Boyd Gaming reports strong Q2, says it’s well-positioned for any downturn

July 27, 2022 12:35 AM
  • Buck Wargo, CDC Gaming Reports
July 27, 2022 12:35 AM
  • Buck Wargo, CDC Gaming Reports

Aided by a strong showing in downtown Las Vegas and its locals’ segment, Boyd Gaming reported its second highest quarterly adjusted earnings in history, and executives said Boyd is confident in its position despite high inflation and talk of a potential recession.

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During a second-quarter earnings call Tuesday, President and Chief Executive Officer Keith Smith said they haven’t seen any sign of weakness from its overall customer base. He reiterated a point he’s made several times over the last two years: Boyd has no plans to return to its past practices and increase marketing spending to entice customers.

Josh Hirsberg, executive vice president, chief financial officer, and treasurer, said Boyd’s philosophy of a lower-leveraged position and access to undrawing capacity gives the company the ability “to weather the uncertain times that everyone is thinking about and wringing their hands about today.” This is a different environment than what drove the Great Recession in the late 2000s, he added.

“The business today feels very different than pre-COVID, in the sense of who the customer is, our focus on that customer, and how we’re marketing to that consumer,” Hirsberg said. “Insightful for us is our core customer (base), that we’re reinvesting in, continues to be very stable and grow. Driving our business and overall performance is a focus on a very loyal and high-quality customer.”

As of June 30, Boyd had cash on hand of $250.2 million and total debt of $2.9 billion. Smith said they’ve worked hard over the last couple of years to have strong balance sheets.

“All the scenarios we run have us comfortable, given our low leverage, at least in the near term with what things may look like,” Smith said. “We’re dealing in an uncertain environment and economy, but everything we see says the business is pretty stable. If something were to happen, given our current financial strength, we’re not losing sleep.”

Boyd reported second-quarter revenues of $894.5 million, up slightly from $893.6 million in the second quarter of 2021. The company reported net income of $146.8 million, or $1.33 per share, for the second quarter, compared to $113.7 million, or $1 per share, for the year-ago period.

Total adjusted EBITDAR was $353.9 million in the second quarter of 2022, compared to the record $385.4 million in the second quarter of 2021. Companywide operating margins after corporate expenses were 39.6%, exceeding 39% for the fifth straight quarter.

The Las Vegas locals segment achieved margins above 50% for the fifth straight quarter, Smith said. On a sequential basis compared to the first quarter of 2022, revenue increased 4% in the Las Vegas locals’ segment, while adjusted EBITDAR rose nearly 6%, Smith said.

Revenues grew 9% sequentially in downtown Las Vegas as the segment set a quarterly adjusted EBITDAR record and operating margins exceeded 40% for the first time, Smith said.

Boyd’s Midwest and South segment posted its strongest revenue and adjusted EBITDAR since the second quarter of 2021, as operating margins remained steady at 38%, Smith said.

“What you see is what you get from the various regions that are delivering,” Hirsberg said. “They’ve been very consistent for the last 18 months or more. While we said we expect a little pressure as a result of incremental marketing over time and a little bit of a labor over time, some of that is associated with revenue growth as well. We generally think the levels you’re seeing today are in the neighborhood you should expect to see from us going forward. We feel pretty good about where the business is these days in terms of being able to deliver those margins.”

Those results occurred even though the second quarter of 2022 was a difficult comparison to the same period in 2021, which benefited from government stimulus and the lifting of COVID restrictions, Smith said.

As the industry has come out of COVID, Smith said different casino competitors have staked out various positions. Some went back to pre-COVID levels of marketing spend fairly early after reopening two years ago. Some even exceeded those levels of spending. Others, such as Boyd, remained disciplined under a new operating model and are targeting customers in different ways.

“We don’t see ourselves getting back into these types of marketing wars,” Smith said. “We’re standing pat and not getting back into that game. If we were to, it would have a significant impact on margins by getting back into that promotional environment. I just don’t see us doing that.”

Boyd plans to open Sky River Casino near Sacramento in early September. It has a seven-year management agreement to operate Sky River on behalf of the Wilton Rancheria Tribe.

As part of its recurring share-repurchase program, Boyd repurchased about $168 million in stock during the second quarter. As of June 30, the company had about $481 million remaining under current share-repurchase authorizations.

Boyd Gaming paid a quarterly cash dividend of $0.15 per share on July 15 to shareholders of record on June 30.