Patrons should expect fewer promotional offers and employees when visiting a Boyd Gaming casino.
That was part of the message handed down by CFO Josh Hirsberg and Director of Corporate Finance Jake Mulcahy in a meeting with Truist Securities analyst Barry Jonas. The executives said there was “no going back” on promotions in the post-COVID climate and that the overall market was “rational” (as Jonas put it) with regard to comps and other such incentives. Increased marketing spend was, they allowed, possible in the long-term future, but not at the expense of corporate cash flow.
As for staffing, Boyd went into the Great Shutdown with approximately 25,000 employees and now has, according to the company, roughly 15,000, with to cover that 40 percent decline beyond adding 1,000 to 1,500 new hires over the next 12 to 24 months.
“While some of the increased staffing will ease pressures on existing staff, [management] believes other hires will drive incremental revenues (ex: current labor levels are unable to satisfy all hotel demand and capture related gaming revenue),” recorded Jonas, adding that Boyd is making technological investments “to ultimately reduce its reliance on labor.” Among the motivating factors is management’s desire to keep profit and cash-flow margins at 2021 heights.
Boyd is feeling no pain at the pump from the price increases of gasoline, citing no material impact from those or other forms of inflation, although that could change if the current situation persists. The company, Jonas added, “has not seen any changes in customer behavior since the Ukraine conflict began.”
Boyd is seeing an increasing return by Hawaiian customers, to the point where downtown Las Vegas was described as having the greatest upside potential for the firm (as opposed to the Midwest or South, where comparisons with record-setting 2021 will become more difficult as the present year matures). Hirsberg and Mulcahy also pointed to a growing number of commercial flights out of Hawaii and strongly hinted that Boyd might get out of the charter-air business altogether, not least because of associated fuel costs.
Consumer trends for 2022 were described as “strong and consistent.” Regionally, Boyd has been experiencing competitive pressure at its Kansas Star property from newcomer Crosswinds. In Shreveport, the smoking ban continues to negatively impact the local Sam’s Town. Mulcahy and Hilsberg, though, “did not express much concern on new or expected competitive supply.”
Share buybacks to the tune of $500 million this year remain on schedule and Boyd has resumed paying dividends.
Debt reduction is not a priority at this point, according to Jonas, who wrote that he remained bullish on the stock “given consistent operating performance driving sizable [free cash flow] generation, deleverage, and now capital returns.” Wall Street, he implied was not giving Boyd enough love, valuing Boyd like an OpCo (such as Penn National Gaming) that does not own its casinos.
Jonas raised his price target on BYD shares to $99 from $90. The stock is currently trading at $68 a share.
