Boyd Gaming Corporation (NYSE:BYD) Q2 2025 Earnings Call Transcript

Boyd Gaming Corporation (NYSE:BYD) Q2 2025 Earnings Call Transcript July 24, 2025

Boyd Gaming Corporation beats earnings expectations. Reported EPS is $1.87, expectations were $1.67.

Operator: Good afternoon, and welcome to the Boyd Gaming Second Quarter 2025 Earnings Conference Call. My name is David Strow Vice President of Corporate Communications for Boyd Gaming. I will be the moderator for today’s call, which we are hosting on Thursday, July 24, 2025. [Operator Instructions] Our speakers for today’s call are Keith Smith, President and Chief Executive Officer; and Josh Hirsberg, 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.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 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?

Keith E. Smith: Thanks, David, and good afternoon, everyone. Before discussing our second quarter results, let me first touch on our recent FanDuel announcement. As we announced 2 weeks ago, we reached an agreement to sell our 5% equity interest in FanDuel to Flutter Entertainment for $1.755 billion in cash, unlocking the significant value that we have created through our partnership with FanDuel. As part of this transaction, we extended our market access agreements with FanDuel through 2038 and adjusted our market access rates. We expect this transaction to close and to receive the proceeds in the next several weeks. The net proceeds will be used to pay down debt, reducing our leverage below 2x. As a result of this transaction, our company is in an even stronger financial position to continue executing our strategy of investing in our properties, pursuing attractive growth opportunities, returning capital to shareholders and maintaining a strong balance sheet, consistent with our focus over the last several years.

Now moving on to second quarter results. We delivered a strong performance in the second quarter. For the quarter, revenues, excluding tax pass-through amounts, grew 4%, while EBITDAR also increased 4% to $358 million. These results were driven by broad-based growth across our operating segments, including both online and managed demonstrating the value of our diversified business model. On a property level basis, year-over-year revenue and EBITDAR growth was the strongest in more than 3 years, while property level margins once again exceeded 40%, a level we have consistently delivered since 2021. Across the portfolio, our results were supported by continued strength in play from our core customers as well as improving trends among retail customers.

Turning to segment results. The Las Vegas Locals segment had a strong quarter, delivering its first year-over-year revenue and EBITDAR growth in more than 2 years while maintaining segment margins of nearly 50%. This performance was led by growth in play from our core customers as well as continued improvements in retail play. Growth in play among our local guests more than offset softness in play from our out-of-town customers. While the Las Vegas Strip has recently seen softer demand trends, there are signs of continued strength in the local economy. In Southern Nevada, employment continues to grow, while local income is increasing with average weekly wages up more than 5% over the prior year, well above the national average. Southern Nevada’s cost of living remains below the national average, ranking among the most affordable of the nation’s 30 largest metropolitan areas.

Las Vegas Valley has nearly $11 billion in construction activity currently underway, reflecting continued strength in this critical economic sector. And the recent tax bill passed by Congress includes several provisions that will benefit both our Southern Nevada operations and our Midwest and South operations. These provisions include tax deduction for tips and overtime, a new deduction for seniors and a larger standard deduction for taxpayers. Given these positive factors, we remain confident in the prospects for the Southern Nevada economy and the future of our locals business. Next, our Downtown Las Vegas segment delivered a solid quarterly performance against a challenging prior year comparison. As you may recall, last year’s second quarter benefited from significant pent-up demand from our Hawaiian customers who did not visit in the first quarter of last year due to higher airfares related to Super Bowl.

Importantly, the underlying performance of our downtown business remained stable. Through the first 6 months of the year, both revenue and EBITDAR in the Downtown segment were up more than 1% over the prior year. Next, our Midwest and South segment, which was impacted by both flood-related closures and the shift of Easter into April delivered revenue and EBITDAR gains of more than 3%. This marked the segment’s highest quarterly revenue and EBITDAR in nearly 3 years. Growth in this segment was led by continued strong performance at Treasure Chest, which marked its 1-year anniversary on June 6. Similar to the Las Vegas Locals segment, we continue to see strength in play from our core customers during the second quarter, while play from retail customers also improved.

Next, in our online segment, both revenues and EBITDAR increased driven by Boyd Interactive and modest growth from our market access agreements. Finally, our managed business continues its strong performance with ongoing growth in management fees from Sky River Casino. Given Sky River’s ongoing success, we remain optimistic about the future potential of the expansion currently underway at this property. The first phase of this expansion set for completion early next year, will address the need for more gaming capacity by adding 400 slot machines as well as a 1,600-space parking garage. The second phase will further diversify Sky River’s offerings with a 300-room hotel, 3 new food and beverage outlets, a full-service resort spa and an entertainment and event center.

Once complete in mid-2027, this expansion will further strengthen Sky River’s position as one of Northern California’s leading gaming entertainment destinations. So in all, we delivered strong results in the second quarter, reflecting the strength of our customer base, the quality of our property amenities and the benefits of our diversified business. Moving next to our capital investment program. We continued our work in the second quarter, highlighted by hotel renovations at several of our properties as well as the ongoing improvements at the Suncoast. During the quarter, we completed a hotel room renovation at Valley Forge and continue to work on our room renovation project at the IP, and we plan to start hotel renovations at the Orleans in the coming months.

In addition, our property-wide renovation of the Suncoast is continuing and is now in its most disruptive stage with large portions of the casino floor under renovation. We are on track to complete the Suncoast renovations in the first quarter of next year. And given the strong response we have already seen to the new amenities we recently added, we are confident in the long-term potential of this project. Beyond property enhancements, we have several projects underway to strengthen the long-term growth profile of our business. These investments are part of our $100 million in annual recurring growth capital cap. In Missouri, we are on track for a late August completion of our meeting and convention center in Ameristar, St. Charles. We expect this project to drive strong returns given the encouraging pre-bookings that the property has already secured for the new space.

Importantly, more than 90% of these pre-bookings are from entirely new customers, a strong indication that this project will further expand Ameristar’s customer base and drive incremental growth at the property. Also, work is progressing on our Cadence Crossing Casino in Southern Nevada. The adjacent community of Cadence is one of the fastest-growing master planned communities in the nation, creating a compelling long-term growth opportunity for our company. On track to open in mid-2026, Cadence Crossing will replace our existing Jokers Wild Casinos with a modern entertainment facility designed to appeal to the thousands of new residents throughout the area. We are well positioned to keep pace with continued residential growth in the area with future plans for a hotel, additional casino space and more non-gaming amenities.

Beyond these investments, we are developing plans for the next phase of projects to further strengthen our long-term growth profile. In Illinois, we are working through the final design and regulatory approval process for a modern new entertainment facility that will replace our existing Riverboat Casino at Paradise. Assuming regulatory approvals are received later this year, we expect this project to begin in 2026 and in Norfolk, we are on track to open our transitional casino in November of this year, while construction is progressing on our $750 million permanent resort, which is scheduled to open in late 2027. Once complete, this resort will include a 65,000 square foot casino, a 200-room hotel, 8 food and beverage outlets, live entertainment and an outdoor amenity deck.

In addition to being the leading gaming resort in the market, our property will be the most convenient gaming destination for much of the Hampton Roads metropolitan area, one of the largest underserved markets in the Mid-Atlantic region with nearly 1.8 million people. We also expect to draw tourists from nearby Virginia Beach, a destination that attracts nearly 15 million visitors each year. By offering a best in-market experience with compelling amenities and easy access, we believe our Norfolk resort will deliver strong returns for our company in the coming years. In all our capital investment program is an important part of driving growth and creating long-term shareholder value. At the same time, we are investing in our properties and developing projects to support our long-term growth.

We remain committed to returning capital to our shareholders. During the second quarter, we repurchased $105 million in stock and paid $15 million in dividends. Since we began our capital return program in 2021, we have returned nearly $2.4 billion to our shareholders. And with the recent FanDuel transaction, we have increased flexibility to continue our capital return program. As a result, we plan to increase our target for share repurchases from $100 million to $150 million per quarter starting with the third quarter. While the proceeds from this transaction will initially be used to reduce debt, our proven track record of making smart capital allocation decisions gives us confidence in our ability to deploy these proceeds toward attractive higher returning investments in the future.

In closing, the combination of an attractive growth pipeline, ongoing property investments, a strong financial position and our ability to deliver consistent results all position us well to continue creating long-term shareholder value. Before I turn the call over to Josh, I want to thank our team members who are key to our ongoing success. Every day, they provide our guests with memorable and distinctive service, providing a unique experience that builds loyalty to our brand. Thank you for your time today. I would now like to turn the call over to Josh.

Josh Hirsberg: Thanks, Keith, and good afternoon, everyone. In light of our recently announced transaction to sell our 5% interest in FanDuel to Flutter, I wanted to take a few moments to review the financial impacts for our company. This transaction further enhances our financial flexibility, strengthens our already strong balance sheet and is accretive to free cash flow. As Keith noted, we expect to receive $1.755 billion in total proceeds in the next several weeks. We estimate after-tax proceeds of approximately $1.4 billion or more than $17 per share. Initially, we intend to use the proceeds to completely repay the debt outstanding under our credit facility. Total leverage at the end of the second quarter was approximately 2.8x or 3.2x on a lease adjusted basis.

Pro forma for this transaction, we estimate leverage will be reduced by approximately 1 turn. As a result of reduced debt balances, we estimate interest expense savings of approximately $85 million on an annualized basis. As noted in our press release announcing the FanDuel transaction, our future results will reflect the economics of the new market access agreements, which are effective July 1, pending regulatory approvals. We estimate our online segment will generate $50 million to $55 million in EBITDAR for the full year 2025 followed by $30 million in EBITDAR in 2026. Summarize the impacts of this transaction, leverage is lower, our market access agreements are extended through 2038 with a reduced fee structure. Free cash flow has increased, and we are in an even stronger position to execute our strategy.

Now let’s take a few moments to review the second quarter. The results for the quarter were strong across the company, growing revenue and EBITDAR, while property level margins were once again 40%. Property level margins have consistently remained at or above this level, a reflection of our continued focus on maintaining operating efficiencies. During the quarter, we continued to see strength in play from our core customers and improving strength in play from our retail customers. Tax pass-through amount for our online segment was $134 million during the second quarter compared to $104 million in the year ago period. Excluding the tax pass-through amount for this quarter, company-wide margins for the second quarter this year would have been 515 basis points above the margin we reported.

With respect to capital expenditures, we invested $124 million in capital during the second quarter, bringing year-to-date capital expenditures to $251 million. We continue to project total capital expenditures for the full year of $600 million or $650 million. 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 finally, $150 million to $200 million for our casino development in Virginia. In terms of our shareholder capital return program, we paid a regular quarterly dividend of $0.18 per share during the second quarter, totaling $15 million.

Also during the quarter, we repurchased $105 million in stock, acquiring 1.5 million shares at an average price of $70.94 per share. Actual shares outstanding at the end of the quarter were 80.5 million shares. Year-to-date, we have repurchased 5.9 million shares at an average price of $72.98 per share. As Keith noted earlier, we intend to increase our share repurchase program to $150 million per quarter, supplemented by our regular quarterly dividend. Considering this higher rate of repurchase activity in conjunction with our quarterly dividend, going forward, our annual run rate of capital returns to shareholders are expected to total approximately $700 million or about $9 per share. Since we began our capital return program in October 2021, we have returned nearly $2.4 billion in the form of share repurchases and dividends while reducing our share count by 28%.

Following the end of the second quarter, our Board of Directors approved an additional $500 million share repurchase authorization, providing the company a total repurchase authorization of $707 million. In conclusion, with strong play from our core customer and improving trends among our retail customers, efficient operations, robust free cash flow and the strongest balance sheet in our company’s history, we have outstanding flexibility to continue executing our strategy for creating long-term shareholder value. With that, I will now turn it to David to open the call for questions.

Q&A Session

Operator: [Operator Instructions] Our first question comes from Steve Wieczynski of Stifel.

Steven Moyer Wieczynski: So Keith or Josh, I guess one of the questions we’ve gotten a lot since this transaction was announced is what is Boyd going to do with the proceeds? And you guys, I think, have made it pretty clear that you’re going to be reducing leverage, taking up your quarterly buyback, all that kind of stuff. But what does this mean now for what I would call kind of other opportunities? And I guess what I’m trying to understand is, does this take away material M&A transactions? Or maybe a better way to ask that is, what does growth opportunities mean for you guys?

Keith E. Smith: Sure, Steve. I’ll take a shot at this. We assume that there would be some discussion around the FanDuel transaction on this call. So let me provide some context for you. First, and I’ll go ahead and say it upfront, this FanDuel transaction is not a precursor to another transaction. Flutter and FanDuel have done a remarkable job over the last 7 years or so in becoming the industry leader in online sports betting and casino. They’ve created tremendous value, both for themselves and for us. And over the last 7 years, our partnership with FanDuel has continued to grow in value and represents a significant asset for our company. Between our market access fees over the last 7 years and our 5% equity interest in FanDuel, we’ve created nearly $2 billion in value for our shareholders, all from a $10 million investment, a pretty fair return, I think.

As we analyze our equity value — Boyd’s equity value, it’s our belief that our stock price doesn’t properly reflect the true value created by this investment. And as a result, we determined that as we’re approaching the end of this partnership, now is an appropriate time to monetize this investment and to focus the proceeds on future growth. So now it’s our turn to take advantage of the investment and invest in the future of our company. And while we’re initially reducing debt, our goal is to deploy this new capital in attractive higher-returning investments to support the long-term growth of our company. We commented on that in our prepared remarks, and we’re confident in our ability to do so. This transaction doesn’t change our strategy of having a balanced approach to capital allocation.

That balanced approach includes investing in our business and pursuing attractive growth opportunities as well as returning capital to shareholders and maintaining a strong balance sheet. This transaction doesn’t change the cadence of our current investment strategy or our views on capital deployment or potential M&A. We have a successful track record of disciplined capital allocation that has served us and our shareholders well, and we remain committed to this approach. This transaction merely allows us to continue our strong track record of making sound capital allocation decisions from a stronger position. I hope these comments answer some of the questions, but I’m sure they don’t answer all your questions. If you have additional questions, feel free to reach out to either Josh or [ Amir ] after the call is over, and we’d appreciate kind of staying focused on Q2 earnings for the rest of the questions.

Operator: Our next question comes from Barry Jonas of Truist Securities.

Barry Jonathan Jonas: I appreciate all the comments there. Maybe just at a high level, philosophically, now that leverage is going to be around 2x. What do you think philosophically is the optimal level that leverage should be for Boyd?

Josh Hirsberg: So I think Barry before this transaction, we would have said leverage was going to be — we were going to run our company at around 2.5x leverage. And I would say — we had always said if by chance there was a transaction that caused us to leverage up, we would have the intention of coming back down to 2.5x. So I’d say today, our expectation is obviously leverage will be lower than 2.5x. We will probably run the company not necessarily with the objective of staying below 2.5x but it’s — that’s probably where we’re going to kind of run the company for the time being as we figure out where best to allocate the capital to get the returns. I don’t think we’re going to kind of go out of our way to do something just to get leverage back up to a level that where it should be.

I think we’re going to continue to be disciplined in terms of how we think about opportunities, continue to be disciplined in how we think about pursuing capital investment within our own company. And I think one thing we’ve said before and I’ll reiterate it here is just because we have a ton of flexibility doesn’t mean we’re going to go out and try to do something that doesn’t make sense. We’ve been really disciplined. Keith made that comment in his remarks. We think it’s paid off for our shareholders and we’ll continue to approach allocating capital in that way.

Keith E. Smith: Yes. Look, I think the way we think about this is as a result of the transaction, we end up with leverage sub-2 in the high 1s, but it’s simply a point in time in the history of the company. We don’t expect that it’s going to stay there. It’s our job to take that and invest it in higher returning assets, simply higher returning them paying down 6% debt, and we understand that’s our mission and our goal and we’ll endeavor to do that. And so the sub-2x leverage is just — once again, it’s a level we’re at today as a result of the transaction, in longer term, I suspect, as Josh indicated, we will be more in the 2.5% range long term.

Barry Jonathan Jonas: That’s great. And then just as a follow-up, any comments you can give in terms of the promotional environment in kind of your key markets? We’ve certainly heard some chatter from some about ramping promos and some select markets. So curious what you’re seeing and how you’re responding if that’s true.

Keith E. Smith: Sure. It sounds like this is simply on replay. But over the last several years, including in Q1 and Q2, the promotional environment has been relatively stable, both here in Las Vegas as well as in our Midwest and South markets. I’ve said in the past, and I’ll say it again, those properties that have been promotional for the last couple of years remain promotional. Those properties that have been more disciplined have stayed more disciplined. And whilst somebody — some properties is always stepping out a little bit, they do it for a month or so, and then it comes back to normal. So there’s not a heightened promotional environment anywhere where we operate.

Josh Hirsberg: And Barry, the only thing I would add to that, you asked how are we responding? We’re not. If you look at our reinvestment rate as a — marketing reinvestment rate as a percent of revenues, it’s been very stable since we came out of COVID. So you can see that reflected in our overall EBITDAR margins for the company, over the last 5 years as well.

Keith E. Smith: And I would say that includes not getting into a room rate war here in Las Vegas where room rates are extremely low. We’re not chasing room rates down. We’re being disciplined and so we’ll just continue to work our way through that.

Operator: Our next question comes from John DeCree of CBRE.

John G. DeCree: Fantastic. Wanted to ask a question about the pickup in retail that you’ve seen. It sounded like kind of unrated play picked up in locals and regionally. And curious if you could give us any more color on that. I know that’s a segment that’s a bit harder to track. And I guess kind of interested in sustainability and kind of the trend over the last couple of quarters leading to what seems like some growth in that segment finally.

Josh Hirsberg: Yes, John. It’s a good question. I think that first of all when you think about and I will primarily touch on Midwest and South in Las Vegas locals when I talk about the trends we are seeing and unrated. So first starting with the Midwest and South. We combined unrated into our what we call our retail segment. In the Midwest and South, I think retail as a whole including the low end of the our database as well as retail has been pretty stable for well over a year I would say. Kind of not really growing but not declining. Starting in the second quarter, we began to see a pickup in unrated play. We attribute that largely to customers staying closer to home i.e. Drive-in business and truly, local customers, even in the regional business, you know kind of not traveling or not taking that extra trip.

Whether it’s — and this is a broader comment whether it’s sustainable or not, I think we’re going to need to see another quarter or 2, but there’s no doubt that’s what showed up in, in kind of pivoted retail to being a much more improved segment of our customer base in Las Vegas, and Keith alluded to this earlier with his comment on room rates, I mean, we’ve seen a real kind of softness and you’re seeing it in the strip as well I think in destination business, we’re seeing it in our own business in terms — in particular place like Orleans where we have our significant room inventory. We’re just not seeing the same level of demand that we’ve seen historically from destination business, but that’s been more than made up by retail and drive-in business and once again showing up in that unrated segment.

And for our business to work we’ve had a very consistent core customer, and we’ve been waiting for the retail customer to really kind of come back into the fray. And I would say the second quarter largely driven by unrated business is where they showed up. Now whether it will continue or nor I think — I do think we need another quarter or 2 before we kind of say we’re back to normal so to speak. Keith, I don’t know, is there anything you want to add to that?

Keith E. Smith: No, I think that fairly summarizes kind of what we saw in the second quarter. So…

John G. DeCree: I appreciate the color. Maybe a quick follow-up on the online gaming strategy from here now that you’ve kind of sold your 5% stake in FanDuel, is there any change in how you approach online gaming kind of under the new commercial agreement that you have with FanDuel? Is it an area that you might look to invest in more aggressively than you’ve had in the past? Or any change in strategy on the digital front?

Keith E. Smith: Yes. No real change in strategy. We bought Pala Interactive several years ago, now known as Boyd Interactive. It has grown nicely over the last several years. We did a small bolt-on acquisition last year to bolster the New Jersey part of that business. It’s performing well. But when we bought Pala, we described what we call the regional strategy. We wanted to be able to make sure we had a compelling and competitive product in the markets where we operate and in some of the important surrounding states where we draw customers that we were not looking to have a national product or be a national leader in the online casino business. That remains the same today. None of that changes with respect to the transaction with FanDuel.

We’ll continue to be focused on a regional online casino strategy. And while we’re waiting for other states to legalize this product, we’ll just continue to make sure that we improve our core product and that it’s ready when various legislatures around the country approve this.

Operator: Our next question comes from Shaun Kelley of Bank of America.

Shaun Clisby Kelley: Josh, maybe to switch gears again on you, a lot of the questions that I had have been asked and answered. The tax bill, you highlighted some of the implications here, but I was kind of curious more on the company level, there were some changes in everything from bonus depreciation to interest deduction, obviously, you’re delevering, so maybe the interest deduction thing is not as big. But sort of to your cash tax rate and your free cash flow conversion, is there any impact? Have you kind of done your first take on what some of the legislative changes might mean for you at the corporate level?

Josh Hirsberg: Yes. So we’ve — I will tell you, we’ve gotten a preliminary estimate. I’m actually not that comfortable kind of telling you what it is, just yet. I think we need to do a little bit more work around it. But the biggest impact or benefit to us will be from — and I think this is probably obvious, the bonus depreciation 100% of depreciation that’s placed in service. I think that you’re right, we won’t get much in the way of benefit from further interest expense deductibility because we already kind of qualify that fully. And many of the other things that we’ve evaluated really are either not material or if they are kind of going or negative, they’re pretty small. But I’m hesitant to kind of give a number just yet until we go through fully the bonus depreciation calculation.

That will be where we get the biggest benefit and we kind of rushed it to be ready for this call, and I just want to have time to kind of double check it. So — but that’s where the benefit will be.

Shaun Clisby Kelley: Great. And then Keith, maybe just going back to the online strategy point because I do think it’s important. You lost sort of material growth lever, which I think we all appreciate you’re going to lose or renegotiate anyways as it relates to market access. But just can you help us think through kind of Boyd’s approach high level, right, as the sort of Internet and online gaming has come for lots of other brick-and-mortar sectors, it’s been highly disruptive. Now we sort of have other areas like prediction markets and things that are sort of at the gate as well. So just strategically, do you think it’s important for you to have a presence here on this side? And kind of how do you think about — and really talking kind of medium to long term that just having something here as a bit of a hedge as it relates to kind of the broad brick-and-mortar piece of the business?

Keith E. Smith: Yes. Look, we bought Pala Interactive a couple of years ago to kind of stake out on our own, if you will. On the online casino side for that very intent, we thought having both an online product as well as the brick-and-mortar product was important. I think we articulated that, and we continue to articulate that. Look, our customers go home at night, and they may want to still continue to gamble and enjoy this and if it’s legal in the state, we want to make sure we have a product that they can enjoy when they’re not on- premise. We have that in New Jersey right now where it’s both legal online and legal on-premise. It’s a great product because it is fully integrated with our land-based rewards program. And so the player gets all the benefits when they’re playing online as they was if they were playing in the building.

And so we do want to be ready. We think it is important. We think they’re clearly complementary to each other and that long term, you need to have both products as part of your portfolio. Now having said that, online sports betting is a different beast. We have a presence, obviously, here in Nevada, where we run 10 sports books ourselves and have for more than 40 years now and quite successful in doing that. As you may have noted in the press release, we’ll begin to transition into running our own sports books outside of Nevada sometime next year. And once again, we have tremendous experience in doing that. And so once again, that will not be a very heavy lift for us, but we don’t think that’s as important to us, the sports betting side as in funding our own books or having our own “national” presence there.

Yes, it is on the casino side for our customers to be able to participate with us. So I think we’re well positioned, very happy with the product we have, happy with the growth of Boyd Interactive and what it’s doing. And I think when other states start to approve this, that we will be in a very strong position to capture a big share of the market in the states where we do business.

Operator: Our next question comes from David Katz of Jefferies.

David Brian Katz: So a couple of things have changed since the last time I’ve asked this question, which is probably one of many times I have asked the question. But at the moment, there seems to be a little bit better outlook in regional gaming. Stocks are just a bit better, yours to some degree, included. Is there any update you can give us on the boundaries or the criteria that you’re thinking about in terms of acquisitions you would consider? Anything changing with respect to hurdles or size, what you might be seeing? Any update there would help.

Keith E. Smith: Sure. I would say nothing has really changed in how we view M&A and regional acquisitions. The size and the scale is important. The quality of the asset will be important obviously, given the size of our company in order to make it meaningful and move the needle and make it worth our time, it’s got to be significant enough. We’ve said in the past, we continue to be somewhat agnostic on markets as long as it’s a strong market with stable regulatory environment, a stable tax environments and there’s a number of those out there. So those are all things we have talked about in the past Is key to us as we look at acquisitions and that all remains the same today. I really don’t have anything to update on.

Operator: Our next question comes from Ben Chaiken of Mizuho.

Benjamin Nicolas Chaiken: Now that no tax on tips and overtime is official, is there any work you’ve done trying to quantify the tailwind, whether quantitative or even anecdotal. Then one follow-up.

Keith E. Smith: So we have done some work around this. I don’t think we are in a position to go out and talk about what we think that, that means to the company. But certainly, it impacts a lot of our customers here in Las Vegas as well as customers around the country who visit our property. So it clearly is a positive for us. And we’ll just — once again, we’ll wait and see how it all plays out. But no tax on tips, no tax on — reduced tax on tips and reduced tax on over time. Look, as well as the deduction for seniors in a different — a new tax brackets at all going to benefit us going forward. So we’re just not sitting here today in a position to quantify that for you.

Benjamin Nicolas Chaiken: Understood. And you may not want to answer the question, but just like in the spirit of the conversation. Any high-level thoughts on maybe like what percentage of the customer base might be subject to those, including the seniors in there?

Keith E. Smith: Well, look, from a senior standpoint, kind of 65 and older, roughly 40% of our customer base is in that age group. And the good news for us there is they over-index in terms of their spend or their total value to us. And so we’ll get — we’ll clearly derive some benefits from that group.

Benjamin Nicolas Chaiken: And just one quick one on repurchases. You repurchased $105 million in the quarter. I guess, you clearly are signaling that you want to buy back more stock, the new run rates 150 of the increased authorization I guess the question is you repurchased multiples of that in 1Q, presumably at higher prices. So definitely not being critical here, but just was there anything preventing you from buying more into 2Q when I would suspect your stock was pretty depressed.

Keith E. Smith: Yes. Look, I mean, there are times we’re in blackouts where we’re not allowed to be in the market repurchasing stock and there’s always a lot of factors that go into those decisions as we sit and decide when and how much to buy back. So it isn’t kind of a straightforward decision as we go through that process. But part of Q2 was blackout as it relates to the FanDuel transaction, quite frankly.

Operator: Our next question comes from Jordan Bender of Citizens.

Jordan Maxwell Bender: I want to double-click on the room rate dipping in Las Vegas comment you made earlier on the call. we’ve heard this commentary or we’ve seen some of the data out of Las Vegas, so it might be good to just touch on the local market here. But is the dip that you’re seeing a function of summer seasonality? Or is there really anything sticking out as to why maybe it’s declining more than historical summers.

Keith E. Smith: Look I can’t comment on how and why properties in Las Vegas change the room rates. Summer room rates right now are lower than they were last year. Summer room rates are always low compared to the other seasons. This year, they’re lower than last year in many cases, by quite a bit. So I don’t know why people are doing that. Obviously, it does impact properties like the Orleans, who have nearly 1,900 hotel rooms in terms of our ability. So we’re not offering $19 hotel rooms, and we’re not going to offer $19 hotel rooms. But I don’t sit in their boardrooms or their marketing meetings or the hotel meetings, so I actually can’t tell you.

Jordan Maxwell Bender: And then on the follow-up, I just want to circle back on the share repurchases. So you upped it by $50 million a quarter. I guess why did $150 million make sense? And does any of that play into kind of getting back within your historical leverage targets from kind of what you see in the business today?

Josh Hirsberg: Yes. It’s a good question, Jordan. I think just as the 100 was a level that was set that you can expect from us, sometimes we’ll do more. but you could expect the 100 in the past. I’d say that was the spirit in which we approached setting the $150 million. It’s a level that we’re comfortable with setting the expectation from the market and people who follow us. And we feel comfortable doing that in the context of not putting any pressure on other decisions that we’re trying to make or influence our balanced capital allocation approach. So it’s a level that we’re comfortable with and feel comfortable that we’ll be able to continue to kind of achieve without people trying to get too far ahead of us, basically.

Operator: Our next question comes from Brandt Montour of Barclays.

Brandt Antoine Montour: So a question for — I think for Josh, I mean, your comments on regional customer feeling better, staying close to home, doing a few less trips and showing up at your door help things clearly. When you think of — when you look at that customer, I’m assuming a lot of those customers are unrated play. And if those folks are not going on trips, does that mean that they would have a higher-than-average spend versus your other average customer? Is that the way we could think about that customer or not necessarily?

Josh Hirsberg: Yes. So first of all, I’m not sure that we — obviously since they’re unrated, we don’t know a lot about that bucket of customers. I would say that you shouldn’t think of them in 1 light or the other, meaning they’re not necessarily customers that are not worth a lot, and they’re not necessarily customers that are worth a lot. It’s a portfolio of customers just like maybe anything else that we talk about. So I don’t know that you can extrapolate anything from that it’s a higher-quality customer spending more money in that segment or not. I think all we can say is that the volume, i.e., the overall play that we received from our unrated customers has improved since Q2 last year and sequentially as well. Hopefully, that’s helpful.

Brandt Antoine Montour: That is helpful. And just a follow-up on the locals market, I think heading into this past quarter, we were looking out at the year for locals and sort of expecting less bad comps over time, you guys still had competitive pressure. You just did a pretty good quarter, but I don’t know and maybe you know what the broader market grew. And if you lost share in the second quarter or if we’re sort of past that promotional environment pressure with the caveat that we know that summer room rates are low and affecting Orleans, maybe from a different side now? I wonder if you could square those thoughts.

Keith E. Smith: Sure. So as you look at the Las Vegas Locals market, and we only have data through May, June data will come out, I think, next week in Las Vegas. But if you — and we look at it in 3-month increments to take out some of the variations or movements. Over the last 3 months, we’ve performed either in line or slightly better than the overall market. So our market shares generally stayed the same, maybe gone up just a smidge — and so we feel pretty good about the overall performance, both of the market as well as our own performance.

Josh Hirsberg: The one thing, Brent, that I would add to your question is that we talked about kind of the competitive pressures just getting less bad throughout 2025. And obviously we don’t give individual property level information, but that is exactly what’s continuing to happen. And there’s some push and pull based on our comments earlier, right? We’re talking about primarily the Orleans, so that’s the property that also would be in fact affected by, you know, a softer destination consumer, but generally it is trending the direction that we talked about. And then overall, the entire segment was benefited pickup and unrated play. So the trends that we talked about before are continuing, if not feel a little better with the support of unrated play with the exception of maybe a property like the Orleans, it’s feeling this right pressure.

I know it’s a lot of pieces, but just wanted to know the competitive environment from our prospective is trending along just like what we expected. It’s just getting better and better with the passage of time.

Operator: Our next question comes from Steve Pizzella of Deutsche Bank.

Steven Donald Pizzella: On the cost side, just curious about what you are seeing in terms of the operating expense environment currently in both the Midwest and South and local segments.

Josh Hirsberg: So Steve, thanks for the question. I would say that costs for us, or I mean we always see pressure from cost and cost increases, but I think we’re doing a really good job of managing those costs. You can kind of really see it in the consistency of our margins both in Las Vegas and the Midwest and Southern for that matter, downtown. So despite, say, in the Midwest and South, having some issues with the shift in the calendar and the flooding, our margins were essentially — have been essentially — have been stable. And in Las Vegas, we talked a lot about some of the pressures from competitive issues and things of that nature. Our margins also are continuing to be very stable. So from my perspective, we always ring our hands around costs and are trying to manage them more efficiently and trying to offset increases, but our guys are doing a really good job of doing that. And so that’s what’s showing up in the results, quite honestly.

Steven Donald Pizzella: And just wanted to look further into non-gaming spend, if we could. Have you seen any changes in spend in your F&B and entertainment?

Josh Hirsberg: Not really. With the — I would say the — if you look at our results, you’ll see F&B was up, and that’s reflective of not only our core customer continuing to be stable and growing, but also now the kind of the retail customer showing up in the second quarter. And then on the hotel side, that was largely Las Vegas through the destination-related comments that we made earlier. So there’s not really — I think the spending from our customers is in conjunction with what we’re seeing for their demand on the gaming floor.

Operator: Our next question comes from Stephen Grambling of Morgan Stanley.

Stephen White Grambling: You touched on this a couple of different ways. So putting together your commentary around investing into growth. Do any subsegments or regions stick out and offering potential for the best returns on invested capital in this backdrop? And how might that rank order compared to investing in digital or greenfield markets?

Keith E. Smith: Yes. Look, I think as we think about the return on any type of M&A investment, whether it be on the digital side or whether it be greenfield or whether it be an actual acquisition of an existing asset, obviously, a lot of factors go into play here. We don’t think about year 1 or year 2 return. We think about it over a longer period of time. But it all depends on, once again, the price and the quality of the assets. So we don’t necessarily force rank them. We do have a hurdle rates that we look at and we want to achieve in order to make an investment regardless of which of those buckets we we’re going to invest in, but…

Josh Hirsberg: Yes, the only thing I would add to that is it’s — M&A is one alternative, reinvesting in our portfolio is another. You’ve seen us do that quite successfully with Treasure Chest and now with the — coming online with the meeting space at Ameristar St. Charles and Cadence Crossing. So it is really trying to find the best alternative among all the different choices that we have. I mean Virginia’s kind of in the pipeline, but that’s going to be a good investment as well. So we’re really evaluating all the time kind of M&A from a strategic perspective but also a return perspective weighed against development opportunities, weighed against opportunities to reinvest in our existing portfolio. And then buying back our shares as well, absent higher returning alternatives.

So it’s hopefully, this starts to sound like a broken record because we believe we’re kind of adding the same — executing on the same approach from our capital allocation perspective that we’ve been doing for quite some time. So hopefully, this sounds familiar to people.

Stephen White Grambling: Yes. I guess I meant more around organic growth, not M&A as you think about renovations or where you’re spending, whether — I mean, you gave the — a couple of different examples there, but are they more likely to be spent within locals, the South and Midwest digital is another one of those. Is anything sticking out as you look at these different markets based on either the trends you’re seeing or the competitive dynamic?

Josh Hirsberg: Yes. I mean I would just jump in and say not really. I mean we have a — online is going to grow as opportunistically as maybe smaller acquisition opportunities come along or as it grows organically. I think from the perspective of reinvesting in different segments of our business, it could be that the highest returning next opportunity is in the Midwest and South just because of whatever that particular opportunity is. I don’t — I think we purely do it based on an economic return of where we can get the best return as opposed to force ranking as Las Vegas is a better market than Missouri or just picking 1 out of the air, right? It’s where we can get the best return for the incremental dollars. And Yes so that’s how we think about it.

Operator: Our next question comes from Dan Politzer of JPMorgan.

Daniel Brian Politzer: I wanted to just focus on the Midwest and South for a bit. This was the highest quarter of GGR growth, at least from the publicly reported data we’ve seen in some time despite starting to lap Treasure Chest. So to the extent it sounds like you’re attributing this to unrated play. What’s — shouldn’t that be showing up in the margin structure or were there any other kind of one-offs to think about in the quarter, whether it’s a promotional environment or mix of revenues?

Josh Hirsberg: Are you saying because it was unrated play, we should have a higher margin? Is that what you’re saying?

Daniel Brian Politzer: Well, yes, I mean I think that usually that does come with higher margin, the flow-through in this quarter versus other quarters just given the revenue growth, I would think, just given that comment on the unrated play would have been a little bit higher, but — that’s why I’m asking if maybe there’s something I’m missing.

Josh Hirsberg: Yes. The only thing I would point out is the margins have been consistent, number one. And number two is we did have flooding that took 2 properties out of commission for basically each a week and then the shift of Easter. That’s basically it. There’s no — there’s nothing else really going on in the segment.

Daniel Brian Politzer: And then just kind of one higher level one in terms of the quarter and the cadence. It seems like trends did improve throughout the quarter. Is there any kind of comment on what you’re seeing quarter-to-date as we look into July here?

Josh Hirsberg: So I would say, and Keith jump in and add anything that I might leave out would be that, first of all, we’ve been burned by trying to answer this question in the past because it’s a limited snapshot of what’s going on. It’s literally been 3 weeks and 3 weeks don’t make a trend or a quarter. But — so just note that disclaimer if things were to change in the future. But basically, I would say the trends that we saw in Q2 are continuing into Q3. That being — has historically been the case, the core customer has continued to be a consistent source of business for us and has continued to grow. And then on the retail side of things, we continue to see the unrated play contribute to that segment. So the first 3 weeks are just like the quarter we just came out of.

Keith E. Smith: Yes. And I do think you have to be careful and look at this kind of by the segments that we operate in, in Las Vegas versus downtown versus MSR. And while I think the trends are generally consistent with what we saw in Q2 as it relates to core and unrated. Here in Las Vegas, we talked about the renovation project, the Suncoast going on it’s being in its most disruptive phase. So we have to take that into account as we think about Q3 and Q4, we’ve done a great job, and our customers have kind of hung with us so far this year at the Suncoast and performing very well, but we are entering a very disruptive period of time. And then the softness on the strip, which impacts the Orleans mainly, we’ll see how that continues to play out.

Downtown some softness as it relates to just visitation to Downtown because if the strip is soft and Downtown tends to be a little soft also. And the MSR, more normal. I mean, once again, benefit of Treasure Chest has anniversaried itself, but still performing well. And as people are not traveling, maybe as much, we’re getting the benefit of them staying closer to home and visiting our properties in the Midwest and South regions. But I think there’s probably as much color as we have. But as Josh said, it’s 3 weeks’ worth of data. And so we’re kind of cautious about talking about it.

Operator: Our last question comes from Chad Beynon of Macquarie.

Chad C. Beynon: I wanted to ask about the overall CapEx, Josh. You ran through that in your prepared remarks. I know it was about 3 months ago when the tariff announcements were announced, and there’s been some volatility there. It doesn’t sound like there was any change in terms of your spend, but I know you were talking about maybe mitigating some of the potential impacts that could happen. So can you help us think about maybe any, I don’t know, guaranteed contracts? Or are you more comfortable now versus 3 months ago when the news was just kind of coming across the desk.

Josh Hirsberg: Yes, Chad, thanks for the question. I think if you look back at our remarks in the first quarter, we had done a lot of work around understanding what we could do to mitigate tariffs, operating expense side but also a capital expense side, whether it was finding alternative sources pre-ordering stuff, ordering stuff from different countries, all that kind of acrobatics. I think that now that we’ve been at it for another 3 months or so, we feel much more comfortable that we can kind of manage through it. Obviously, we don’t know the final picture with respect to tariffs, but I just think we’ve gotten better at it, and we’ve gotten more comfortable with how to kind of manage through it. In Q1, we said we’re comfortable with the risk and our budgets are — we don’t believe our budgets are at risk from a capital perspective.

And we didn’t — while our costs may go up, we felt like we had enough contingency and enough flexibility with respect to timing where we were in those procurements processes where those projects were that we were going to be able to manage through it. And I would say that really hasn’t changed. If anything, we’ve just gotten more and more comfortable with our ability to manage through it. And I think it’s really important to say this as well, is back then, we were approaching a potentially uncertain environment at 2.5x leverage. Now it’s 1.8x leverage or whatever. So we’re probably in a much better position than the company has ever been in to deal with any kind of uncertainty whether it’s manmade or otherwise. So we come at it from a position of real strength.

And I think that’s what we’ve tried to communicate to the investment community and the reason we want to run at a lower leverage is so that we have the flexibility to tell you here’s what we’re going to do and in most cases or a large number of cases, be able to execute that and not change direction because of something that’s going on out of our control. So the FanDuel transaction took us to a level — a lower level of leverage than maybe we thought we would be at, but the same philosophy applies. So hopefully, that gives you some help…

Operator: This concludes our question-and-answer session. I’d like to turn the call over to Josh for concluding remarks.

Josh Hirsberg: Thanks, David, and thanks to everyone for joining our call today. If you have any follow-up questions, including any ones related to the FanDuel transaction, please feel free to reach out to [ Amir ] and myself, and we’ll be happy to try to help you out. Thank you very much.