Boyd Gaming Corporation (NYSE:BYD) Q4 2023 Earnings Call Transcript

Boyd Gaming Corporation (NYSE:BYD) Q4 2023 Earnings Call Transcript February 8, 2024

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David Strow: Good afternoon, and welcome to the Boyd Gaming Fourth Quarter and Full Year 2023 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 is being recorded on Thursday, February 8, 2024. At this time, all lines are in listen-only mode. Following our remarks, we will conduct a question-and-answer session. [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, 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.

So with that, I would now like to turn the call over to Keith Smith. Keith?

Keith Smith: Thanks, David, and good afternoon, everyone. 2023 was another great year for our company as we continue to build upon the record performances we have delivered over each of the last several years. We achieved full year records for both revenues and EBITDAR with operating margins remaining well above historical levels. 2023 was the third consecutive year we set revenue and EBITDAR records on a full year basis. This full year performance is a tribute to our diversified portfolio with strong growth from both our Online and Managed businesses. This growth was complemented by stable revenues from our property operations as we saw continued strength in play from our core customers and growth in our non-gaming business.

And we finished the year strong with a solid fourth quarter performance. During the fourth quarter, company-wide revenues rose 3% to $954 million, driven by growth in our Online segment. EBITDAR for the quarter was $355 million, down slightly from a record fourth quarter last year. Looking at property operations, gaming revenues for the fourth quarter were down less than 1%, a notable improvement from the last several quarters. During the quarter, play from our core customers grew at the strongest rate of the year. While this growth was offset by lower retail play, the year-over-year decline in retail play was the smallest we have seen since the first quarter of 2023. And non-gaming revenue for the quarter continued to grow, rising 1.5% over prior year.

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Q&A Session

Property-level operating margins for the quarter exceeded 40%. This is in-line with the margins we have delivered over the last three years, reflecting our team’s ability to operate efficiently through a variety of economic conditions. Now, moving to results for each segment. In our Las Vegas Locals segment, both revenue and EBITDAR for the fourth quarter were in-line with our expectations. Play from our core customers grew at a rate similar to the third quarter, demonstrating the continued strength of this customer segment. Retail play was also sequentially consistent with third quarter levels. Our non-gaming business continues to perform well with hotel revenues up 4% during the quarter. Finally, our property teams did an excellent job managing expenses in a difficult environment with margins once again exceeding 50% in our Locals operations in the fourth quarter.

Looking ahead to 2024 in our Locals segment, recall that we produced a record first quarter performance last year, so we are facing tougher year-over-year comparisons. In addition, we also expect to see some impact from the recent opening of a new competitor in the Las Vegas Locals market and a room remodel project at our Gold Coast Hotel. Having said this, we are encouraged the customer trends in the Las Vegas Locals segment are holding steady so far in the first quarter, with overall play volumes looking similar to fourth quarter levels through early February. Moving next to Downtown Las Vegas, revenues rose slightly while EBITDAR equaled last year’s record fourth quarter performance. These results benefited from the completion of construction projects at both Main Street Station and the Fremont during the quarter.

While these construction projects impacted our Downtown results throughout most of the year, these investments are beginning to pay off. The Fremont performed at record levels during the fourth quarter, while Main Street had its best quarterly performance of 2023. Our Downtown segment also saw solid growth in play from our core customers during the quarter, while retail play also rose. Looking ahead, we are optimistic about the direction of our Downtown Las Vegas segment. With our construction projects now complete and the Fremont performing at record levels, our Downtown Las Vegas business is poised for healthy growth in 2024. Our optimism for our Las Vegas operations is supported by the continued strength of the Southern Nevada economy. In the near term, we are excited about Las Vegas’ first Super Bowl this weekend as we are experiencing strong demand in cash hotel business at both our Locals and Downtown properties.

In the longer term, the direction of the tourism sector remains vibrant with nearly 41 million people visiting Nevada in 2023, exceeding the prior year by more than 5%. Gaming revenues in Southern Nevada reached a record $13.5 billion in 2023, a 5.5% increase over 2022. And convention business was up 20% in 2023, about 10% below its all-time high in 2019. Average daily room rates continue to trend higher, increasing 12% for the year across the Southern Nevada market. And more than 57 million people passed through the Las Vegas airport last year, topping the record set in 2022 by more than 9%. But the strength of the Southern Nevada economy goes beyond tourism. Of the nation’s 30 largest metro areas, Las Vegas ranked #1 for job creation last year, with total employment rising more than 4% in 2023.

This employment growth was broad based with growth across eight of 11 major job sectors. And with billions of dollars in projects under development across the Las Vegas Valley, the construction sector continues to serve as an economic engine for the Southern Nevada economy. Moving outside of Nevada, our Midwest & South segment returned to growth in the fourth quarter. Both revenue and EBITDAR increased over the prior year, with operating margins of more than 38%. Gaming revenues were essentially even with the prior year, the strongest quarterly performance we saw from our Midwest & South segment all year. And we saw encouraging results from the various property investments we made in 2023. Our new amenities have been well received by customers and helped drive a 4% increase in food and beverage revenue during the quarter.

Looking ahead, the first quarter results have been impacted by January’s severe winter weather. But with these storms now passed, customer trends over the past two weeks have rebounded to fourth quarter levels, giving us optimism in the direction of this business. Next, in our Online segment, revenue and EBITDAR growth in the fourth quarter was primarily driven by the introduction of sports betting in Ohio in early 2023. On a full year basis, our Online segment performed in-line with our earlier estimates with total EBITDAR of $62 million for 2023. Looking ahead, we expect the Online segment to maintain this level of performance in 2024 with $60 million to $65 million in full year EBITDAR as no new sports betting markets are expected to come online this year.

And finally, our Managed & Other business produced another strong quarterly performance. Both revenue and EBITDAR grew over prior year in the fourth quarter, thanks to continued strong results at Sky River in Northern California. For the full year, this segment generated EBITDAR of $84 million, including management fees earned from Sky River. In 2024, we expect our Managed & Other business will maintain its current level of performance with full year EBITDAR of approximately $85 million, driven mainly by Sky River. And given the strong performance of Sky River, the Wilton Rancheria Tribe is exploring significant expansion of the property, including additional casino space, a hotel tower and meeting and convention facilities. While plans have not been finalized, we are optimistic about the long-term growth potential of this property.

So in all, the fourth quarter of 2023 was a strong close to another record year for our company, with continued strength from our core customers, solid growth from our Online and Managed businesses, and strong returns from our recent property investments. The property investments we’ve been making are improving the customer experience, supporting growth in play from our core customers and driving increased visitation throughout the business. After opening nearly a dozen new or upgraded restaurants and bars across the country in 2023 and completing casino renovations at the Fremont, we plan to renovate or upgrade a similar number of food and beverage outlets in 2024. Beyond these investments in our food and beverage offerings, we plan to renovate hotel rooms at the Gold Coast, Blue Chip, Ameristar St. Charles and Valley Forge in 2024.