Earnings Call Transcript - BYD Q4 2020

Operator, Operator

Good afternoon. And welcome to the Boyd Gaming Fourth Quarter 2020 Conference Call. All participants will be in listen-only mode. Operator Instructions After today’s presentation, there will be an opportunity to ask questions. Operator Instructions Please note, this event is being recorded. I would now like to turn the conference over to Josh Hirsberg, Executive Vice President and CFO. Please go ahead.

Josh Hirsberg, Executive Vice President and CFO

Thank you, operator. Good afternoon, everyone, and welcome to our fourth quarter conference call. Joining me on the call this afternoon is Keith Smith, our President and Chief Executive Officer. Our comments today will include statements that are forward-looking statements within the Private Securities Litigation Reform Act. All forward-looking statements in our comments are as of today’s date, and we undertake no obligation to update or revise 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. 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. So, with that, I would now like to turn the call over to Keith Smith. Keith?

Keith Smith, President and Chief Executive Officer

Thanks, Josh. Good afternoon, everyone. Thank you for joining us. Our fourth quarter was another display of the more efficient and focused operating model we have established across our nationwide operations as we set a new fourth quarter margin record of 33.1%. This is the second consecutive quarter that we’ve achieved record margins across our business, clearly demonstrating the sustainability of this more efficient operating model. Our fourth quarter results also demonstrate the continued strength of our core Locals customers. Business from our local customers remained resilient in our Las Vegas Locals segment and across the Midwest and South as well. At the same time, we continued to make great progress in realizing the growth potential of online gaming. Our EBITDAR for mobile sports betting continues to grow. And we expect to see further gains this year as we prepare to launch our first iCasino offering. I will discuss our online progress in more detail in a few minutes, but first, let’s review our operating performance. Nationwide, the majority of our properties that were open for the entire fourth quarter delivered EBITDAR growth, with nine properties setting fourth quarter EBITDAR records. In the Midwest and South, we again achieved record EBITDAR and margins, despite temporary closures of Par-A-Dice in November, Valley Forge in early December, and increased operating restrictions in many markets. Excluding these two closed properties, EBITDAR at our other Midwest and South properties rose 10% from last year, with combined operating margins increasing over 650 basis points. Results were particularly strong in the South, as our seven properties in Louisiana and Mississippi grew EBITDAR by more than 19% and improved margins by more than 1,100 basis points, a remarkable performance considering the impacts of two hurricanes on our Gulf Coast properties in October. To the Western Nevada, our Las Vegas Locals segment also delivered exceptional margin improvement, increasing almost 1,100 basis points to a record 43.5%. While Locals EBITDAR was down slightly from last year’s record levels, this was due entirely to softness at The Orleans. Unlike the rest of our Locals portfolio, The Orleans is heavily dependent on destination and group business generated by its 1,900-room hotel, and its meeting and event space. As a result, this property has been more significantly impacted by declines in tourism to Las Vegas. Excluding The Orleans and our closed properties, our core Locals portfolio achieved EBITDAR growth of nearly 13% in the fourth quarter, while margins improved nearly 1,300 basis points to 46.3%. This performance illustrates the continued strength of our core local customers as well as the increased profitability of that business segment. Even at The Orleans, gaming revenues from our local players were up 14% during the quarter capped by record results over the New Year’s holiday weekend. As we move into the New Year, we are increasingly optimistic about the prospects for our business. Starting in late December and continuing over the first six weeks of the New Year, we have seen encouraging trends in both Las Vegas and the Midwest & South. At the same time, operating restrictions are being eased across the country and the deployment of vaccines is accelerating. All of this bodes well for our future outlook. Additionally, we expect to see increasing benefits from ongoing marketing, analytical and technology initiatives. While we are very pleased with the results from these initiatives so far, our work is continuing. We are currently partnering with Aristocrat Technologies to roll out a new cashless digital wallet called Boyd Pay. After launches in Indiana and Ohio, we have begun a field trial in Nevada and anticipate adding locations in Kansas, Louisiana and Pennsylvania by the end of the first quarter, subject to regulatory approvals. Over the course of this year, Boyd Pay will become a true digital, cashless wallet available on smartphones used to pay for everything we offer in our properties nationwide. Longer term, this digital wallet will have functionality beyond the walls of our properties as we work to integrate the Boyd Pay digital wallet into our online products. This integration will allow us to create a seamless experience for our guests between digital gaming experiences and our traditional properties, creating the opportunity to stay engaged with our customers wherever they choose to play with us. The integration of our traditional and digital products is one of the many reasons we are excited about the long-term growth potential of our online gaming business. While it is still early, we are already generating solid returns from our online business. For the full year 2020, online gaming contributed more than $10 million in EBITDAR to our Company-wide results, predominantly from our share of FanDuel’s mobile sports operation in Pennsylvania, Illinois, Indiana and Iowa. This year, we anticipate our online business will generate over $20 million in EBITDAR for the full year, including expected contributions from our soon-to-be-launched Stardust iCasino in Pennsylvania. Looking beyond this year, we see further potential from online gaming with lawmakers in Louisiana, Kansas, Missouri and Ohio all expected to consider retail and mobile sports betting legislation in their upcoming sessions. Online gaming is clearly a compelling growth opportunity for our industry and our Company. By partnering with a proven market leader like FanDuel to pursue these opportunities, we are generating immediate and growing profit from digital gaming today, while maintaining flexibility to explore the many opportunities available to us to ensure that we are well-positioned for the future. Next, I’m pleased to report that we’re making good progress toward the expansion of our geographic presence in Northern California as we prepare to break ground on the Wilton Rancheria resort in the next several weeks. With this location off a major highway, just south of Sacramento, this resort will be the closest Class 3 casino to downtown Sacramento in the South Bay Area, positioning us for a strong start after its scheduled opening in the second half of 2022. We are excited for the opportunity to start bringing the Tribe’s vision to life, allowing our partners and friends to finally realize their long-awaited goal of self-sufficiency. Across the country, our Company is making great progress, but we know that many are still struggling as a result of the COVID pandemic, and we are doing our part to help. When the pandemic forced Par-A-Dice and Valley Forge to close their doors, we did not want these temporary closures to cause financial hardship for our team members during the holiday season. And so, we extended full pay and benefits to every Illinois and Pennsylvania team member for the duration of the closures, just as we did for our Delta Downs team members after Hurricane Laura temporarily closed that property last summer. At the same time, we continue to assist our communities through our support of charities that are helping vulnerable populations severely impacted by the pandemic. These COVID relief initiatives continue to be a priority for our company. We know these are difficult times for many, and we remain committed as ever to supporting our communities and our team members. In conclusion, as we begin a new year, I’m pleased with what our teams have been able to accomplish during 2020 in an extremely challenging environment, and I am confident about what lies ahead. We are demonstrating the sustainability of our more efficient operating model, consistently delivering record margins across our business. Our core customers remain resilient in Las Vegas and across our regional operations, and we are seeing encouraging trends across the country over the first six weeks of the New Year. And we continue to make excellent progress capitalizing on the digital future of our industry, building a robust and growing mobile sports and iGaming presence across the country. 2020 was a challenging year, but also one of significant progress for our Company. And we know that this would not have been possible without the hard work of our team members across the country. Over the last several calls, I’ve spoken frequently about a more efficient and focused operating model. It is our team members who make this model work. Throughout the country, they have successfully adapted to a more efficient way of doing business, while continuing to deliver exceptional and memorable guest service. I want to thank every member of the Boyd Gaming team for all that they do for our Company and for our customers each and every day. Together, I am confident that we will achieve continued success in 2021 as we apply the lessons and experiences of the past year to drive continued growth. Thank you for your time today. I’ll now turn the call over to Josh. Josh?

Josh Hirsberg, Executive Vice President and CFO

Thanks, Keith. For obvious reasons, we are happy to close the books and move beyond 2020. On the other hand, 2020 has created exciting opportunities for our Company, for this year and the future. Our operating teams are focused on delivering higher margins, utilizing a more efficient business model, leveraging many of the initiatives, technologies and capabilities that were started pre-COVID in combination with the marketing philosophy focused on higher-value customers will continue to lead to improved profitability and cash flow for our Company. EBITDAR in the second half of 2020 actually increased from the second half of 2019, despite a revenue decline of more than 20%, a hesitancy on behalf of some of our better customers to return, no EBITDAR contribution from our Downtown business, closed properties and operating restrictions throughout the portfolio. Pretty remarkable. And combining our success of driving improved margins with the recent trends in our customer base, we are encouraged for 2021. As Keith mentioned, we believe our ability to deliver higher margins is sustainable, and our operating teams are committed to the continued achievement of this throughout our Company. We are also well-positioned to take advantage of online sports betting and iGaming, generating profits today in what is and will likely continue to be a highly promotional, capital-intensive and competitive landscape. Our 5% equity ownership in FanDuel also provides participation in the broader rollout of sports betting. As more states legalize and FanDuel leads the way as one of the long-term winners in online sports, our equity stake will only continue to grow in value for our shareholders. And separately, we are excited to introduce our own Stardust branded iCasino product this coming April. As we move forward, we will continue to evolve our online strategy to ensure that we are well-positioned for the long-term opportunity that is represented by sports betting and iGaming in our industry. Finally, we also emerged from 2020 with a strong balance sheet. We have no debt maturities until 2023, no outstandings under our $1 billion credit facility and a cash balance of over $500 million. So, as we begin 2021, we are confident in our ability to continue to deliver improved margins, and we are encouraged by recent consumer trends. Our online business will continue to be a focus for us, growing and creating value for our shareholders as more markets are legalized, and we introduce our Stardust iCasino product. Operator, that concludes our remarks. And we are now ready to take any questions from the audience.

Operator, Operator

Operator Instructions And our first question comes from Carlo Santarelli of Deutsche Bank.

Carlo Santarelli, Analyst

Hey, Keith and Josh. Thank you for taking my questions. Just for starters, guys, Keith, you talked about in your introductory remarks, kind of middle of December through the present, really seeing things starting to pick up, not only in the locals market, but your regional markets. As you think about what’s driving that outside of kind of confidence around vaccine progress or probably specifically starting to see some of the numbers cases and things kind of go down, thankfully, as well as kind of stimulus and stuff rolling out, have you guys gotten a sense based on who that customer is that’s coming in the door? Maybe what is specifically driving that? And how you’re thinking about as we move through the year, we should expect to see more benefits from, obviously, less cases and seeing that older customer come back or if it’s more of a stimulus kind of younger demographic, or what is it exactly you’re starting to see in December may change?

Keith Smith, President and Chief Executive Officer

Sure. Good question. I think you’ve summarized it well in terms of today, what is driving those customers in the door. I think it is the rollout of the vaccine and confidence that there’s light at the end of the tunnel. I think there is a certain amount of wariness with the shutdowns and the increased cases that occurred later in the fourth quarter and people wanting to get out and starting to live life normally again. Clearly, there is some stimulus in the results that we’re seeing as we move into the New Year. But basically, it’s the same customer. It’s the younger demographic. It’s the higher-worth segment. The nature of the customers coming in the door hasn’t changed much over the last six months, or more. The senior population still hasn’t shown up yet. And so, that’s a great benefit for the future once they get vaccinated and are more comfortable coming out and participating and joining us in our operations. So, not much change in the overall nature of the customer or the type of customer — younger, still spending at a higher level and just greater frequency in Q4 and moving into January and February, frankly, than we saw in Q3.

Carlo Santarelli, Analyst

And then, this one is a little bit more specific, I guess. But, if I look at your results, just in kind of the income statement, categorization of revenue and expenses, other revenue line was up significantly year-over-year, as well as the other expense, and both were up tremendously on a sequential level, but the other profit line was kind of down. I believe that line is primarily retail or other entertainment offerings at the properties. Is there anything else that’s running through there that seems to be driving that? I guess, the $57 million of revenue is up significantly year-over-year, which seems unusual, given some of the restrictions that are in place and everything else at this point. So, I was just wondering if there’s something in that bucket that is driving kind of the outperformance?

Keith Smith, President and Chief Executive Officer

Sure. It is in the other revenue line item, the $57 million you mentioned, included in that is online gaming revenue. And that’s what’s driving it higher. Without that, that number would be down, much like the other numbers in gaming and rooms, and food and beverage. So, that’s what’s driving that number.

Josh Hirsberg, Executive Vice President and CFO

Yes. So just to add a little bit of detail, Carlo, in that number, our relationship with FanDuel requires us to be obligated for the taxes associated with the revenues. So, we get the tax payment from FanDuel. It counts as revenue for us and then shows up as expense. And that’s what you’re seeing also. Other is effectively the taxes, a portion of the taxes that we are paying on behalf of our relationship with FanDuel. And then, in the other expense line item, there’s the offset to that revenue in the form of the tax expense on online. If you took all that out, it would look very similar to Q3 or prior year.

Carlo Santarelli, Analyst

And Josh, sorry, are you then just recording that on an annual basis then, meaning you’re getting trued up in the fourth quarter for the entirety of the year? Because the jump from 3Q to 4Q just from a revenue perspective implies FanDuel’s revenues are massive in the fourth quarter. That’s where I was going with it.

Josh Hirsberg, Executive Vice President and CFO

Yes. No, it’s not a catch-up. It’s basically a reflection of the business picking up in that time period. It’s effectively a pass-through.

Keith Smith, President and Chief Executive Officer

Carlo, it is kind of the peak sports season with NFL and college football. And you’re right, FanDuel’s revenues were massive. It was the benefit of that.

Operator, Operator

The next question comes from Steve Wieczynski of Stifel.

Steve Wieczynski, Analyst

So, Josh or Keith, I don’t know if we can keep going with Carlo’s line of question there. But so if we’re kind of thinking about that line moving forward, is the fourth quarter run-rate a pretty good run-rate there, or are you kind of saying, given, obviously, all the high-profile sporting events, we should bring that number down a little bit, if that makes sense?

Keith Smith, President and Chief Executive Officer

Yes. I think the way to think about it, first of all, as we all know, sports betting is extremely seasonal with Q4 and early Q1 probably being the bulk of it. We focus in on, frankly, EBITDAR. So, when you think about — if you’re trying to think about our online business, as we said, we generated north of $10 million in EBITDAR in 2020 and will generate north of $20 million in the year we’re in today. But, it is lumpy. It is not consistent or even throughout the year. It’s based on the sports season.

Josh Hirsberg, Executive Vice President and CFO

Yes. I don’t think you can take Q4 and annualize it. Another way to say what Keith just said, you can’t take Q4 and annualize it.

Steve Wieczynski, Analyst

Okay. That’s what I was getting at. Makes sense. And then, Josh, normally, this would be a call where you guys are giving guidance for the year. And obviously, we understand why you’re not providing guidance at this point, given the current backdrop. But, is there a way for us to understand how you’re thinking about the business this year without explicitly giving guidance? And I guess, what I mean is, I would assume at this point, you guys have modeled out multiple scenarios in terms of what ‘21 could look like. And just wondering what are some of the key items that you guys are watching and I would assume most of it is tied to the virus and vaccinations and stuff like that. But any other color that would help us kind of think about what could get you to a higher end or lower end of those potential ranges would be helpful.

Josh Hirsberg, Executive Vice President and CFO

So, I don’t know if I’m going to be able to help you much because you’re right, we don’t feel comfortable giving much guidance at this point. And I’d ask Keith to jump in if he has any other views on this. I generally think of it as the customers that we have been seeing, and Keith described this early on, really going from Q3 to Q4 and into the first six weeks of 2021. The cadre of customers has been largely the same. And I think to the upside would be just a larger participation from that older demographic that we really haven’t seen. We have a higher-value demographic across all ages, but certainly among the older age group we have less participation than we have had historically. And so, I think with the passage of time, people feeling more comfortable, it’s certainly understandable that we’re not seeing that today, but we expect that will grow over time. And anybody’s guess as to when that will happen is anybody’s guess. But, the reality is, we expect that to improve over time and get the benefit of that. I think, to some of the earlier points people were making and asking questions about, we have a healthy, younger demographic as well. And we understand that there is limited entertainment options and some of it may be driven by some of the payments that are being made from the government at this point. But that, in our mind, is largely the unrated segment. And so, from our perspective, it’s a continued focus on that rated customer, that higher-value customer, that higher-worth customer to us and just continuing to grow that business over time as they feel more and more comfortable to come out. That’s how we, I think big picture, think about our business.

Keith Smith, President and Chief Executive Officer

Steve, if you’re asking about how we view the drivers of the business over the next 12 months or so, it really is the passage of time and the success of the rollout of the vaccine and how quickly customers get comfortable with that and start to come out in bigger numbers. The easing of restrictions throughout the U.S. and throughout the portfolio, the lowering of case counts generally, once again, in each of the markets where we operate because those case counts themselves get widely reported, and it’s a psychological impact on people. And then, here in Nevada, the overall recovery on the Strip, which will really impact our Downtown business, as we talked about, will help support the strength of our Locals business at The Orleans. So, those are the drivers. Exactly the timing of all of those and how they roll out and how quickly people respond to them, obviously, is the big unknown. But, those are the key things we think about as we think about 2021.

Josh Hirsberg, Executive Vice President and CFO

And then, the last piece I would add to it is I think we feel really good about the core business that we have today and the core set of customers that we have. We have a good business today. They can potentially get better as both Keith and I are alluding to with the passage of time and improvement of overall conditions and confidence.

Operator, Operator

The next question comes from Barry Jonas of Truist Securities. Please go ahead.

Barry Jonas, Analyst

I wanted to ask about Boyd Pay. Can you talk a little bit about the CapEx requirements? And how do you think about ROI here?

Keith Smith, President and Chief Executive Officer

So, with respect to Boyd Pay, I would say that on the CapEx standpoint, it was not a significant lift. It’s nothing that would — you would hear us call out if we were detailing out CapEx in a given quarter. We’re leveraging up some technology that exists with products we’ve already bought from ATI and simply deploying them. And so, the ROI will be very strong because there’s very little invested in it, a lot of sweat equity, a lot of effort by the two IT teams and by our property people to roll it out. And it is early. We don’t have a lot of data under our belt at this point, but we think it will be a great addition to the overall suite of offerings we have and another way for us to stay engaged with our customers.

Barry Jonas, Analyst

Got it. And is the intent to link this up to FanDuel’s offerings at some point, or would this more just be your Stardust offerings?

Keith Smith, President and Chief Executive Officer

We haven’t engaged in that conversation with our partners at FanDuel, but that’s certainly something that is an opportunity for us to discuss with them. We’re focused on today’s rollout. But we certainly have great hopes for expanding it so far and wide.

Josh Hirsberg, Executive Vice President and CFO

The product has the capability to include a suite of products that could include FanDuel, if that’s how each party wanted to move forward.

Barry Jonas, Analyst

And then, just I wanted to ask about Nevada in terms of any views on the state potentially moving to remote registration for sports betting? And then, also, any thoughts on iGaming at some point getting legalized in the state?

Keith Smith, President and Chief Executive Officer

No specific commentary on either of those topics. It is part of the online world, which is important to our industry. Remote registration for sports betting is important in other states. And online iCasino is important and is a growing part of the business. So, overall, we’re supportive of the online business. Each state operates differently and has its own dynamics. Certainly, here in Nevada, the Strip operates differently from the local operators. So, we all have slightly different interests in this. But overall, the growth of online is important. It is a way for us to leverage a new customer and introduce a new customer to our business. So, we’re supportive.

Operator, Operator

The next question comes from Joe Greff of JP Morgan. Please go ahead.

Joe Greff, Analyst

Keith, you spent a decent amount talking about the sustainability of some of the margin-enhancing initiatives that you undertook last year. I guess, as we’re thinking about sort of near-term and this year, given the encouraging comments you had about the first six weeks of this year and sort of maybe a consumer or a customer mix that’s not dissimilar from what you saw in the 3Q and 4Q, would you say near-term, the property level margins in the Locals, the Midwest & South are this quarter or more akin to the 3Q than the 4Q? I mean, it has to be directionally that just because you don’t have properties that workflows that are open. But, I’d love to hear your thoughts on that.

Keith Smith, President and Chief Executive Officer

Sure. So, if you look at the Q3 margins and you look at the Q4 margins, it’s clearly Q4 margins across the board, while records in many cases, were not as strong as Q3. That was purely a revenue issue. So, if you look at the detail, expenses actually went down. And so, the margins in Q4 were driven down a little bit by declines in revenues. To the extent we see a rebound in revenues in Q1 and throughout the year, we’re very comfortable with our expense structure and the level of expenses and the control we have over them. And so, yes, we’d expect margins to be whether it’s Q3 levels or between Q4 and Q3, but clearly, as revenues go up, we expect to see them exceed Q4 levels as we move throughout the year. And one of the things I probably should have said when I was talking about the first six weeks of the year is we’re very excited about the trends through the first six weeks, until this last weekend, where the bulk of the country is frozen in the grip of this ice storm. So, that’s going to take a little steam off of it. But other than that, we’re still pretty excited about the first six weeks of the year.

Joe Greff, Analyst

Great. And Josh, you may have said this and I missed it, but did you talk about where you think corporate expense and CapEx for ‘21 shakes out for you guys? And if you can give 4Q CapEx, that would help.

Josh Hirsberg, Executive Vice President and CFO

Sure. Fourth quarter CapEx had a few one-time items in it related to Wilton as well as repair work related to the hurricane that impacted Delta Downs that we haven’t been fully reimbursed for from the insurance company. So, if you take those items out, our run rate maintenance capital in Q4 was about $33 million to $34 million. Including the other items, our total CapEx in Q4 would have been about $70 million. So, there was quite a bit related to Delta Downs in that number. And so, for the full year, we end up at $175 million. For 2021, we’re going to be especially careful deploying capital, just given the environment that we’re in. I would say, assuming that things stay good and there are really no issues as we move throughout the year, people can generally think of us spending $150 million to $170 million of capital. But again, all of that is really dependent on how the year progresses month by month. And I would say this will tend to be a little bit more back-end loaded than spread evenly. From a corporate expense perspective, I think we are comfortable talking about that for 2021 at this point, and I think we’re kind of in the $73 million to $75 million range for corporate expense for 2021, based on what we know today.

Joe Greff, Analyst

Great. And then, just a follow-up to that Delta Downs commentary, what’s the anticipated amount that you would get back under the insurance receivable?

Josh Hirsberg, Executive Vice President and CFO

We’ll be getting it all back. It’s just a delay between when we submitted and when the insurance companies reimburse us for it. So, it’s a timing issue. The Q4 amount was about $15 million to $20 million, and then the rest was related to Wilton.

Operator, Operator

The next question comes from Shaun Kelley of Bank of America. Please go ahead.

Shaun Kelley, Analyst

Josh, maybe just to stick with the last one on sort of working through some of the corporate items. Could you just remind us as we move through ‘21 on sort of leverage targets and maybe cash flow prioritization as well as any related NOL balance that you guys have at this stage, or just how should we think about what you’re targeting? And where we’ll be? Because I imagine, especially with this higher-margin profile, the business should be throwing off quite a substantial amount of cash.

Josh Hirsberg, Executive Vice President and CFO

That’s right, Shaun. First, the NOL balance at year-end 2020 was estimated to be about $560 million. Given the uncertainty in the business, we’re not comfortable giving leverage guidance per se because if I give you leverage, then you’ll know EBITDAR generally. But what I would say is that leading into the end of 2019 our leverage targets were toward the low end of kind of 4 times leverage, 4 to 4.5 times and closer to the 4 times leverage. If the business were to stay at these current levels, we’ll essentially be at those levels by the end of this year. Again, I’m not trying to provide guidance, but I’m saying that we need the business to stay its current course. If it does, we would be on track to be at the leverage levels very near the 4 times that we’d set for ourselves in 2019. So, hopefully that helps people think about the business.

Shaun Kelley, Analyst

That’s great. And then, maybe to change gears and go back to the customer profile for a moment. Obviously, a lot of discussion and wondering about when the older demographic is going to come back. But, I’m wondering, just over the last few months, Josh, have you had a chance to do any deeper digging on this younger demographic that we’ve seen? Because I think there’s also this question about when other entertainment alternatives present themselves how sticky that customer maybe. Just what are your insights or any thoughts from any customer work that you’ve done?

Keith Smith, President and Chief Executive Officer

Look, it’s always a difficult question to answer as to how sticky that customer is going to be. I think the good news is we’ve had that younger customer visiting us now for six or eight months through the course of this pandemic; they’ve been coming out and participating. And so, we’ve had quite a while to secure their loyalty and have them get comfortable with us. So, I think we feel good and are confident about the ability to maintain a good share of their wallet. Will we maintain 100% of the share of their wallet that we have today once other entertainment options open? Probably not. I think that would be foolish to expect we would maintain 100%. But we feel good about maintaining that customer and having them continue to participate with us. So, when you think about continuing to get that new customer, that younger demographic, and then we get the older customer that comes out as the vaccines roll out and they become more comfortable, the setup for 2021 could be quite nice as we move through the course of the year, assuming vaccines roll out as expected and case counts continue to decline. 2021 looks very good.

Josh Hirsberg, Executive Vice President and CFO

The other thing I would add is the younger demographic should be looked at with the perspective that we have the rated younger demographic, which had been a growing segment pre-COVID. That trend largely continued once we reopened. That’s a rated customer we know and they’re not spending or behaving any differently than pre-COVID. The unknown is the unrated segment; that’s the group we’re trying to sign up and build more loyalty with. There’s a part of the unrated segment that may be in our building because of stimulus or limited entertainment options, and those would be the slice that may be at risk. But the rated younger demographic that we know well is performing similarly to pre-COVID and we expect them to continue to perform and be loyal customers even when stimulus goes away or other entertainment options present themselves.

Operator, Operator

The next question comes from Chad Beynon of Macquarie. Please go ahead.

Chad Beynon, Analyst

Josh, Keith, I wanted to ask about Downtown properties, understanding that it’s difficult for Hawaiian customers to get there now, and most people don’t want to travel. But, do you have any sense of how the back half bookings may look or if it’s just going to be a short booking window? And then, a similar question on The Orleans, if you have a sense of what the future sports or event schedule could look like, given that that’s a big driver of that property? Thanks.

Keith Smith, President and Chief Executive Officer

When you think about the Downtown properties, generally the Downtown market is really driven by visitation in Las Vegas. For decades, the statistic is generally half the people visiting Las Vegas visit Downtown. We need the overall visitation to Las Vegas to recover. In the fourth quarter, visitation in Las Vegas was less than half of what it was in the prior year. So that’s the first driver for The Cal and the Fremont and Main Street. The second driver is the Hawaiian market, unique to our properties. Up until now, Hawaii has been in a pretty tight lockdown and I don’t see that changing in the near term. We’re not currently flying our charter. It will be a number of months before we start that back up. So, clearly, I think the rebound in Hawaii business will be in the second half of the year, and the rebound in general visitation to Las Vegas is also likely second half of the year. The cadence is unknown, but I don’t see much change in the trajectory of that business over the next three to six months. As it relates to The Orleans, restrictions were eased last week and those did include restrictions for properties like The Orleans Arena where we can now have up to 20% of our capacity for sporting events. We’re working to get approvals to be able to do that. They eased meeting and event restrictions, so we can start to expand that business, though it will take a little while to come back because many events were canceled. The signals are good and we’re able to start rebuilding that business. Booking windows today are anywhere from zero to a couple of days. Historically they’ve been two weeks to a month or better, and I don’t see that booking window expanding in the near future. Occupancies across the portfolio are roughly half of what they were last year, so the hotel side of the business is still a tough business.

Chad Beynon, Analyst

And then, regarding traditional U.S. bricks-and-mortar M&A, has your appetite changed lately, just given the improvement in your core business, given that you might be in a better position than some of your regional peers? And if so, what’s your latest thinking in terms of on-balance sheet versus incorporating a REIT to help the financing? Thanks.

Keith Smith, President and Chief Executive Officer

As we sit here today, we are very much focused on sustaining the positive momentum we’ve built in our operations over the last six months and sustaining this new operating model. As Josh noted when he talked about CapEx, we’re committed to maintaining financial flexibility while we’re in this period of uncertainty. It was only a month or so ago both our Par-A-Dice and Valley Forge properties were closed, and we certainly don’t expect that to happen going forward. We’re being cautious and watching the landscape. We’re focused on our existing model and focused on remaining flexible with respect to our financial capabilities, and we’ll see where we go from there.

Operator, Operator

The next question comes from David Katz of Jefferies. Please go ahead.

David Katz, Analyst

You’ve covered a lot of detail. I wanted to just go back and look at the digital strategy holistically, between the relationship with FanDuel, iGaming, et cetera. Is there anything that you can share data wise in terms of its impact, benefit or positive or negative on the land-based business, as you can see it so far? It’s a question that comes up a lot as to whether it’s a substitute, a benefit or generally neutral?

Keith Smith, President and Chief Executive Officer

I don’t think we’re in a position today to go into any specific detail on that. We don’t see online betting, mobile betting or iCasino as a detriment or cannibalizing the business at all. It is, at worst, neutral based on some of the high-level information we have. But overall, we believe it’s additive in terms of creating new customers and having those customers visit our properties and just having other ways to generate new business. We don’t have specific data here with us today to speak to that.

David Katz, Analyst

And with respect to FanDuel, the structure that you have in place, obviously, it’s different from what most others have. It appears to be working for you at least economically at this stage. Can you see yourself evolving that strategy at some point, where you own more assets, control more technology, et cetera?

Keith Smith, President and Chief Executive Officer

It is a great relationship. FanDuel has been a great partner and it’s been a very successful relationship as noted in our comments about producing $10 million in EBITDAR last year and north of $20 million this year, probably one of the few companies actually making money in sports betting today. We do have the flexibility to evolve our overall online strategy. We will see where it goes in the future, but we certainly have the ability to determine whether we continue to operate through FanDuel — they’ve been a great partner — or how it evolves in the future. So really nothing else to comment on now.

Operator, Operator

We have time for one more question, and that will come from David Hargreaves of Stifel. Please go ahead.

David Hargreaves, Analyst

So, Wilton is going to break ground shortly. And I’m just wondering what the financing plans look like for that. Haven’t seen anything announced, will this be done with an advance?

Josh Hirsberg, Executive Vice President and CFO

I’m sorry, what was the last part of your question — will this be done with what?

David Hargreaves, Analyst

I’m wondering if you’ll be working initially with just capital advances from Boyd or whether we should be looking for a financing in the market for Wilton.

Josh Hirsberg, Executive Vice President and CFO

We would expect to have third-party financing in place when we start to build the project.

David Hargreaves, Analyst

Okay. And then, you have a couple of bond issues that are going to be callable in 2021, and the market is hot right now. So, I’m just wondering how you’re thinking about the puts and takes of doing those, possibly calling some of the bonds and doing refinancings? It looks like the arithmetic is very favorable.

Josh Hirsberg, Executive Vice President and CFO

For some of the bonds it’s favorable; for some, it’s a push. From our perspective, we will be opportunistic with respect to refinancing those bonds when they become callable. The benefit of our capital structure is over the next two years we have the ability to refinance our balance sheet, which gives us flexibility and optionality to create the optimal structure in a very favorable current environment. So we’ll weigh all of that and figure out where we want to end up.

David Hargreaves, Analyst

Could I squeeze in one last one? Did you pay down any debt during the quarter to have leverage targets factor in the rent adjustment?

Josh Hirsberg, Executive Vice President and CFO

We’ve been generating a lot of free cash flow. I don’t have the exact amount of how much we actually paid down in Q4 in front of me. We haven’t been paying down debt aggressively; we’ve been building cash. Effectively, we have less debt today than we did as of June 30 and even as of year-end 2019 when you factor in all of that cash. We’ve been deleveraging and generating free cash flow since around June 1 when our properties reopened and that cash has been accelerating over the second half of the year.

David Hargreaves, Analyst

And the leverage target in the low-4s, was that lease adjusted, or was that just conventional?

Josh Hirsberg, Executive Vice President and CFO

That’s conventional. It’s not meant to be guidance because we’re not giving guidance, but in the context of where we were coming into the end of 2019, to the extent the business stayed like it is today, we would be at a very similar point in time for a very similar point of leverage.

Operator, Operator

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

Josh Hirsberg, Executive Vice President and CFO

Thank you, Andrea. And thank you, everyone, for joining today. If you have any further questions, feel free to reach out to the Company.

Operator, Operator

The conference has now concluded. Thank you for attending today’s presentation and you may now disconnect.