Boyd Gaming Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
July 27, 2023

There are 15 speakers on the call.

Operator

Afternoon, and welcome to the Boyd Gaming Second Quarter 2023 Conference Call. My name is David Strow, Vice President Corporate Communications for Boyd Gaming. I will be the moderator for today's call, which is being recorded on Thursday, July 27, 2023. Of O'Neill. At this time, all lines are in listen only mode.

Operator

Following our remarks, we will conduct a question and answer session. Of

Speaker 1

Investor

Operator

Relations. Our speakers for today's call are Keith Smith, President and Chief Executive Officer and Josh Hirschberg, Executive Vice President and Chief Financial Officer.

Speaker 2

Of Investor Relations.

Operator

Our comments today will include statements that are forward looking statements within the Private Securities Litigation Reform Act. Of Corporate Solutions. All forward looking statements in our comments are as of today's date, and we undertake no obligation to update or revise the forward looking statements. Of OCC. Actual results may differ materially from those projected in any forward looking statement.

Operator

There are certain risks and uncertainties, of Investor Relations, 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. Of Financial Services. 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. Boygaming.com.

Operator

Of Financial Services. We do not provide a reconciliation of our forward looking non GAAP financial measures due to our inability to project special charges and certain expenses. Of today's call is being webcast@boygaming.com and will be available for replay in the Investor Relations section of our website of Corporate Solutions shortly after the completion of this call. So with that, I would now like to turn the call over to Keith Smith. Keith?

Speaker 2

Thanks, David. Of Investor Relations. Good afternoon, everyone. The Q2 was another solid performance by our company as the benefits of our proven operating model, of Investor Relations. Our strong management teams and our successful growth initiatives all contributed to company wide revenue and EBITDAR in line with last year's strong second quarter results.

Speaker 2

Of Operations. Operationally, we maintained our focus on driving play from our core customers. During the quarter, of the Company. Our core customer trends improved sequentially over the Q1 and were consistent with last year's record levels as a result of stable frequency and spend per visit. Of Corporate and Investor Relations.

Speaker 2

However, the consistency in core customer trends was offset by continued softness in retail play that began in the second half of last year. Of Corporate and Financial Services. During the quarter, our management teams continued to do an excellent job controlling expenses in a challenging environment. Of Corporate and Financial Services.

Speaker 3

Over the last

Speaker 2

year and a half, we have held property level expenses essentially flat during this highly inflationary environment. Of Corporate Capital. As a result, we achieved property level operating margins of 42% in the 2nd quarter, consistent with recent quarters of Global Services and remaining well above our pre pandemic levels. Finally, we realized substantial benefits from our ongoing growth initiatives, of Online Gaming, Sports Betting and Sky River Casino. Combined, our online and managed segments of Investor Relations.

Speaker 2

We generated $33,000,000 in EBITDAR in the quarter, putting these businesses on pace to achieve $135,000,000 in total EBITDAR for the full year. Of Corporate and Financial Services. Let's review each of the segments in more detail. In our Las Vegas Local segment, we faced a difficult comparison to last year. Of Locals.

Speaker 2

This comparison was most pronounced in April, which accounted for roughly 90% of the quarterly year over year decline in Locals revenue and EBITDAR. Of Investor Relations. As you may recall, early last spring, we saw a temporary surge in business after mask mandates and other COVID restrictions were lifted in Nevada. Of Locals. By comparison, both May June were nearly flat with prior year in the local segment, and we are encouraged that these positive trends of Investor Relations

Speaker 3

and Company have continued into the 1st few

Speaker 4

weeks of July.

Speaker 2

During the quarter, core customer trends remained solid in the segment of Corporate and Financial Services with core guest counts growing slightly year over year. This strength was offset by softness in play from out of town gaming customers of Local and Global Services, as well as retail customers in the local market. However, we continue to effectively manage expenses during the quarter with margins exceeding 51% of Locals segment. Overall, we remain confident in the long term trajectory of our Locals business, which should continue to benefit of Strong and Vibrant Southern Nevada Economy. Visitation to Las Vegas continues to recover, increasing nearly 10% over the trailing 12 months, of Corporate and Corporate.

Speaker 2

And while meeting and convention business is still 13% below pre pandemic levels, of Investor Relations. We are seeing encouraging metrics within the local economy as well. Employment in Southern Nevada of Investor Relations,

Speaker 3

which is up more than

Speaker 2

4% over the prior year, the 3rd strongest job growth rate among major U. S. Cities. Of the company. And with more than $10,000,000,000 in projects now under construction and more in the pipeline, Southern Nevada has a solid foundation to continue this employment growth well into the future.

Speaker 2

Of These positive conditions across Las Vegas are also benefiting the downtown market. During the quarter, business levels and pedestrian traffic remain of Greater Los Angeles, which has become an increasingly popular tourist destination. Last year, nearly 60% of Las Vegas tourists of Downtown Las Vegas at least once during their stay, driving continued growth in visitation throughout the downtown market. Of Operations. Additionally, we continue to see solid demand from our Hawaiian customer base.

Speaker 2

While the overall downtown market is performing well, of Investor Relations. Our results during the quarter were impacted by construction disruption at the Fremont and Main Street Station. At the Fremont, of disruption was related to our ongoing casino renovation project that began in January. While we had originally planned to complete this renovation in phases throughout 2023, of Operations. We recently decided to accelerate this work during the slow summer season.

Speaker 2

As a result, about 20% of our slot machines of Corporate and Regulatory, and a third of

Speaker 3

our table games were out

Speaker 2

of service during the quarter. Despite this disruption, EBITDAR at the Fremont for the quarter was essentially flat with the prior year. Of Fremont, once we complete this renovation in October. Of Next, at Main Street Station, began a hotel remodel early in the second quarter. As a result, of only 20% of our rooms at Main Street Station were available during the quarter, impacting results at both the California and Main Street.

Speaker 2

Of Operations. We expect this remodel to be completed early in Q4. While construction disruption will continue in the Q3, of We are confident these investments will help drive long term growth in our Downtown Las Vegas segment. Moving outside of Las Vegas, of Operations. Results in our Midwest and South segment were impacted by continued softness in Louisiana and Mississippi.

Speaker 2

However, our performance in this segment has continued to improve of both revenue and EBITDAR increasing sequentially since the Q4 of 2022. We also maintained strong expense controls during the quarter of Corporate margins of 39% in the Midwest and South. Across the segment, customer trends are encouraging, of the company's business, including at our Louisiana and Mississippi properties with overall play and visitation growing sequentially during each of the last two quarters. Of And importantly, we saw the year over year gap in revenues and EBITDAR continue to narrow at our properties in the South. Of Corporate and Financial Services.

Speaker 2

Next, our online segment continues to be an excellent story for our company. During the quarter, this segment achieved a 75% EBITDAR gain, of driven largely by FanDuel's strong performances in Ohio and Pennsylvania as well as the addition of Boyd Interactive. Of Retailer's branded online casinos in Pennsylvania and New Jersey during the quarter. This marks the first time we have leveraged the Boyd Interactive platform of Operations and Company to

Speaker 3

manage our own online casino operations.

Speaker 2

In all, our online operations generated $13,000,000 in EBITDAR during the quarter. Of Operations. We now expect our online segment, which includes contributions from FanDuel, other market access agreements and Boyd Interactive of Ocado, which is a strong quarter for the full year, an increase from our previous forecast of $50,000,000 of In addition to these financial contributions from online, there is substantial value in our 5% equity stake in FanDuel, of Operations and Co, the nation's clear leader in sports betting. Finally, in our Managed and Other segment, Sky River Casino continues to perform at an exceptionally high level. Of This property has consistently exceeded expectations since it opened last August and it did so again in the 2nd quarter, of Corporate Insurance, Inc.

Speaker 2

Of Management fees for our company. Given the success of SkyRiver to date, the company's loan to the property of Investor Relations and Company is being paid down more quickly than originally anticipated. We received a $32,000,000 payment on this loan during the 2nd quarter of Investor Relations and an additional $33,000,000 payment in July. This brings the current outstanding loan balance to $31,000,000 Sky River, which we expect to be fully paid by the end of the year. The success of Sky River has been a tremendous benefit for the Wilton Rancherian Tribe, of Allowing the tribe to finally realize their vision of self sufficiency.

Speaker 2

And given the property's strong start, the tribe is now working on plans to expand Sky Room, of Potentially expanding the casino and adding a hotel, meeting space and other amenities to the property. While neither a timeline or scope for this project have yet to be finalized, of we share the tribe's optimism for the potential of this expansion. Based on SkyRiver's current level of performance of Global Services

Speaker 3

and Services

Speaker 5

and Services. And including contributions

Speaker 2

from our Illinois distributed gaming business, we expect our Managed and Other segment will generate 75,000,000 of $80,000,000 in EBITDAR this year, consistent with the forecast we provided during the last quarter's call. Of Operations. So in all, we are pleased with the company wide results we delivered during the Q2. And as we look ahead to the second half of the year, of Operations. We currently do not expect any meaningful change in customer trends based on what we are seeing today.

Speaker 2

In the Las Vegas Local segment, of Operations. We expect play from our core customers to remain stable at current levels, though we will continue to face challenging year over year comparisons during each of the remaining quarters this year. Of Downtown Las Vegas will continue to experience disruption from the Fremont and Main Street projects in the 3rd quarter, of Corporate Solutions. Our results will improve once work is completed on these projects early in Q4. And in the Midwest and South, we expect stabilizing trends will continue.

Speaker 2

Of Operations. Finally, our online and managed and other segments will continue to be important contributors to our overall performance. Of Investor Relations. Further ahead in 2024, we believe we will see benefits from our ongoing expansion projects. In Louisiana, of Operations.

Speaker 2

The expansion of our Treasure Chest Casino remains on track for completion next spring. By moving to a single level land based facility of Expanded Gaming and Non Gaming Amenities and improved customer access, we will significantly enhance this property's appeal, of Corporate Development, Inc. Contributing to incremental growth in our Midwest and South segment beginning in the second half of twenty twenty four. And in Downtown Las Vegas, of Investor Relations. We expect to see strong returns for our ongoing property investments.

Speaker 2

Given the excellent demand we have seen for our recently completed upgrades at the Fremont, of We are confident these enhancements will position our Downtown segment for long term growth. Growth investments in our existing portfolio

Speaker 3

of Investor Relations. Our next question comes from the line of David Strow, an important part

Speaker 2

of our approach to creating long term shareholder value and we expect to have additional opportunities to share with you as our current projects near completion. Of Investor Relations. And thanks to our low leverage and strong free cash flow, we're able to balance these investments with a robust capital return program. Similar to our Q2, of Investor Relations. We intend to continue our pace of share repurchases at $100,000,000 per quarter supplemented by regular dividend distributions.

Speaker 2

Of Corporate and Investor Relations. Since we reinstated our capital return program in late 2021, we are on track to return over $1,000,000,000 to our shareholders

Speaker 3

of Investor

Speaker 2

Relations by the end of this year. Through our capital allocation decisions, we are utilizing our strong free cash flow to create significant long term value for our shareholders of Corporate Insurance, while maintaining a strong balance sheet. In summary, we are pleased with our 2nd quarter results as our effective operating model, of Investor Relations. Strong management teams and ongoing growth initiatives all contributed to solid results during the quarter. Throughout our nationwide operations, our core customer remains healthy.

Speaker 2

Our management teams continue to do a great job managing the business efficiently despite higher costs, of Corporate Capital Markets. Maintaining property level margins at 42%, and we continue to see strong returns from online gaming and Sky River. Of Corporate Capital. With limited capital outlays, we have created 2 new business segments that accounted for nearly 10% of our total EBITDAR this quarter, of Investor Relations. They have proved that we have the right team in place to achieve solid results through challenging conditions.

Speaker 2

Thank you for your time today.

Speaker 3

Investor Relations. I would now like to turn the call over to Josh.

Speaker 1

Thanks, Keith. I'm going to present a few financial items related to the quarter of Investor Relations and Company, and update you on our capital investments and shareholder return programs. Total company wide revenues of $917,000,000 of U. S. Dollars rose 2.5% over prior year, while EBITDAR of $351,000,000 nearly matched of last year's strong Q2 performance.

Speaker 1

As Keith described, we faced difficult year over year comparisons during the quarter, of the company's office, with April accounting for nearly 70% of the year over year property level EBITDAR declines. May June's of the company's earnings release. Year over year variance improved sequentially with June performing essentially even with prior year.

Speaker 3

Of Corporate.

Speaker 1

Property level margins were 42%, while company wide margins exceeded 38% during the quarter, both consistent with the last several quarters. Of As an aside, our online segment included a tax pass through amount of $63,000,000 of Corporate, compared to $48,000,000 last year in the second quarter. These amounts are recorded as both revenues and expenses in this segment. Of During the Q2, capital expenditures were $75,000,000 including spend for both Fremont and Treasure Chest. Of Corporate Capital expenditures have been $171,000,000 We continue to project total capital expenditures $350,000,000 for the year, including $250,000,000 in maintenance capital and $100,000,000 related to treasure chest in Fremont.

Speaker 1

Of We repurchased $100,000,000 in stock during the quarter, representing 1,500,000 shares of Corporate and Financial Services at

Speaker 3

an average price of $67.02

Speaker 1

per share. This brought our actual share count at the end of the quarter to approximately 100,000,000 of Shares. In less than 2 years since we resumed our capital return program, we have repurchased 14,000,000 shares of Investor Relations for about 12% of the shares outstanding at the initiation of our repurchase activity. We had approximately $533,000,000 remaining under our current repurchase authorization as of June 30. Additionally, of Operations.

Speaker 1

We paid a regular quarterly dividend of $0.16 per share on July 15. And pending Board approval, of Investor Relations. Our next dividend is expected on October 15. Our balance sheet remains in excellent shape with total leverage at the end of the quarter of approximately 2.3 times and lease adjusted leverage 2.7 times. We have no near term debt maturities of Investor Relations and ample borrowing capacity under our credit agreement.

Speaker 1

In conclusion, this quarter reflected the benefits of our diversified portfolio, of Investor Relations. Our growth initiatives, our focus on our core customer segments and efficiently managing our business. We have a very strong balance sheet, of Investor Relations and Company. We will now begin to provide a significant amount of capital to our shareholders. Of Corporate Investor Relations.

Speaker 1

David, that concludes our remarks, and we are now ready to take questions.

Operator

Thank you, Josh.

Speaker 3

Of Investor Relations.

Operator

We will now begin our question and answer session.

Speaker 3

Of

Speaker 2

Investor Relations.

Operator

Of of Operations. Our first question comes from Joe Greff of JPMorgan. Joe, please go ahead.

Speaker 6

Of Good afternoon, everybody. I was hoping we can dig in a little bit in the Locals market. Of Investor Relations. And if you can maybe talk about sort of the customer segment, not necessarily by kind of core local or out of town guest, of But in terms of average theoretical or net worth, was there a big difference between the upper tiers of your database versus of the business. Those in the lower tiers of your database in terms of visitation and spend.

Speaker 6

And then how did that how do those sort of buckets of trends, of Investor

Speaker 2

Relations. So Joe, this is Keith. In terms of of Under the higher end of the database or what we refer to as our core customers versus the lower end. The upper end of the database, our core customers of You performed well. As I said in my prepared remarks, what we saw was some pullback in visits.

Speaker 2

So the number of customers was stable, of Operations. The spend per customer was stable, just a little lower in visitation. The lower end of the database, which has been kind of shrinking for years, just continued to shrink. Of It didn't accelerate or decelerate it. It has been on a trajectory that just been soft.

Speaker 2

So of So I don't think there's anything noteworthy there. And once again, we simply saw some pullback in visitation. Now I indicated in my prepared remarks also that of July is looking better. The trends we're seeing in the 1st 3 weeks of July in the locals market visitation is back up. Of And so those the trends and not that 3 weeks makes the entire quarter, but the trends in the 1st 3 weeks of July have certainly changed of Operations.

Speaker 2

Yes.

Speaker 1

The only thing I would add just broad based and high level is it was really about of Softness in April and as we move through the quarter, things just sequentially improved and then as Keith mentioned, have kind of of Investor Relations. We'll see where it goes from here.

Speaker 6

Of Great. Thanks, Keith. Thanks, Josh. That's all for me.

Operator

Thank you, Joe. Our next question comes from Carlo Santarelli of Deutsche Bank. Carlo. Please go ahead.

Speaker 7

Sure. Thank you. Hey Keith, hey Josh. So just following up on Joe's question, when you guys kind of looked at that of April period and there was some softness. Did you notice any change or any change in the behavior promotionally from of Investor Relations.

Speaker 7

Your competitors in the market or that little soft pass kind of went of With how much incremental promotions or offers going out.

Speaker 2

I would say here in the locals market, Carlo, that the promotional environment really hasn't changed for a while. Everybody's kind of laid out their position from a marketing standpoint and everybody is remaining relatively stable, of Corporate Investor Relations. A couple of aggressive competitors, but for the most part, everybody is continuing to do what they do. Of Corporate Insurance. April and Josh alluded to this a few minutes ago, really was about a comparison issue to last year.

Speaker 2

So sometimes of OTC. Oftentimes, we go back and look at 2019 as a baseline. In April of last year, April of 2022, it was up nearly 100% of Locals market compared to 2019. And so while it was soft of This April of 'twenty three is really more of a comparison issue. And as Josh said, May June actually compared to 2022 of We're relatively flat.

Speaker 2

So I do think April was not about more softness than May or June. It was really about a comparison issue.

Speaker 7

Of Understood. Thank you. And then just in terms of as you look across the operating portfolio, obviously, we of Trying to look and see what OpEx trends look like. They all look fairly stable in terms of of Non Gaming Tax Related Operating Expenses. Is it fair to say that kind of any iterations of expenses from here would relate more of Investor Relations.

Speaker 7

And certain markets in their respective seasonalities or is there are there still pressures or incremental hiring or things of that nature that haven't yet come through.

Speaker 2

No, I think you're right. If you think about our if we think about our expense levels have been relatively consistent of Corporate Insurance. For a number of quarters now and we've implemented wage increases. We had put our team members on a pathway, our hourly team members on of Pathway to $15 an hour. We've completed that.

Speaker 2

And so utility expenses are high in many markets, but that's of Investor Relations. So I think any future variation will be based on seasonality and or demand. Of Investor Relations. As revenue goes up, we can see some incremental labor, but there should not be any significant changes in the overall kind of expense of levels going forward.

Speaker 7

Great. Thank you, guys. Appreciate it.

Speaker 3

Of Operations.

Operator

Thank you, Carlo. Our next question comes from Steve Wieczynski of Stifel. Steve, please go ahead.

Speaker 8

Of Hey, guys. Good afternoon. So Josh or Keith, I want to go to the Southern markets, which you've now called out. I of I think it's been a couple of quarters at this point in terms of seeing some softness there. It sounds like it's a little bit more on the lower tier of your Database.

Speaker 8

And I guess the question is, has that market or those markets, is that deteriorating? Or of Is that still just it's soft, but it's stable? And hopefully that makes sense.

Speaker 1

Yes, Steve. I'll take a shot at it and then Heath wants to add something. Of Bank. Basically, I think we in Louisiana and Mississippi started to see real softness in the Q4 of last year. Of I think the right way to think about it is as we've kind of come into this year, things have just continued to kind of of They've started to stabilize along the bottom and started to show signs of improvement both in terms of customer trends, of Revenue Trends and EBITDA Trends.

Speaker 1

And so like the variances year over year are narrowing in terms of financial performance, of Investor Relations. The trends with respect to customer behavior, whether it be number of customers, frequency, spend of

Speaker 3

Investor Relations. We're all starting to

Speaker 1

pick up. And I think it's a little early to say that it's going to keep going in that direction, but at least it's kind of bouncing off of a stable bottom and seems to be improving. Of And I would say that's generally how we are starting to gain some confidence that, that part of the business has stabilized along with the rest of of Kind of even the markets outside of Mississippi and Louisiana.

Speaker 2

Yes, maybe just to reiterate what Josh said, Q4 of 2022 was kind of a bottom of Sequential improvement since then. And so I wouldn't view it as kind of deteriorating. I'd actually view it as stabilizing and improving since Q4 last

Speaker 8

of Okay. And then second question for you guys is of And I don't know who wants to take this, but I mean you guys still have and continue to have one of the better balance sheets out there in the across the industry, of Especially when you compare yourself to some of your peers and you are you remain in a very enviable position with that balance sheet. So of Yes. I guess the question is, can you maybe just update us today in terms of what the appetite is for your company in terms of any of Large acquisitions at this point or where you potentially would look at in terms of using that balance sheet from an acquisition standpoint?

Speaker 2

Of Yes. Look, I think the only thing we could probably comment on is of Those of you who have followed us for a while as the company has grown over the years quite dramatically through M and A, what I like to call smart M and A. We've of We've done a great job of picking the right assets and then being able to grow EBITDA from those assets, which has gotten us to where we're at today. Of Corporate Solutions. We tend to be very, very disciplined and if there's something interesting in the future, we could take a look at it, but of We're not going out of our way to kind of to do anything, but we have grown.

Speaker 2

It is our history to grow through acquisitions, but of We will be continuing to be very disciplined.

Speaker 1

Yes. I think the only concept I'd add to what Keith is saying is of Investor Relations. We like having a low fully levered balance sheet because it enables us to consider growth opportunities if they come along. Of Operations. And if they don't come along, that's fine too.

Speaker 1

Just because we can do acquisitions doesn't mean that we of Will. It just continues to be one of being disciplined around that. And I think what we want to really focus on is continuing to be able to return Capital Shareholders and be able to pursue growth initiatives at the same time should they come along to be able to do that whether the environment is good or bad. Of Operations and that's why we have chosen to kind of be at this level from a leverage perspective. It's kind of what we view as an all weather balance sheet.

Speaker 8

Of Okay, great. Thanks guys. Appreciate

Speaker 2

it. Welcome.

Speaker 6

Thank you, Steve.

Speaker 3

Of Investor Relations.

Operator

Our next question comes from Dan Politzer of Wells Fargo. Please go ahead.

Speaker 5

Hey, good afternoon, everyone. Thanks for taking my question. Of I want to follow-up on the digital guide, the $55,000,000 to $60,000,000 just so we can kind of understand where that's coming from. Of Is that simply just taking year to date and then adding the back half of last year? Because this is obviously tied to Sandoz.

Speaker 6

And so of To the

Speaker 5

extent that we're thinking about possibly up possible upside there, is that the scenario? And along with that, if you can just comment on any kind of early take since you've unplugged of on the iGaming side and have launched your Stardust online casino.

Speaker 1

Yes, I'll take the online and then of Keith can take Boyd Interactive. So the kind of we were originally at $50,000,000 I think consensus was a little ahead of us. Of Investor Relations. Kind of the outperformance in Q2 really from a year to date perspective catches us up with consensus, of If you will, and then kind of we think that and then we went in and upped kind of middle of the year kind of Q3 performance to kind of come up with the guidance of of 55 to 60. So if we outperform in Q3, then that will probably put us toward the higher end of the range.

Speaker 1

But what we have basically done is incorporate year to date, of Investor Relations. Improve what we expect to do in Q3 and kind of mirror what we expect what we did last year in Q4, just given Q4 had of Some one off payments in there as well as the start of markets that we think will have additional competition as we move through this year. So, we think it's kind of a middle of road expectation for Online at this point.

Speaker 6

Got it. Go ahead.

Speaker 2

Of As I say, with respect to the second half of your question, the launch of Stardust, the online casino business, of Look, we did we relaunched in Pennsylvania and New Jersey in early May. We spent the 1st 60 days really just fine tuning of the product and haven't really launched any marketing. July was the month where we actually started to step out a little bit and do some marketing. Of Investor Relations. What I can say is that we're pleased with the launch.

Speaker 2

We are pleased with kind of the organic growth that we're seeing just from having the Product out there without doing a lot of marketing. We're pleased with the reception by our land based brick and mortar customers of And their participation with it. But remember, this is a small business for us. We'll grow. This of This is about kind of the long term and being set for the long term and not necessarily about the short term.

Speaker 2

So we don't expect to move the needle materially in the short term, but of We would consider it a successful launch and are pleased with the early results.

Speaker 5

Got it. And then just for my follow-up moving to Downtown, of If there's any way to just quantify the disruption there so we can better kind of frame the Q3. And then as you think about the Q4, of I would think that you may see an uptick just in terms of obviously that coming online and maybe even in Formula 1 Coming to Town. Is that a fair assessment directionally?

Speaker 1

Yes. I think that's right, Dan. I think that of Operations. The downtown impact from an EBITDA perspective, we kind of back of the envelope estimate to be kind of $2,000,000 to $3,000,000 in EBITDA. Of Corporate and Financial Services.

Speaker 1

And I would expect that you'll see pressures in Q3 related to that of further disruption and then we'll start to try to make some of that back both in Q4 and Q1 as the businesses come back online as we make our way through Q4 of Because it's not all going to come back on Q1st day of Q4. But so that's kind of how we expect

Speaker 3

of

Operator

of Investor Relations. Thank you, Dan. Our next question comes from Jordan Bender with JMP Securities. Jordan, please go ahead.

Speaker 9

Of Great. Thanks for taking my question. Looking into the locals market, maybe just an update on the convention and group business, what you're

Speaker 2

of Probably the only comment we have on overall convention business and we have some limited square footage at the Orleans and a few other Properties. So it isn't a huge piece of our business, but we see it continue to grow back. Convention business was up significantly year over year, of Financial Services. Still running slightly behind 2019, but is up significantly year over year, so continues to grow. I don't have any specific statistics about the next of several months.

Speaker 2

The summertime here in Vegas is traditionally a very slow time for convention business, probably won't pick up significantly until mid September. Of

Speaker 9

we have there. Great. And then maybe bigger picture question on the Distributed Gaming Business. That's a market that's slowing and maybe a lower margin. I was just wondering how Latner kind of fits into the portfolio longer term?

Speaker 9

Of

Speaker 1

Yes. I think, look, we put our toe in the water with respect to that particular of the company. Niche market for us just to try to begin to understand it. And I think to the extent that it were to be able of Legalize in other states, we would consider expanding it. For now, it's largely status quo for us in Illinois, quite honestly.

Speaker 1

Of Corporate Solutions. And we leverage they get the benefit of some of our technology and marketing capabilities over time. So they kind of get outsized support.

Speaker 3

Of

Operator

of Thank you, Jordan. Our next question comes from Brent Montour of Barclays. Brent, please go ahead.

Speaker 10

Of Thanks. Good evening, everybody. Just one question, if we could go back to the Midwest and South segment and dig in a little bit on the seasonality for the back half. And what I'm really trying to get at is, of the company. Keith, you described it as stabilizing here, which is reassuring.

Speaker 10

I guess if you look back at 2019 seasonality, it would of Investor Relations. I suggest 3Q is typically weaker than 2Q, maybe that was an off year, but that would still suggest of Down comps at the EBITDA level year over year in the 3Q. So just maybe you could help us understand of The stabilization comment, how we should think about that into the Q3.

Speaker 1

Yes. I do look, of Operations. This is Josh. I think you're not going to stabilization is not going to override seasonality. I of Investor Relations.

Speaker 1

All we're trying to say is that we saw weakness with respect to specific consumer trends of the business and those particular consumer trends have now started to come back and started to improve. And so it's of O'Neill. It's not to say that we won't see them have inflow with respect to the seasonality that normally is characteristic of certain markets or certain business segments. Of It's just to suggest that we're starting that business is starting to get a little bit back on track relative to overall performance.

Speaker 5

Of

Operator

of Investor Relations.

Speaker 2

You

Speaker 4

of You covered a lot of ground. I just wanted to, if you don't mind, touch on the dividend, which is of Well, how you think about growing it over time? How you think about its use and value drive today as it sets of And where it could lead one day?

Speaker 2

Look, we look at our of We look at returning capital to our shareholders as a multipronged approach. Obviously, we have a large of Share repurchase program committed to and as I said, we'll supplement that with an ongoing dividend program of Capital Markets. And we'll return nearly over $1,000,000,000 between the 2 of them by the end of this year. We think that of Look, the dividend is just one element of returning capital. It's up to our Board and how they view this in terms of where it goes each year.

Speaker 2

Of I really can't say much more on the dividend than that. I mean, it will be up to the Board to sit and talk about it. But I think it of Corporate Capital. Yes, I would see it continuing. It's an important part of how we return capital to shareholders.

Speaker 2

Not all shareholders view getting capital back the same way. Many like of Share repurchases and some like dividends. And so we're trying to accommodate kind of all of our investors through that.

Speaker 4

Of Operations. Understood. And if I can just follow-up quickly in another direction with respect of the margin performance, which was actually pretty good, right? I think that's been sort of a of the recurring focus of how much can you really sustain. How do you view of Investor Relations.

Speaker 4

Sort of the next few quarters with respect to that, do you feel like you have, Josh, all the sort of costs under control that you can foresee at the moment? Of And or should we be just a little more conservative about that?

Speaker 1

Of My own perspective is I think our operating teams do a great job managing to the level of revenues of Investor Relations, that they are seeing come in the door every day quite honestly. And that's enabled them to offset pressures, whether it's from labor from time to time,

Speaker 3

of

Speaker 1

Utilities that are seasonally driven. Another big increase that we've seen recently is insurance. Of Corporate Solutions. But yes, despite those pressures that get a lot of press, so to speak, the reality is these guys find ways to kind of offset that of U. S.

Speaker 1

And just continue to deliver what I believe to be very consistent levels of margin performance. And we've said from the beginning, of Coming out of COVID, we weren't going to be able to maintain those levels of margin, but we were going to stay in that neighborhood. And I think we've lived up to that. Our teams have lived up to delivering that. Of O'Connor.

Speaker 1

And I'm sure there'll be periods of time where it's not always that way, but generally I think that this is what you should expect of Investor Relations in terms of margins from us.

Speaker 4

Got it. Thank you very much.

Speaker 1

Of Corporate.

Operator

Thank you, David. Our next question comes from Chad Beynon of Macquarie. Chad, please go ahead.

Speaker 2

Of

Speaker 11

First, I wanted to talk about additional projects in the future organically. Of Downtown and Treasure Chest, you've kind of laid those out and those have all been in our models and you've talked about the returns of That we should see in the next 6 to 12 months. As we get beyond that, are there other properties where you could of Investor Relations. Make any adjustments, whether it's hotels, casino floors, add, just something to think about, getting additional returns of Within the Organic Portfolio. Thanks.

Speaker 11

Yes.

Speaker 2

So we have a number of things that we are considering and evaluating right now, of We have several very high performing properties that we can leverage up an existing strong market and strong management of the team to further grow EBITDA at those properties. We don't have anything to announce right now, but we will be of You're prepared to start to lay out what we think those next projects are, but they're in the zip code of the Fremonts of And the treasure chest, so it's nothing significant. But once again, we have several very, very strong opportunities to continue to grow those, just not ready to of

Speaker 1

Yes. And the only thing I would add to that, Chad, is Keith gave you a sense of order of of magnitude in terms of size. We're not going to kind of open the floodgate and start so many at one time. It's going of continue to be paced along just like we did with Fremont and Treasure Chest and kind of dribble them into the capital allocation process.

Speaker 11

Of Okay. Thanks, Josh. Thanks, Keith. And then in terms of the FanDuel partnership, of We're coming up on the 5 year mark. I don't know if this was disclosed or if it's public from when the partnership originally came together.

Speaker 11

Of But is there anything that's out there that we should be aware of in terms of terms on the deal? That change after a 5 year mark, was it a longer of the merger, partnership. We're just hearing a lot of these 3 to 5 year deals are coming up for renewal. Of Corporate Solutions. Thanks.

Speaker 2

So I think the short answer is there's really nothing pending or coming up in the of Corporate and Corporate. Ours were longer term deals that were structured differently because we had a portfolio type of approach across of 9 states and how it all rolled out and what the extension options were in the whole bit, but nothing in the short term.

Speaker 11

Of Excellent. Thanks guys. Appreciate it.

Operator

Welcome. Thank you, Chad. Our next question comes from Joe Stauff of Susquehanna.

Speaker 2

Of O'Gorman. Good morning

Speaker 1

or good afternoon, Keith, Josh.

Speaker 12

Just two clarifications, if I could. You were asked of Corporate Markets. Largely on kind of M and A, but capital markets certainly have opened a bid. And I was just wondering maybe if you could describe, of Say maybe the number of inbound calls, is it fair to say that it has increased to some degree? And then of Investor Relations.

Speaker 12

I just wanted to ask to clarify your comments on July trends. Of And correct me if I'm wrong, but I thought you said that in terms of your core customer, the number of visits has of Corporate Insurance. Increased sort of sequentially versus what you saw in the second quarter and that spending levels of Per visit kind of remain consistent. I guess clarification on that and of I'm wondering if the out of town visitors have also, say, increased, again, of Relative to your July guidance 1st 3 weeks.

Speaker 2

Yes. So with respect to kind of of Core Customer Comment and the trends that we're seeing in early July. I think my comments were that of Corporate Solutions. As we looked at those core customers like in Las Vegas, in the second quarter, it really was frequency. We had a few less visits.

Speaker 2

They of We're spending the same and the core customer count was generally the same. As we got into the 1st 3 weeks of July, we're actually seeing of More visits. So visits are back and spend is flattish to up. And so positive trends, of As I said, I caution that 3 weeks isn't a permanent trend, but certainly a turn from Q2. So positive trends there.

Speaker 2

Of And those are out of town customers coming in. In terms of M and A, look, of I'm not sure that the call volume has picked up or slowed down. It's always spotty. So I wouldn't say that we're getting more calls or less calls than we've gotten over the last year or 2. Of Josh?

Speaker 1

Yes. The only thing I would say is like, we're really focused today. It's not so much about M and A unless it's of opportunistic opportunity that comes along. It's really about just continuing to run the business, reinvest in our existing portfolio of Investor Relations and Return Capital to Shareholders, and we have the balance sheet to continue to do that in an uncertain environment. And to the extent that of Investor Relations.

Speaker 1

Something came along that was attractive, we would expect that not to affect kind of our the how we're thinking about running the business today. Of That's just kind of how we're thinking about it. It's not like we're going over 2.5 times leverage generating a ton of free cash flow and we're running around looking for things to buy. That's not the of the company internally.

Speaker 12

Okay. Appreciate it.

Speaker 2

Thank

Operator

you, Joe. Credit Suisse. Our next question comes from John DeCree of CBRE. John, please go ahead.

Speaker 13

Hi, Keith. Hi, Josh. Of Maybe just one question for me on non gaming revenue, F and B and room revenue. It's been of We're covering pretty rapidly. Last quarter was a pretty strong quarter.

Speaker 13

This quarter it looked like that non gaming revenue was kind of flattish year over year versus the 2Q last year. Curious if you could speak to the trends that you're seeing in that business. Is it of More seasonal that we'll see uplift as it's still recovering, was just tough comp to last year. Just curious to get your thoughts on those segments.

Speaker 1

Of Yes, John. I'll take it and then Keith, if you have something to add, jump in. Of Like when we look at room revenue by segments, I think what you'll see or eventually when we put it out in our queue is that of Room revenue in Las Vegas was actually up. And where the softness in room revenue largely came from was the construction disruption downtown. Of F and B.

Speaker 1

And then on the in terms of the other kind of segment of non gaming for us in terms of F and B, of we had kind of flattish performance in Nevada, but basically growth consistent with what we were talking about in terms of Stabilizing and Improving Trends in Midwest and South, Growth in F and B, kind of outside of Nevada. Of Oppenheimer. Kind of consistent with what's going on in the business and the commentary of the quarter, that's what's coming through on the non gaming side of things. Keith, I don't know if there's anything to add or if that covers of Corporate.

Speaker 6

Thanks, Josh. I appreciate it. That's all for me.

Operator

Of Thank you, John. Our next question comes from Stephen Grambling of Morgan Stanley. Stephen, please go ahead.

Speaker 14

Of Thanks. Two quick follow ups. First on the digital guidance increase, I don't think I heard you say kind of what you're thinking about of Kala. And as you're talking about this ramp in startups, is that usually when there's this increase in of Effectively customer acquisition, there could be increased losses. So are you assuming that there's going to be incremental investment there that's offset by strength in the rest of the business?

Speaker 2

Of Yes. So as you think about Pala, once again, it's a very small part of the overall business. Of We bought PAL Interactive. It was profitable and it will continue to be profitable, but it is small. When we talk about starting marketing, which

Speaker 3

of We started in the

Speaker 2

month of July. It's small. It's small dollars. It's nothing that's going to change the trajectory of the business. Of I wouldn't anticipate this even this being visible to anybody as

Speaker 1

we go. Of So Steve, as Keith suggested, it's small. When we acquired it, it was doing about $5,000,000 in EBITDA. Of O and M and A. And in our projections, we're assuming that it's going to continue to do $5,000,000 of EBITDA for this year as it transitions and builds out of its capabilities.

Speaker 1

It certainly has the opportunity and we expect it to grow from here. But for 2023, it's a formative year for that business to kind of transition of the business over to the Stardust business to our platform and to build out its technical capabilities to kind of continue to grow from here. Of So this is not we're not running the business similar to maybe how our peers are thinking about online, where of You're used to seeing big marketing budgets and potentially losses early on. That's not what this is about. It's We've got a healthy little business and we're not spending more to suggest that it's going to go backwards.

Speaker 14

Of Got it. That's helpful. And then, going back to the South and Midwest, you gave a lot of commentary there, but I just want to make sure that of It's all kind of coming out on the same page, which so from an EBITDA standpoint, I guess you're saying are you saying revenue is stabilizing of Investor Relations. And EBITDA should be stabilizing where we are today, so we shouldn't anticipate just sequentially it to move around a lot from here.

Speaker 1

Of We're talking about kind of year over year performance in terms of of So let me back up, maybe that's the best place to start. Q4 and Q1, Midwest and South was impacted largely by performance of the company in Louisiana, Mississippi. Those businesses had softness in terms of consumer trends and resulted in of Revenue and EBITDAR declines that affected the overall segment. We're saying as we and the rest of the business was pretty much stable. Of Operations.

Speaker 1

As we move into Q2, the rest of the business remains stable and what we're starting to see in Louisiana, Mississippi is customers' trends starting to inch up of and improve and as a result, the economic or financial performance of the Louisiana Mississippi assets to follow along. So year over year, of Investor Relations. If we were down a certain amount, we those amounts are reducing as we move through time based on of Sequential performance going from Q4 to Q1 to Q2 and that's what we're talking about. It's not going down any further. Of U.

Speaker 1

S. It's stabilized, it's starting to improve. That's what's encouraging from our perspective for Louisiana and Mississippi, and that will only contribute to of what's happening in the rest of the Midwest and South. It doesn't mean that going into the Q3 when of U. S.

Speaker 1

And of typically go down in Q3 that you won't see that. We just expect that the underlying trends of the business continue to improve of From a customer perspective, quite honestly. And so that's what we're seeing. That's what we're seeing continue. And hopefully that kind of of Investor Relations.

Speaker 1

Helps you understand it. If not, we can talk about it further offline. But it's not meant to suggest that of We'll lose seasonality. It's meant to suggest that the year over year variances should start to diminish.

Speaker 14

Of

Operator

Thank you, Steven. Of our last question comes from Barry Jonas of Truist Securities. Barry, please go ahead.

Speaker 7

Thank you. Just wanted to start, can you maybe give us an update on any risks around competitive openings we should be mindful of from here?

Speaker 2

Of Yes. So Barry, as it comes to competition, the only, I think, pending opening of It's obviously the Durango project here in the Las Vegas locals market. We have had HHR's opening in Kentucky, which of Investor Relations. Have impacted and we haven't completely anniversaried their impact at Belterra Resort and Belterra Park in Ohio and Southern Indiana. Of And then the Four Winds project in South Bend that opened recently, which of has had some minor impact on our blue chip operation in Northwest Indiana.

Speaker 2

But once again, those have been open for a while. Durango Station of We'll open whenever they say it's going to open later this year. And my only comment would be, I think like other openings, we certainly have a lot of experience

Speaker 3

of the company. With these types of things, opening up new

Speaker 2

properties, customers will go visit it. They always do. Of the company's new toy and the majority of our customers will come back home. And that's generally what we've seen happen over the years. Of the Palms.

Speaker 2

If you look here in the Las Vegas locals market, when the Palms opened a number of years ago, we had our customers go and visit of the company. And the majority of them have come back, and it has not had a significant overall impact on either the Orleans or the Gold Coast, which is where it would of Felt. And so we'll go visit and we'll be prepared for it. And once again, we certainly have a lot of experience of Investor Relations. And we are prepared for it and we'll see how it goes.

Speaker 7

Of Great. And then I guess just for a follow-up, I believe there was a change in the Board leadership with Mr. Boyd moving to the Chairman Emeritus role and congratulations to him. Of Just wondering if we should expect a pretty seamless transition from here.

Speaker 2

Of Yes. I would expect nothing has changed and nothing will change and it will be kind of status quo. The Board is stable and we have a very of Solid Board. Everybody's good. And so, yes, nothing should expect no changes.

Speaker 7

Great. Thanks so much.

Speaker 3

Of Investor Relations.

Operator

Thank you, Barry. This concludes today's question and answer session. I'd now like to turn the call over to Josh for concluding remarks. Of

Speaker 1

Thanks, David, and thanks, everyone, for joining today. And if anyone has any follow-up questions on anything we've discussed today, of Operations. Please feel free to reach out to the company and we'll try to get those questions answered for you. Thank you.

Operator

Of Thanks, Josh. This concludes today's call. You may now disconnect.

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Earnings Conference Call
Boyd Gaming Q2 2023
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