Bolstered by strengthening demand in the Las Vegas locals market, Boyd Gaming reported a strong 2017 first quarter Tuesday afternoon – generating a haul of $605 million in revenue and $156 million in EBITDA.
Las Vegas locals were the strongest performers, posting revenues of $220 million and adjusted EBITDA of $66 million – up from $158 million and $44 million, respectively, during the prior year quarter.
This segment, which contributes 38 percent of Boyd’s EBITDA, was bolstered by the 2016 additions of three new casinos – Aliante, Cannery and Eastside Cannery – which combined to produce 17 percent EBITDA growth and a 385 basis point margin improvement over the first quarter of 2016.
But it wasn’t just the new casinos performing well. Same-store adjusted EBITDA at locals properties grew at double digit rates and same-store margins were up 330 basis points.
“Positive trends continued throughout our operations during the first quarter. Every segment of our business recorded year-over-year margin improvements, as the large majority of our properties posted year-over-year Adjusted EBITDA growth,” said Keith Smith, chief executive officer.
“We were particularly encouraged by broad-based strength in our Las Vegas Locals segment, as all nine Locals properties achieved year-over-year EBITDA gains – including strong performances at our three recently acquired properties,” Smith added.
The Wall Street community was impressed by the performance.
“Boyd delivered another solid quarter, as all three operating segments delivered EBITDA in line with or ahead of our forecast,” wrote Steven M. Wieczynski, an analyst with Stifel.
“Perhaps most encouragingly, the ramp of the three acquired Las Vegas Locals assets appears to be pacing ahead of schedule, resulting in consolidated LVL EBITDA exceeding our forecast and consensus by 9 percent and 10 percent, respectively,” he continued.
Boyd reported total net income of $35.5 million – or $0.31 per share, up from $33.2 million and $0.29, respectively, during the prior year quarter.
Downtown Las Vegas revenues ticked up slightly less – from $58.6 million to $60.7 million, while adjusted EBITDA grew from $12.7 million to $13.6 million.
The Midwest and South region saw revenues fall to $325 million from $335 million year-over-year, while adjusted EBITDA fell from $95.9 million to $94.1 million.
“We continue to like Boyd’s Las Vegas locals and Downtown exposure, but are more cautious on its regional exposure particularly to the Southern region,” wrote Cameron McKnight, an analyst with Wells Fargo Securities.
The company’s board of directors also reinstated its quarterly dividend and paid out $0.05 per share.
“Thanks to the continued strength of our operations, our successful acquisitions, and the significant progress we have made deleveraging our balance sheet, we are now able to reinstitute a program of returning capital to our shareholders,” said Smith.
“We believe a balanced approach of deleveraging, investment in organic growth projects, and opportunistic acquisitions – combined with the return of a portion of our free cash flow to shareholders – is the right strategy to maximize long-term shareholder value,” he continued.
This was good news for investors who had been clamoring for capital to be returned to shareholders.
“Our call on the shares of Boyd Gaming has been that the company has the ability to drive enough operating performance and cash generation to reach a comfortable leverage level and begin returning capital directly to shareholders. This is now coming to pass,” said David Katz, an analyst with the Telsey Group.
Boyd finished the first quarter with $167 million in cash on hand against total outstanding debt of $3.26 billion.
“The company remains on track to reduce leverage below 5.0 times [debt to adjusted EBITDA] by the end of 2017, and will begin considering share repurchases, which we view as a pivotal event for the stock,” Katz said.
