In its third-quarter earnings call, Boyd Gaming reported a a 4% decline in unrated play and warned that the imminent opening of Red Rock Resorts’ Durango Station casino in southwest Las Vegas will temporarily cut into its locals’ customer base, but business will return without a major impact to its bottom line.
Boyd also reported a 1% gain in core customer play, but that higher labor, utilities, and insurance costs impacted third-quarter earnings,
Executives noted that additional capital projects, beyond its hotel renovations currently underway, will be announced in mid-2024.
“We do have significant acreage in Las Vegas at the Orleans, Suncoast, Gold Coast, and Aliante Station to be able to grow these businesses,” President and CEO Keith Smith told Wall Street investors. “We’ve talked in the past about trying to invest and leverage up strong existing businesses that we can continue to grow and get a good return on our investment. The first two were the Fremont (in downtown Las Vegas) and Treasure Chest (in Louisiana) and we’ll be announcing a few more next year, but certainly our local properties are very strong performers that we think can continue to grow with some additional capital investment.”
Boyd reported third-quarter revenues of $903.2 million, up 3% from $877.3 million in the third quarter of 2022. The company reported net income of $135.2 million versus $157 million a year ago.
Total adjusted EBITDAR was down 5% to $320.8 million in the third quarter compared to $337.7 million in the third quarter of 2022. Adjusted earnings for the third quarter were $137.3 million versus $159.2 million for the same period in 2022. Property margins were 40%.
Core-customer play increased from the second quarter and on a year-over-year basis, while hotel rose 4% and food-and-beverage revenue was 5% higher year over year driven by strong cash business. These gains were offset, however, by year-over-year softness in retail play, though business volumes from retail customers have remained consistent since late last year across all segments, the company reported. Retail play fell off in the fourth quarter of 2022, but has remained consistent since then.
Smith said the performance during the third quarter in Las Vegas was consistent with the second quarter. Core- customer play rose 2%, while retail play fell 4%, with a 6% increase in non-gaming revenue.
“Looking ahead to the fourth quarter, we expected trends among both core customers and retail players to remain consistent with the last several quarters,” Smith said. “We also expect the current cost pressures to continue into the fourth quarter, but overall expenses should be sequentially consistent with the levels we saw in the third quarter. We expect there to be some impact from the opening of a new competitor. As we’ve seen with previous openings of new properties, we expect some initial trial visitation from our customers to this new property. After this initial trial is over, we expect this impact will fade and our customers will return and long-term growth will continue as the Las Vegas market absorbs this new capacity.”
Josh Hirsberg, vice president and chief financial officer, said they don’t feel Boyd will have a “direct impact” with the added competition in the marketplace and that over time, “all boats will benefit from a rising tide.” The impact will be low- to mid-single-digits, he said, who like Smith didn’t name the competitor.
“We generate $450 million to $500 million of EBITDA and worst case would be a $25 million impact for all of next year, and I think that would be pretty conservative,” Hirsberg said.
Smith said downtown Las Vegas is thriving, with strong pedestrian traffic and visits from the company’s Hawaiian customers. Boyd expects improved performance in 2024 as renovations are completed at its downtown properties.
“Looking at our southern Nevada operations as a whole, the continued growth of our core customer, the stability of the retail customer, and the strength of the Las Vegas economy give us optimism for the future,” Smith said. “Visitation in Las Vegas is up 8% year to date, convention and meeting business is up 30% this year, and average daily room rates are more than 10% across the market. Airport traffic is at all-time highs and with coming events like Formula One and the Super Bowl, a busy convention calendar, the recent debut of the Sphere, and fourth- quarter openings of two new resorts with nearly 4,000 hotel rooms, the stage is set for continued growth of the Nevada market.”
In the Midwest and South, Smith said customer trends remained stable during the third quarter. Broad growth in core-customer volumes was offset by declines in retail play.
Boyd’s online segment benefited from strong results from FanDuel’s operations, as well as the addition of Boyd Interactive, acquired by the company in November 2022, officials said. Strong revenue and adjusted EBITDAR growth in its managed and other business was driven by management fees from Sky River Casino, which opened in August 2022.
“This (online) segment is on track to achieve $60 million to $65 million in EBITDAR for the full year,” Smith said.
As part of its ongoing share-repurchase program, the company repurchased $106 million in stock during the third quarter.
Smith said they’ve seen some turnover of employees with the opening of two new casinos, including the Fontainebleau Las Vegas, but nothing significant enough to impact Boyd’s business.
