Good day, everyone, and welcome to the Boyd Gaming Fourth Quarter and Full-Year 2018 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask question. [Operator Instructions] And please note, that today’s event is being recorded. And now I would like to turn the conference over to Josh Hirsberg, Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, William. Good afternoon, everyone, and welcome to our fourth quarter and full-year 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 on the Investor Relations section of our website at boydgaming.com. We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to project special charges and certain expenses. Finally, today's call is also being webcast live at boydgaming.com, and will be available for replay in the Investor Relations section of our website shortly after the completion of this call. I'd now like to turn the call over to Keith Smith. Keith?

Thanks, Josh. Good afternoon, everyone. Thank you for joining our fourth quarter earnings call. The strategic initiatives we've been executing over the past several years, continued to payoff for our Company in the fourth quarter of 2018. Our recent acquisitions, our operational efficiencies and our marketing refinements all contributed to our strongest performance of the year. During the fourth quarter of 2018 we delivered revenue EBITDAR and margin growth in every segment of our business. Just as important, we also achieved revenue EBITDAR and margin growth in every segment of our business on a full-year basis. Across the country our consumer remains healthy and willing to spend and our business is the strongest it has been in more than a decade. Nationwide, customer visitation and spending was solid throughout the fourth quarter as 20 of our 24 same-store properties posted year-over-year revenue, an EBITDAR growth and same-store operating margins improved nearly 200 basis points across the Company. In addition, we began integrating five new properties into our portfolio during the fourth quarter, significantly enhancing our EBITDAR and free cash flow potential in the quarters ahead. On a segment basis and consistent with prior quarters, our Southern Nevada operations led the way with strong growth. Revenues continue to increase in our Las Vegas local segment, while EBITDAR rose more than 13% reaching its highest fourth quarter level since 2005. We saw revenue in the EBITDAR growth across our major locals properties with record fourth quarter results at several properties including our largest property, the Orleans. We also continued to deliver very strong returns at the newest additions to our locals portfolio, Aliante and Cannery, which are consistently exceeded our expectations in the two years we've owned them. While our locals’ portfolio continues to benefit from a strong Southern Nevada economy, we…

Thanks Keith. The fourth quarter was a very good quarter for our Company and marked the conclusion of a successful year. During the quarter, same-store EBITDAR grew over 9.5%, and same-store margins improved nearly 200 basis points. For the year we had equally strong results. The same-store EBITDAR grew almost 6% and margins improved nearly 125 basis points. We have consistently driven profitable revenue growth and margin improvement for several years now. We expect this trend will continue based on the strength of our customer and the internal opportunities for continued improvements and operational effectiveness and leveraging our size and scale. We continue to be focused on our ability to generate free cash flow. Free cash flow that we will use to pursue the highest returning projects, whether they are investing in our business, strategically growing our company or returning capital to shareholders, all while continuing to focus on deleveraging our balance sheet. During 2018 we completed three acquisitions acquiring five new properties and four new markets and we enter the Illinois distributed gaming business. And all we invested approximately $950 million to acquire these assets and expect to generate about $250 million in combined EBITDAR from these assets during our first full-year of ownership. Evaluating these acquisitions on a Holdco basis with $250 million of EBITDAR and capitalizing the annual rent payment related to the operating companies. Our combined purchase price represents roughly a 7x multiple. And in terms of our recent acquisitions of Aliante and Cannery. Since we acquired these properties, annual EBITDA has grown 40%. Including the incremental benefits we have captured at Sam's Town Las Vegas from owning the Cannery assets. The purchases of Aliante and Cannery represent approximately an 8x multiple, which will continue to only get better from the anticipated growth inherent in these…

Thank you, sir. And we will now begin the question-and-answer session. [Operator Instructions] And our first questioner today will be Carlo Santarelli with Deutsche Bank. Please go ahead.

Keith, Josh, thank you very much for your comments and congratulations on a really good year.

Thank you.

Josh, just based on some of your commentary and probably reading between the lines too much, but clearly in the gaming environment as we see it today, scope has become a much bigger positive, and obviously the success you guys have had in your – not just acquisitions this year, but your Locals acquisitions that you closed on in prior years. You guys clearly have the scope and size and have shown a tremendous competency to get kind of the synergies out that you expected and buy things at pro forma accretive multiples. At this stage, like, when you think about 2019 and you think about 2020 and beyond, how much more appetite is there for acquisitions? And more specifically if you were to get deeper in the Locals market, how much do you think FTC issues and issues of that sort could kind of come into play?

Good question, Carlo.

Thank you.

Look, I think that the company, kind of, one of its key attributes or success factors has been its ability to make acquisitions successfully and deliver on the synergies that it lays out for its investors and based on the expectations that we set for ourselves when we established a purchase price. So I think it's a core competency that, and it's something that we will always kind of continue to evaluate and we'll continue to look for as a means to grow the Company. I don't see us kind of limited in that respect, as we surveyed the opportunities that are out there kind of on the horizon or there might be available to us. I don't – when we think about risks of transactions, we certainly evaluate kind of the FTC related risk at times. But I will say that we have had experience with those types of analysis when we've done acquisitions throughout our history. So I think we understand where the risks are around that. And having said that, I feel like at least my view is as we continue to have opportunities that will not be limited by that risk. I do think that we have been a Company that does not necessarily feel like we need to grow just for growth sake by making acquisitions. We feel like we want to do solid deals that are good long-term value for our shareholders that have strategic rationale for our Company and therefore we'll wait for the right opportunities to come our way. And I think that's how you're seeing us play – play this out over the last couple of years. I don't know if I've hit all of the aspects of your question, I'm certainly willing to go back and cover any of those or I don't know if Keith wants most to add anything to that, but I think very high level. I'm trying to address everything you brought up in your question.

Yes. I think for the most part you certainly did. I don't know if Keith wants to interject that that would be great.

Look, I think Josh covered it well. Well, we continue to have an appetite to grow. I think one of our core competencies is growing through acquisitions. As Josh said, we have a pretty good model in terms of how to deliver on synergies as we work through this. We understand the risks, but and I don't think we are limited whether it be here in Nevada or other places in order to continue to grow. So we'll continue to look for good opportunities, opportunities that can grow the company. I think Josh, made a very important statement, which is we've never been about growing for growth sake. We've been about growing to be able to and to increase profitability and shareholder value and have something to make strategic sense for us and we'll continue to operate that way.

I think the one other aspect that I would mention is, is that absent acquisitions, we feel like we have a lot of opportunity internally to continue on our path of improving our overall operations, continue to execute on many of the initiatives that we've spoken about over the last several years. So we don't need – acquisitions are something we will continue to evaluate, but absent acquisitions, I think we feel like we have a really good foundation of a portfolio that we can manage that we have things we want to do with that to improve how they operate and how they work together. And so absent acquisitions, I think we feel comfortable with where the business is and the trajectory of that business.

Great. And then if I just could one follow-up is that as I think about the new guidance and the midpoint of the new guidance, I obviously back off that the 250 that you talked about being in there for the Pinnacle, Valley Forge and Lattner acquisitions. I think you guys had provided enough color on EBITDA through the 3Q of the stuff that you'd acquired earlier in the year. And I know that you've talked about $50 million as the 4Q number for those three, assets or those three portfolios of assets combined in the 4Q. If I'm just trying to get to kind of a same-store organic, what's implied in your EBITDA growth? Is it fair to assume that that $50 million in the fourth quarter was roughly accurate?

Yeah, I think – I don't know if the $50 million is the right number. I remember giving guidance of – I think it was $45 million to $47 million for Q4 and I think it was $50 million or $52 million for the full-year – for the period of time, we own those acquisitions for the full-year. But the underlying statement is correct, Carlo, that basically the guidance we gave you was what was achieved by the acquisitions that we made. And you have to be careful whether you're including Lattner or not including Lattner. But ultimately at the end of the day, your statement is correct. The acquisitions performed in line of the guidance we provided you.

Perfect. Thank you, guys, and congratulations.

Thank you.

And our next question or two will be Steven Wieczynski with Stifel. Please go ahead.

Hey guys. Good afternoon. So Josh or Keith, if I can start, just around the guidance and you guys continued to a very good job of expanding your margins. And I don't think you'll answer this directly, but can you give us somewhat of an idea in terms of the way you guys are thinking about margin expansion in front of 2019, but also for 2020 as well. Or maybe a different way to ask is, how you guys are kind of thinking about the flow through opportunities in the near-term would be helpful.

Yes. So obviously we had a very good quarter with – that we just completed with in terms of flow through, I mean we had in excess and many of our segments in excess of 100%. And I don't think that is something that we would expect to continue at that level. I think that general that we've tried to guide folks toward a kind of – middle kind of the range of kind of 60% to 70% flow through for our business overall. Las Vegas locals may be a little bit for the higher end of that range. Midwest and South maybe kind of toward the lower end of that range, maybe even a little bit below that at time. We feel very comfortable with that kind of expectation of from us. I think our operators do a really good job of running the business along the lines of how we think about it, which is from the perspective of driving profitable revenues, not just trying to drive revenues for growth, driving profitable revenues. And I think that Steve, you will continue to see us do that. Many of the tools and capabilities that we are building out will help us to get better at that over time and be more effective at that. So I think, as I kind of try to frame the answer for you, this is how we would think about it over the next year or two years. And I don't think we see much in the way of changing that, but just more opportunities to kind of reinforce around that flow through level.

And maybe the follow-up on that, do you guys have any type of internal long-term target in terms of where you think you can get margins? And I'm not looking obviously for the number. But not sure if internally you guys kind of have a goal in your mind?

Sure. I think we do it's certainly higher than it is today. I think with Josh was alluding to is we feel good about the opportunity to continue to see margin expansion in the various parts of our business. We've executed on a plan over the last couple of years to grow margins will continue to do that. That some of the tools are rolling out are still in their infancy and that will continue to kind of gain and sophistication and gain traction. So we feel good about being able to continue to expand margins kind of across the portfolio.

Okay. And the last question, and may be I'm overthinking this a little bit too much, but and I know it's still early on, but you've obviously had competitors with Palace Station and Palms, put a lot of money into those assets. And I guess the question is around whether it's the New Orleans or maybe even can Cannery and Aliante, but one to see if you've seen any impact at those assets to those assets. And then maybe also if you've seen any uptick in promotional spending, in or around the market.

Well, a couple of comments. First, look we're very happy with the kind of condition of the Las Vegas locals market's extremely healthy and you're seeing kind of good revenue growth in the market. We're even more happy or more pleased with the performance of own business. You look at the Orleans or record fourth quarter, I'm strong, strong results of the Gold Coast, 13% EBITDA growth for the portfolio overall. So we're very happy with kind of how we're executing the business. From a promotional aspect, is it elevated? No, I think it generally is – generally speaking, I think fairly normal promotional environment. I mean there maybe a little bit of elevated advertising related to Palms or Palace here and there, but that's just launching of a new product. We're happy with our business at the Gold Coast. And once again, we are happy with the condition of the market.

Okay, great. Thanks guys. Appreciate it. Well done.

And our next questioner today will be Thomas Allen with Morgan Stanley. Please go ahead.

Hey, congrats on the good result. When we think about your 2019 EBITDA guidance, can you just give us a little bit more color on how you're thinking about growth by your three segments? Thanks.

Thomas, I think I'm going to try to stay away from answering that question. I think, we give global guidance and that's what we're comfortable giving. And so let me just leave it at that.

Okay. It was worth a shot. Can you talk a little bit about the weather impact that you’re seeing here today? Is there anyway to quantify it?

Not yet, Thomas. I mean there's been obviously any number of weekends, as anybody follows along what’s happening with the weather, up to and including yesterday and today here in Las Vegas where we're seeing unprecedented snow and cold in the like. And so we all know that in the business that after some of these weather events, there's little bit of pent-up demand and some of the business comes back. And so we're not prepared today to give any sort of an impact in terms of maybe the first six weeks of the year. It certainly will be a number, but we're going to wait and see how the rest of the quarter turns out before we start to quantify and see how much of the business maybe comes back in the form of pent-up demand before we quantify it.

Okay. Thank you.

Yes.

And our next questioner today will be Felicia Hendrix with Barclays. Please go ahead.

Hi, thanks. So you guys have been consistently beating at Blue Chip. Wondering if there's any chance you want to revise your prior expectation for EBITDAR cannibalization there?

Well, the year is over. So I think we will just let that lie.

It's a new year.

I can follow – for the New Year; can I delete it out of my model?

I think the way to think about it, or at least the way we think about is Blue Chip did a really good job of kind of managing to the competition that it had. The impact was not what we expected it to be, but I think we have felt largely the impact that we are going to see. And what we're doing now is having a business that has the opportunity to grow off of the levels that it's at. We kind of – to the extent of competitive dynamics today, essentially as they are today, we would expect Blue Chip to kind of go off this base going into 2019.

In fairness, just to answer your question, look, we saw the impact that we expected to see out of the battle ground markets between the new competitions on Blue Chip. We saw really significant declines. What the team was able to do, we talked about this in prior quarters was really grow the business in other areas that worked between them and the new competition that came out of Chicago and other places. And so the team did a remarkable job of being able to offset those declines by picking up business from other places. So as Josh said, I think we feel good about we are at a stable base now, the impact of the new competition has been felt, whatever it is, and we can grow off of this base at modest levels.

Yes, that's helpful. And then just if you could – I don't think you touched upon your synergy expectations or an update or just to be addressing them for Pinnacle and Valley Forge, the $13 million, both of those. Is that still the plan? Can you update the magnitude or the timing? Or is that is what it is?

Look, I think we feel very comfortable with the levels of synergies that we've outlined. When we announced those transactions, it was $8 million for Pinnacle and $5 million for Valley Forge. And I would say most, if not all, most of those synergies were expected to be achieved in 2019. And that's part of what the – that's incorporated into the guidance that we provided. So I would say everything, there have been really no surprises to the downside. And I think probably some slight surprises to the upside and things that we have learned that the properties that we're acquiring through better than Boyd and where you planned to kind of roll those out through Boyd and vice versa. So I think we're trying to be a really adhere to trying to get the best practices of all the assets that not only that we run, but there we've required. And so that that's what creates more upside as we go through time. We identify those.

Okay. Okay, thank you. And then just the last one and just I wanted to address this, but to quantify it more than was in a prior question. I think you had given a goal of, improving EBITDA margins by 250 basis points to 300 basis points from about 2017 to 2020. That was something you gave a few years ago. As of 2018 – and the end of 2018, you've now improved same-store EBITDA margins by 200 basis points, right? So you're kind of well into that goal with really two years to go. So I'm just wondering is that 250 basis points to 300 basis points is something that you're still shooting for? Or just given the successes that you've had with a lot of your initiatives has been everything. Is that something that could be adjusted higher?

I think the way I would think about it as we're going to achieve our goal first before we set a new goal. And while I think we feel good about continuing to make progress toward that goal and we feel good about the initiatives that we have underway that are like Keith described, that are kind of in their infancy. I think we want to kind of start to get the full benefit of those before we kind of see where we're headed from there. But we feel good about everything that we've been communicating to the investment community over the last several years in terms of the initiatives, the margin improvement, you're seeing it kind of play out generally. And look at the end of the day, it won't – not everything is always going to work out. So there will be some times no doubt that, we don't get the margin improvement that we expected or the flow through. But I would say generally that's the general trend and trajectory of our business over a longer period of time.

It does seem pretty realistic that you could get to the low end of that call by the end of this year, correct?

Yes.

I think we're on track to achieve our goal.

Okay. Okay. Thanks a lot.

And our next questioner today will be Shaun Kelley with Bank of America. Please go ahead.

Hi, great. Thank you for taking my question. Josh, a lot of the things that I had were answered. But just in the prepared remarks and I might have missed it. Did you give a cash interest expense number? I'm just trying to square up the free cash flow number that you provided.

Yes. So I basically gave a – I guess it's a book interest number of $240 million to $245 million. And then to say, cash interest was about $10 million less than that. So if you come out somewhere between $240 million and $245 million and you subtract to $10 million, you'll get a cash number.

Great. Thank you for that for feeding that. And then second question would just be in another release it was also tonight, there was some comment about a little bit of elevated promotional activity in some regions. I mean it seems like in terms of what you saw your core regional business this quarter, it's probably pretty hard to see that. But I just curious, have you seen any promotional change or anything that you guys wanted to call out? We hear of activity kind of picking up here and there, but just curious if there is any pattern in what you guys have seen?

No, I don't think we've seen any sustained elevated promotional activity in any of the markets, certainly not here in Las Vegas. I mentioned a little bit about it earlier, maybe just a little bit around the launch of Palace Station or the relaunch of Palms, all pretty normal. So I wouldn't really call it elevated. And nothing that's sustained is, as I'm fond of saying, look, people go out from time-to-time and get a little aggressive for a week or a month, but there's nothing on a sustained basis in any of our markets that it was worth calling out.

Great.

I think Shaun, we continue to be focused and I think you'll hear from many of our peers just in terms of just be more effective and efficient with marketing span and market reinvestment generally. And we don't really see that changing. That seems to be a philosophy that's pretty widespread within our industry.

Great. That's it for me. Thanks very much.

Sure.

And our next questioner today will be Harry Curtis with Instinet. Please go ahead.

Hey, guys. Two quick questions. In Mississippi, do you think that the sports betting, is EBITDA positive at this point or is it too early to tell?

Well, if you look at kind of sports betting as a whole, not simply as the profitability of that none of what I'll call the one vertical of sports. But yes, it is clearly, but not positive. It's grown new customers as customers, staying on the property longer, maybe spending a little more money, some up tick in food and beverage here and there. And then, I don't know if the P&L in front of me, but it is the actual profitability is greater than zero in the book itself. But it really, and I encourage people to think about this not as the profitability of the operation of the sports book, but the impact of the overall property.

All right. And then going back to the first question and sorry, I apologize have been bouncing around various calls. I don't know if he bought any stock back in the fourth quarter?

Yes. Harry, we have that in our prepared remarks. We bought back, I think it was $14 million in Q4 and then we said we bought back $20 million and so far year-to-date.

Okay. So there's nothing keeping you obviously out of the market. You really haven't been blacked out?

That's correct.

All right. Okay. That's all I had. Thank you very much.

Okay. Thanks Harry.

And we have one more question are today that's going to be Barry Jonas with SunTrust.

Hey guys. Wanted to start with Lake Charles. Just curious if you're seeing or expecting upside at Delta downs given, there's pretty substantial roadwork closer to Lake Charles. Thanks.

Sure. No, we're certainly aware of the potential impact of the roadwork. The roads are being impacted for better than a year now with all the construction activity, but just generally in the area, we haven't seen anything significant happened to the business to date from the actual road construction itself. We'll be prepared if it does, but we haven't seen anything to date.

Great. And then just one more for me. Few of your peers have commented on the DOJ reinterpretation of the Wire Act. I'm curious, does this alter your strategy at all or maybe make you pause at all? Just curious any thoughts on that? Thanks.

Certainly it got our attention and we looked at it and we're studying it and we're watching what is going on around that. But as long as sports betting occurs within the four walls of the borders of the state, it really doesn’t impact anything. And so it doesn't, in that respect, alter our plans to move forward in Pennsylvania, or moving forward in other states. Look, there's any number of states we continue or continuing to pursue sports betting legislatively and I believe that that will continue. So it hasn't slowed down the legislative action around sports betting. So yes, it really hasn't kind of changed our focus or frankly our excitement about the opportunity to grow that business.

Great. Thank you so much.

Thanks Barry.

And there actually is another questioner today, that's going to be David Katz with Jefferies. Please go ahead.

Hi gentlemen. Congrats on the quarter. So look, I just wanted to clarify and drill a little deeper on one matter, if we're getting to the leverage target, that is between 4x and 5x, which I assume it does include the leases on a lease adjusted basis. Can we think about other sort of internal capital allocation choices or would you consider any acquisitions within the next year or so that push the leverage back up again? Are those inside or outside the boundary, just as we think about what to do with our forecast this year or next?

So I think as we think about our leverage goal if you will, our leverage target, and we've had this philosophy for a while is we remain flexible in terms of when and how we get there, if you will. So if there is a very strategic acquisition that is priced right and we'll create long-term value or the company and for our shareholders then we will go ahead and make that acquisition even if it takes our leverage up a little bit, as long as we can see a path to get back to that 4x to 5x. I think the acquisitions we made in 2018, we're good example of that, where we had expect it to be at that leverage profile at the end of 2018, but spend $950 million buying a few assets that were great additions, very strategic to our Company. We'll have great long-term value. And so we ended the year just a tad above 5x or confident that next year we'll get to between 4x and 5x, next year being 2019 to be clear. So we'll be flexible. We will let it go up if there is a great acquisition out there otherwise that we will focus on being between 4x and 5x. And with respect to kind of the lease adjusted leverage, obviously it will be at a higher end of the 4x to 5x then the lower end. But yes, it also will be within that boundary.

Got it. Okay, we'll try to model flexibly then. Thank you very much.

And this will conclude our question-and-answer session. I would now like to turn the conference back over to Josh Hirsberg for any closing remarks.

Nice, William, and thanks everyone for joining the call today. We appreciate all the questions and if there's any follow-up or any other additional questions, feel free to reach out to the Company and we'll make ourselves available. Thank you very much.

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