Boyd Gaming Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
April 25, 2023

There are 15 speakers on the call.

Operator

Everyone. Thank you all for attending today's Boyd Gaming First Quarter 2023 Conference Call. My name is Sierra, and I will be the moderator today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to our host, Josh Hirschberg, CFO and Treasurer of Boyd Gaming.

Operator

Please proceed.

Speaker 1

Thank you, operator. Good afternoon, everyone, and welcome to our Q1 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 those forward looking statements.

Speaker 1

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 ks furnished to the SEC today and both of which are available at investors. Boydgaming.com.

Speaker 1

We do not provide a reconciliation of forward looking non GAAP financial measures due to our inability to project special charges and certain expenses. As noted in an 8 ks filed earlier this month, we have recast our segments. Online is now reported separately. Additionally, The results that include Wilton's management fee and Lattner Entertainment are reported in a separate category, Managed and Other. These results were previously reported as part of our Midwest and South segment.

Speaker 1

For additional information on these segments, Including results recast for prior periods, please refer to the Form 8 ks we filed on April 11. Today's call is being webcast live at voidgaming.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,

Speaker 2

I would now like to turn the call over to Keith Smith. Keith? Thanks, Josh. Good afternoon, everyone. The Q1 of 2023 was an excellent start to the year for our company As we once again prove the strength of our business model and the resilience of our diversified portfolio.

Speaker 2

Our strategy of focusing on growing play from our core customers Managing our business efficiently has delivered consistently higher levels of performance and record results over the last several years. And the Q1 was no exception, led by record performances in our Las Vegas Locals and Downtown segments, As well as substantial growth in both our online operations and our management fees from Sky River Casino. On a company wide basis, revenues were $964,000,000 and EBITDAR was more than $367,000,000 both first quarter records As operating margins exceeded 38%. And when excluding contributions from the online and managed segments, Our margins were 40% again, consistent with our margins over the last several years. During the quarter, Play from our core customers across the country rose more than 3%, driven by increased spend per visit, while our core customer counts also continue to grow.

Speaker 2

Our strategic focus on growing core customer play is the foundation of our ongoing success. By tailoring our business to our core customers, We've built a more efficient and profitable business model that exhibits both strength and resilience in today's economic environment. Looking at segment results, our Las Vegas locals business had another strong quarter setting 1st quarter records for revenues, EBITDAR and operating margins. Revenues and EBITDAR each grew about 6% in the segment, while operating margins were 52.5%, Once again exceeding 50%. Gaming revenue was up in the local segment as core play increased 3% over the prior year, Well, unrated play also grew slightly.

Speaker 2

Non gaming revenue growth was even stronger driven by demand from out of town guests. Hotel revenue in the segment rose nearly 30% year over year, driven by double digit gains in both occupied rooms and cash room rates. These trends should continue as hotel reservations for the next 90 days at our locals properties are currently up more than 10% year over year. We also drove solid gains in our food and beverage business at our locals' properties. Looking ahead, we expect to see continued benefits from the strong tourism trends Across the Las Vegas Valley.

Speaker 2

Over the trailing 12 months, more than 40,000,000 people visited Las Vegas, up 16% From prior year, while traffic through the Las Vegas airport reached 54,700,000 passengers during that same timeframe, an all time record. And Las Vegas visitors are spending much more during their trips, averaging over $1100 per visit last year, An increase of nearly 35% over 2019 levels. This resulted in annual visitor spend Approximately $45,000,000,000 in Las Vegas last year, an all time high. Convention business is strengthening as well, rising 86% over Trailing 12 months, the entire market is benefiting from a strong lineup of entertainment and sporting events across the city, both in the Q1 and throughout 2023. With more than 5,000 hotel rooms in the market, our locals properties are well positioned to capitalize on these strong visitation trends.

Speaker 2

These trends are also helping to drive solid growth at our Downtown Las Vegas business, which set 1st quarter records for EBITDAR and margins. Downtown revenues rose 14%, EBITDAR was up 22% and margins increased 240 basis points To 39.5%. With more people visiting Las Vegas, more of them are stopping by downtown during their stay. 58% of Las Vegas visitors reported they visited Downtown Las Vegas last year. This increased visitation This is benefiting all three of our downtown properties.

Speaker 2

But our downtown growth story goes well beyond increased tourism in the Fremont Street area. We continue to see strong trends in our core Hawaiian customer segments as well with play from these customers up more than 10% year over year at our Downtown properties. In our recent investments at the Fremont, including our new food hall, expanded slot offering and FanDuel Sportsbook Help to drive significant revenue and EBITDAR gains with rated play of 20% year over year at that property. Moving next to the Midwest and South, revenues were in line with the prior year, while EBITDAR declined due to softness in Louisiana and Mississippi. However, outside of these two states, customer trends remain very stable across our Midwest and South portfolio With core customer play for the entire segment increasing 2% for the quarter, excluding our Louisiana and Mississippi properties, Core play grew 6% and unrated play also grew at our other regional properties.

Speaker 2

And on a sequential basis, Results for the Q1 improved over the Q4 in the Midwest and South region. Similar to the rest of our portfolio, We are seeing strong growth in non gaming revenues across the Midwest and South. We have recently made investments to enhance our hotel In food and beverage offering across many of our regional properties and these investments are now contributing to solid non gaming revenue growth and core customer play. Next, our online segment achieved 1st quarter EBITDAR of nearly $21,000,000 This is more than double our prior year results, Driven by the launch of online gaming in Ohio and Kansas, continued growth in our existing markets and the addition of Boyd Interactive. Based on our strong start to the year and normal seasonality of the business, we estimate our online operations We'll generate approximately $50,000,000 in EBITDAR in 2023.

Speaker 2

This projection includes a full year of contribution from FanDuel Operations We have in Ohio and Kansas as well as results from Boyd Interactive. We will soon be expanding Boyd Interactive's portfolio. We expect to transition, subject to final regulatory approvals, our Stardust online casinos in Pennsylvania and New Jersey To the Boyd Interactive platform during the month of May. Once complete, this transition will be an important step forward in the execution of our online gaming strategy. Beyond the increasing financial contributions of our online business, we've also created significant shareholder value as a result of our 5% equity stake And FanDuel Group, which has established itself as the nation's clear leader in sports betting.

Speaker 2

Last, our Managed and Other business benefited from exceptional results at SkyRiver. SkyRiver continues to perform ahead of expectations, Generating $20,000,000 in management fees for our company during the quarter. We are proud to have achieved such strong results for the Wilton Rancheria Tribe And given this early success, Tribe is now considering expanding the property, which could further enhance its long term potential. SkyRiver is off to an excellent start and we look forward to continued success in the years ahead. So in all, our nationwide operations had a great start to the year.

Speaker 2

Looking ahead, while the economic outlook remains uncertain, we remain optimistic regarding the direction of our business. Our core customer continues to perform well and we have not seen any meaningful change in consumer behavior. In addition, our results will benefit from online And management fees from Sky River as we expect both to maintain strong year over year growth. We also expect continued returns from the investments we are making in our Nationwide. In addition to driving non gaming revenue growth, these investments are essential to our strategy of attracting and retaining core customers.

Speaker 2

Looking further ahead, we anticipate solid returns from our $100,000,000 expansion of Treasure Chest Casino, which is on track to open next spring. This project will significantly improve our product with a land based single level casino facility and expanded array of non gaming amenities And much improved parking. When complete, we are confident this investment will allow us to improve the customer experience, attract new customers and enhance the overall efficiency of operations at this property. Thanks to our robust free cash flow, We are successfully balancing these investments in our portfolio with our capital return program. We plan to continue our $100,000,000 per quarter share repurchase program Supplemented by our dividend distributions.

Speaker 2

We are also creating value through our ESG initiatives as illustrated in our recently issued ESG report. In this year's report, we outlined our continued progress on many key initiatives such as reducing carbon emissions, Conserving water, diverting waste from landfills, promoting diversity and inclusion and supporting our communities Through contributions to non profit organizations nationwide. Through these initiatives, we're fulfilling our long standing commitment to ensure that our company Having a positive and lasting impact on our communities. In conclusion, this was another outstanding quarter for our company, Further demonstrating the resilience of our business and the strength of an efficient operating model built on driving play from our core customers. As a result of our diversified portfolio, our record performances in Las Vegas locals in Downtown Las Vegas and increased contributions From our online and managed operations, we delivered another quarter of record results.

Speaker 2

Our core customer remains strong. Our growth initiatives like SkyRiver, Online and Property Investments are delivering strong results and we are successfully maintaining Strong efficiencies throughout our business remaining financially disciplined in the allocation of our free cash flow. I'd like to thank every member of the Boyd team for their contributions to our success. Together, we are delivering great results for our shareholders And it is a privilege to be part of this talented and dedicated team. Thank you for your time.

Speaker 2

I would now like to turn the call over to Josh. Josh?

Speaker 1

Thanks, Keith. This was another successful quarter for our company, reflecting a focus on our core customer And a disciplined approach to operating our business. Revenues were $964,000,000 and EBITDAR after corporate expense Was $367,000,000 both records. Margins were 38%. Excluding contributions from online And management fees, property level margins after corporate expense were 40%, consistent with the margins we have delivered over the last several years.

Speaker 1

This quarter's performance stands out for its consistency and for our ability to continue to deliver these results in today's economic environment. As I mentioned earlier, we are now reporting separately our online operations and our managed operations. The online segment consists of contributions from our partnership with FanDuel and other market access agreements, as well as results from Boyd Interactive, Our online casino business. Revenues in this segment also include tax pass through amounts that were $96,000,000 in the first quarter And $42,000,000 last year during the same period. Based on Keith's earlier comments, We expect this segment will generate about $50,000,000 in EBITDAR this year compared to $40,000,000 last year.

Speaker 1

This performance reflects the growth in our online business as well as a full year contribution from Boyd Interactive. The Managed and Other segment consists of fees generated by our management contract at Sky River Casino As well as contributions from Lattner Entertainment. On our last call, we indicated we expected to generate about $50,000,000 Management fees during 2023 from Sky River. Given the ongoing success of this property, we now believe it is reasonable to expect And we will earn approximately $65,000,000 to $70,000,000 in management fees this year. In addition to the management fees that we earned during the first The tribe began repaying the $113,000,000 we advanced to the project.

Speaker 1

We received $17,000,000 during the quarter And based on current projections with ongoing quarterly payments, we expect the loan will be fully repaid by early 2024. As you can see from our results, both of these segments were important contributors during the quarter. For the full year, These segments are expected to generate approximately $130,000,000 of EBITDAR in 2023 compared to approximately $80,000,000 in 2022 on a comparable basis. During the Q1, capital expenditures were $96,000,000 Including spend for Fremont and Treasure Chest. For the full year, we expect total capital expenditures to be $350,000,000 Including $250,000,000 in maintenance capital and $100,000,000 related to the treasure chest land based project in completing the renovation of the Fremont.

Speaker 1

In terms of capital returns to shareholders, we We repurchased $106,000,000 in stock during the quarter, representing 1,700,000 shares at an average price of $1.59 per share. The actual share count at the end of the quarter was 101,500,000 shares And we have approximately $133,000,000 remaining under our current repurchase authorization. During the Q1, we also announced an increase in our quarterly dividend, dollars 0.16 per share, which was paid on April 15. Between our share repurchases and dividends, we have returned nearly $800,000,000 to shareholders since late 2021, And we expect to surpass $1,000,000,000 in capital returns by the end of 2023. We have a very strong balance sheet With low leverage, no near term debt maturities and ample borrowing capacity under our credit agreement.

Speaker 1

As of March 31, total leverage was 2.3 times and lease adjusted leverage was 2.7 times. With our robust free cash flow and strong balance sheet, we have significant flexibility in today's uncertain economic environment To successfully balance our shareholder returns with capital investments. So in all, after another record first Our company remains on very solid footing. Our diversified operations continue to generate substantial free cash flow And combined with our strong balance sheet, allow us to execute our capital return program while reinvesting in our property portfolio. As a result, our company is in the strongest position in our history with a proven business model focused on our most loyal customers, Robust and diversified free cash flow and a strong balance sheet.

Speaker 1

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

Operator

And as a reminder, if you're using a speakerphone today, please remember to pick up your handset before asking a question. Our first question today comes from Steve Zubinski with Stifel. Please begin.

Speaker 3

Yes. Hey, guys. Good afternoon. So Josh, I want to ask about margins in the Midwest And the South segment, which were down about 200 basis points. And I'm just wondering if you could help us think about maybe what the drag was from Louisiana, Mississippi.

Speaker 3

And then maybe have you seen those markets improve at all? Or at the very least, are they weakening anymore? Are they pretty stable at this point?

Speaker 1

Yes, Steve. So, I think we've started to see stability In

Speaker 2

those two

Speaker 1

markets, it's really hard for us to understand at this point totally what's going on. Some of it is related to One time events that happened in those markets, but it does seem to be a little bit more broader based and economically impacted. If we kind of look at margins, When you if you kind of excluded Mississippi and Louisiana out of the Midwest and South and looked at the margins Without those two properties, margins would be down about 90 to 100 basis points or so. So most of the decline and those two assets make up about a little bit more than half of the decline in margins. So hopefully that gives you a sense of kind of what's going on.

Speaker 3

Yes, it does. Thank you very much. And then second question, Josh, if we think about your guide for the online segment, I think you said you're still Kind of expecting that $50,000,000 ish for the year. Can you maybe just help us think about seasonality then through the last Couple of quarters of the year, given the fact that you guys did $21,000,000 in the Q1, just trying to kind of square away how you guys kind of think about the year, maybe some of The things we need to be watching for over the balance of the year?

Speaker 1

Yes. So When we think about 1st for in the Q1, we generated $21,000,000 as you stated, Steve. Part of that there were some there are some one time items where we See one time fees related to some of our market access arrangements. And then also in that number is obviously the 1st full quarter of Boyd Interactive, which was formerly Paula. But as we think about the seasonality of the business outside of Boyd Interactive, I think the Q1 is one of the better quarters and the Q4 will be one of the better quarters.

Speaker 1

And then 2nd and third are much Lighter in terms of performance, just given the normal seasonality. So you can look back at last year and get a sense of the level of magnitude of Business that we saw in the second and third quarter and get a sense of the difference in that and maybe the Q4 that you saw our performance as well as the Q1 this year.

Speaker 2

Yes, Steve, this is Keith. It really is about the seasonality of the sports calendar. College and NFL, football Is what drives most of it in Q4 and then into Q1 as well as the college basketball playoffs in Q1, it gets pretty soft from a business standpoint in Q2 and Q3.

Speaker 3

Okay, great. Thanks guys. Appreciate it.

Operator

Sorry there, I was having a technical difficulty, but thank you Steve for your question. Our next question comes from Joe Greff with JPMorgan. Please proceed.

Speaker 4

Good afternoon, guys.

Speaker 5

I was hoping you could talk a little bit about what you're seeing on your land based Casino side of things in April, particularly, with maybe some of the lower tiers in your database as well as the 55

Speaker 2

Yes. So Joe, this is Keith. I think the trends we're seeing in early April are not Meaningfully different than what we saw in the Q1. In Q1, we saw Good growth from both our 45 and up customers as well as we call our core customers Through the kind of high end customers, as you get lower in the database, they didn't perform as well, but that is nothing new. It's been going on for several years and so it's Kind of an ongoing trend.

Speaker 2

Our focus is on the higher end of the database. So again, strong growth both across Demographics, age categories as well as worth categories.

Speaker 5

Great. Thank you.

Operator

Thank you for your question. Our next question is from Carlo Santarelli with Deutsche Bank. Please proceed.

Speaker 6

Hey, guys. Just want to follow-up on I believe it was Steve's question. If I just look at Kind of the year over year performance in online for the balance of the year 2Q to 4Q relative to the 50,000,000 Guidance in the Q1. It looks like that you're effectively guiding to a Flat results for the April through December period. Could I read into that as A, being conservative or B, Some spend associated with Boyd Interactive customer acquisition, etcetera, that is more or less off Set by the growth that you're seeing in the with the FanDuel relationship and the online sports betting side.

Speaker 1

Yes. I'll try to help you Carlo a little bit. I think that I don't we We tend to be conservative, but I don't think we're trying to go out of our way to be ultra conservative or anything like that. I think Part of it is going to be a shift between online and Boyd Interactive, number 1. All of it will show up in this Same category, so you kind of have to make sure you're grouping all that together when we think about it.

Speaker 1

But when you think about the revenue share component of our business, Based on what I just kind of the $21,000,000 or so that we reported in Q1, you back out kind of the one time payments in Boyd You've got a run rate of about, at least in Q1, of about $17,000,000 of revenue share. And that's the business that's what we're Zane is the seasonal aspect of the business. Boyd Interactive itself, which was obviously formerly Paula, Did about $5,000,000 last year, so we expected to do in that $5,000,000 to $6,000,000 again this year. And so you just kind of build it On a full year basis, so kind of $17,000,000 Q1, factor in seasonality. Q4 will be probably similar to a little bit better than that.

Speaker 1

And then, factor in Boyd Interactive on a full year basis and that's generally how we came up with the numbers.

Speaker 6

Got it. That makes sense. And then, Josh, and I'm 90% sure on this, but I just wanted to double check. When you were Discussing Managed Another and you were talking about the success at Wilton. Your guide was 65 to 70, then you mentioned the 130 number.

Speaker 6

The plug there Between that and online, is Lattner contributing somewhere in the $10,000,000 to $15,000,000 range? Is that the piece that was missing there?

Speaker 1

Yes. That's exactly right, Carla.

Speaker 6

Great. Okay. And then just lastly on the Locals market. Clearly, top line remains strong. You don't really have any sort of weather impacts in there, but it did look like There was an acceleration of revenue in the Q1, benchmarked against the Q1 of 2019, Relative to what you saw in the second half of last year, is there anything noticeable, that you guys are seeing in the locals market of late?

Speaker 1

I wouldn't call out anything noticeable. I would just the only thing I could point to really Carlo to help you think through that is I think we do believe that the Q1 performance was generally a little bit better than the 4th quarter, So talking sequentially here now. And we saw better performance in the lower end and unrated segments of our data And good strength overall and I'd say continued strength in our core customer and older demographic generally. And so I think That's what we're seeing from the benefit of in both Las Vegas locals and downtown, quite honestly. So that might be playing into kind of what you're seeing when you look at kind of the pickup in performance.

Speaker 2

Carla, I think overall Las Vegas had a very strong Q1 when you think about convention business and hotel occupancy. Absent the gaming numbers that came out today, convention business was extremely strong, grew from January to February into March, occupancies were high, rates were high. And so there was a lot of business in town in the Q1 of this year. So I think you probably saw a little bit Stronger performance maybe in Q1 than you've seen in prior quarters.

Speaker 1

Great. All right.

Speaker 6

Thank you, guys. I appreciate it.

Operator

Thank you for your question. Our next question is from Barry Jonas Mr. Truist, please proceed.

Speaker 7

Hey, guys. Maybe just at a high level, you grew EBITDA over 8% Year on year in Q1, consensus estimates right now assume EBITDAR is going to contract 3% this year around there. Is there anything you're seeing expect to see which would warrant total EBITDAR to contract this year?

Speaker 1

Yes, Barry. I think the only thing that we from where we sit today, the consumer trends continue to look very stable, consistent. As I mentioned in a comment earlier to Carlo's question, I think we saw a little bit stronger business in the actually in the Not only among our core customers and higher work customers, but we got the benefit of some of the lower end play, certainly in January February. So Q1 was good. I think we are looking at a little bit more difficult comps as we go into Q2.

Speaker 1

And as we look at the rest of the year, quite honestly, what gives us some comfort with not only the stable Customer trends that we're seeing, but also we feel like we have a little bit of insurance policy, if you will, with the growth that we have in Mine and managed and other that we spoke about in our prepared remarks. So we feel like we have a little bit of cushion should Our business get weaker, obviously, in what people are concerned about. But Yes, that's all that's what we see.

Speaker 7

Got it. And then just as a follow-up, can you maybe comment a little bit more about the labor environment Right now across your segments, do you expect that to hold Margins basically where they're at now or do you expect to see any further hits there just given the labor environment?

Speaker 2

So Perry, this is Keith. I think from a margin standpoint, we're comfortable kind of in the zip code that we're in today. Yes, we're competing or dealer, I should say, not competing with, but dealing with cost pressures, whether they be wage pressures or utility cost increases or other cost increases across the board, But our teams are able to manage through them. So we're comfortable with the margins that we're producing, whether it be in the Las Vegas locals region or the downtown region or the Midwest And expect to be able to kind of hold while not the exact number very close to that as we go forward.

Speaker 7

Great. Thank you so much.

Operator

Thank you for your question. Our next question comes from Shaun Kelley with Bank of America. Please proceed.

Speaker 8

Hi, everyone. Thanks. Most of my questions But just 2 smaller ones. First one, just to kind of go back to online and apologies if this is kind of give an inch, take a mile type Detail. But Josh, can you just remind us, I mean, Ohio had a really big gross gaming revenue number out of the box For your partner there, when you're receiving your fees, presumably you're paid off of the gross.

Speaker 8

Is that part of the kind of Extra seasonality we may see in that market there?

Speaker 1

Yes. I would say we had a very strong start in Ohio,

Speaker 2

And it

Speaker 1

is we do their performance gets indirectly reflected in our performance based on our Share of revenue.

Speaker 2

Yes, Sean. And you have to remember, I think when Ohio launched in January, not everybody launched right away. And so when you come around to Yes, the Q4 this year, you'll have more competition for the gambling dollar. So We had a great FanDuel had a great start in Q1, but there'll be more competition as you get around to Q4.

Speaker 8

That's helpful. And then a small just sort of detailed one, but you gave Some color on the consumer side, particularly in the regional markets. I think you mentioned the core customer spend Both kind of with and without Louisiana, Louisiana and Mississippi. Just any quick highlight on kind of how unrated play looked in those markets? Was it down?

Speaker 8

And are you seeing that subside at all? Or is it relatively stable or healthy?

Speaker 2

I think if you look at unrated play here in the Las Vegas markets, the locals market or the downtown markets, we We continue to see growth in unrated play. And if you exclude the South, we continue to see growth in kind of the other parts Our Midwest region, the South is down for the reasons we've talked about frankly over the last couple of calls.

Speaker 8

Okay. But no real change in pattern there even on the unrated side?

Speaker 2

No, not at all.

Speaker 8

Okay. Thank you very much.

Speaker 2

Welcome.

Operator

Thank you for your question. Our next question comes from David Katz with Jefferies. Please proceed.

Speaker 9

Hi, afternoon everyone. Thanks for taking my question. Josh, you commented earlier about roughly $5,000,000 last year and $5,000,000 to $6,000,000 for Pala. Could we maybe get a bit more specific about what's in that 5% or 6% or there are some extra costs? I'm trying to get a sense for where that could go and what the earnings power Might be so that we could venture our own forecast as we get out a little farther.

Speaker 1

Yes, David. I think that the reason we've tried to focus people on what they have done historically and kind of think of that as what they'll probably do this year It's just because we look at that as a business that is being aligned and being formulated within the Boyd infrastructure now. So this is kind of a formative year for them where they will invest in their existing business in terms of human capital as well as Technology to enable them to kind of execute on the business they were growing at some point and the business that we That we acquired them for to help them grow longer term. So I think it's By now at least we would view it as premature to kind of expect growth until we've got made those investments and get into the New Year, next year sometime.

Speaker 2

Yes, David. And this is not a zero sum game. So as we take over the platforms in New Jersey and Pennsylvania, hopefully during the month of May, We'll stop receiving the fees we're receiving from FanDuel. And so simply to look at the growth in the Boyd Interactive business without some offsets For other fees, you'd be overestimated over forecasting the results. Overall, we provided Some level of guidance, which we generally don't do is provide guidance and that's probably about as far as we're going to go.

Speaker 9

Fair enough. And if I can just ask one other qualitative follow-up about it. It may be too early to tell, But the degree to which you're seeing some crossovercannibalization one way or the other from Land based to digital, is there anything that's discussable there?

Speaker 2

No, I would just say that it's been our experience thus far as we've ventured into the online space, whether it be in the sports betting space For the online space, we haven't seen any cannibalization. We firmly believe that the two businesses are complementary and Together that it makes for a much stronger product overall.

Speaker 9

Okay, Fair enough.

Speaker 2

Thanks very much.

Operator

Thank you for your question. Our next question comes from Dan Politzer with Wells Fargo. Please proceed.

Speaker 10

Hey, good afternoon everyone and thanks for taking my questions. So first on the local segment, I think that revenues were up about 6% year over year. In the press release, you called out double digit growth in non gaming. So one want to check, is it can we presume that gaming revenues were up there as well? And as far as it relates to margin, to the extent that non gaming is a bigger part of the mix for this business Right now and maybe in the next couple of quarters, how should we kind of think about the margin structure there given maybe the mix changes that are going on?

Speaker 2

So I think it is fair to assume that gaming revenue did grow in the locals market during the quarter. I think we called out non gaming because we saw Significant upside or uptick in the business both in the hotel side and the F and B side. I commented a little bit earlier about the growth in convention business during the Q1. That helped drive both meeting and convention business at the Orleans where we have a bit of space as well as room rates Throughout the Las Vegas portfolio, look, it's still not a significant portion of the locals business. Our gaming revenue still is what drives our results here in Las Vegas.

Speaker 2

But in a quarter like this, it was up significantly, which is why we called it out. I don't think there's a significant margin shift as a result of the growth in that business. So I wouldn't adjust your model for that.

Speaker 1

No, I don't think it's significant enough of a contributor versus the I don't think it Cam, just one other comment. I don't think it's significant relative to the gaming revenues we generate, But also we just improved the overall margins in those segments as well as we sequentially go through our business also. So We don't expect it to dilute our margins.

Speaker 10

Got it. And then for my follow-up, if Flutter is Exploring a secondary listing in the U. S, it seems like obviously that they are the clear market leader. How do you think about The timeframe or ways to maybe unlock the 5% stake that you have in Sandoz? And is would the listing possibly be a catalyst to get there?

Speaker 10

Thanks.

Speaker 2

So I think we view our 5% ownership stake FanDuel is a very strategic ownership stake. It's been a great partnership over the years. Obviously, it's created a very profitable online business for us. They're great partners and it's great to have partnered up with the market leader. How and when We might monetize some of that or any of that, TBD, haven't really Going to venture down that path.

Speaker 2

We're just focused on helping FanDuel to the extent we can continue to be a market leader and That's about it.

Speaker 10

Got it. Thank you.

Operator

Thank you for your question. Our next question is from Brandt Montour with Barclays. Please proceed.

Speaker 11

Hey, good evening everybody. Thanks for taking my question. Wondering if you'd be willing to Give us your thoughts about the setup for Las Vegas citywide and convention calendar for the 2Q and 3Q. And if you look out and sort of see the activity and sort of think that can grow handily off of last year or if there's going to be any sort of pockets Within that timeframe where there's actually less activity, how do you think about that?

Speaker 2

Yes, it's a good question. We're probably not the best Suited to talk in detail about the convention business, we do have some space, as I said, at the Orleans and some limited space at other properties, but the convention business Has rebounded. Once again, the numbers in January February March of this year grew significantly As each month went by, I think we had over 700,000 attendees in the month of March and the calendar I do know is strong. The exact number of groups and where there may be a pocket of weakness, I couldn't articulate sitting here today, but the calendar It's strong and the commercial business is continuing to grow, which is a great sign for the overall city and a great sign for our portfolio.

Speaker 11

Thanks. That's super helpful. And then my second question is just on Sky River and the managed and other segment. Just when you think about that property and what it did in the Q4 and the Q1, should we consider that sort of fully ramped Here and then, are you expecting some seasonality in that property throughout the year?

Speaker 2

Well, I think the best way I can answer it is that the business has been remarkably stable since we opened in August. We haven't seen Many peaks are valleys and so you could consider it fully ramped and we gave some indication of what we thought the full year management fee might be, That's $65,000,000 to $70,000,000 so it should be kind of an indication. We think it's a pretty stable business. It has proven to be in the 1st 8 months We've been open. We haven't been through a full year, so I don't think we fully understand seasonality of that business.

Speaker 2

We haven't seen Any true seasonality in the 8 months has been open.

Speaker 4

Okay. Thanks for all the color.

Operator

Thank you for your questions. Our next question is from Edward Engel with Roth. Please proceed.

Speaker 5

Hi. Thank you for taking my question. Was there any notable improvement from the 65 plus or Retiree segment, since the start of the year or was performance from that demographic, generally in line with the rest of the core business?

Speaker 2

I think that the 65 plus demographic performed extremely well, Probably stronger than many other parts of the database. And so we're very pleased with how it performed.

Speaker 5

Got it, helpful. And then it looks like just across the portfolio, your kind of core OpEx increased a bit Q over Q. Is that a fair run rate to kind of think about the rest of the year? Or are you still seeing some inflationary Impacts that might continue to drive that higher?

Speaker 2

I think if you're projecting out, that's probably a fair run rate to use. Most of the costs have settled in as we look at the business. It's probably a good number to use going forward.

Speaker 5

Great. Helpful. Thank you.

Speaker 6

Welcome.

Operator

Thank you for your question. Our next question comes from Joe Stolf with Susquehanna. Please proceed.

Speaker 12

Good afternoon, Josh. Good afternoon, Keith. I wanted to ask you your commentary, Keith, about core customers. You had mentioned that average spend was up about 3%. But I wanted to know about just say volume.

Speaker 12

You also mentioned it growed. It grew, sorry. But I was curious to see, Did it yes, I'm just learning English now. If it was a function of customers kind of moving up In the loyalty database in terms of total spending or that it was just kind of new customers coming into the casino?

Speaker 2

So I think depending on which region, obviously, the numbers move around. But overall, Yes, we saw an increase in play from our core customers and we saw increased counts of core customers. So Your total guest counts were up and Play was up. So it was a combination of both.

Speaker 10

Okay.

Speaker 13

And then

Speaker 1

Joe, we are Joe, just to add to that. Please. First, I'm learning to speak as well, so that's okay.

Speaker 12

Let me know when you get there, Josh.

Speaker 10

Yes, we'll do.

Speaker 1

And I think from the We continue to see good health in not only Keith alluded to growing customer counts, but Adding to the overall database as well. So sign ups are improving and the value of those sign ups has been improving really Since we reopened from COVID, so that's been a theme as well. So we're signed the database overall is Growing in the health of the database continues to be pretty good.

Speaker 7

Got you. Perfect.

Speaker 12

And if I could have a follow-up, I just wanted to figure out maybe say an update in some of the competitive markets that you have. And Have you seen, I guess, in particular in those markets, one would think that promotional spending It's higher, say, than certainly other markets without new supply, but if you can just comment maybe, what you're seeing.

Speaker 2

Sure. So I'd say all of our markets are competitive. I don't think we have the we don't have the good fortune of operating in any markets that aren't competitive. I think when we look at marketing spend, kind of across the portfolio, whether it's here in Las Vegas or downtown or across the Midwest and South, I would describe the landscape as rational that most competitors have kind of fallen into Kind of a steady cadence when they came out of COVID in terms of how they were going to market, some being much more aggressive, Operating pre COVID, some being much more disciplined and that hasn't changed much in Q1 or frankly last Here, and so you're here in Las Vegas, the market remains rational. Those that have been disciplined or disciplined, those that have been A little more aggressive, continue to be more aggressive, so nothing new there and that same trend exists kind of across our portfolio of properties.

Speaker 13

Thanks a lot.

Operator

Thank you for your question. Our next question comes from Chad Beynon with Macquarie. Please proceed.

Speaker 13

Afternoon. Thanks for taking my question. Given some of the stats that you gave on the broader Downtown visitation, just in terms of overall engagement in that area. In addition to the strong growth that you put up at the Fremont post the December expansion. How are you thinking about additional opportunities down there?

Speaker 13

I know you said the Hawaiian customers are coming back, but are there opportunities for you to either Expand or renovate kind of similar to what you did at Fremont given that it seems like a high return Opportunity for the next several years. Thanks.

Speaker 2

Sure. Was your question direct related to the assets downtown or across the portfolio?

Speaker 13

Downtown.

Speaker 2

Yes. So the Fremont has gone through A pretty full renovation will complete it later this year with a remodel of all our hotel rooms that was completed within the last 18 months, the expansion of The new food hall and the new sports book and some additional casino space that opened in December. And once again, we're just finishing the renovation of the rest of the casino Space over the next several months. So that property will be complete and there's really no additional square footage to expand into at that property. California Hotel and Casino, which is just a block away from the Fremont was fully renovated about 2 years ago, and so whether it's rooms or the casino floor, it's got a brand new fresh look.

Speaker 2

The Main Street Station, which is across the street from the California Hotel connected by a bridge over the street is going through a room renovation In the very, very near future, and so the entire kind of suite of assets downtown will be kind of fully Updated, I'd say, by the end of the year.

Speaker 13

Okay, great. Thank you. Okay. And then in terms of How you're thinking about the capital returns, this $100,000,000 quarterly repo number has kind of been the bogey for several Quarters you executed on that this quarter and in the Q4. Given that business sounds largely better kind of across the entire portfolio, What would it take to get you to change either overall capital allocation or just the repo number that you're thinking about here?

Speaker 13

Thank you.

Speaker 2

Look, I think we'd have to just have the passage of time and more certainty about kind of where the overall economy is going, right? I think it is Clearly, still an uncertain economy out there. We're being cautious. We've done a great job managing through this. We have a solid business model.

Speaker 2

But in terms of Taking the share repurchase number up higher, I think we're comfortable in the $100,000,000 a quarter and committing to that. We've talked about that I think for more than a year now. And I just I don't see us kind of moving off of that anytime in the near future. We just have to see business Improve significantly and have more comfort about the broader economy and what's going on.

Speaker 10

Thank you.

Operator

Thank you for your questions. Our next question comes from John DeCree with CBRE. Please proceed.

Speaker 4

Hi, Josh, Keith.

Speaker 1

Yes. Hi, John.

Speaker 4

Hi, sorry, technical difficulty there, I guess. Thanks for taking my questions. Just wanted to follow-up on Joe's question related to promotional activity. I think you answered it pretty clearly, but Maybe to try another angle as it relates to Louisiana and Mississippi where you've seen some softness in the last Two quarters. Have those markets seen an increase in promotional activity relative to some of your other markets?

Speaker 4

Have competitors started to respond maybe a little more aggressively when there's been pockets of softness?

Speaker 2

Nothing unusual. Once again, I would have called it out. But so as we look at Louisiana, Mississippi, Once again, you used the word very rational, pretty stable from a marketing or promotional standpoint. We're not jumping out and doing anything crazy and we're not seeing competitors Do anything that unusual, again nothing is consistent from month to month, but there's nothing usual going on.

Speaker 4

Thanks, Keith. I appreciate the additional color. And then lastly, I don't think we could get you off the call without asking you about M and A. I know the environment's obviously been Not that active in your capital allocation policy is pretty clear, but I'm sure you guys get a good look at anything and everything that comes out there. So curious whether it might be land based or digital if there's any increase in activity or things that you've seen over the last Quarter or so, any change in the M and A environment or your thoughts as to how you might deploy capital?

Speaker 2

I don't think we have a whole lot of comments. Look, when we bought Palo, now known as Boyd Interactive, I think we're pretty clear about that was as we viewed it a complete platform that gave us what we needed to Head into the online digital space and so there's really no additional acquisitions in that space That I foresee. And yes, we've grown a lot over the last 20 years through M and A, but nothing interesting to talk of.

Speaker 4

Thanks, Keith. I appreciate it. Thanks, Josh, and congratulations again on another great quarter.

Speaker 2

John.

Operator

Thank you for your question. Our final question will come from Stephen Gramble with Morgan Stanley. Please

Speaker 14

proceed. Hey, thanks. A quick follow-up on Brandt's earlier question. I think your comments about the events calendar in Las Vegas. Love to hear any thoughts you have on how more convention centered events like ConAg typically impact the locals in downtown segment Versus some of the upcoming events on the strip like Formula 1 or the Super Bowl or perhaps you get more of a leisure oriented customer?

Speaker 2

Look, I think anything that draws people into Las Vegas and fills up hotel rooms and creates demand, Whether you're on the Strip, whether you're in the locals market, we all benefit. And as they're able to price their rooms up, we're able to price their rooms up as the Time is full. I gave a statistic during my prepared remarks that talked about 58% of the people visiting Las Vegas visit downtown. So More people visiting Las Vegas means more people visit downtown that supports our overall downtown business. So There's not a huge distinction whether it is a sports oriented crowd, a leisure oriented crowd, an event oriented crowd, Whether it's focused on entertainment or something else, if it's filling up the hotel rooms in Las Vegas, it's bringing people to town, Then we're going to do better.

Speaker 14

Great. Thanks. That's helpful. And maybe one other follow-up on Sanddul. Are the license access fees Set over a specific length of time or are these negotiable at various points or even if they list the U.

Speaker 14

S. Entity, does that Trigger any changes in terms of the contract? Thank you.

Speaker 1

Yes, Steve. So basically, Each agreement has a life associated with it when it was originally approved in that state. It's generally a decade or more. And then there's no triggering event as a result of them choosing to list either Flutter or if they chose to list FanDuel at some point, that wouldn't Trigger anything from our perspective either. So it's all status quo.

Speaker 14

Great. Super helpful. Thanks so much. Sure.

Operator

Thank you for your questions. That will conclude the question and answer for this call. So I will pass the conference back over to the management team for any closing remarks.

Speaker 1

Thank you, Sierra and thank you everyone for spending time with us today. And if you have additional questions or follow-up, please feel free to reach out to the company. Thank you very much.

Operator

That concludes the Boyd Gaming's Q1 2023 conference call. Thank you all for your participation. You may now disconnect your line.

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Earnings Conference Call
Boyd Gaming Q1 2023
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