Boyd Gaming Corporation

Good afternoon, and welcome to the Boyd Gaming first quarter 2025 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, April 24, 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 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 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 8-K, 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. Today's call is being webcast live at boydgaming.com and will be available for replay in the investor relations section of our website shortly after 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. During the first quarter, our company continued to deliver consistent results, growing revenues in EBITDA on both the company-wide and property-level basis. Revenues for the quarter were nearly $1 billion, while EBITDA was $338 million, and we maintained property-level margins of 40%, consistent with the prior year. During the quarter, our team successfully managed a number of issues, including significantly more weather-impacted days in our Midwest and South segment, the comparison issues created by leap year, and the benefits of last year's Super Bowl in Las Vegas. Including the impact from these factors, play from our core customers continued to grow on a company-wide basis during the first quarter, while retail play was even with the prior year. With respect to recent trends in the business, we have not seen any meaningful shift in consumer behavior or spending patterns thus far in the second quarter. Through the first three weeks of April, customer trends have remained consistent with March. And while we are encouraged by the consistency of the trends in our business, we recognize that the last several weeks have brought an increased level of economic uncertainty. However, our management teams have successfully managed through periods of uncertainty before. And with the strongest balance sheet in our history, and a larger and more diversified business, we remain confident in our ability to manage through the current environment. Now, let's review our performance by segment, starting with our Las Vegas locals business. During the quarter, revenues in the local segment were nearly even with the prior year, while EBITDA was down less than 4%, primarily attributable to the Orleans. At the Orleans, while we continue to be impacted by competitive pressures, year-over-year declines in both revenue and EBITDA narrowed during the quarter. In the remainder of our local segment, even with the difficult comparisons created by leap year and last year's Super Bowl, revenues for the quarter grew modestly, EBITDA was even with the prior year, and operating margins once again exceeded 50%. Across the entire local segment, play from our core customers grew during the quarter, while retail play was consistent with fourth quarter trends. And through the first three weeks of April, these trends have continued throughout our local business. Next, downtown Las Vegas achieved both revenue and EBITDA growth during the first quarter. We continue to see encouraging customer trends downtown, with growth in play from both our core customers and retail customers, solid visitation from Hawaii, and healthy pedestrian traffic along Fremont Street. Additionally, Recall that Hawaiian visitation to our downtown segment was temporarily impacted in last year's first quarter by higher airfares from Hawaii related to the Super Bowl. This created a favorable comparison during the first quarter of this year that will not continue in future quarters. Looking ahead, we remain confident in the future of our Southern Nevada operations. The long-term fundamentals of the Southern Nevada economy remain strong, with consistent growth in local population, employment, and tourism. Next, in the Midwest and South segment, both revenues and EBITDA grew during the quarter. Margins were even with the prior year. We achieved this performance despite a 28% increase in weather-impacted days compared to last year, as well as the impact of leap year. During the quarter, play from our core customers continued to grow while retail play was even with the prior year. Importantly, As we move past the impacts of weather, trends in late March and April were consistent with the last several quarters, similar to what we saw in our two Nevada segments. Looking ahead to the second quarter, keep in mind that we will anniversary the opening of our new Treasure Chest facility on June 6th. Additionally, our Belterra Park and Belterra Resort properties were forced to close for several days earlier this month due to flooding on the Ohio River. Next, our online segment grew EBITDA by nearly 14% year-over-year, driven by stable performance from our market access agreements and strong growth from Boyd Interactive, our online gaming business. On top of the continued growth we are delivering in our online segment, our 5% equity stake in FanDuel represents significant and growing value for our shareholders as FanDuel further strengthens its position as the nation's leading online gaming company. Finally, our Manage Another business had yet another strong quarter, driven by continued growth in management fees from Sky River Casino. And the foundation for future growth at Sky River is being laid with the ongoing expansion activity at this property. The first phase of this expansion, set for completion early next year, will add 400 slots and a 1,600-space parking garage, providing much-needed additional gaming capacity. Second phase will further diversify SkyRiver's offerings with a 300-room hotel, two new food and beverage outlets, a day spa, and an entertainment and event center. Once fully complete in mid-2027, this expansion will position SkyRiver to continue growing well into the future, strengthening its position as one of Northern California's leading gaming entertainment destinations. So in all, our revenue and EBITDA growth in the first quarter reflected the strength of our diversified business, the resiliency of our customer base, and the appeal of our properties. And we are further enhancing the competitiveness of our amenities as we refresh and update our hotels at the IP, Valley Forge, and Orleans. We're also continuing our property-wide renovation of the Suncoast. We began these improvements last year with the addition of several new amenities and have now begun a complete renovation of the casino and public areas. While disruption from this project has been minimal so far, we will be moving into the most impactful phase of the casino floor renovations this summer, which fortunately is the property's slowest time of the year. We expect to complete these renovations during the first quarter of next year. Beyond these property enhancements, we have several projects underway to strengthen the long-term growth profile of our business. These projects are located in markets with long-term growth potential. each providing the opportunity for a strong return on investment for our company and are part of our $100 million in annual recurring growth capital. In Missouri, work is progressing on our meeting and convention center expansion at Maristar St. Charles. The vast majority of pre-bookings for this new space are from entirely new customers, significantly expanding the property's reach and appeal when we open our expansion this fall. And earlier this month, we broke ground on Cadence Crossing Casino, adjacent to the master plan community of Cadence in the southeast part of the Las Vegas Valley. When it opens in mid-2026, this new property will replace our existing Joker's Wild Casino with a modern gaming entertainment facility designed to appeal to the thousands of new residents throughout the Cadence community. And this property has been designed for continued growth with future plans for a hotel, additional casino space, and more non-gaming amenities. As we near the completion of these investments, we are developing plans for the next phase of projects to strengthen our growth profile. One example is our plan to replace our 30-year-old Paradise Riverboat Casino in Illinois with a modern and new entertainment facility. We are in the design phase of this project and expect to seek regulatory approval and begin construction in the next 12 months. Construction is now underway on our $750 million resort project in Norfolk. This project will further diversify our portfolio by expanding our presence into one of the largest underserved gaming markets in the mid-Atlantic region. Scheduled for completion in late 2027, this best-in-market resort 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. And as part of this project, we plan to open a modest transitional casino in November of this year. Our development site is located near downtown Norfolk with convenient interstate access. Importantly, it will be the most convenient gaming destination for a significant number of the 1.8 million residents of the Hampton Roads metropolitan area. It will also be the closest gaming resort to Virginia Beach, a tourism destination that attracts nearly 15 million visitors each year and is the state's largest city. Given all of these dynamics, we are excited about the long-term potential of our Norfolk project. While our capital investment program is an important part of our strategy to create long-term shareholder value, we also remain committed to returning capital to our shareholders. During the first quarter, we repurchased $328 million in stock and paid $15 million in dividends. While we remain committed to $100 million per quarter in share repurchases, with the current economic uncertainty, we will be much more conservative and buybacks above that level as we balance our capital expenditure program and maintaining a strong balance sheet with returning capital to our shareholders. So in all, this was a good start to the year for our company. as we continue to deliver year-over-year growth despite challenges from weather and the calendar during the quarter. And we are encouraged that customer trends have held steady so far in April. We remain confident in the long-term prospects of our company and our strategy to create value for our shareholders. Before turning the call over to Josh, I wanted to take a moment to personally thank our team members for their continued contributions to our company's success. Their hard work and dedication to providing memorable service that keeps our guests coming back, and we are grateful for all that they do for our company. Thank you for your time today. I would now like to turn the call over to Josh.

Thanks, Keith, and good afternoon, everyone. Our first quarter reflected a continuation of the positive operating and customer trends over the last several quarters, despite the weather impacts on our Midwest and South segment in the leap year comparisons. And while acknowledging that the recent past is not a guarantee of future performance, particularly in light of the current environment, customer trends from the first quarter are continuing into the first several weeks of April. Now some additional points on the quarter. Tax pass-through amount for our online segment was $130 million during the quarter, compared to $116 million in the year-ago period. Excluding the tax pass-through amount, company-wide margins for the first quarter this year would have been 520 basis points above the margin we reported. Beginning with this quarter, we are recording non-controlling interest activity related to our Virginia development. This amount reflects expenses incurred by the tribe related to the Virginia development. In terms of capital expenditures, We invested $127 million in capital during the first quarter. Continue to project total capital expenditures for the full year of $600 million to $650 million. As a reminder, these capital plans include approximately $250 million in maintenance capital, $100 million related to our hotel room projects at IP, Valley Forge, and the Orleans, $100 million in growth capital for the meeting and convention space at Ameristar St. Charles and the new Cadence Crossing development here in Las Vegas. And then finally, $150 million to $200 million for our casino development in Kenya. Given our current capital plans and today's environment, we have taken steps to mitigate the potential tariff impacts on these projects, and we have also identified capital projects that can be deferred if needed. On the operating side of the business, we have also taken steps to mitigate the potential impact of tariffs on our operating expenses. Moving next to our capital return program, we paid a regular quarterly dividend of 17 cents per share during the first quarter. And as previously announced, we increased our quarterly dividend to 18 cents per share beginning with our April distribution. Also during the quarter, we repurchased $328 million in stock acquiring 4.5 million shares. As of the end of the quarter, we had $312 million remaining under our current repurchase authorizations and the actual number of shares outstanding at quarter 81.9 million shares. Since we began our program to return capital to shareholders in October of 2021, we've earned over $2.2 billion in the form of share repurchases and dividends. and reduced our share count by more than 27%. As Keith noted, we remain committed to repurchasing $100 million in shares per quarter. We will balance this commitment with our capital expenditure plans and ensuring we retain a strong balance sheet. Given the current environment, you should expect us to be more conservative in repurchasing amounts in excess of our $100 million per quarter commitment. We ended the quarter with total leverage of approximately 2.8 times and lease-adjusted leverage of about 3.2 times. We have no near-term maturities, robust free cash flow, and ample borrowing capacity. In conclusion, our company remains in excellent financial condition to continue executing our strategy. With that, I'd now like to call David to open it for questions.