Boyd Gaming reports record first quarter

April 26, 2023 3:51 PM
Photo: Shutterstock
  • Buck Wargo, CDC Gaming Reports
April 26, 2023 3:51 PM
  • Buck Wargo, CDC Gaming Reports

Boyd Gaming reported record revenue, adjusted earnings, and operating margins for its Las Vegas casinos during the first quarter, thanks to increased visitation to the city.

Boyd on Tuesday reported first-quarter revenues of $964 million, up 12% from $860.7 million in the first quarter of 2022. The company reported net income of $199.7 million for Q1, compared to $162.9 million for the year-ago period.

Boyd cited double-digit growth in non-gaming revenues and continued strength in play from core customers. The downtown Las Vegas segment also set first-quarter records for adjusted earnings and margins, driven by strong visitation throughout the downtown area, continued growth in play from core Hawaiian customers, and increased traffic at the Fremont Hotel-Casino following its recent expansion.

Boyd Gaming President and CEO Keith Smith said its Las Vegas locals business had revenues and adjusted earnings that each grew about 6%, while operating margins were 52.5%. Gaming revenue was up in the locals segment as core play increased 3% over the prior year, while unrated play also grew slightly.

Non-gaming revenue growth was even stronger, driven by demand from out-of-town guests, Smith said. Hotel revenue rose nearly 30% year over year, driven by double-digit gains in both occupied rooms and cash run rates. These trends should continue as hotel reservations for the next 90 days at the locals properties are currently up more than 10% year over year.

“Looking ahead, we expect to see continued benefits from the strong tourism trends across the Las Vegas valley,” Smith told Wall Street analysts.

During the trailing 12 months, more than 40 million people visited Las Vegas, up 16% from the prior year, while traffic through the Harry Reid International Airport reached 54.7 million passengers during that same timeframe, an all-time record. In addition, Las Vegas visitors are spending freely, averaging more than $1,100 per visit last year, an increase of nearly 35% over 2019 levels.

Convention business is strengthening as well, rising 86% over the trailing 12 months, Smith told analysts.

“The entire market is benefiting from a strong lineup of entertainment and sporting events across the city within the first quarter and throughout 2023,” Smith said. “With more than 5,000 hotel rooms in the market, our local properties are well positioned to capitalize on these strong visitation trends.”

These trends are also helping to drive growth at its downtown Las Vegas business, which set first-quarter records for EBITDAR and margins, Smith said. Downtown revenues rose 14%, EBITDAR was up 22%, and margins increased 240 basis points to 39.5%.

“With more people visiting Las Vegas, more are stopping by downtown during their stay,” Smith said. “Fifty-eight percent of Las Vegas visitors reported they visited downtown Las Vegas last year. This increased visitation is benefiting all three of our downtown properties. But our downtown-growth story goes well beyond increased tourism in the Fremont Street area. We continue to see strong trends in our core Hawaiian-customer segments as well, with play from these customers up more than 10% year over year in our downtown properties.”

In the Midwest and South segments, core-customer play grew year over year; however, segment results were impacted by continued softness at the company’s properties in Louisiana and Mississippi, Boyd reported.

Boyd’s online segment achieved first-quarter adjusted earnings of nearly $21 million. This is more than double than prior year results, driven by the launch of online gaming in Ohio and Kansas, continued growth in existing markets, and the addition of Boyd Interactive, Smith said.

Based on a strong start to the year and normal seasonality, Smith estimated online operations will generate about $50 million in EBITDAR in 2023 and discussed expanding the Boyd Interactive’s portfolio.

“We expect to transition, subject to final regulatory approvals, our sturdiest online casinos in Pennsylvania and New Jersey to the Boyd Interactive platform in May,” Smith said. “Once complete, this transition will be an important step forward in the execution of our online-gaming strategy.”

Joseph Greff, an analyst for J.P. Morgan, said Boyd’s Q1 revenue and EBITDAR exceeded consensus estimates and expects similar reports next week when Red Rock Resorts releases its first-quarter earnings.

Barry Jonas with Truist Securities reiterated a buy for Boyd stock. He said the valuation doesn’t factor Boyd real estate and its 5% ownership in FanDuel.

Jonas noted that management has previously indicated they expect $50 million in annualized EBITDA from the Sky River management agreement in northern California, though he now believes it could generate $65 million to $70 million in 2023.

Carlo Santarelli, an analyst with Deutsche Bank, said that while beating Street projections was expected for Boyd, the upside in the locals market, the online segment, and Sky River management agreement will be well received.

“As we previously noted, we didn’t expect the first quarter of 2023 upside to come as a surprise, nor did we expect the quarter to serve as a meaningful near-term catalyst for shares and we remain of this view,” Santarelli said. “That said, we continue to believe Boyd remains well positioned within the regional-gaming space.”

Santarelli also said Boyd’s results bodes well for Red Rock Resorts.

As for Caesars Entertainment, also hindered by the lagging nature of the Gulf Coast properties, “The larger story in their regional segment is likely to be the impact of weather in Reno, and we remain modestly below consensus in the regional segment, though nicely ahead overall given upside in Las Vegas and digital,” Santarelli said.