Rising gas prices, inflation, and the war in Ukraine haven’t slowed patrons at Boyd Gaming properties in Las Vegas and other states where it operates. What’s more, business has picked up as omicron wanes and older customers start to return in larger numbers. All those positives were cited by company executives during a first-quarter earnings report.
Boyd officials said the return of conventions and other encouraging trends should offset rising business and labor costs. In addition, the company’s focus on their loyal core customers since they reopened from the pandemic continues to pay dividends.
For the first quarter historically, Boyd set adjusted earnings records in each of its three operating segments, as well as revenue records in the Las Vegas locals, Midwest, and South segments. The Las Vegas locals segment reported year-over-year revenue growth of nearly 25% and adjusted-earnings growth of 31%, with operating margins exceeding 50% for the fourth straight quarter.
Those strong trends continued in downtown Las Vegas, which set a record for adjusted earnings and margins for the third consecutive quarter. The Midwest and South segments also posted record first-quarter revenue and adjusted earnings, as business trends continued at levels similar to the second half of 2021.
“Our first-quarter results were a great start to 2022 and continue the momentum of a record 2021,” Boyd CEO and President Keith Smith told Wall Street analysts. “Our continued focus on our core customer, enhanced capabilities, and streamlined cost structure all contributed to record revenues, (adjusted earnings), and operating margins in the first quarter.”
Smith said January got off to a slow start due to the omicron variant, but business levels gradually returned during the quarter, as both case counts and concerns about COVID began to subside and a mask mandate was lifted in February in Las Vegas.
“Customer trends overall remained consistent with the third and fourth quarters of last year, including guest counts, frequency, and spend,” Smith said. “Unrated-play trends also remain consistent for the last several quarters.”
Smith said there hasn’t been any shift in customer behavior during the first three weeks of April to start the second quarter. He said he sees opportunities to grow the business the rest of the year. That starts with the hotel business that due to labor constraints has been unable to accommodate demand from core customers.
“As travel continues to recover nationwide, we expect to see further recovery in our midweek destination and meeting and convention business, especially at our Las Vegas properties,” Smith said. “We expect to see continued improvement in our downtown Las Vegas segment over the next several quarters, with all three properties now open and visitation recovering in both the downtown and broader Las Vegas markets.”
Boyd continues the renovation of its Fremont Hotel & Casino in downtown that will be completed in early 2023. It has started work on expanding the gaming floor to help deal with weekend crowds. Dining options will feature a food hall with six quick-service restaurants, including several nationally known brands, which takes the place of the buffet.
“Once completed early next year, we are confident these enhancements to the Fremont will drive further growth in our downtown segment,” Smith said.
In Louisiana, Boyd will start work this summer on a land-based facility at its Treasure Chest riverboat-casino that will open in late 2023.
Smith said the company continues to focus on projects like the Fremont and Treasure Chest and other smaller projects, extracting what it can out of existing businesses rather than mergers and acquisitions of properties.
Higher-worth customers continue to perform “extremely well.” The mid-term segment is doing well. Older customers, once the COVID counts started to drop midway during the first quarter, “have performed extremely well and are coming out in big numbers.
“The trends are really consistent,” Smith said. “We assume there’s some falloff with some of our customers, but it’s not discernible as we analyze the database. To the extent they’re falling off on the unrated side, they’re being replaced by additional players on the rated side.”
Josh Hirsberg, executive vice president and chief financial officer, said they’ve gotten better at focusing on their loyal core customers to drive business from them and offset any cost pressures.
“It’s too hard to look at your business today without being cognizant of what everyone’s worried about – inflation, war, and all of those things that could weigh on the consumer,” Hirsberg said. “We have confidence in the underlying trends we see in the consumer, which have largely not changed since we reopened. Our core customers continue to grow, even during omicron, and the business took a little bit of a step back because of that.”
Hirsberg said they don’t expect to replicate the second quarter of 2021 when the federal stimulus rolled out, but they expect to make up over time some of that difference through the growth they expect to happen naturally over the course of the year. “We’re not naive to the risks.”
Smith said the return of meeting and convention business and destination travel help offset higher wages and inflation.
“Hopefully, it nets out to zero and we end up where we were last year,” Smith said. “We’ll work our way through it every day and week as we move forward.”
Boyd Gaming reinstated its quarterly cash dividend with a payment of $0.15 per share on April 15, more than double the amount of the company’s previous quarterly dividend. The previous dividend was suspended in March 2020 due to the impact of the COVID pandemic on the company’s operations.
As part of its ongoing share-repurchase program, the company repurchased approximately $132 million in stock during the first quarter of 2022. As of March 31, the company had approximately $149 million remaining under current repurchase authorizations.
