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spk04: Good afternoon and welcome to the Boyd Gaming first quarter 2024 conference call. My name is David Strau, Vice President of Corporate Communications for Boyd Gaming. I will be the moderator for today's call, which is being recorded on Thursday, April 25, 2024. At this time, all lines are in listen-only mode. Following our remarks, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star then zero for the operator. Our speakers for today's call are Keith Smith, President and Chief Executive Officer, and Josh Hershberg, Executive Vice President and Chief Financial 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, we undertake no obligation to update or revise the forward-looking statements. Actual results may differ materially from those projected in any forward-looking statement. There are certain risks and uncertainties, including those disclosed in our filings with the SEC, that may impact our results. During our call today, we will make reference to non-GAAP financial measures. For a complete reconciliation of historical non-GAAP to GAAP financial measures, please refer to our earnings press release and our Form 8-K, furnished to the SEC today, 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. Today's call is being webcast live at boydgaming.com and will be available for replay at 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.
spk00: Thanks, David, and good afternoon, everyone. Following a record 2023 performance, the first quarter of 2024 was a challenging start to the new year. While we knew our first quarter results in Nevada were comping to a record first quarter of 2023, our results for the quarter were also impacted by January's severe winter weather in the Midwest and South and a softer Las Vegas locals market in the first quarter. However, beyond these challenges, there were encouraging trends during the first quarter. Both in Nevada and across the Midwest and South, Playformer core customers improved as we moved through the quarter. In our Midwest and South segment, once January's severe winter weather passed, the revenue growth trends that began in the fourth quarter returned in February and March. In addition, both our online and managed businesses continued to produce strong results. And importantly, our management team stayed focused on maintaining operating efficiencies and a disciplined marketing approach as we achieve property level margins of 40% during the quarter, proving once again our ability to maintain a high level of efficiency. So now let's review each of our operating segments in more detail. In our Las Vegas local segment, the EBITDA shortfall to prior year was a result of three main issues, each accounting for roughly one third of the decline. First, as I mentioned a moment ago, and as we discussed on our last call, our local segment was comparing to a record performance last year. While January was a particularly strong month last year, both February and March were also record months for the segment. Second, as expected, we also felt the impact of competitive pressures related to the opening of a new property in the market. The overall impact of these competitive pressures during the quarter was in line with our previously stated expectations of 20 to 25 million in EBITDA for the full year. And finally, on the same store basis, the overall Las Vegas locals market was softer than expected during the quarter. Despite these issues, the fundamentals of our locals business remain intact. During the quarter, play from our core customers grew each month. And when excluding January, play from core customers increased on a year-over-year basis. Non-gaming revenues also grew in the local segment during the quarter. even with a substantial number of hotel rooms out of service for a room remodel project at the Gold Coast. And finally, we remain disciplined in our marketing strategies and focused on operating efficiencies. Even with lower revenues, we maintain margins of nearly 50% in our local segment during the quarter, consistent with our performance over the last several years. Looking ahead, while we expect competitive pressures and market softness to continue into the second quarter, We remain encouraged by continued strength and play from our core customers and confident in our management team's ability to achieve efficiencies throughout our operations and maintain a disciplined approach to marketing. Next, in downtown Las Vegas, similar to our local segment, some of the shortfall to prior year was the result of comparisons to a record first quarter of 2023. Much of our strong performance in the first quarter of 23 was driven by pent-up demand from our Hawaiian guests. While we expected some normalization from last year's elevated levels, high airfares during much of the quarter of this year kept more Hawaiians away than we had anticipated. In addition, gaming revenues in the downtown market declined during the quarter, with overall pedestrian traffic trending lower along Fremont Street. Looking at more recent trends, we are encouraged that Hawaiian visitation has improved over the last 30 days, as airfares from Hawaii have started to decline from the elevated levels we saw earlier in the first quarter. While our two Nevada segments face comparisons to prior year record results and market softness, we continue to have long-term confidence in the Southern Nevada market. On an overall basis, visitation to Las Vegas continues to grow, led by increases in convention business over the last 12 months. Employment remains a positive story as well, increasing 3.3% over the last 12 months, the strongest growth rate of any major metropolitan area in the U.S. This employment growth continues to be broad-based with gains across most employment sectors. The ongoing growth trends we see in visitation, conventional business, and employment all bode well for the future health of the Southern Nevada economy. Moving to our Midwest and South segment, we saw encouraging trends during the first quarter. Our results were down year over year, and this was primarily due to severe winter weather impacting January. Beyond January, gaming volumes from our core customers grew, continuing the trends from the fourth quarter. And retail play in February and March was also encouraging, coming in nearly flat to the prior year, the best year over year performance we have seen in almost two years. We also saw growth elsewhere in the business, adjusting for rooms out of service related to a hotel renovation project, at our Ameristar St. Charles property, non-gaming revenues grew 4% in February and March. And our management team successfully maintained their focus on operating efficiently. Excluding the weather-impacted month of January, margins were 39% for the quarter, similar to our recent performance for this segment. As we look ahead, we are encouraged by the improving customer trends over the last several quarters, and those trends have continued across our Midwest and South segment in April. Next, our online segment maintained its strong level of performance. With $20 million in EBITDA in the first quarter, the segment matched last year's exceptional results, a tribute to FanDuel's industry-leading position in online sports betting across the country. We are pleased with our online segment's strong start to the year, and looking ahead, we continue to project the segment will generate $60 to $65 million in EBITDA for the full year. In addition to these financial contributions, we also continue to benefit from our 5% equity interest in FanDuel Group. This investment is growing in value with the success of FanDuel across the country, and it remains a valuable strategic and financial asset for our company. Finally, our managing other business benefited from another strong quarter at Sky River Casino, which we manage on behalf of the Wilton Rancheria Tribe. Well into its second year of operations, demand at Sky River remains healthy. Thanks to Sky River's excellent performance since opening, the Wilton Rancheria Tribe is now finalizing plans for a major expansion of the property that will include additional casino space, a hotel tower, and meeting and convention facilities. As a result of Sky River's continued strong performance, we now expect our managed and other business to generate approximately $86 to $88 million in EBITDA this year. While company-wide results were below prior year during the first quarter, we continue to generate significant free cash flow, allowing us to execute on our balanced approach to capital allocation. First, we are investing in our nationwide portfolio with the objective of driving long-term growth while enhancing the competitiveness and appeal of our properties. We are repositioning or upgrading many of our food and beverage outlets with nearly a dozen projects planned throughout the year. We're also refreshing and updating our hotel products. Currently, we are in renovating rooms at Gold Coast, Ameristar St. Charles, and Blue Chip. And we are set to begin similar projects at the Orleans, IP, and Valley Forge later this year. Beyond upgrading our property amenities, we are also nearing completion of our land-based project at Treasure Chest Casino. This project will transition the property from a three level riverboat to a spacious single level land based facility, adding significantly enhanced non gaming amenities, expanding gaming options and convenient parking for our guests. Once complete in June, we are confident this investment will significantly enhance the treasure chest experience and position the property for long term growth. While investing in our portfolio is a key part of our approach to capital allocation, We're also committed to returning capital to our shareholders. During the quarter, we repurchased $105 million in company stock while increasing our dividend for the third consecutive year. We intend to continue returning capital to our shareholders with $100 million per quarter in share repurchases and quarterly dividend payments. And finally, we remain committed to maintaining a strong balance sheet, which provides us with significant flexibility to navigate the current environment execute a balanced approach to capital allocation, and pursue opportunities. In summary, while this was a challenging quarter, there were many encouraging trends in the business, including continued growth and play from our core customers. We remain diligently focused on our disciplined marketing and operating strategies and our commitment to operating efficiently. And thanks to our significant free cash flow and strong balance sheet, we continue investing in our properties while returning substantial capital to our shareholders. Thank you for your time today. I would now like to turn the call over to Josh.
spk13: Thank you, Keith. I'm going to provide a few additional details on the quarter. With the current trends in our business, we have remained disciplined in our expense management, resulting in property level margins of 40%. We have also remained focused on our core customer strategy and disciplined in our marketing efforts. which has been one of the keys to our success over the last several years. For our online segment, our results include tax pass-through amounts related to our online partnerships. These amounts are recorded as both revenue and expense. During the quarter, the tax pass-through amount was $116 million, compared to $96 million last year in the first quarter. In terms of capital expenditures, we invested $90 million in the first quarter, including investments in the Treasure Chest land-based project. We remain on track to spend $200 to $250 million in maintenance capital during 2024 and $100 million in growth projects that you should think of as recurring. We also expect to invest an additional $100 million during the year in room renovation projects that Keith mentioned. bringing our total capital expenditures in 2024 to $400 to $450 million. With respect to our program to return capital to shareholders, during the quarter we repurchased $105 million in stock, acquiring 1.7 million shares at an average price of $63.62 per share. We also increased our quarterly dividend to 17 cents per share during the quarter, starting with the dividend that was paid on April 15th. Since resuming our capital return program in late 2021, we have returned approximately $1.3 billion to shareholders in the form of dividends and share repurchases and reduced our actual share count by 15% to 95.4 million shares. At the end of the first quarter, we had approximately $221 million remaining under our current repurchase authorization. Our capital return program is an important part of our capital allocation philosophy, and we are committed to $100 million per quarter in share repurchases. We finished the quarter with total leverage of 2.3 times and lease adjusted leverage of 2.7 times, consistent with year-end levels. With low leverage, no near-term maturities, and ample borrowing capacity under our credit agreement, we have created the strongest balance sheet in our company's history. As a result of our strong balance sheet and significant free cash flow, we have created significant financial flexibility to maintain a balanced approach to capital allocation, providing our company the ability to continue reinvesting in our portfolio and returning substantial capital to our shareholders while pursuing growth opportunities. That concludes our remarks, and David, we're now ready to take any questions.
spk04: Thank you, Josh. We will now begin our question and answer session. If you would like to ask a question, please press star then 1 on your touchtone phone. You will hear a three-tone prompt acknowledging your request. Should you wish to withdraw your request, please press star then 2. If you're using a speakerphone, please use your handset when asking your question. We will pause for a moment while we compile our list of questioners. Our first question comes from Steve Wyszynski of Stifel. Steve, please go ahead.
spk12: Hey, guys. Good afternoon. So just want to ask a little bit maybe about the overall Las Vegas market. I mean, it seems like there's what we would call, I guess, kind of mixed messages out there. I mean, unemployment, as you mentioned, looks good. It's low. Housing market still seems relatively strong. So just wondering here, what you guys think is maybe causing some of that market softness as it just seems to be a bit confusing as to what's going on out there?
spk00: Yeah. So in terms of what's causing the softness, it's always hard to kind of unpack and understand exactly what's driving the Nevada numbers came out earlier today. And if you look at the locals market on a last three months basis, adjusting for a new competitor, you know, it is, you know, it is declined out of mid single digits. And so, And even if you look back to January and February, there were some small declines on a trailing three-month basis. So the market has been soft for a couple of months. It's not just March. You know, as we talked in our prepared remarks, our core customer is actually performing well. You know, we continue to see growth from that core customer. It is more the retail customer where we're seeing the softness. You know, that retail customer is more economically sensitive to you know, inflation and other changes in the economy. And so my guess is it's that customer that is simply being more cautious about how they're spending their discretionary dollars.
spk12: Okay. Thanks for that, Keith. And then the second question, I guess, in terms of staying in Las Vegas around the promotional environment, obviously Durango is open. I assume they're out there promoting. And it seems like you guys are obviously kind of drawing somewhat of a line here and not going to go down that path too much. But I guess, I guess the question is, at what point do you maybe start to think about promoting, or are you guys just going to kind of hold the line here and, again, not go down and kind of chase dollars right now?
spk00: I'd make a couple of comments. One is we think about getting more promotional each and every day. We don't do it because we have a strong discipline to not do it. The good news is that our major competitor – even with the opening of a new property, really has not elevated their level of promotions. You know, it is some of the other smaller operators and dependent operators kind of around town. There are some properties around New Orleans and the Gold Coast that have gotten more promotional late in 2023 and into 2024 that I think are impacting the market. So, you know, we We are very disciplined. It's not that we don't trial things. It's not that we don't test different programs. We simply don't stick to the same playbook. But we're just trying to stick to a reinvestment level that doesn't increase our overall costs. So we'll continue to monitor. We'll continue to test the market. We'll continue to try new programs and monitor the market. But look, today the team's doing a great job managing through it. generating nearly 50% margins, which, you know, significantly elevated than anything we've seen, you know, prior to the last several years. And so I think the team is doing a great job. Josh, if you want to add anything. Oh, I think you did.
spk12: Okay, guys, really appreciate the color. Thank you very much. Sure.
spk04: Thank you. Our next question comes from Joe Greff of JP Morgan. Joe, please go ahead.
spk06: um afternoon guys uh also want to touch on the las vegas locals market here and just uh keep just so we're crystal clear and understanding um how you're thinking about that market you said there were three reasons each with about a a one-third weight in terms of the performance locals tough comparisons last year's record monthly results durango and then same source softness so that means each of those things contributed about $5 million in terms of a year-over-year EBITDA decline, correct? Yes. Okay. Right. And then Durango and the same source office, was that more pronounced towards the end of the quarter versus the beginning? Because your comments are a little bit different than what you guys indicated three months ago on the fourth quarter call. Is that a fair deduction?
spk00: So, yeah, the market – softened, or the softness in the market, I think, increased as you went through the quarter. So if you look at, once again, the Las Vegas gaming numbers that come out on a monthly basis, when we last updated at the end of January, first of March, we didn't have the full January numbers at that point. We were looking at the end of the year. When you look at January, February, and March came out this morning, you'll see on a trailing three-month basis for each of those months, the softness in the market accelerating. And once again, when I talk about this, it is making an adjustment for the new competitor. And you can make whatever calculation you want as to the revenue you think that new competitor is doing. But regardless of what level you pick, assuming any reasonable level of revenue, the market has declined. And once again, it's increased as you've gone through January, February, March.
spk13: I think the thing I would add to it, Joe. OK. I'm sorry. Go ahead and do your follow-up, then I'll add. Go ahead.
spk06: No, I was going to say, on that point, Keith, so just as we look at it, isolating for the impact of a competitor in Durango, you're saying that the impact worsened or was more pronounced in March versus February, January. Is that fair?
spk16: Yes.
spk06: Okay. And what are you seeing so far this quarter? Is it consistent? Is it worse?
spk00: What we're seeing within our numbers, I would say, it's really consistent with what we saw in February and March. We're not seeing an acceleration of the softness, and we're not seeing a reversal of the softness.
spk06: Got it. And then, Josh, you were going to say something, and then I think you cut me off. I want to add a couple things.
spk13: So first of all, I think in Keith's remarks, he reiterated kind of our expectation that the impact would be 20 to $25 million this year. So I think, you know, we're not really changing. We are not changing our view with respect to that expectation. I think the other thing to understand is while we are focused on the newest competitor in the marketplace, what we are seeing is maybe an impact from other smaller competitors that are more responsive to it than we are. And so you can focus on Durango as the newest operator in the marketplace. They have a great facility, new facility, everybody knows how well it's doing. But there are other competitors in the marketplace other than ourselves and our largest competitor here that are reacting differently to that new competition than we are. And what we're trying to say is, Those are the folks that are having an impact on our business, and Durango is maybe having a lesser of an impact. Just so you know, just so you can kind of understand the dynamics of the marketplace.
spk06: Got it. And then, Keith, one of your final prepared comments, you talked about seeing growth in your core players. Can you talk about that in some greater detail? is a way to interpret your comments that it's growing, but at a decelerating pace is still positive, or is it growth and is it slightly accelerating? And if you can share with us what exactly you mean by that, growth in core players or from the core players.
spk00: So when we talk about growth in core play, it is revenue from that core group. And the revenue has and continues to grow from that core group I don't have the statistics in front of me to tell you whether it's accelerating or decelerating. My sense is it's relatively stable in terms of the growth rate. Josh may have something to add. But the revenue from that group of customers on a year-over-year basis is continuing to grow.
spk13: And Josh, you have some... Well, I was just going to say, you have to... Remember, part of what we're talking about is a comparison to record results last year. So when you start thinking about what is happening with core customer growth, you have to do it in the context of putting that on a relative basis. So excluding January, core customer growth, the core customers grew in both February and March. And so that's what's skewing these results as well, is that comparison to prior record year results. And let me just add a little bit more color around that. If you look at Las Vegas locals, our performance last year, as we mentioned in our remarks, were record results. Every month was a record. But 75% of the year-over-year performance gain that happened last year all happened in January. So you have to kind of be sure you kind of keep all this in perspective as you think about what's happening and as we move through the quarter, because a lot of it has to do with just a comparison-related issue, and then a soft market where we've had a new competitor and incremental competition responding to that new competitor.
spk06: Thanks, guys. Yep.
spk04: Thanks. Our next question comes from Carlo Santorelli of Deutsche Bank. Carlo, please go ahead.
spk05: Afternoon, Keith. Afternoon, Josh. Guys, I think mine involves the fourth quarter a little bit as well. But if I look at Midwest and South, historically speaking, 1Q tended to be a larger period than 4Q. And I know With year end, sometimes there's accruals that true up in your favor and whatnot. And the fourth quarter margin was surprisingly stronger than expected, if I recall. This one a little bit weaker than expected. Was there anything one time in there that maybe caused cost to look a little bit maybe overstated for the period? And should we expect a similar kind of seasonal run rate on the expense side moving forward this year?
spk13: Yeah, thanks, Carlo. I think really what you have to remember when you look at the quarter for the Midwest and South, it's all about weather and it's all about January. I mean, January was essentially wiped out because of the weather influence. So, you know, if you really want to kind of see what was going on, I think the easiest way to do that, and you obviously can't do it, but we can, we can look at February and March of this year. I understand it's two-thirds of the quarter, but January was essentially affected significantly by weather. And you look at February and March of last year and say, what was going on? Margins in February and March of this year were 39%. Margins last year in February and March were 40%. So I don't look at that, quite honestly, as any really change in direction of expenses or anything else around the Midwest and South. Other than really taking into account what we talked about all last year around property insurance and labor-related costs that are going to kind of bleed through the first half and maybe a little bit into the third quarter of this year, especially when you're looking at the Midwest and South. So hopefully that helps kind of. I mean, all of the declines that happened in the Midwest and South with respect to revenues happened in January. February and March grew.
spk05: Understood on that front. And then, well, I guess along those lines, Josh, from an EBITDA margin perspective, are you saying margins were up in February and March as well?
spk13: I'm saying February and March. When you look at February and March, margins were on a combined basis, 39%. When you look at February and March versus last year, combined basis, again, just trying to get the weather out of the conversation. They were about 40%. If you look at them on an individual a month, they were a little bit less, but not materially less. And that's reflective of what, you know, the expenses that we've talked about last year that still have to kind of work their way through the system, if you will. Labor, property taxes.
spk05: Got it. And when you anniversary the bigger stuff, i.e., when on a static kind of revenue environment, should we be looking for kind of margins in that segment to flatten out?
spk13: Yeah, so the biggest impact has come from introduction of the minimum wage, and that was rolled out throughout. It began in, if I remember correctly, in the Midwest and South late 2022, and the last vestiges of the increases happened somewhere around mid-year of last year. Around mid-year of last year is also when most of the increases in Las Vegas also went into effect around the minimum wage. So, you know, you can, first half of this year, we'll mainly get most of the increases in labor through both Midwest and South and LVL.
spk00: Said another way, Carlos, second half of the year, we should be on an equal footing.
spk05: Yeah. Okay. Thank you very much, guys. Appreciate it.
spk04: Our next question comes from Barry Jonas of Truist Securities. Barry, please go ahead.
spk16: Barry, please go ahead. Hi, sorry. Can you hear me now? Yes. Yes, we can hear you.
spk08: So just following up on the last question, I just want to make sure I'm clear. In terms of the negative flow through that you saw this quarter in each of the land-based segments, is your expectation that there's another quarter of sort of constrained flow through, but you should sort of get back to more normalized in the second half of the year, obviously assuming sort of a normal top-line environment?
spk13: Yeah, so look, I think we were pretty, at least I thought we were pretty transparent when we talked about expenses in 2023. So I'll try to remember what we communicated then. But there were around, obviously we had labor pressures that, as Keith succinctly described recently, just now, we'll kind of anniversary those in the second half of this year. Secondly, were property taxes and property insurance. Those largely went up in the middle of the year. and to a lesser or smaller degree in September. So labor we're going to largely get through by the second half of the year. Property taxes and property insurance, we're assuming not the same level of increases. So, you know, that should be kind of a third quarter kind of event also. And then we should be on a level playing field. I hope, you know, hopefully that helps, Barry.
spk08: Yeah, sorry. Thank you for that clarification. And then just one other questions talking about locals and what you're seeing there. As you think about the new competition impacting your local segment, I'm just curious, is it more specific to any properties or fairly spaced out across all the locals' properties in your portfolio?
spk13: I'll take it real quick, Barry, and if Keith, you want to add anything, jump in. you know, it's primarily, it's concentrated in a couple of properties. You know, I think one of the benefits we obviously have is we have some property, we own more than one property in the Las Vegas locals market. We can see properties that are being impacted by competition, and we can see those that aren't being impacted by competition. That helps us identify what is going on in the market more broadly, and then what is the effect of competition. That's how we can kind of quantify the one-third, one-third, one-third numbers that we cited in our comments. So it is a subset of our properties that are being impacted by competition.
spk08: Just geographically closer to the new property or any, you know, I assume that's the common denominator?
spk00: No, look, I think we've, the new competitor, that launched is having a direct impact on our properties, but at a lesser extent than we had predicted. It is the ripple effect or the trickle-down effect that happens in the market when everybody starts then to lose customers and compete for those customers. I said in answer to an earlier question, what we're really seeing is some heightened competition in properties directly around Gold Coast and Orleans that have um started to increase and frankly goes back to the end of q4 when they enhanced their kind of level of spend and have kept it at those levels and so i wouldn't think of it as really the new competitor durango i would think of it as just there's a little bit of that and there are just others that are competing more aggressively or surrounding some of our other properties great thank you for all the clarification and color
spk04: Our next question comes from Dan Pulitzer of Wells Fargo. Dan, please go ahead. Hey, good afternoon.
spk02: Josh, you talked about February and March and juxtaposing that versus January. Have you seen that strength or the relative strength continue into April, maybe as comparisons get easier? And have the margins kind of still tracked along that 1% lower level that you called out in February and March?
spk13: Yes. Let me, I haven't really looked at April margins, to be honest. But look, I know that the trends with respect to the customers and the performance of the assets going into April is consistent with what we've made in terms of comments around February and March. So I feel good about kind of answering that question. And I would say that, just doing some math real quick, which I'm not very good at. Yeah, so April is about a percentage point behind April of last year. So it seems like it's generally kind of headed in the same direction as February and March at this point.
spk02: Got it. Thanks. And then just to make sure we're on the same page on the locals. So the 20 to 25 million, that just is basically a little, you know, that's Durango being a little less worse, but also it's more the knock-on effect is worse. But that doesn't include any of the market softness impact that you've seen thus far this year. Is that fair?
spk00: That is fair. As I described in my comments, it's a third, a third, a third. And so the 20 to 25 million is one of the third's The market softness is the other third. And, yeah, the comparison to last year, which was just a very, very strong first quarter, is the other third. So, yeah, they're all separate and distinct.
spk13: Yeah, based on how we could evaluate what happened in the quarter.
spk02: Got it. Thanks.
spk04: That's it for me. Our next question comes from Sean Kelly of Bank of America. Sean, please go ahead.
spk15: Hi, everyone, and thanks for taking my question. I think we've covered a lot of different angles on locals and and regional. So maybe I'll just tackle downtown briefly. You know, you called out pedestrian and foot traffic. You know, there, you know, obviously, Keith, some specifics around the Hawaiian segment too. But just kind of any theories on the pedestrian levels there, just given that, you know, you did have Super Bowl in market. In general, traffic levels across the strip have been pretty good and we kind of think they should be decently correlated. So, you know, it's not a market that we get quite as much information on. Just, yeah, any thoughts about from your operators about, you know, what's going on there?
spk00: No, I think we were surprised by the, you know, slowness, if you will, of traffic on Fremont Street, the overall declines in traffic downtown generally as we watch the numbers. You know, outside, obviously, The Hawaiian business for us is a large chunk of our overall revenue stream, gaming revenues for downtown, so that had an impact, but really no theories around the specific slowdown of retail customers downtown. It was just soft for a few months. Now, again, as we said, Hawaiians are picking back up. It feels like general traffic downtown is picking back up, but no... Can't put my finger on an explanation.
spk15: Got it. And then just same for locals. I think this is a repeat, so apologies for making you do it. But when we just disaggregate that locals market softness, that component of the third, is that a traffic problem? I.e., are these people going somewhere else and being attracted in by those promotions? Or is it, you know, just like a CEO problem? There's not quite spending as much.
spk00: Well, once again, we break it into kind of our core customers, which, as I've said a few times here in the locals market, continue to grow. And they continue to grow just to make sure, and Josh was trying to ensure people kept this in context, they continue to grow in the first quarter over a very strong first quarter of last year. So it's really a very good sign that our core customers are continuing to show up and spend more money. It is the retail side, the lower end customer, where we're seeing the shortfall. in the lack of spend. And is it the economy? Is it they're going to a competitor? Is it they're sharing their wallet? A lot of these are unrated players, so we actually don't know exactly how they're spending their dollars, whether they're not spending them, whether they're sharing them with another property. We just don't have the visibility because they're not rated.
spk15: Got it. Thanks. I know that was a repeat. I appreciate it, Keith.
spk00: It's all right.
spk04: Our next question comes from Chad Bannon of Macquarie. Chad, please go ahead.
spk11: Afternoon. Thanks for taking my question. Josh, if I got this right, based on the pass-through revenues for Interactive, it looks like Boyd Interactive, I believe year over year, may have grown double digits. Also, sequentially, it looked like it probably grew double digits as well. Can you just kind of give us an update in terms of how that product is being received by customers and any plans to kind of ramp up marketing or drive at least revenue higher in the next couple quarters? Thanks.
spk00: So, Chad, I presume you're talking about the Stardust online casino product when you referenced Boyd Interactive? Yes, please. Yeah, yeah. I just wanted to make sure that I was going to answer the right question. Okay. um so look we're we're very pleased with the kind of the steady roll out of that product and where it's at so we're less than a year into market with our own product because it launched may of last year we're live in pennsylvania and new jersey you know the pennsylvania revenue numbers frankly are about double where they were when we took it over new jersey not Hasn't grown quite as robustly as Pennsylvania, but they're both still ahead of where they were when we launched those businesses. There's also the start of social product that we're running out of Boyd Interactive. So overall, it is a small business, as we continue to say. It is a growing business. And remember, we have described this as we're taking a regional approach, not a national approach. So we want to launch in the states where we do business and a few surrounding states that are important to us. But the business does continue to grow and is ahead of our expectations for where we thought it would be.
spk11: Great. Thank you. And then you always get the question, sometimes even a few times on these calls about M&A, anything changed really in the last two months as you've seen, you know, more More properties or portfolios come across your desk now that, you know, some of the sugar high revenues have worn off and I think we have a better path towards interest rate declines. Any update there? Thanks.
spk13: Yeah. Really not. I would say that, you know, we continue to evaluate opportunities. I would say that we are going to continue to be disciplined in how we evaluate those opportunities. There are a lot of things that are for sale that don't meet the criteria that we kind of put forth for ourselves in making a decision. So, you know, we're going to continue to be disciplined in how we think about acquisitions, continue to be disciplined in terms of our capital allocation strategy, continue to stay committed in reinvesting in our business and our return of capital to shareholders, and then to the extent something were to come along that, you know, kind of strategic for us, generated the free cash flow that we wanted to and could create value for our shareholders, then that's when we'll kind of be aggressive around it. Otherwise, we'll continue to be a spectator to that sport.
spk11: Thank you very much. Appreciate it.
spk13: Yep.
spk04: Our next question comes from David Katz of Jefferies. David, please go ahead.
spk10: Afternoon, everyone. Thanks for taking my question. I wanted to go back to downtown just one more time, if that's okay. Some of the dynamics, Keith, that you described in the prepared remarks about flight costs, et cetera, can you just give us a sense of whether those are continuing into the second quarter or what your expectation is as to how long that particular market's going to be impacted?
spk00: And during the last 30 days, we've seen a decline in airfares coming out of Hawaii. And conversely or directly correlated to that, we've seen a pickup in our Hawaiian business. And so it looks like it is starting to, you know, the rates are starting to decline from their highs earlier in the year. Look, rates into Las Vegas across the board were extremely elevated in late January and February because of the Super Bowl. And so we just know by looking at our database, many of our Hawaiian customers stayed away because they simply weren't going to pay the higher airfares, and now they're starting to make their trips. And so there is a direct correlation there. Best as I can tell, I don't control airfares, but it looks like the airfares inbound from Hawaii seem to be normalizing or continuing to become less than they were earlier in the year. So, yeah, we expect that that will continue and that we'll continue to see a rebound in our Hawaiian business.
spk10: Got it. And if I can just sort of – I know we've sort of discussed this pretty thoroughly, but just come at it one slightly different way. You know, I think we were sort of hearing commentary about Las Vegas locals, you know, since, you know, the new property opened late last year, and it seemed to be a relatively benign – you know, impact, or at least that's what the commentary was. Did we sort of misinterpret what we were hearing? Did it turn out to be just a little worse? Did it, you know, accelerate at some point? How would you sort of look back and characterize?
spk13: I think, first of all, we were able to talk about what was going on through the first, at our fourth quarter call. So we were consistent with that. I think the second thing is it did accelerate as we moved through the quarter, not so much from the new competitor getting more aggressive from a promotional perspective, but from others in the marketplace, as Keith tried to describe, getting more promotional. Some advocating they have the most generous loyalty program in the Las Vegas locals market. So we're contending with those type of pressures on our properties without being aggressive in responding promotionally because we don't think that is a profitable way to run our business. So I think you had a soft market. You had a new competitor come in. Everything was kind of stable and getting so slowly absorbed, and then you had some competitors, again, not us and not our major competitor in the market, start to get significantly more aggressive, and that started to influence our performance.
spk10: Okay. Helpful. Appreciate it. Thank you.
spk04: Our next question comes from Brent Montour of Barclays. Brent, please go ahead.
spk09: Hey, everybody. Good evening. Thanks for taking my question. So, Josh, you mentioned or you reiterated the $100 million in growth projects. Think about that as recurring. And, you know, the project you're working on right now ends in June. And I know this isn't going to be the big unveil right on the next one you're thinking about, but maybe just... Maybe just scope or type or anything maybe you want to tease out there in terms of what we could hear about in a couple months here.
spk00: Yeah, Brent, this is Keith. I think you're right. There is no big unveil today. We'll leave that probably for our next call. We have several projects. We have a pipeline of projects that we're getting ready to embark on but not prepared to describe any of them yet. Many of them are still in the planning and design phases. still finalizing budgets and timeframes for them. But there's a pipeline of them. We'll be prepared to talk about them in the very near future. But nothing today, no teasing out, no potential this or potential that.
spk09: OK. I'll give it a shot. And then over at Sky River, obviously, great results there so far. And thanks for the updated guidance. The expansion of that, could you maybe give us a sense of timing and scope, what we can sort of think about for that?
spk00: Yeah, look, in terms of scope, once again, expanding the casino, hotel, meeting convention space, probably a few additional restaurants is the general scope. It's not to the point where the tribe has announced we're not going to announce on their behalf kind of the exact number of slots we'll be adding or tables or anything else at this point. Timing, we're waiting for final regulatory approval. There's a number of regulatory approvals, including from the NIGC. And so we're awaiting those. Once we get all of those approvals, which we certainly hope is in the very near term, I think the tribe is ready for groundbreaking, but we have to wait for all the final approvals before we can go any further.
spk09: Great. Thanks for the additional comment.
spk04: Our next question comes from Ben Chaiken of Mizuho. Ben, please go ahead.
spk03: Hey, how's it going? Just one very quick clarification in downtown. The comment about the last 30 days kind of improving, was that a reference to the airfare and Hawaiian visitation? Or was that also did that also encompass the kind of like broader Fremont visitation demand as well?
spk00: It was more specific to the Hawaiian business, which we have obviously very, very good visibility into. We don't have great visibility on a weekly basis to overall counts downtown. But so it really was specific to the Hawaiian traffic.
spk03: Understood. And then for Treasure Chest, any color on how you're thinking about that opening from both a demand standpoint and timing? Is this the same customer you expect to return or someone else? And then should we expect any disruption as that development transitions in the next couple months?
spk00: So I think the way to think about it is, you know, this is a significantly enhanced facility moving from a three-story riverboat to on water to the dry side of the levee and land-based and much more convenient parking and much, you know, many more food and beverage amenities and just an overall better environment. So we expect a good uplift on the overall, you know, EBITDA from that property, both revenue and EBITDA. We expect to get a good return on our investment there. It is, yes, the existing customer, and yes, it is a new customer. We're confident that we can grow the market there and obviously build that business. That's why we did it. We spent a lot of time studying this. Overall, the casino floor will not be larger than it is today, but it will be more efficient because it's not spread over three floors. It's all on one floor. So it's not like we're going to have three times as many slots. As a matter of fact, we'll have a similar number of slots. They'll just be more efficient because it's all on one floor. Same with table games. But it will be you know, much more attractive assets, much more inviting asset. And we're confident that it will draw in significantly more customers. And in terms of disruption, you know, they'll be minor. We'll have to likely and this will be based on requirements of the Louisiana regulatory authorities and state police will likely have to shut for a few days while we transition some items. But outside of It may be being shut for a couple of days midweek. I would not anticipate any disruption.
spk03: Thanks. I appreciate it.
spk04: Our next question comes from Jordan Bender of Citizen JMP. Jordan, please go ahead.
spk07: Great. Good afternoon. I want to touch on the cadence of your online EBITDA. So backing out the one-time item in the prior year, I think EBITDA was up about $3 million or so in the quarter. You know, and your guidance kind of implies for the remainder of the year of a flottish outlook. I guess it might be a call on the growth of FanDuel, but can you maybe unpack how you're thinking about, you know, the outlook for that segment for the rest of the year?
spk13: Yeah, I think that, you know, we've been pretty, well, since Q4, we've been pretty consistent that, you know, we kind of expect this range of 60 to 65. You know, we know some of the one-time items that were in there in our numbers last year from some of the skins we sold and things of that nature. And so there's actually growth in the business if we can continue to hit in the $60 million to $65 million range. I guess there's a potential we do better. Obviously, this is very seasonal. We're out of the best quarter of the year. And we'll get another look toward the end of the year when football season starts back up. So everything between now and then is going to be more modest, we expect. So we'll just have to, I think we'll know more as we get to the fourth quarter if it's going to be better or not. But from where we sit today and factoring in some of the one-time items that occurred last year and building a little bit of growth, that's kind of where it plays out. So that's the best we can do right now, at least our view.
spk07: Understood. Thanks. And then within the Midwest and South segment, I guess more in the South, was there any change to that lower tier customer, either positive or negative from what we saw in the back half of last year?
spk13: Not really. I would say that in the late part of 2022 is when we saw the South get softer than the rest of the region. I would say as we've moved through, the region has started to more perform all similarly in line, and that's what's happening in Q4 of last year and in Q1 this year. All of the customer trends are kind of headed in the same direction, whether you're talking about regardless of the region of the Midwest and South or the customer core or retail.
spk07: Great. Thank you.
spk13: Sure. Thank you.
spk04: Our next question comes from Joe Stauff of SIG. Joe, please go ahead. Thanks.
spk14: Hi, Keith. Hi, Josh. Just one more back on Las Vegas locals. Just curious to see if, you know, whether it be the new competition or even the growth in the market, you know, especially over the past couple years and the outlook, Has that at all changed the way that you think about the required level of capital reinvestment? And I know you're not going to reinvestment specifically say you're not going to compete on promotional level, but more on any larger capital projects you think you need in your portfolio, whether it be in response to the competition and or for the longer term.
spk00: Yeah, we think of the capital program that we have going on in terms of upgrading many of our food and beverage amenities and upgrading our hotel rooms as a form of maintenance. Look, it's a very highly competitive business, whether it's here in Las Vegas or across the country. We operate in local markets, frankly, everywhere we operate outside of Las Vegas. So we need to continually refresh those. Customers want to see new and different food and beverage offerings on a frequent basis. And so these really are not defensive. They're just kind of required to, we think, to maintain our level of business, to maintain our focus on our core customers, ensure our core customers continue to come back and visit us. And so it's not in response to anything in particular. You know, there's some of the work that we have going on at the Suncoast. That property was opened in 2000 and therefore, you know, it's now 24 years old and You know, every 24 years you have to refresh things. And so, you know, that's what we're in the process of doing.
spk14: Thanks very much.
spk04: Our final question comes from John Decree of CBRE. John, please go ahead.
spk17: Thanks, Josh. Thanks, Keith. Make it quick. You may have touched on it already, but not sure if I missed it. A lot of talk about promotional environment and locals, but if you had any commentary on the Midwest and South segment, maybe broadly competitive promotional environment, and then if there's any specific areas where you see any different or change in behavior on the competitive or promotional front would be helpful.
spk00: Yeah, John, as I just reflect on your question quickly, no real significant changes um in any of our midwest and south operating markets from a promotional environment nobody is you know all of a sudden doing anything crazy in the last quarter or stepping out and being ultra aggressive um just stepping back for a moment and thinking but but no nothing nothing to report um it's all fairly stable once again as we've talked over the quarters Some of our competitors got aggressive several years ago, and they've stayed aggressive. Others have remained more disciplined like us, and they've remained more disciplined. There's really no material changes in any of our markets outside of Nevada from a promotional spend or aggressiveness of the promotional environment standpoint.
spk17: Great. That's it for me. Thanks, Keith.
spk13: Thanks, John.
spk04: This concludes our question and answer session. I'd now like to turn the call over to Josh for concluding remarks.
spk13: Thanks, David. Thanks, everyone, for joining the call today. If you have any follow-up questions, feel free to reach out to the company, and we'll make ourselves available. Thank you again, and have a good rest of your day.
spk04: Thanks, Josh. This concludes today's call. You may now disconnect.
spk13: Reach out to the company, and we'll make ourselves available.
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