Boyd Gaming Corporation (BYD) Earnings Call Transcript

Good afternoon, and welcome to the Boyd Gaming Second Quarter 2026 Earnings Conference Call. This is David Strow, Vice President of Corporate Communications for Boyd Gaming. I will be the moderator for today's call, which we are hosting on Thursday, July 23, 2026. [Operator Instructions] Our speakers for today's call are Keith Smith, President and Chief Executive Officer; and Josh Hirsberg, Chief Financial Officer. Our comments today will include statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. All forward-looking statements in our comments are as of today's date, and we undertake no obligation to update or revise the forward-looking statements. Actual results may differ materially from those projected in any forward-looking statement. There are certain risks and uncertainties, including those disclosed in our filings with the SEC that may impact our results. During our call today, we will make reference to non-GAAP financial measures. For a complete reconciliation of historical non-GAAP to GAAP financial measures, please refer to our earnings press release and our Form 8-K furnished to the SEC today, both of which are available at investors.boydgaming.com. We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to project special charges and certain expenses. Today's call is being webcast live at boydgaming.com, will be available for replay in the Investor Relations section of our website shortly after the completion of this call. So with that, I would now like to turn the call over to Keith Smith. Keith?

Thanks, David. Good afternoon, everyone. Our second quarter results reflect the continued benefits of our diversified business model, success of our ongoing capital investment program and broad-based growth in play across our customer segments. On a company-wide basis, revenues increased 3% and EBITDA grew 2% for the quarter when adjusting for the impact of last year's FanDuel transaction and the tax pass-through amounts related to our market access agreements. This performance was led by strong growth across our Midwest and South segment, solid contributions from Boyd Interactive and increased management fees from Sky River. We also maintained operating efficiencies throughout the business, delivering property operating margins of 40%, consistent with the last several years. Strong performances of our Midwest and South, online and managed segments in the quarter were partially offset by continued softness in destination business in Las Vegas, primarily at the Orleans, and ongoing construction disruption at the Suncoast. Excluding the Orleans and Suncoast, the balance of our Las Vegas Locals segment delivered revenue and EBITDAR growth, strong margins during the quarter, reflecting the continued strength of our local customer. And while we are only 3 weeks into the third quarter, the overall trends of the second quarter are continuing into July. Now looking at our results by segment. First, our Midwest and South segment delivered a strong performance on top of last year's solid results. Revenues grew 3% in the quarter, led by growth in gaming revenues, while EBITDA grew 4% with property margin expanding to nearly 38%. This was the segment's strongest margin in almost 2 years, demonstrating our continued ability to drive operating efficiencies throughout our business. These results were supported by growth in play from both our core and retail customers, our guests continue to stay and spend closer to home. We are also benefiting from our property investments throughout the segment with our recent hotel renovations and new food and beverage offerings contributing to our strong performance across the Midwest and South. In addition, we continue to deliver growth at properties where we have made larger, more strategic investments such as Treasure Chest and Ameristar St. Charles. Moving to our Las Vegas Locals segment. While our Las Vegas Locals business continues to be impacted by softer destination business and ongoing construction activity at the Suncoast, overall gaming revenues for the segment were even with prior year with stable play from our core and retail customers. Excluding the Orleans and Suncoast, the remainder of our Las Vegas Locals segment achieved solid results for the second quarter. Revenues from these properties increased 4% in the quarter, driven by increases in gaming revenue, while EBITDAR grew 3% and margins once again exceeded 50%. The growth in gaming revenue was driven by increased play our core and retail guests, demonstrating the underlying strength of our locals customer. And while results of the Suncoast for both our first and second quarter were impacted by construction activity, we expect to finalize our renovations of the casino floor and other public areas by the end of the third quarter. Once this work is complete, we will have modernized all public spaces in the building, including the entire casino floor, the sports book, bingo room and the high limit room, and we will significantly enhance our food and beverage offerings, expanded and refreshed the property's meeting space. As a result, we expect to deliver improved performance at the Suncoast starting in the fourth quarter. We are also finalizing plans for a refresh of the Orleans casino floor in public spaces. We expect to begin this work in the Orleans in the first half of next year. At Cadence Crossing, visitation and revenues have been strong since its debut in late March, and we remain confident we will achieve our long-term return on this investment. Beyond these projects, we continue to invest in our properties throughout the Las Vegas Valley. We recently opened new restaurants in Gulf Coast, Sam's Town and Suncoast and plan to introduce others throughout the Las Vegas Valley in the coming months. We have hotel renovations underway at the Orleans and Suncoast, both of which are expected to be complete by year-end. And we are updating our sportsbook at Sam's Town and Aliante, both opening in time for the upcoming football season. In all, by early next year, we will have renovated over 70% of our Las Vegas hotel room inventory, introduced 17 new food and beverage concepts and significantly enhanced our Southern Nevada presence with our new Cadence Crossing property and the investments we are making at the Suncoast. Together, these investments are elevating the competitiveness and the appeal of our Las Vegas Locals portfolio and positioning the segment for long-term growth. Our confidence in our Locals business is also supported by the growth of the Southern Nevada economy. Southern Nevada employment is increasing at the fastest rate of any major metro area in the country. Job growth is occurring across most major employment sectors, further diversifying the local economy has added more than 200,000 jobs outside of the hospitality sector over the last decade. Employment growth is also driving further gains in local income with weekly wages increasing at more than twice the rate of the national average. And Las Vegas remains an attractive destination for relocation, offering one of the most competitive cost of living environments in the Western United States. And all of Southern Nevada's continued growth in population, employment and personal income support our confidence in the long-term prospects for our Las Vegas Locals business. Next, in our Downtown Las Vegas segment, trends in the business were consistent with recent quarters. While play from both core and Hawaiian guests was stable, our downtown business was impacted by lower pedestrian traffic throughout the downtown area, reflecting continued softness in destination business. Next, our online segment achieved revenue and EBITDA growth on a comparable basis. These results reflected strong growth from Boyd Interactive as well as contributions from our market access agreements that were consistent with the last several quarters. Finally, our managed business grew EBITDAR by 18% year-over-year. This outstanding performance was driven by the recent completion of the first phase of the Sky River expansion project, significantly increased the casino floor and added a new multilevel parking structure. With Phase 1 off to a strong start, we now begin to work on Phase 2, which will add a 300-room hotel, three new food and beverage outlets, full-service spa and a new entertainment and event center. Once complete in early 2028, we are confident this expansion will further strengthen Sky River's position as one of Northern California's most successful and popular gaming destinations. So in all, our second quarter performance was driven by our diversified business model, broad-based growth in play from our core retail customers and the success of our recent capital investments. While we are investing in our properties across the country, we also continue development pipeline to drive long-term growth. In Virginia, our resort development on the Norfolk Waterfront remains on time and on budget for a late 2027 opening. Once complete, upscale resort will be a true market leader, a 65,000 square foot casino, 200-room hotel, food and beverage outlets, live entertainment and an outdoor amenity. We will also offer the most convenient gaming destination for many of the 1.8 million residents in the Hampton Roads region as well as the 15 million tourists visit nearby Virginia Beach each year. Next, in Illinois, our modernization of the Par-A-Dice Casino is in the design phase. Once complete, this project will transform Par-A-Dice into a single-level entertainment facility with a modern casino floor and enhanced amenities, positioning this property for growth well into the future. With Par-A-Dice in the design process, we're gearing up for our next growth projects. One such project is in Louisiana at our Amelia Belle property. Subject to regulatory approval, we are planning to convert this property to a land-based facility with a modern casino floor and enhanced food and beverage offerings. Once design work is complete, we expect to begin construction on this project in late 2027. As we invest in the future growth of our business, we continue to balance our capital investments and our commitment to returning significant capital to our shareholders. To that end, we returned over $170 million to our shareholders during the second quarter in a combination of share repurchases and dividends. Going forward, we intend to continue repurchases at a $150 million per quarter pace, supplemented by our quarterly dividend. In summary, this was another successful quarter for our company. On a company-wide basis, we grew both revenues and EBITDAR on a comparable basis with strong performances from our Midwest and South operations, our online segment, our managed business and much of our Las Vegas Locals portfolio. We continue to drive growth in play from our core retail customers on a company-wide basis. The capital investments we have made in our properties supported growth during the quarter and position our properties for future success. In addition, we continue to build our development pipeline to drive long-term growth. And we continued our commitment to returning capital to our shareholders, repurchasing nearly 1.9 million shares in the second quarter alone. Supported by a strong balance sheet, efficient operating model and robust free cash flow, our company is well positioned for the future and to continue creating long-term shareholder value. I'd like to thank the entire Boyd team for their contributions to our continued success. Their hard work and dedication helped create memorable experiences for our guests, and we are grateful for all they do for our company. Thank you for your time today. And I'd now like to turn the call over to Josh.

Thanks, Keith. During the quarter, our Midwest and South segment delivered another strong performance, contributing revenue and EBITDAR growth as well as achieving margins that were their highest in nearly 2 years. And in our Online and Managed segments, we also produced strong results on a comparable basis. And in Las Vegas, excluding Orleans and Suncoast, Las Vegas Locals segment generated revenue and EBITDAR growth while continuing to deliver margins over 50%. As a result of Boyd Interactive's strong performance, we are raising full year guidance for our Online segment by $5 million to $35 million to $40 million full year 2026. And given the positive response to Sky River's recent expansion, we are raising our guidance by $3 million for our Managed business to $113 million to $117 million for the full year. During the quarter, we invested $142 million in capital expenditures, bringing year-to-date CapEx to $297 million. We remain on track to spend between $650 million and $700 million for the full year. Our full year capital expenditure estimate includes about $250 million of maintenance capital, $75 million in incremental hotel capital associated with our Orleans hotel remodel, which is on track to be completed by the end of this year, $50 million in growth capital primarily related to completing Cadence and the design and preconstruction efforts related to our Par-A-Dice project. Finally, $300 million for our casino resort development in Virginia. In terms of our capital return program, during the second quarter, we paid $15 million in dividends and repurchased $156 million, 1.9 million shares at an average price of $83.60 per share. Our actual share count at the end of the second quarter was 73.1 million shares. We plan to continue repurchasing approximately $150 million in shares per quarter, putting us on track inclusive of dividends to return more than $650 million to shareholders this year representing approximately $9 per share in value for our shareholders. Since we began our capital return program in late 2021, we have returned over $3 billion to our shareholders, reducing our share count by 35%. Even with our capital investments plus capital return program, our balance sheet remains strong. We finished the quarter with traditional leverage of 2.2x and lease-adjusted leverage of 2.7x. We have ample capacity available under our credit facility and our next debt maturity is in December 2027, which we intend to refinance later this year or in the first half of 2027. Debt balances at June 30 reflected $267 million in tax credit payments made during the second quarter that were related to last year's FanDuel transaction. And finally, as a reminder, we previously announced we had entered into an agreement to sell our Shreveport property. We expect to complete the sale of this property by the end of July. So in conclusion, our second quarter results reflected the benefits of our diversified business model, our ongoing capital investment program, broad-based growth in play from our core and retail customers. Our strong balance sheet, consistent operating performance and robust free cash flow all position us well to continue creating long-term value for our shareholders. David, this concludes our remarks, and we're now ready to take any questions.

[Operator Instructions] our first question comes from Barry Jonas of Truist Securities.

Keith, you mentioned guests staying closer to home in the opening remarks. Can you talk a little bit more about what may be driving growth in the Midwest and South? And maybe how sensitive you think that outlook is to all the macro volatility we're seeing?

Sure. Look, I think we've seen guests or believe that guests are staying closer to home and spending their dollars closer to home for the last several quarters, whether that's a result of just everything going on in the world or higher airfares, it just appears that our Midwest and South portfolio is outperforming our Las Vegas portfolio. And so whether that's -- what all that is driven by how all that comes together, there's a lot going on with the consumer these days. For higher-end consumer, they're in the stock market, they're doing quite well. There are tax credits from One Big Beautiful bill. There are larger tax refunds this year, and those are all offset by things like higher gas prices and higher inflation. So all of that nets out, as we can report, we're seeing good growth from our core customers, good growth from our retail customers in the Midwest and South. But importantly, we also see that here in Las Vegas in our locals region. The locals region for Boyd, anyways, is really impacted by declines in the destination side of the leagues. But when it comes to the Las Vegas Locals customer, we see good growth there also.

Great. And that maybe goes into my follow-up. I wanted to ask about the destination business in the Locals. Was the negative, say, year-over-year EBITDA impact in this quarter about similar to what you guys saw last quarter? And maybe just walk us through how that shifts going into Q3 when I believe we lap comparisons.

Yes. So Barry, this is Josh. I'll try to take that. So I would say that in the Las Vegas locals market or segment for us, destination continued to be an impact. It was a similar level at around $5 million of EBITDAR. That's the level we've seen really very consistently since Q3 of last year. I think when we anniversary it in Q3 of this year, it's not realistic to really expect it to kind of pivot to flat to positive. We just don't see any indication that those trends are changing. I think our expectation is things just to be less bad. I think we've put a number out there of around $3 million is kind of our best estimate for Q3. I think a similar amount probably for Q4, maybe a little bit not as bad as Q2, but similar level. So destination for us has been very consistent. Don't expect to flip just because we haven't really seen any indication changing getting worse or getting better, but I just don't think it's realistic to expect all of a sudden start to improve once we anniversary. So kind of a less bad scenario for us. I think similarly, with another impact during the quarter was Suncoast construction disruption. Keith mentioned it. It was the first quarter that we saw a full impact of construction disruption. And we estimate that to have been around about $3 million for Q2. And we expect that to be a similar level in Q3 before Suncoast comes online and starts to contribute in Q4. And then obviously, the last piece of the Las Vegas locals, and you really didn't ask about this, but I'll just volunteer it, is Cadence, which has had a good start in terms of revenue growth, and we're kind of adjusting the expense side of things as we move through time. We expect Cadence to start contributing later in Q3 and then continue to ramp into Q4 and after. So those, I think, are the moving pieces that's going on within the Las Vegas market. And I think the last point I would make is that the truly local customer remains pretty -- remains healthy for us. And that's what's on the gaming revenue side, mitigating the impacts that we're seeing from destination customers and some of that construction disruption.

Our next question comes from Steven Wieczynski of Stifel.

So Keith or Josh, wondering if you could go through the cadence of the second quarter in the Las Vegas locals market. Just trying to get a sense for maybe what you saw across the different months in the quarter and if they were pretty similar or they were dramatically different. And then, Keith, you noted the first 3 weeks so far in the third quarter in July were similar to the second quarter. I just want to be sure that, that means outside of Orleans and Suncoast, the rest of the portfolio is performing in line with recent trends. I want to make sure I heard that right.

Yes. So with respect to your last question, you heard it right, is that outside of Suncoast and the Orleans, the rest of the portfolio here locally as well as throughout the Midwest is performing the same as we saw in Q2. Once again, I know it's only 3 weeks, and we certainly expect it to continue, but it's only 3 weeks, and we certainly expect it to continue, but it's only 3 weeks into the quarter. With respect to kind of the cadence of the second quarter, look, every month is different. And so we look at the quarter in the aggregate. June was probably a little softer. May was a little stronger. April was fine. When you combine them all in the quarter was pretty much what we expected. I would not take anything away from whether the fact May was a little stronger June was a little weaker. I don't read any trends into that at all.

And Steve, this is Josh. I would just add, with Keith's comments around locals outside of Orleans and Suncoast, Midwest and South are obviously correct. Reality is even Suncoast and Orleans are performing generally in line with what we expect because we really haven't seen a change in to an inflection in either directional destination, and we haven't in the construction disruption that we expect to occur in Q2 happened to the level that we expected as well. So I would say the business general big picture is performing just in line with what we expected coming into the quarter. And all of that continues to play out in a similar fashion so far in the first couple of weeks of July.

Okay. Got you. And the second question would be on reinvesting in your portfolio. And I guess my question is, I mean, you've seen strong returns from the properties that you've reinvested in. So just wondering if that makes you guys think about getting a little bit more aggressive with other assets, whether that's in the regional portfolio, whether it's -- whether that's in the Las Vegas locals market. But any color there, I think, would be helpful.

I would say that we're probably at a pace of reinvesting that we can comfortably handle right now. There's only so many things that you can do and do them in a high-quality fashion. So the team is fully engaged. We have a list of projects when we're done with these, that we'll continue to engage on. But I wouldn't expect that, that pace or the amount of money we spend is going to pick up. It will continue but it won't pick up. I think we're pretty comfortable with the cadence of and the trajectory we're on right now of these capital projects.

Our next question comes from David Katz of Jefferies.

Good evening, everyone. Good afternoon, everybody. Two things. One, the internal investment on Amelia Belle, obviously, it presents a return opportunity. I'm frankly -- I'm just curious how the decision to focus on that one versus, say, some of the larger properties in the portfolio? Or was this really just the next best opportunity?

Well, there's a number of factors that go into how we prioritize projects, not appropriate to kind of go into those details at this point. it's the appropriate time to tackle Amelia Belle. It's not a one-off project. We can do multiple things at a time, and we are -- once again, there's a number of other projects that we'll continue to process and we'll update you on as we get ready to start them. So Amelia Belle doesn't postpone or take the place of anything else, it just happens to be next in line for us.

Understood. And I think we all have talked about your boundaries for external M&A. And I think we probably have a pretty good sense of where some of the more obvious opportunities are. But I'd love to get a sense for what you're seeing out there, what your appetite is and whether we might see some external property level, M&A in the near term from you all?

Would the risk of being repetitive or something like a broken record, we've had same view on M&A. We have the same view on M&A today that we've had for quite a while. We're interested. We're always looking. It's got to be strategic, it's got to be the right asset in the right market at the right price. They have to be higher-quality assets. We've got -- the business is performing at a very high level. We're returning significant dollars to our shareholders. We have a strong balance sheet. And so we don't need to do M&A, but if the right opportunity comes along, we certainly have our eyes open, we're not afraid to execute. But once again, as it always has, has to tick those boxes. So I don't think it's any different than unfortunately, the answer I've provided in the previous years, and it remains the same today, nothing's changed for us. Just because we have a strong balance sheet and robust free cash flow doesn't have us be more or less aggressive.

Our next question comes from Shaun Kelley of Bank of America.

Josh or Keith, just -- I wanted to go back to locals for a second. And I think you had mentioned a bit about an ongoing or an additional renovation project at the Orleans starting in 2027, if I caught that correctly. Obviously, I think you're working on the rooms now. So could you just talk about scope and scale there, if I caught that right? Or correct me if I didn't. And then secondarily and probably more importantly, just help us think on net what construction disruption going to look like in '27 versus '26 for the segment? Obviously, Suncoast and the Orleans room should be largely done by then. So on net, should we see a little less disruption next year than what we saw this year?

So a couple of comments. One, you heard correctly that we're in the design process for a refresh of the Orleans, the casino space as well as the public space as it is one of our premier top properties and great proximity to the strip. And so we are in the process of going through that don't have scale and scope to announce at this point. That will come at a later date. As you think about construction disruption, one, we'd expect it to largely -- at the Suncoast, we'd expect it to largely conclude at the end of Q3. And therefore, in Q4, we expect the Suncoast to start producing better performance. As it relates to the Orleans, and I think I indicated in my prepared remarks that we'd be probably starting that project sometime in 2027, the initial part of that will be behind walls off space right now, I think a hold phase, if you will. Therefore, there will be no construction disruption at the Orleans in 2027, there will be no construction disruption at Suncoast in 2027. So as you think of the locals portfolio, it basically should be absent construction disruption.

Our next question comes from Ben Chaiken of Mizuho.

If I'm not mistaken, I think you said ex the Orleans and Suncoast revenue and EBITDA were higher year-over-year. I think when you gave -- I think you gave a similar update a quarter ago and it was closer to flat. Am I reading too much into that? Or did trend sequentially accelerate?

You heard right, absent Orleans and Suncoast, we did see growth in revenues and growth in the remaining Las Vegas Locals properties. I'll have to see if Josh has the numbers. I don't have the numbers handy in terms of did it accelerate in Q2 versus Q1.