Boyd Gaming Corporation

Hello, 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. If you would like to ask a question, press star one on your telephone keypad. I would now like to pass the conference over to our host, Josh Hirshberg, CFO and treasurer of Boyd Gaming. Please proceed.

Thank you, operator. Good afternoon, everyone, and welcome to our first quarter earnings conference call. Joining me on the call this afternoon is Keith Smith, our president and chief executive officer. Our comments today will include statements that are forward-looking statements within the Private Securities Litigation Reform Act. All forward-looking statements and our comments are as of today's date. We undertake no obligation to update or revise those forward-looking statements. Actual results may differ materially from those projected in any forward-looking statement. There are certain risks and uncertainties, including those disclosed in our filings with the SEC, that may impact our results. During our call today, we will make reference to non-GAAP financial measures. For complete reconciliation of historical non-GAAP to GAAP financial measures, please refer to our earnings press release and our form 8K, furnished to the SEC today, and both of which are available at investors.boydgaming.com. We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to project special charges and certain expenses. As noted in an 8K filed earlier this month, we have recast our segments. Online is now reported separately. Additionally, The results that include Wilton's management fee and Latner Entertainment are reported in a separate category, managed and other. These results were previously reported as part of our Midwest and South segment. For additional information on these segments, including results recast for prior periods, please refer to the Form 8K we filed on April 11th. 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, I would now like to turn the call over to Keith Smith. Keith.

Thanks, Josh. Good afternoon, everyone. The first quarter of 2023 was an excellent start to the year for our company as we once again proved the strength of our business model and the resilience of our diversified portfolio. Our strategy of focusing on growing play from our core customers and managing our business efficiently has delivered consistently higher levels of performance and record results over the last several years. In the first quarter 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 million, And EBITDA was more than $367 million, 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 continued to grow. 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 first quarter records for revenues, EBITDAR, and operating margins. Revenues in 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, while unrated play also grew slightly. 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, so 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. Over the trailing 12 months, more than 40 million people visited Las Vegas, up 16% from prior year while traffic through the Las Vegas airport reach 54.7 million passengers during that same timeframe, an all-time record. And Las Vegas visitors are spending much more during their trips, averaging over $1,100 per visit last year, an increase of nearly 35% over 2019 levels. This resulted in annual visitor spend of approximately $45 billion in Las Vegas last year, an all-time high. Convention business is strengthening as well, rising 86% over the trailing 12 months. The entire market is benefiting from a strong lineup of entertainment and sporting events across the city, both in the first quarter and throughout 2023. With more than 5,000 hotel rooms in the market, our local properties are well positioned to capitalize on these strong visitation trends. These trends are also helping to drive solid growth at our downtown Las Vegas business, which set first quarter records for EBITDA and margins. Downtown revenues rose 14%, EBITDA 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 is benefiting all three of our downtown properties. 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 in our downtown properties. And our recent investments at the Fremont, including our new food hall, expanded slot offering, and FanDuel Sportsbook, helped to drive significant revenue in EBITDA gains, with rated play up 20% year-over-year at that property. Moving next to the Midwest and South, revenues were in line with the prior year, while EBITDA 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. And on a sequential basis, results for the first quarter improved over the fourth quarter 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 and 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 first quarter EBITDA of nearly $21 million. 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 Void Interactive. Based on our strong start to the year and normal seasonality of the business, we estimate our online operations will generate approximately $50 million in EBITDA in 2023. This projection includes a full year of contribution from FanDuel operations 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 in FanDuel Group, which has established itself as the nation's clear leader in sports betting. Last, our manage and other business benefited from exceptional results at SkyRiver. SkyRiver continues to perform ahead of expectations, generating $20 million 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, the tribe is now considering expanding the property, which could further enhance its long-term potential. Sky River 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. 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 properties nationwide. In addition to driving non-gaming revenue growth, these investments are essential to our strategy of attracting and retaining core customers. Looking further ahead, we anticipate solid returns from our $100 million 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, an 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're successfully balancing these investments in our portfolio with our capital return program. We plan to continue our $100 million per quarter share purchase program, supplemented by our dividend distributions. We're 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 nonprofit organizations nationwide. Through these initiatives, we're fulfilling our longstanding commitment to ensure that our company is 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 and downtown Las Vegas, and increased contributions from our online and managed operations, we delivered another quarter of record results. 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. I would now like to turn the call over to Josh. Josh?