Boyd Gaming’s Las Vegas locals segment powered ahead in the third quarter of 2016 with its sixth consecutive quarter of adjusted EBITDA growth, the company reported Tuesday afternoon.
While net revenues from its Vegas environs properties increased slightly year-over-year to $148.9 million, EBITDA surged by 12.1 percent to $36.2 million – the result of every property in the segment growing its EBITDA and operating margins.
“Our Nevada operations continued their strong performance in the third quarter, as our Las Vegas Locals segment delivered double-digit EBITDA growth for the fifth time in the last six quarters,” said Keith Smith, Boyd Gaming president and chief executive.
Overall, the company posted net revenues of $531.9 million, down from $546.3 million during the prior year quarter and falling shy of analyst expectations. Total adjusted EBITDA checked in at $121.9 million, down from $125.2 million – also short of expectations, though this figure excludes earnings from discontinued operations. Income from continuing operations was $161.9 million compared to $7 million in 2015, and net income was $342.6 million, or $2.97 per share.
These results were positively affected by the receipt of $190.4 million in noncash income tax benefits stemming from a previous deferral. Boyd also reaped a $181.7 million after-tax gain from the sale of its 50 percent equity stake in the Borgata in Atlantic City to MGM, and the company received another $15.2 million during the quarter from discontinued operations and property tax benefits resulting from the Boyd transaction.
Boyd’s downtown Las Vegas segment performed in line with expectations, posting $56.6 million in net revenues. The Midwest and South segment – which were combined in the third quarter for reporting purposes – reported a year-over-year drop in net revenues from $341.6 million to $326.4 million, mainly due to flooding problems in Louisiana other largely non-controllable factors.
“Outside of Nevada, results were primarily impacted by continued softness at IP and Par-A-Dice, while the remainder of our regional operations generally performed in-line with our expectations,” Smith said.
The reaction from Wall Street analysts was mixed.
“Overall, the segments exhibited challenging trends which were below our optimistic expectations,” wrote David Katz of the Telsey Group. “Las Vegas Locals revenue of $149M (+1% YoY) was 5% below our expectations, though operating margins improved 250bps across the segment.”
“Though (Boyd) is clearly experiencing new competition-induced pressures in several of its operating markets, namely (Mississippi) and (Illinois), we believe the business at its core continues to operate according to plan,” wrote Steven M. Wieczynski of Stifel Nicolaus Capital Markets.
Smith also touted the purchase of the Aliante Hotel in North Las Vegas for $380 million – a deal that closed on September 27 – as a key asset that will give the company a foothold in North Las Vegas.
“Looking ahead, the acquisition of Aliante positions us well for future growth, as we expand our presence in our top-performing market,” he said, noting that the proposed acquisition of Cannery casinos was still awaiting regulatory approval and that the deal should close by the end of the year.
Smith also highlighted the company’s efforts to simplify its balance sheet through debt consolidation, a tactic that will reduce interest expenses, increase free cash flow and reduce leverage over the long term.
“We also continued to strengthen our financial foundation with the completion of a major refinancing, simplifying the Company’s capital structure and significantly reducing interest expense,” he said. “We remain Confident in our ability to reach our long term leverage target of 4-5x ebitda within the next 12-14 months.
