Boyd Gaming Corporation

Good afternoon, and welcome to the Boyd Gaming fourth quarter and full year 2024 earnings 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 we are hosting on Thursday, February 6th, 2025. 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 assistance, Please press star then zero for the operator. Speakers for today's call are Keith Smith, President and Chief Executive Officer, and Josh Hirshberg, 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, and 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 8K, furnished to the SEC today, and both of which are available at investors.boygaming.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 on our Investor Relations 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, David. Good afternoon, everyone. 2024 marked another successful year for our company. as our diversified business model, continued operating efficiencies, and recent property investments all contributed to a strong full-year performance. We generated over $3.9 billion in revenues in 2024, setting a full-year record, and we achieved company-wide EBITDA of nearly $1.4 billion while maintaining property-level operating margins of over 40%. These results demonstrate our company's continued ability to deliver a high level of performance. Looking at the fourth quarter specifically, our performance was consistent with the solid results we have achieved over the last several quarters. Quarterly revenues surpassed the $1 billion mark for the first time, while EBITDA increased to nearly $380 million. Our fourth quarter performance, much like our full year results, was driven by our diversified portfolio, efficient operations, and contributions from our recent property investments, most notably a treasure chest. Importantly, throughout our property operating segments, we continue to see strength in play from our core customers and stable trends in play from our retail customers. Now let's review segment results in more detail. Starting with our Las Vegas Locals segment, during the fourth quarter, we delivered our best year-over-year performance of 2024, despite ongoing competitive pressures in the market. Excluding Orleans and Gold Coast, our Las Vegas Locals properties continue to perform better than the same store market, and our operating margins continue to exceed 50%. Play from our core customers continue to grow across the segment during the quarter, while play from our retail customers improved. And our ongoing project to enhance the Suncoast is beginning to show its potential, as this property posted a solid performance despite the addition of a new competitor in the market in late 2023. Next, we delivered another strong performance in our downtown Las Vegas segment during the fourth quarter. Our recent enhancements at our downtown properties are providing us a solid foundation for long-term growth. Similar to our Las Vegas local segment, overall customer trends were consistent with recent quarters, with growth in play from our core customers and consistency in play among our retail players. Visitation from our Hawaiian customers remains healthy, while pedestrian traffic throughout the downtown area has been steady. Looking at the Southern Nevada market more broadly, fundamentals of the local economy remain strong, with recent gains in employment, personal income, population, and tourism-related activity. Local employment has grown for 45 consecutive months now, with increases across most major employment sectors. Average weekly wages increased nearly 6% during the fourth quarter, outpacing the national growth rate. Southern Nevada's population has surpassed 2.3 million residents and continues to show growth, with home building permits increasing 13% over the prior year. Total visitation to Las Vegas remains healthy, growing more than 2% over the prior year to nearly 42 million visitors in 2024. And airport traffic continues to achieve record levels, exceeding 58 million passengers last year. By the end of the first quarter this year, airline capacity is expected to increase by another 3%, which includes continued growth from international markets. Finally, residential and commercial construction activity remains robust throughout Southern Nevada, with more than $8.5 billion in notable projects currently under construction. In all, we remain confident in the long-term strength of the Southern Nevada economy as we enter 2025. Outside of Nevada, Our Midwest and South segment achieved another quarter of growth, led by continued strong results at Treasure Chest Casino. Our new facility at Treasure Chest has consistently performed ahead of expectations since opening in June and remains on track to exceed our targeted EBITDA return. While Treasure Chest was the strongest performer in this segment on a year-over-year basis, we were also pleased with the performance of our same-store operations. After adjusting for certain one-time benefits in the fourth quarter of 2023, same-store revenue and EBITDA grew slightly while margins remained consistent at 37%. And on both a total same-store basis, Playformer core customers continued to grow while retail customer play remained stable, consistent with recent quarters. Next, our online segment once again contributed to company-wide growth. With a strong fourth quarter performance, our online segment generated $76 million in EBITDA full year after excluding $32 million in one-time fees. This performance reflects continued growth from our market access agreements, primarily with FanDuel, as well as contributions from our nascent online gaming business. Beyond the financial contributions from our online segment, we also have significant value in our 5% equity interest in FanDuel. Across the country, FanDuel is strengthening its position as America's leading online gaming company further enhancing the considerable value of our equity stake. Finally, our managed business closed out 2024 with another solid quarter of growth. For the full year, this business generated $96 million in EBITDA, driven mainly by management fees from Sky River Casino. As Sky River continues to perform at a very high level, work has begun on a significant expansion of this property. Work is now underway on the first phase of that expansion, which will add 400 slots, and a 1,600-space parking garage to the property. Upon completion of phase one, first quarter of 2026, construction will begin on the second phase of the expansion, which will include a 300-room hotel, two additional food and beverage outlets, a day spa, and an entertainment and event center. Once fully complete in mid-2027, this expansion will position Sky River for continued long-term growth, further strengthening its reputation, as one of Northern California's leading gaming entertainment destinations. So in all, both our fourth quarter and full year results demonstrated our company's continued ability to deliver a high level of performance. And we are building on our track record of success as we continue our program of investing in our nationwide portfolio. An example of these investments is the ongoing renovation of our hotel room product. We have recently begun hotel renovations at the Orleans, IP, and Valley Forge, which account for nearly one-third of our hotel rooms across the country. When combined with other recently completed hotel renovations, we will have refreshed and updated nearly 60% of our hotel room inventory by next year. We're also enhancing the customer experience throughout our properties. An example of this is the Suncoast, where we opened a new sportsbook, high-limit room, and premium steakhouse in 2024. All of these new amenities have been well received by our customers, helping drive solid results of Suncoast over the last several quarters. Next to come at the Suncoast is a complete renovation of the casino floor, a new food hall, and an expansion of the property's meeting space. We unveiled the first section of the Suncoast casino renovation earlier today and are on track to complete all property enhancements by early 2026. In addition to enhancing our properties, we continue to pursue strategic growth investments in our portfolios. At Ameristar St. Charles, we are making progress on the expansion of that property's meeting and convention center. Ameristar's existing meeting and convention business is a core part of its business model. With a four-diamond-rated hotel, extensive amenities, and close proximity to the St. Louis airport, Ameristar sees more demand than it can currently accommodate. With demand already exceeding our current space, the Ameristar team is having great success booking future business for its expanded convention center, positioning the property to deliver strong results once our expansion is completed this fall. Next, in Southern Nevada, we remain on schedule to open Cadence Crossing Casino in mid-2026. This development will replace our existing Joker's Well Casino with a modern casino entertainment experience. The nearby master plan community of Cadence is one of the fastest growing neighborhoods in the Las Vegas Valley, and this development will position us to capitalize on the growth. Cadence Crossing will begin as a smaller property, with 450 slots and several restaurants. But as the Cadence community continues to grow towards its full build-out of 12,000 homes, Cadence Crossing will grow with it, with plans for a hotel, more casino space, and additional amenities. And as work continues on these projects, we are developing plans for the next investments in our property growth pipeline. One of these projects will be in central Illinois, where we anticipate replacing our 30-year-old Riverboat Casino at Paradise with a compelling new entertainment destination. While it is still early in the design process, we could begin construction as early as the first half of 2026 pending regulatory approvals. We are confident that this project will deliver a solid return on our investment by driving incremental growth in visitation and business volumes at Paradise following its completion. In addition to ongoing investments in our existing properties, we're also investing to expand our portfolio with our resort development in Norfolk, Virginia, where construction is set to begin shortly. This $750 million project will further diversify our portfolio by expanding our presence in one of the largest underserved gaming markets in the Mid-Atlantic region. We are confident in our ability to create a market-leading resort experience in Norfolk that will attract customers from throughout the region, serving as a key growth driver for both the City of Norfolk and our company. The resort which is scheduled for completion in late 2027, will include a casino with 1,500 slots and 50 table games, a 200-room hotel, eight food and beverage outlets, live entertainment, and a 45,000-square-foot outdoor amenity deck. Part of this project, we plan to open a modest transitional casino this November. In all, these investments form the foundation of our future growth. And while we are investing in these strategic growth opportunities, We're also continuing to return capital to our shareholders. In the fourth quarter, we repurchased $203 million in stock, bringing our total repurchase activity for 2024 to $686 million. While we have repurchased more than our targeted level of shares over the last several quarters, this has been purely opportunistic. Looking ahead to 2025, we remain committed to $100 million per quarter in repurchase activity, supplemented by our ongoing dividend program. In addition to investing in growth opportunities and returning capital to our shareholders, our balanced approach to capital allocation includes maintaining a strong balance sheet. We ended 2024 with total leverage of approximately 2.5 times, giving us a strong foundation to continue our successful approach to capital allocation. So, as we look back on 2024, we're pleased with the performance of our company, strong foundation we have built for the future. We continue to generate substantial free cash flow through our diversified business model and our consistent operating performance. Our ongoing property investments are delivering solid returns and positioning us for long-term growth. And we are successfully balancing these investments with our capital return program, returning nearly $750 million in capital to our shareholders in 2024, while maintaining the strongest balance sheet in our company's history. Finally, before I turn it over to Josh, I wanted to take a moment to recognize a historic milestone for our company. January 1st of this year, we celebrated Boyd Gaming's 50th year in business. We've come a long way since Sam and Bill opened the California Hotel and Casino in 1975. Since then, our company has grown from that single property in downtown Las Vegas into one of the largest and most respected gaming companies in the United States. And while our company is much different today than it was in 1975, the vision and integrity of Sam and Bill Boyd continue to guide us to this day. Their commitment to growth and their commitment to making a positive difference for our team members and our communities are principles that we proudly carry forward as a company. Our success throughout these past five decades would not have been possible without the hard work of our team members, their dedication to delivering memorable service for our guests, is what makes the Boyd experience unique. Thank you for your time today. I would now like to turn the call over to Josh.

Thank you, Keith. The fourth quarter represented the conclusion to a very good year for our company. We finished 2024 generating nearly $1.4 billion in EBITDA with annual property level margins exceeding 40%. As a result of our performance, our diversified portfolio generates significant free cash flow. that we are deploying to reinvest in our business and return significant capital to our shareholders. I'll now provide additional commentary on our fourth quarter and full year 2024 results and provide comments on our 2025 outlook. Beginning with our online segment. In this segment, we generated $108 million in EBITDA for the full year of 2024, including $32 million in non-recurring market access fees. For 2025, we expect to generate approximately $80 to $85 million from our online segment, which compares to the $76 million of run rate EBITDA in 2024. This segment includes contributions from our revenue share agreements and Boyd Interactive. For reference, the tax pass-through amounts reported as revenues and expenses in our online segment were $128 million for the fourth quarter. and $450 million for the full year of 2024. This compares to $97 million in the fourth quarter of 2023 and $328 million for the full year of 2023. In our managed business, we generated $96 million for the full year of 2024, primarily driven by the management fees we earned from Wilton Rancheria's Sky River Casino. We expect to generate a similar amount of EBITDA in 2025 from our managed and other businesses. In terms of capital expenditures, we invested $111 million in capital during the fourth quarter, bringing total 2024 capital spend to $400 million. For 2025, our capital investment plans include maintenance capital, incremental maintenance capital related to our hotel room refurbishment initiative, recurring property growth investments, and starting our development project in Virginia. In terms of each of these capital spend categories, we estimate our recurring maintenance capital to be approximately $250 million per year. We will spend an additional amount on maintenance capital related to hotel room refurbishments this year of approximately $100 million at IP, Valley Forge, and the Orleans. Our initiative to upgrade our hotel rooms is scheduled to be complete in mid-2026. In terms of our recurring property growth investments, we expect to invest approximately $100 million each year. In 2025, this amount includes investments in the convention expansion at Ameristar St. Charles, which is scheduled to open in the fall of 2025, and the Cadence Crossing development here in Las Vegas. expected to be complete in mid-2026. As these projects come to conclusion, we expect to begin the next round of projects, including potentially replacing our 30-year-old riverboat at Paradise. And finally, we are beginning work on our casino resort development in Virginia, with estimated capital spending of $150 to $200 million in 2025. The total investment in this project related to the development of the temporary and permanent facilities is estimated to be $750 million. The temporary facility is on track to open in November of this year, while the permanent resort is scheduled to open in late 2027. To summarize our capital plans for 2025, we estimate maintenance-related and property growth capital of $450 million and an additional $150 to $200 million for Virginia, resulting in total CapEx for 2025 of approximately $600 to $650 million. In addition to these investments, we remain committed to returning capital to our shareholders. We paid a quarterly dividend of 17 cents per share during the fourth quarter. Also during the quarter, we repurchased $203 million in stock at an average price of $71.79 per share, acquiring 2.8 million shares. When combined with our share repurchases with our dividend program, we returned nearly $750 million to our shareholders during 2024, or more than $8 per share. As of year end 2024, we had $640 million remaining under our current repurchase authorizations, and the actual number of shares outstanding at year end was 86.2 million shares. Since October 2021, we have returned nearly $1.9 billion in capital to our shareholders in the form of share repurchases and dividends, reducing our share count by more than 23% over that time period. We ended the quarter with total leverage of about 2.5 times and lease adjusted leverage of about 2.9 times. We have no near-term maturities, strong free cash flow supported by a diversified portfolio of assets, and ample borrowing capacity under our credit agreement, continuing to place our company in the strongest financial position in our history. Transitioning to our 2025 outlook, in our Las Vegas local segment, we expect stability will return to the Orleans and Gold Coast during the second half of the year, as we fully anniversary competition. Expect other properties in our local segment to perform slightly better than the overall locals market, consistent with the 2024 performance of these properties. In downtown Las Vegas, we expect growth during the year in line with the downtown market. In our Midwest and South segment, we expect to benefit from an incremental five months of the treasure chest expansion, which opened in June of 2024. For the remaining properties in this segment, we expect results similar to 2024. For the first quarter, It is worth noting this segment has been impacted by poor weather conditions throughout January, similar to the first quarter of 2024. Beyond our expected performance for these three segments, with the continued success of investments like the Fremont and Treasure Chest, our pipeline of investments continues to strengthen our EBITDA and position us for future growth. David, that concludes our remarks. We're now ready to take any questions.