Boyd Gaming reported one of its best southern Nevada performances in recent memory Thursday afternoon in the company’s second quarter earnings, but the company missed analyst expectations due to softer showings at its regional properties – particularly in Louisiana.
“Our Las Vegas locals business achieved its best second-quarter results in nearly 10 years, driven by ongoing improvements to our operations and a strong regional economy,” Boyd Gaming CEO Keith Smith said. “Our three newly-acquired Nevada properties delivered another great quarter as well, as we continued to successfully execute on growth and synergy opportunities.”
Company-wide, net revenues were up 10 percent to $599.9 million, and net income grew from $30 million to $48.6 million. Adjusted EBITDA checked in at $151.2 million – up nearly 10 percent year-over-year, but 3 percentage points shy of the Wall Street consensus estimate.
The growth driver for the quarter was the locals segment. Revenues grew year-over-year from $154.9 million to $214.2 million and adjusted EBITDA from $43.2 million to $63.1 million with the incorporation of Aliante, Cannery and Eastside Cannery into the portfolio.
But this strength was mitigated to a degree by rocky performances in Boyd’s other segments.
Revenues in downtown Las Vegas were largely flat year-over-year at $59.6 million while adjusted EBITDA was down from $14.3 million to $12.6 million. The company attributed these numbers to unanticipated construction disruption at the California Hotel.
Both revenues and adjusted EBITDA were down in Boyd’s Midwest and South segment – $330.7 million to $326.1 million and $94.7 million to $93.7 million, respectively. While a majority of these properties produced year-over-year EBITDA growth, sluggish performances at certain Louisiana locations mitigated some of these gains.
“As we’ve seen for some time, localized economic weakness continues to affect Amelia Belle and Evangeline Downs,” Smith said on a conference call with investors. “These communities are dependent on the oil production industry and the persistent weakness in oil prices is having a significant impact on our customer base at those properties.”
Macquarie Capital gaming analyst Chad Beynon noted that the concerns in Boyd’s regional markets are difficult to overlook.
“While the Las Vegas locals story (same-store results plus mergers and acquisition integration) remains the brightest (growth and multiple) part of the story, the non-Las Vegas Regional Gaming piece (55 percent of total EBITDA), which missed second quarter consensus by $2 million, continues to dim the shiny light,” he wrote in a note.
Stifel gaming analyst Steven Wieczynski was less concerned by the EBITDA miss, citing the company’s solid position in the Las Vegas locals market – which has recently been one of the fastest growing gaming markets in the country.
“Adjusting for approximately $2 million in unanticipated one-time construction-related disruptions associated with a hotel room refresh within the Downtown segment, property-level results were in line with our expectations,” he wrote.
“Perhaps more importantly, within the company’s recently expanded Las Vegas locals segment, both the recently acquired and same-store properties grew EBITDA at a double-digit pace year-over-year and expanded EBITDA margins,” Wieczynski continued.
Telsey Group gaming analyst David Katz took a similar view: “We maintain our view that Boyd is perhaps better positioned than comparable companies given its exposure to stable regional markets as well as Las Vegas locals.”
Boyd also ramped up its efforts to return capital to shareholders during the quarter by repurchasing 600,000 shares of stock and declaring a $0.05 divided.
“We recommenced our capital return program during the quarter, making our first share repurchases and dividend payments in nearly a decade,” said Smith.
“At the same time, our strong and growing free cash flow allowed us to continue investing in our business while deleveraging our balance sheet, as we paid down $74 million in debt in the quarter,” he continued.
Boyd did not amend its previously issued full-year adjusted EBITDA guidance of $585 million to $605 million.
As of the end of the second quarter, the company had $3.19 billion in total debt outstanding and $163 million cash on hand.
