to see opportunities to operate our business more efficiently, to leverage our opportunities to more effectively, execute on our marketing campaigns more effectively, and be more efficient with respect to our marketing campaign.
So I think while we have continue to make progress in the Las Vegas locals and to a similar degree and our other segments, I think that, we continue to believe that there are opportunities to do so. So I’m not sure, I’m answering your question exactly as you want me Steve, but I think our view of the world is that we continued have opportunities to improve our margin really in all of our segments. And that’s really what is the process we are going through and that we are right in the middle of in reality so.
Look, said another way, what Josh is indicated as we believe, we have additional room to grow margins, whether is in the locals business, so the Downtown business, so in the Midwest business and we have been successful over last several years. We are kind of in the middle of these processes to leverage our size and scale and we report it as BI or shared services. We are not in the 100% efficiency yet. So there is more to go there so I think again, we have more room to grow margins whether it’s by marketing analytics or once again short-term there is additional room.
I think our comments on the fourth quarter kind of reiterate results when we saw all of our segments, all of our properties in Las Vegas grow in terms of revenue and EBITDA. And they all grew double-digit in terms of EBITDA also that modest kind of small to medium size growth in revenue. So I think that’s what we expect to continue to happen in 2018 and that we expect that similar performance to play out again in 2018.
Okay good that’s a good color. And then the second question a little bit different in terms of CapEx start by the 150 for the year and obviously that probably excludes or that does exclude the five acquisitions that you have made. But I guess the question is for, as we look out maybe past 2018. As you guys have got all more comfortable and looking to the Ameristar properties and the Belterra properties and Valley Forge. Is there anything that sticks out in terms of the being, spending that might have to come along as you guys do cold on those acquisitions?
No, I think the, I have got a chance go through the properties and quite a bit of detail properties are in very good conditions they have been well maintained, they are high quality assets. There are no significant CapEx dollars that are immediately required to do anything. I think there are opportunities in all those businesses to find ways to continue to grow the business, but there are no kind of differed maintenance issues, that’s your question in terms of something we are going to have to do once we take over the operation.
Okay, great. Thanks guys. I appreciate it.
Thanks Steve.
The next question comes from Shaun Kelley with Bank of America. Please go ahead.
Hi guys. Josh, can you just wanted to start with a quick just clarification. I think earlier in the Q&A you talked about maybe 4% to 5% Las Vegas locals growth. Or you are referring to like market, I think there was a market statistic. What were you frame that exactly, is that market, and was that revenue or is that more of an EBITDA type environment?
Yes Shaun, thanks for asking the question so I can clarify. It is market and so I am just generally saying that I generally took the question I mean what are we expecting to occur in Las Vegas in 2018 to maybe I jump to - false conclusion that we were talking about the market overall. I think we are generally thinking of level of revenue growth that we saw in 2017 being replicated in 2018 generally for the market overall. So that was kind of 4% to 5% as I recollect so that's generally what I would say we are generally expecting in terms of our guidance on our expectation for that segment kind a trickling down to our business.
Okay. And I guess if you think about the broader backdrop there, I mean there are some numbers that you can think about versus competitors, but with some of your initiatives are you - is it your sense that you are - I mean when we look at the overall local statistics that we get monthly, and we appreciate that those will line up exactly to how you guys are poured. But is your sense right now that you are holding share, gaining share or sacrificing a little bit of share relative to the market wide numbers given some of the initiatives you are working on, just as it relates to revenue?
When you look at in the aggregate in Las Vegas, we are somewhere between holding our own and losing a little bit in that, losing a little bit is what is going to be a strategy we have deployed to spend our marketing dollars more efficiently and not to chase kind of unprofitable business. At some of our locals properties were actually either holding our own or growing a little bit, in some we are in the other direction. But in the aggregate it is kind a flat to down just a tick.
Okay, thank you, I think that's clear. And then like last question but on the same topic. Keith in the prepared remarks, you talked a little bit about some of the different marketing technologies efficiencies things you are looking - you are either rolling out or looking to rollout across the portfolio just to kind a work on marginal EBITDA gains. Kind of we are sitting here at analyst which line items do you think are the best ones to measure some of that progress. Is it EBITDA margins or do you think some of that is going to show up in promotional allowances and the differences between net and gross revenues. Just kind of how should we be tracking that or thinking about some of those programs and efficiencies that again probably hard to judge over a quarter, but we maybe look back over a year or two and then see?
It is hard to judge frankly between properties and this properties has unique circumstances and then you know we may have nine local properties here at the State of Nevada. They operate somewhat differently based on the surrounding competitors of what they are doing. So at the end of the day I would focused on margin, I wouldn’t focus specifically on promotional allowances that could give it false positive in one quarter and false negative in another quarter.
And so just I would just say stay focusing on the margin and watch that and once again revenues for us maybe don't grow we are not overly concerned as long as EBITDAs growing and the margin is growing. It’s a reflection of smarter reinvestment of our marketing dollars in today's world vis-à-vis a year or two ago.
Got it. So as we think about that promotional allowance line. Is there maybe inefficient spend than that's gets redeployed and then something else where we the EBITDA benefit, but the absolute dollar number doesn't get down to that sort of one way to characterize how that might play out?
I think it’s a very fair way to characterize it.
Great. Thank you very much.
Next question comes from David Katz with Jefferies. Please go ahead.
Hi, afternoon everyone. I know that where you have kind of gone around and around with the Las Vegas locals market a little bit, but I wondered as you think about what the market should grow this year. What would be the one or two or three things that could drive it one way or the other up or down, what data points or other things can we be tracking to keep an eye on whether we should come back to you and ask you whether the outlook improves or not or gets wore for that matter obviously hope not, but…
Well I think the statistics that I spoke in my prepared remarks whether it’s employment growth whether it’s kind of the average wage growth that we are seeing in town or unemployment rate those were all the important indicators to us, those of things that we watch kind of every month as indicated so kind of the help to the economy.
And so if job growth were to double in 2018 over 2017, yes we probably expect that the local economy would heat up more if the average wage growth doubles in 2018 versus 2017 then we would expect that to grow faster. If all the sudden 10 new construction projects went in the ground and construction employment went from 70,000 jobs back to 90,000 jobs. We would expect that the market growth will be significantly higher and conversely on the converse my statement would also be true, my comments would also be true.
So it’s just those metrics, they are not very complicated metrics, there are things that we have watching for years. This is the lag effect and so the many construction jobs go up it doesn’t mean spending goes up as we have seen over the last several years. It takes a while for it to flow into the business, but those are things you should look at.
If I can follow that up those kind of broad categories which are there sub segments of them that maybe developing unevenly, whether it be residential real estate prices or different kinds of employment or different categories of wage growth that you look at that may make a difference one way or the other for the Company?
Well I think as we have seen historically not all jobs are created equal. We like construction jobs just given the nature of that customer more than we like government sector job as an example. And so it is important in terms of what types of jobs are being created in the local community.
It is important as to kind of where the wage growth is occurring, because if it’s occurring with the right customer group then we will see a better impact on our business than once again other customer groups.
So we do look at that in detail, not in the time of the call today that start to go into all intricacies of the different metrics and those kind of the subcategories of those with surprise to say, we just spend a lot of time watching and monitoring that.
Okay. Thank you very much.
Next question comes from Harry Curtis with Nomura Instinet. Please go ahead.
Hi, good afternoon. Just following up on Blue Chip having watched the progress of the casino for, I don’t know 15 years. It would seen that your guidance implies roughly 25% to 30% decline in the EBITDA level. Am I being too negative?
Yes. Yes.
That’s probably all I’m going to get out of you. Right? Yes.
Yes.
The second question…
You answer the answers from now on.
You have given some kind of per broad estimate on the closing of your transactions in the second half. It would be helpful to get a more specific estimate. Is there a month that we can target for each one?
Yes. I think that we certainly love to know it ourselves, we would love to have it. We are going through the process and file our applications and we are simply wining to go through the process. And the best information frankly we have is second half of the year and at this point, it’s just hard to narrow it beyond that. [indiscernible] have to be able to feel.
If you have the data, put a line in the sand that at the beginning of the fourth quarter as the mid-point, would you guide us towards the earlier part of that mid-point or the later part of that mid-point based on what you know today?
That’s not a yes or no answer.
So you have already just got into the third quarter. Here is what we have learned over the years. Once again, we have four, five different regular Authorities who are looking at that and need to improve the transaction and we are not going to get out of ahead of what they tell us. And so until I gave us some indication of when we maybe on an agenda, we are simply not going to speculate kind of how long it’s going to take than we get through it. So would love to give you kind of better insight, frankly we just don’t have.
Okay well thank you for satisfying my curiosity.
Talk to you later Harry.
The next question comes from Chad Beynon with Macquarie. Please go ahead.
Hi thanks you for taking my question. A few months ago, you guys has to the call and the Pinnacle acquired assets, and now after we have seen the filings in Penn and Pinnacle I guess the process will begin further outlines and hats off to you guys on the multiple and it’s been crystal-clear in terms of what the approach is there. So I wanted to ask about the other acquisition the Valley Forge one, it looks like a lot of things were attractive here. You mentioned location, even EBITDA multiple. And then I think something that was unique the expansion of the property. Could you maybe just kind of high level, what you liked about it and then provide a little bit of detail on the unit expansion that may currently be going on at the asset? Thanks.
Sure. So I think you hit on a lot of the things that we liked frankly. For us, it was priced at the right point where with a single standalone property expenses, once we are able to extract synergies it’s an attractive multiple, it does have expansion capabilities as the ability to increase the slot count at that property quite significantly by the 250 games. And so that 600 games today have highest slot win per unit in the state today and so that will be a nice expansion. It has the ability to add a few more table games if the property needs it.
But beyond that, we have the opportunities to participate in online gaming, which is just incrementally positive and potentially sports betting if the Supreme Court rules in its favor and so I think we looked at all of those things and find it just to be a very, very attractive acquisition. It's market we are not in, the state that we are not in, so it gives us yet another distribution channel in the Northeast where we don't have a presence anymore. So we kind of checked all the boxes as we look for acquisitions.
Okay. Keith ,so with respect to the cash flow licenses that are [indiscernible]. I believe the process and before you guys are expecting to close the deal. Could you work with the seller to potentially bid for one of these, and if you could is this tough time that you are interested in another one of these licenses that are being bid in Pennsylvania.
Yes, I don't. I think we probably could, whether or not we would and if we are interest we don't kind of speculate on potential acquisitions or new projects, but certainly I think if we have the appetite to do something like that we could probably work with the existing owner and a find a way through it.
Okay thanks. And then the last one for me maybe yes or no question, with respect to your 2018 guidance you talked about Las Vegas locals a couple of times. I think [Red Ross] (Ph) reported after you guys did in the third quarter and since then there is kind of adjusted Phase 2 at that [Palms] (Ph). Has that announcement changed how you are thinking about your 2018 Las Vegas guidance in terms of either market share or just opportunities in Las Vegas. Thank you.
Yes I would say, no. I think if we look at what is being done at the Palms is really additive that to whole kind of tri facto Palms, Gold Coast and Rio and those guys are great operators and they will be able to do very well with that asset relative to how they are positioned in.
And we think that the combination of kind of the product we offer and the product they offer will just make that part of the Las Vegas market more attractive bring more people to the market and we can kind of share off of each other's prosperity in that once they get finished over there.
So we are not seen any kind of positive impacts on our business as a result of what they are doing over there today, but we expect to benefit once they do finish and deliver a great product that’s appealing to people in the locals market as well as tourist destination oriented folks.
Yes we have said in the past, look, some of our past years of Gold Cost were - Rio and Palms were kind at their peak, because they drove more business to the areas, Josh has indicating. And so once they are fully out of construction and fully function, then I think we are going to do even better as more people in the area and they will stop by and visit our products. And I think they will enjoy it and we will get some business.
Okay. Thank you very much.
This concludes our question-and-answer-session. I would like to turn the conference back over to Josh Hirsberg for any closing remarks.
Thanks Anita. If anyone has any other questions about our guidance or Blue Chip or anything else you want to ask about, feel free to call the Company and now we will be happy to answer those questions. Good-bye.
The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.