Boyd posts slight revenue increase in Q2; company confident on US retail and digital expansion despite economic uncertainty

Gaming and hospitality business Boyd Gaming has reported revenues of $894.5 million for the second quarter of the year, up slightly from $893.6 million in the same period last year. The modest 0.1% increase came despite a 6% decline in its gaming operations, which were down by about $40 million to $684.9 million, compared to $727.5 million in Q2 2021. Encouraged by the positive results, the company now targets to expand its US retail and digital footprint further.

Keith Smith, President and Chief Executive Officer of Boyd Gaming, called it “another strong quarter” for the company, with quarterly Adjusted EBITDAR that was “second only to last year’s record results.” Additionally, he explained that Q2 2021 was “a challenging comparison” due to benefits from government stimulus, and the lifting of Covid-19 restrictions.

“This quarter’s excellent results were driven by a continued focus on our core customer and sustained efficiencies throughout our business,” said Keith. “Our operating trends remain strong, as play from core customer segments grew both year-over-year and sequentially from the first quarter of 2022.”

The company reported a net income of $146.8 million -or $1.33 per share- for the quarter, up from $113.7 million for the year-ago period. Total Adjusted EBITDAR was $353.9 million, and Adjusted Earnings were at $163.5 million. Boyd was also able to improve company-wide operating margins from the first quarter, despite inflationary pressures in the period. Margins after corporate expense were 39.6%, exceeding 39% for the fifth straight quarter. 

Keith Smith, Boyd Gaming's President and CEO

Recovery would seem strongly underway, with all three operating segments -Las Vegas Locals, Downtown Las Vegas, and Midwest & South- continuing to produce solid results. Revenue, Adjusted, EBITDAR and margins are in line with the last three quarters and “well above pre-pandemic levels,” according to a statement.

The Las Vegas Locals segment posted margins above 50% for the fifth straight quarter, and on a sequential basis against Q1, revenue increased 4%. Meanwhile, revenues grew 9% sequentially in Downtown Las Vegas, setting a quarterly Adjusted EBITDAR record; while the company’s Midwest & South segment posted its strongest revenue performance since the second quarter of 2021.

Broken down by business segments, “Gaming” accounted for most of second-quarter revenue at nearly $685 million, despite being a little more than $40 million down against Q2 2021. Meanwhile, “Food & Beverage” was responsible for $70.3 million of total quarter revenue, while “Room” delivered almost $50 million, and “Other” posted $89.3 million.

“Overall, we are encouraged by the continued strength of our business, and remain confident in our strategy and our ability to navigate today’s uncertain economic environment,” further added Smith, who in a second-quarter earnings call Tuesday said the company hasn’t seen any sign of weakness from its overall customer base.

“We are dealing in a very uncertain environment and a very uncertain economy, but everything we see says the business is pretty stable,” commented Smith to investors. “But if something were to happen, given our current financial strength, we're not losing sleep.” As of June 30, 2022, Boyd Gaming had cash on hand of $250.2 million, and total debt of $2.9 billion.

The company's strategy includes the expected completion of the previously announced acquisition of  California-based online gaming company Pala Interactive, for a cash consideration of $170 million. Pending the receipt of all remaining regulatory approvals, Boyd anticipates closure of the deal around year-end, ahead of a previously unveiled completion date by Q1 of 2023.

The Pala acquisition is part of Boyd’s strategy for the online gaming segment, which also includes the company’s presence in sports betting. As a result of recent legalization in Kansas and Ohio, the operator is planning the roll-out of retail and mobile sports gaming in these states alongside giant FanDuel. Boyd has a 5% ownership of this company.

“Our online gaming strategy is built upon leveraging our geographic distribution, loyalty program and customer database to build a profitable regional online casino business,” Smith explained to investors. “Pala will provide us with the full suite of products, technology and expertise we need to execute that strategy without the need for additional significant investments or acquisitions."

Rendering for Sky River Casino

Additionally, the company remains committed to its retail plans, which include the opening of Sky River Casino, a new venue near Sacramento, California, which includes a 100,000-square-foot gaming floor. Boyd has a seven-year management agreement to operate Sky River on behalf of the Wilton Rancheria Tribe, and is expected to debut the venue in early September this year.

Other projects include work on a new land-based facility for the riverboat Treasure Chest Casino in Louisiana, which Smith said the company is confident will “further expand the property’s customer base” while increasing its appeal to its existing customers. An opening is expected in late 2023, he noted.

Treasure Chest Casino in Louisiana

And in downtown Las Vegas, work is underway on an announced expansion of the Fremont Hotel and Casino. The company expects that once completed, the project will allow Boyd to capture a larger portion of pedestrian traffic.

As part of its recurring share repurchase program, Boyd repurchased about $168 million in stock during the second quarter. As of June 30, 2022, the company had approximately $481 million remaining under current share repurchase authorizations. It has also paid a quarterly cash dividend of $0.15 per share on July 15 to shareholders of record on June 30, 2022.