Boyd Gaming Corporation (NYSE:BYD) Q3 2025 Earnings Call Transcript

Boyd Gaming Corporation (NYSE:BYD) Q3 2025 Earnings Call Transcript October 23, 2025

Boyd Gaming Corporation beats earnings expectations. Reported EPS is $1.72, expectations were $1.57.

Operator: Good afternoon, and welcome to the Boyd Gaming Third 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, October 23, 2025. [Operator Instructions] Our speakers for today’s call are Keith Smith, President and Chief Executive Officer; and Josh Hirsberg, Chief Financial Officer. Our comments today will include statements that are forward-looking statements within the meaning of 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, 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 the completion of this call.

With that, I would now like to turn the call over to Keith Smith, Keith?

Keith Smith: Thanks, David, and good afternoon, everyone. The third quarter was another quarter of growth for our company with revenues once again exceeding $1 billion, while EBITDAR was $322 million for the quarter. After adjusting for our recent FanDuel transaction, we continue to deliver revenue and EBITDAR growth on a company-wide basis, while margins were consistent with the prior year at 37% as we successfully maintained efficiencies throughout our operations. During the third quarter, play from our core customers continued its long-term growth trend, and we saw further improvements in play from our retail customers. This strength in play drove healthy gaming revenue growth across all 3 of our property operating segments and more than offset the weakness in destination business.

Across the portfolio, our results reflect continued broad-based improvements in customer demand, sustained operating and marketing efficiencies and the success of our capital investments focused on enhancing our property offerings. Now turning to segment results. Our Las Vegas Locals segment posted revenues of $211 million and EBITDAR of $92 million for the quarter. Gaming revenues continued to grow during the quarter, driven by strong demand from our locals customers. We continue to benefit from ongoing growth in play from our core customers as well as improving trends in play from our retail customers. This growth in gaming revenue was offset by declines in our destination business, primarily at the Orleans. Excluding the Orleans, our Locals segment delivered year-over-year growth of 2% in both revenues and EBITDAR with gaming revenue growth in line with the broader locals market for the quarter, while margins for the third quarter were consistent with the prior year at 47%, supported by disciplined marketing and operating efficiencies.

For the broader Las Vegas Locals market as a whole, gaming revenue growth was up more than 3% over the last 12 months, reflecting the resilience of the Locals market. The health of the Locals market is supported by solid wage growth throughout the Southern Nevada economy. Through August, average weekly wages were up more than 6% over the trailing 12 months, outpacing the national average. Over the last 10 years, the local population has grown at twice the national rate, reaching 2.4 million last year. And during the same time frame, per capita income in the Las Vegas Valley has grown by more than 5% on an annual basis, while total personal income in Southern Nevada has nearly doubled. An important driver of this growth has been the increasing diversification of the local economy.

While hospitality has continued to grow over the past decade and currently represents approximately 25% of the local job market, job gains have been more substantial in other sectors. These include education, health services, transportation, warehousing and professional and business services sectors. Construction jobs have also remained a steady performer, growing more than 5% since 2019. With more than $10 billion in projects currently underway across the Las Vegas Valley, construction employment should remain healthy well into the future. And as we head into next year’s tax season, we believe that our customers around the country will benefit from the tax bill passed by Congress this summer, including new deductions for tips and overtime and an additional deduction for seniors as well as a larger standard deduction for all taxpayers.

In all, the Southern Nevada economy remains resilient and is more diversified than ever, positioning our Las Vegas Locals business for continued success. Next, in our Downtown Las Vegas segment, revenues and EBITDA were in line with the prior year, supported by continued strength in play from our Hawaiian customers. Much like our local segment, growth in gaming revenues were offset by softness in destination business, including lower hotel revenues and reduced pedestrian traffic along the Fremont Street experience. Next, our Midwest and South segment achieved its strongest third quarter revenue and EBITDAR performance in 3 years. For the quarter, revenues rose 3% to $539 million, while EBITDAR grew to $202 million, more than 2% over the prior year.

Operating margins once again exceeded 37% as we remain disciplined in our cost structure and marketing spend. Growth in the segment was broad-based, including continued gains at Treasure Chest more than a year after the opening of our new land-based facility there. Similar to our Nevada segments, gaming revenues increased year-over-year in the Midwest and South, driven by continued growth in play from our core customers and further improvements in play from our retail customers. Next, results in our Online segment reflected growth from Boyd Interactive as well as changes related to our recent FanDuel transaction. Given current trends, we are increasing our guidance for this segment to $60 million in EBITDAR for this year. For 2026, we expect approximately $30 million in EBITDAR from this segment.

Finally, our managed business had another strong performance with continued growth in management fees from Sky River Casino. Demand has remained strong over the 3 years since Sky River opened, giving us in the Wilton Rancheria Tribe great confidence in the growth potential of the property’s ongoing expansion. The first phase of this expansion will add 400 slot machines and a 1,600 space parking garage upon completion in the first quarter of next year. Once this first phase is complete, we will begin a second phase that will further enhance Sky River’s appeal by adding 300-room hotel, 3 new food and beverage outlets, a full-service resort spa and an entertainment and event center. On its completion in mid-2027, we are confident this expansion will further strengthen Sky River’s position as one of Northern California’s leading gaming and entertainment destinations.

So in all, the third quarter was another quarter of growth for our company. Across the country, we continue to see strengthening play from our core customers and improvements in play from our retail customers against the backdrop of consistent and efficient property operations. And while the fourth quarter has just started, it is worth noting that the customer trends we saw in the third quarter have continued into October, including improving play from both core and retail customers. Our strong operating performance is supported by the investments we are making throughout our portfolio as we enhance our casino floors, food and beverage outlets and hotel rooms. Hotel room renovations will be completed early next year at the IP and work is set to begin next month on our room renovation project at the Orleans.

We are also continuing our modernization project at Suncoast with the complete transformation of our casino floor as well as enhanced meeting and public spaces. While we are dealing with ongoing construction, we are encouraged that Suncoast performance is in line with the prior year, further increasing our confidence in the long-term growth potential of this investment. Following completion of our Suncoast renovations around the middle of next year, we plan to begin a similar project at the Orleans as we look to further enhance our offerings at this important property. In addition to these property enhancements, we are continuing to work on our growth capital projects with an annual budget of $100 million per year. In September, we completed our expanded meeting and convention center in Ameristar St. Charles.

By nearly tripling the size of its meeting space, Ameristar can now accommodate more and larger events. This will create incremental visitation from new customers as well as groups who had previously outgrown our space. We are already seeing great interest with strong bookings in the fourth quarter and into the next several years. In Southern Nevada, construction is progressing on Cadence Crossing, our newest Las Vegas Locals property, scheduled to open in the second quarter of 2026. Cadence Crossing will replace our existing Joker’s Wild casino with a modern and appealing gaming and entertainment facility. This investment will allow us to better serve the adjacent community of Cadence, one of the fastest-growing master planned communities in the nation.

And we are well positioned to keep pace with continued residential growth in the area with future plans for hotel, additional casino space and more non-gaming amenities. Next, in Illinois, we are continuing the design and planning work for our new gaming facility at Paradise and expect to start construction in late 2026, pending regulatory approval. Finally, development is well underway on our most significant growth opportunity, our $750 million resort development in Norfolk, Virginia. Pending regulatory approval, we are just a few weeks away from opening our transitional casino at the site. And while we look forward to reaching this key milestone, our focus remains on the development of our permanent resort scheduled to open in November of 2027.

This market-leading resort experience will feature a 65,000 square foot casino, 200-room hotel, 8 food and beverage outlets, live entertainment and an outdoor amenity deck. In addition to offering the highest quality gaming experience in the market, we will have the most convenient location for much of the 1.8 million residents of the Hampton Roads region as well as the 15 million tourists who visit nearby Virginia Beach each year. In all, our capital investments are delivering strong returns for our company, enhancing our competitiveness and supporting our long-term growth. At the same time, our substantial free cash flow and strong balance sheet allow us to continue returning capital to our shareholders. During the third quarter, we repurchased $160 million in stock and paid $15 million in dividends.

So far this year, we have returned a total of $637 million to our shareholders. Share repurchases and dividends are important components of our balanced approach to capital allocation, and we intend to maintain a pace of $150 million per quarter in share repurchases, supplemented by our recurring dividend. In closing, we are pleased to deliver another quarter of strong performance as we continue to execute on our strategy and create long-term value for our shareholders. During the quarter, we continued to benefit from strong growth in plate from our core customers as well as improving plate from retail. Our capital investment program is delivering excellent returns and positioning us well for future growth. Our teams across the country are successfully maintaining efficiencies and delivering consistent property operating results, and we continue to return substantial capital to our shareholders while maintaining the strongest balance sheet in our company’s history.

Our success is a reflection of the dedication and contributions of thousands of Boyd Gaming team members across the country, and we are grateful for all that they do for our company and our guests. 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. During the third quarter, play from our core customers continued its long-term growth trend, while retail customers play also continued to improve. Management teams did their part remaining focused on operating efficiently and generating returns from our capital investments. As a result, excluding the effects of our recent FanDuel transaction, we continue to deliver growth in revenue and EBITDAR despite weakness in our destination business. We are continuing our capital investment program to enhance our guest experience while expanding our opportunities for growth. During the third quarter, we invested $146 million in capital, bringing year-to-date capital expenditures to $440 million.

We now expect total capital expenditures for this year to be approximately $600 million. Our capital plans include approximately $250 million in recurring maintenance capital, an additional $100 million in maintenance capital related to hotel room renovation projects. A $100 million in growth capital, which includes the recently completed meeting and convention space at Ameristar St. Charles and the ongoing Cadence Crossing development here in Las Vegas. And then finally, $150 million or so for our casino development in Virginia. Our growth capital projects remain on budget and on schedule. In terms of our shareholder capital return program, we paid a quarterly dividend of $0.18 per share during the quarter, totaling $15 million. Also during the quarter, as Keith mentioned, we repurchased $160 million in stock, acquiring 1.9 million shares at an average price of $84.05 per share.

Actual shares outstanding at the end of the quarter were 78.6 million shares, an 11% reduction in our share count since the third quarter of last year. Since we began our capital return program in October 2021, we have returned more than $2.5 billion in the form of share repurchases and dividends while reducing our share count by 30%. Going forward, we intend to maintain repurchases of approximately $150 million per quarter, supplemented by our regular quarterly dividend. This equates to more than $650 million per year or more than $8 per share. With strong free cash flow, low leverage and ample liquidity, we are maintaining the strongest balance sheet in our company’s history while continuing to invest in our business and return capital to shareholders.

As you may recall, during the quarter, we closed on our transaction to sell our 5% stake in FanDuel. We initially used proceeds from that transaction to repay our Term Loan A balance and borrowings outstanding under our revolver. As a result, our total leverage ratio declined from 2.8x at the end of the second quarter to 1.5x at the end of the third quarter. Our lease adjusted leverage declined from 3.2x to 2.0x. Finally, beginning with this quarter’s financial results, we have provided the tax pass-through amounts as a separate line item on our GAAP income statement. Excluding the tax pass-through amount for this quarter, company-wide margins for the third quarter this year would have been 510 basis points above the margin we reported. In conclusion, with strong play from our core customer and improving trends among our retail customers, efficient operations, robust free cash flow and a strong balance sheet, we have outstanding flexibility to continue executing our strategy for creating long-term value for our shareholders.

With that, I’d like to turn the call to David to open the call for questions. David?

Q&A Session

Operator: Thank you, Josh. [Operator Instructions] Our first question comes from Barry Jonas of Truist.

Barry Jonas: I wanted to start on Vegas. Can you talk about what you see as the main drivers of the weakness you’re seeing in the destination business? And just help us feel comfort that you think the non-destination business won’t see any of that related weakness.

Keith Smith: So maybe starting with the second half of your question. I think as we noted, we’ve seen strong play from our core customers. And as we look at the database here and the source of our revenue here in Las Vegas, our locals customers are performing extremely well, and our core customers are growing extremely well. The shortfall really was all about the destination business has been kind of widely reported and talked about. How long that continues? We’ll all have to see. We have seen, as we look at our kind of forward 90-day bookings in our hotels here in Las Vegas, we’ve seen improvement, still soft, but certainly better results than we saw 3 months ago. So we turned the corner, hard to say, but the 90-day booking results certainly look better than they did 3 months ago.

Josh Hirsberg: And Barry, one thing I would add to Keith’s remarks is when we — pretty much the impact of the destination business, as we said in our remarks, are focused on the Orleans. So when you separate the Orleans from the rest of the business, you see a couple of things going on. You see growth in gaming revenues throughout the remainder of the portfolio. You see growth in overall revenues. You see growth in EBITDA. You see consistency in margins. So I think we see — and the gaming revenue kind of is growing in line with the overall market. So I think we feel pretty good about the underlying customer trends overall. It’s just one aspect of the business that we’re trying to deal with. And in fact, when you look at the segment’s performance, you could really attribute the EBITDA decline in Q3, all to the Orleans because it was down even more than what we’re seeing in the segment for the quarter.

Barry Jonas: Got it. That’s really helpful. And then just as a follow-up, we’re starting to see some M&A deals come about. Curious if you could share your thoughts on the M&A pipeline, the environment, either in terms of buying whole assets or opcos?

Keith Smith: Look, we obviously have a fairly successful track record of M&A based on a disciplined strategy of making sure it’s the right asset in the right market at the right price. And so we continue to look at it. We certainly note that a few things have traded recently. I don’t know that we’re necessarily seeing more pitch books across our desk, but we certainly pay attention and monitor opportunities. And for the right opportunity, we’re certainly prepared to dig in. But other than that, I’m not sure we have a whole lot to comment on.

Operator: Our next question comes from Steven Wieczynski of Stifel.

Steven Wieczynski: So Keith or Josh, if we think about the Midwest and South properties, I mean, those results were really solid, came in much better than we were expecting. So if you think about that portfolio, wondering if the trends you witnessed there were pretty much broad-based or there were markets or pockets of strength versus other markets? I guess just trying to figure out if certain markets are kind of outperforming other markets. And obviously, you guys called out Treasure Chest, I guess, excluding Treasure Chest.

Keith Smith: I think when we look across that portfolio that comprises some 17 properties, it was generally broad-based. Look, there’s always 1 or 2 that don’t perform maybe quite as strong in any given quarter, but it generally was broad-based strong results. We called out Treasure Chest because it’s interesting to us and very positive that it continues to grow even after anniversarying its opening. So Josh, I don’t know if you have anything to add?

Josh Hirsberg: Not really, Keith. I think that covers it.

Steven Wieczynski: Okay. And then, Keith or Josh, a little bit of a bigger picture question. But wondering if you kind of take a step back and look at your Vegas Locals assets, how do you think they’re positioned today from a CapEx perspective? I mean — what I mean is, do you think the majority of your assets in that market are in a pretty good spot relative to your peers in that region? And — or is it something where you guys might have to spend a little bit more across your portfolio over the next couple of years to keep up with some of that newer supply? I heard your comment about Orleans and Suncoast there.

Keith Smith: Right. So look, we’ve been talking about the renovation work we’re doing at the Suncoast over the last year or so. And so that has been, I think, a very positive investment for us as we’re not even fully through it yet, and we’re seeing performance that’s in line with the prior year. So that gives us confidence that this will be a successful investment. Look, the Orleans needs a little bit of an updating also. It’s an important asset for us. Look, other than that, I think our portfolio of properties here in Las Vegas are well positioned. We’re looking at a number of restaurant projects just as part of our overall capital plan to make sure the properties remain competitive. It’s not significant capital, but it’s an important capital to be competitive.

So you look at our slot floors, and I would put them on par with anybody’s in the market and probably better than most. And so I think we feel pretty good with the exception of once again, needing to make, I think, an important investment in the Orleans to make sure it’s competitive for the long-term.

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

David Katz: So I just wanted to get your updated thoughts on the investments that you’re making internally in the portfolio and how you’re thinking about returns, the timing to those returns or hurdle rates? And just — it will help us think about forecasting out into the future. But what’s the return process? And how should we think about the earnings potential on it?

Josh Hirsberg: Yes. Dave, it’s Josh. I’ll take it and then Keith jump in and add anything. Generally, I think kind of for good rule of thumb and modeling purposes, we generally think of kind of a 15% to 20% kind of cash-on-cash type of return. And so we certainly achieved that with Treasure Chest. I think we’re seeing the early signs of achievement with that with the meeting space at Ameristar St. Charles. The next one up will be Cadence, which is like a $60 million investment. So that will be in that, we fully expect that property once it comes online to generate incremental EBITDA above what we’re getting today from the current Jokers Wild facility that would generate that return. And then after that, I think we’re more dependent on regulatory approval for Paradise, but we’re excited about that opportunity.

So good rule of thumb is that 15% to 20%. We’ve been fortunate enough to kind of meet or exceed that on the projects that we’ve announced to date. We have as we’ve tried to condition the market to think about kind of a pipeline of these projects and we continue to kind of better choose the one that have the highest return potential throughout. A lot of the stuff around Suncoast, most of the hotel renovations even the Orleans will be in our maintenance capital budgets. But as Keith mentioned, the early signs that Suncoast or — we’re seeing new customers in the building. We’re seeing people visit more frequently. And so we’re encouraged by those type of investments even though they kind of qualify in our book as maintenance capital. So I hope that kind of gives you some color.

David Katz: It does. And if I can just follow up and clarify, when we’re thinking about the Orleans because it’s in the maintenance budget, we aren’t necessarily sort of holding it to the same standard or thinking about its earnings power longer term in the same way with that 15% or 20%, right?

Josh Hirsberg: Yes, I think that’s right, because it gets to be a blend of maintenance and capital and growth, and it’s just hard to kind of distinguish between kind of what that project? Is it more maintenance or is it more growth. So I think that’s why we put it in maintenance really.

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

Brandt Montour: So first question is just a clarification about the Orleans project for next year, which you mentioned. Is that — I mean, I imagine your hotel rooms, you mentioned a few things. Is that something we should consider some — potentially some disruption impact? I know that it’s got easy comps here, and there’s a couple of different things going on in the market that’s affecting that property. So how do you think about that property into next year?

Josh Hirsberg: So I think it’s a little early to try to figure out kind of disruption. I don’t — I think our view would be that at the beginning of a project like that, if we’re even able to get it started in the second half of next year, it’d be more limited in terms of the disruption. Once we understand the actual program scope and the timing, we can provide better color on that. We’ve been — our management teams at Suncoast have done a very good job to manage through the disruption to date at that property, and it’s been significant and that construction activity continues. So we’re learning how to manage that — those processes. Each one will be unique and different. But to date, we’ve been pretty good at managing through it at the Suncoast.

No doubt, it is affecting our performance in some way. But the fact that it is, like Keith said, in line with prior year at this point, that’s pretty encouraging. So I think at this point, we wouldn’t be calling out expectations for disruption related to Orleans and until we have better clarity on timing and the full scope of the project. Keith, I don’t know if you want to add to that.

Keith Smith: No, I think just tagging on to what Josh said, as you’re thinking about 2026 and thinking about the Orleans, I wouldn’t anticipate anything significant as we begin to have more clarity on the timing of all of that and what’s going to take place first and second. And when we end up getting to “the middle of the casino,” which, yes, we will have some disruption as we get into those types of things, yes, we’ll be able to update you. At this point, as you’re modeling out 2026, I wouldn’t anticipate anything.

Brandt Montour: Great. That’s helpful. Just a quick second question about Midwest and South. How would you describe the promotional environment across your markets? Any sort of changes quarter-over-quarter? Or has it been pretty consistent from competitors?

Keith Smith: In several markets, there have been competitors who’ve been stepping on the gas, so to speak, with respect to marketing spend and being more aggressive. We have generally remained very disciplined. It is reflective in our margins that remain consistent year-to-year. And while we may be up just a tick just a little bit overall, once again, it is highly efficient, highly productive dollars reflected and we’re able to grow revenue, we’re able to grow EBITDA and we’re able to maintain margins. So we are seeing some enhanced marketing by our competitors, but we’re not responding. Frankly, some of the enhanced marketing we’re doing is in relation to declines in destination business, not in relation to what our competitors are doing.

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

Benjamin Chaiken: On the Suncoast renovation, you mentioned in line with the prior year a few times, but I would think that there was still some disruption. So to the extent there was, could you quantify that impact in 3Q and then maybe how you’re thinking about 4Q even just anecdotally?

Keith Smith: Yes, I’d love to, but it’s really difficult to quantify the disruption. Look, when we say it was in line with prior year revenue and EBITDA perspective, I think that says it all. There’s clearly disruption. We have fewer slots on the floor today than we did a year ago because we’re in the middle of the casino. There are a lot of walls up. There’s ceiling work being done. So it is disruptive, and it will continue to be disruptive. If you were to walk in the building today, we have a temporary front desk because we’re doing work around the front desk area. But to date and through Q3, and we’d expect it to be through Q4, things are in line with the prior year. Our customers are hanging in there with us. The management team is doing a great job of taking care of our guests. The guests have had very, very strong positive reactions to what we’ve unveiled thus far. And so everything is working, but hard to quantify.

Benjamin Chaiken: Okay. Understood. And then you’ve got a large expansion at Sky River, I believe, that opens early next year, 1Q, I believe. Understanding you earn management fees here, is there anything we need to watch out for in Q4 in terms of construction, just ahead of that opening?

Keith Smith: From a construction standpoint, everything is on the outside of the building. And so there really isn’t any impact to — on the negative side to the ongoing construction or “the opening whenever that happens sometime early next year,” it’s parking garage, along with some added casino space that will house the added slots. The second phase that I described, which includes hotel towers, more restaurants, also is on the outside of the building. And so there will be no immediate impact or construction disruption from that.

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

Steven Pizzella: Just curious, as we think about early next year, can you share any expectations you might have for a benefit from the tax bill?

Josh Hirsberg: Yes, Steve, I mean it’s a question we get asked quite a bit. I don’t — we’ve not really found a way that we’re comfortable to kind of estimate the overall benefit from that. We — there’s several elements to it from — and I think Keith mentioned in his remarks, ranging from tax on tips to certain higher standard deductions and credit for seniors. I think ultimately, we come away thinking it’s just incremental benefit to us overall, but we have not quantified it in terms of revenue and EBITDA.

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

John DeCree: Josh or Keith, I wanted to ask if you could provide a little color on kind of how the quarter played out and maybe the Cadence month-to-month. We kind of use the state GGR data to help us, but July and August looks pretty strong. September, maybe a little bit more mixed. So any color you could give us on kind of how the quarter played out, particularly in the Midwest and South regions.

Keith Smith: I think as we look across our portfolio, it was fairly steady. You have to take into account like in September where the holiday fell different, and therefore, we got a little bit bigger benefit technically in August than we did in September. But that’s over the course of a 10-day period, it flips in 1 month versus the other. But when we look at kind of core trends in the business week-to-week, not a lot of fluctuation. So I don’t know that I have anything else to add other than that.

John DeCree: That’s great, Keith. And then maybe I know this one is difficult to kind of track given the limited data, but curious if you could give us a little bit more color, again, in the Midwest and South, specifically on the retail play, some of the better trends you’re seeing there. Is that kind of year-over-year growth in kind of spend, more customers come in the door? And if you have any guesses, a number of theories, but kind of what might be driving that uptick in retail play?

Keith Smith: So it’s a trend that actually has been going on for a couple of quarters now. We’ve actually been talking about it, and it continued in through the third quarter with the improvements kind of increasing, so to speak. I think we’re seeing generally on the rated side, increases in frequency and increases in spend. So both ADT or spend are going up and frequency is increasing, which are positive trends. Josh, I don’t know if there’s anything else to add.

Josh Hirsberg: Yes. I would just add, just to clarify for everyone, retail is 2 buckets. It’s the lower end of the rated. That’s what Keith was just talking about in terms of spend and frequency. And then there’s the unrated component as well. So we can kind of understand what’s going on with the lower end of the rated piece. What’s interesting as a group is the unrated business has also been improving sequentially over time as well and actually been a big driver of the retail component. So both the low end of the retail rated piece that we know about and the unrated segment have both been kind of in lockstep improving year-over-year as we’ve moved through this year. So — and it’s been a consistent trend. It’s been very interesting to watch.

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

Daniel Politzer: I was wondering maybe we can walk through the fourth quarter. It seems like there’s a few moving pieces there. So maybe just to get some clarity. I think Tunica is closing in November in Norfolk. I think there’s a temporary casino that opens also in November. And then I don’t know if you gave — I don’t think you gave an update for Managed & Other, but then also that would help. And then any impact from the cybersecurity incident in the quarter?

Keith Smith: I think as you think about Tunica, you should expect obviously a fairly negligible impact. I wouldn’t adjust your models for anything related to that or for Norfolk for that matter. We’ve talked in previous calls about this is a very small, modest temporary facility, and our focus really is on the permanent. And so you assume that this will be a breakeven as you think about the fourth quarter or even next year. As you think about the cyber event, once again, not much we can say other than what was in the 8-K, which is it did not have any impact to our business operation and we’ve got cyber insurance to backstop us. There was a third question in there, I lost — fourth I lost track of…

Daniel Politzer: Managed & Other?

Josh Hirsberg: Yes. I’ll let you answer that. So Managed & Other, I think the key for Managed & Other, it’s going to be a pretty stable business in Q4 relative to when you think about the trends of this year just because the business is operating at or very near capacity. And then once it gets the incremental slots early next year, that’s in the quarters following that, I think, is where we’ll start to see the benefit of that and then eventually from the expansion of the hotel and meeting space in mid — probably mid 2027. So I think for Managed & Other for Q4 will be very similar to what you’ve seen in the quarters of other — earlier quarters of this year.

Daniel Politzer: Got it. And then just for my follow-up, I don’t think you paid the taxes in the quarter on the FanDuel stake sale. When can we expect that? And then along with — on the tax front, the one big bill, is there any impact or offset you could get from that, that may be applied here?

Josh Hirsberg: Not much of an offset. More than likely, the payment will occur sometime in the first quarter of next year.

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

Stephen Grambling: I was hoping you could dig into the balance sheet a little bit. Just how are you thinking about the optimal leverage of the business, particularly if M&A opportunities maybe don’t come to fruition, could we see that leverage tick back up? Or what would you be looking to do in terms of optimizing the balance sheet longer term?

Josh Hirsberg: Steve. So before the FanDuel transaction, our leverage was about 2.8x as — and our leverage target was around 2.5x long-term. Post — as a result of the FanDuel transaction, which happened in late July, early August, our leverage is, as I stated in my remarks, around 1.5x. I think based on just the capital plans that we have now, primarily related to Virginia coming — the capital related to the permanent of Virginia, our leverage will tick up over time. It will go back up to around probably in the next 1.5 years or so to around 2.5x. I think it’s odd to talk about your optimal leverage being at least for us, it’s odd for optimal leverage to be above where a target above where we are. But I think that it doesn’t — it’s not something we strive to achieve given where we are today.

To the extent that we have opportunities I guess the way I would say, in other words, we’re not trying to hit the target just because we’re a 1.5x, and we want to be at our target leverage. It could be that our leverage remains at 1.5x over time. We don’t think that’s probably the right leverage, but we don’t have anything that warrants increasing our leverage at this point. And so we’ll continue to think through this and continue to be kind of prudent on how we think about it. But it’s kind of like we were in a good place and doing everything we were doing at 2.5x, happened to get a big windfall, we’re 1.5x, and that doesn’t really change the way we think about anything that we were doing before. If opportunities come along, if we decide to buy back more shares or return more capital, then that will be just part of our thought process that we develop over time.

But until then, we’ll be running the business between 1.5x to 2x and will gradually tick up as a result of our capital plans and the plans we have in place today. Keith, I don’t know if there’s anything you want to add to that?

Keith Smith: No, look, I think what Josh was alluding to is, first, it’s only been — it’s less than 90 days since we received the payment and leverage has been pushed down to 1.5. And we want to take a long-term view, be thoughtful about what to do with the current leverage, how best to position the company, could be M&A, could be other things, could tick back up. And so we don’t have an answer for you right now other than we understand it, and we’re having thoughtful discussions about where that should be. I’m sure we’ll have more to talk to you about in future quarters, but nothing really to say right now.

Stephen Grambling: That all makes sense. If I could sneak one unrelated follow-up in. As we look at the Locals market, and you talked about the 6% wage growth there. It seems like it’s about as wide as I’ve seen it relative to the GGR growth for that market in aggregate. Do you think that there’s a lead lag here? Or is there anything else that you would point out that’s maybe creating that wider gap versus history?

Josh Hirsberg: Yes. So Steve, I think that like — I mean, it’s a good observation, but I think you perhaps at least in our business, the impact of the destination business is shown and visible on the income statement when you look at hotel revenues year-over-year. You can look at that, see they were down about $5 million. But that destination business is a significant amount of hotel room nights. While it’s primarily at the Orleans, it affected really every property in Las Vegas and outside of Las Vegas to some degree. And there is F&B. There’s banquet business, is highly profitable to us, and there’s a significant amount of gaming revenue associated with that business. So it’s very profitable business to us. And while it’s very difficult to estimate the impact, I think the reality is that, that’s probably what’s creating that gap.

There’s wage growth that we’re seeing show up in our business in terms of a stronger local customer, but if you had backed up and said, okay, we had that wage growth and destination business, you would see probably a healthy gaming revenue growth that would mirror maybe what your expectations were. So that’s how I think about it at least.

Operator: Our next question comes from David Hargreaves of Barclays.

David Hargreaves: So in terms of Hawaii, I think you said revenue was steady. I’m wondering about headcount and volumes. How are things there?

Keith Smith: Specifically coming out of Hawaii?

David Hargreaves: Yes, with Downtown.

Keith Smith: Look, Downtown volumes on the street are down, and that’s frankly driven by visitation to Las Vegas because there’s a strong, strong correlation between visitor volumes Downtown and visitor volumes to Las Vegas. And so visitation on the street is down, which is what kind of impacted, we call it destination business in the downtown area for us. Kind of our core market, which is the Hawaiian market, performed normally. And — but we felt softness in the destination business. We felt softness from lack of tourism on the street.

David Hargreaves: And then with respect to the Tunica closure, I’m just wondering if there’s just leaving the building and leaving town something that maybe happens with the gaming equipment. Did you try to sell that property? Curious as to what happened there?

Keith Smith: I think the way to think about the closure of Tunica, first of all, when we’re all done with this, the site will be scraped clean. We’ll take everything down. We’ve already found homes for the equipment and all the recoverable assets, so to speak, in the building. The property had gotten to a point where EBITDA was fairly small and the level of maintenance capital required to maintain it at our standards was growing. And frankly, there was not going to be a good return on that capital investment to maintain that building or standards because we do have standards as to how we want our buildings to look and feel and what we want our guests to experience. And so we’re just looking at the data, looking at the maintenance capital that’s going to be required and the current level of EBITDA and where the market is, it just made sense to close the building down.

Not a decision we came to lightly, but it’s a decision we came to. And once again, we will be able to reuse a lot of the gear and a lot of the equipment, sell off some stuff that we don’t have use for. Everything will be scraped clean. It will be turned back into just raw land, and we’ll attempt to dispose of the land.

David Hargreaves: Last one. I really applaud your conservatism with the balance sheet. If we look at your properties that are leased, are you happy with the EBITDA coverage of interest and rent at this point as you are with your leverage? How do you feel about the rent coverage picture?

Josh Hirsberg: Yes. I think we’re happy with it and our landlord is happy with it, quite honestly. They don’t have a corporate guarantee, but they really don’t need one given the coverage there. So everything is a happy partnership there.

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

Chad Beynon: First one on the opening or start of Missouri sports betting. I know you have a partnership with Fanatics. I believe it might be the first with them. And I know that includes some of their branded retail sports books at your properties. So could you maybe talk about anything you’re willing to disclose in terms of the relationship and then maybe future opportunities with this company given their ascension on market share that we’ve been able to track?

Keith Smith: Yes. So you’re right. We have 2 properties in Missouri, Ameristar Kansas City, Ameristar St. Charles. And both of them received licenses as did Fanatics yesterday when the Missouri Gaming Commission issued licenses. So people could be prepared to open the 1st of December. It is our first relationship with Fanatics. And whether or not that expands, always hard to tell. It’s a strong relationship thus far. We know some of the folks in that organization. So we have a good relationship there. And we’ll see, once again, how it develops and what other opportunities exist to take that relationship further. Nothing really to report other than that at this point.

Chad Beynon: Okay. Great. And then in terms of some of the near-term, I guess, an inflection in Vegas in the destination market, we met with a lot of the companies on the strip in the past couple of weeks and some pointed to November, others obviously talked about F1 maybe being more of a good guy this year and then the strength into Q1. Should all of that help you as well? And in terms of internal bookings, are you viewing maybe November as kind of an inflection point where you’re starting to see good year-over-year growth? I guess that would be more Downtown, maybe excluding Orleans with some of the things that you’ve talked about?

Keith Smith: Yes. So once again, I noted earlier that as we look at our kind of 90-day booking pattern, today, sitting here today or a week or so ago, it is much more positive than it was 3 months ago. And it’s still soft, but it is significantly better than it was 3 months ago. And so that makes us feel good about kind of the next several months given those numbers, and that’s true for Downtown as well as it is for our Locals properties with hotels. So we’ll see how it all comes together. As the strip continues to do better, as occupancy and rate on the strip continue to rebound, clearly, that will benefit us. It’s just an indication that people are traveling again and coming back out. So that will help us. But overall, our own bookings are once again better over the next 90 days than they were a couple of months ago.

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

Josh Hirsberg: Thanks, David, and thanks to everyone for joining the call and the questions we received today. If you have any follow-ups, please feel free to reach out to the company. This concludes our call and you can now disconnect. Have a good day.