Q1 2022 Boyd Gaming Corp Earnings Call
[music].
Okay.
Good afternoon, and welcome to today's Boyd Gaming first quarter 2022 earnings call. My name is Sam and I will be your moderator for today's call.
All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end if you'd like to ask a question. Please press star one on your telephone keypad.
At this time I would now like to hand, the call over to our host Josh Hirschberg Executive VP, Chief Financial Officer, and Treasurer of Boyd Gaming Josh. Please proceed.
Okay.
Thank you Sam good afternoon, everyone and welcome to our first quarter earnings Conference call.
Joining me on the call. This afternoon is Keith Smith, our President and Chief Executive Officer. Our comments today will include statements that are forward looking statements within 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 SEC filings 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 and both of which are available at investors Dot Boyd gaming Dot 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 also being webcast live at Boyd gaming Dot com and.
And 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, Josh and good afternoon, everyone. Our first quarter results were a great start to 2022 as we delivered another remarkable quarterly performance across our business and continue the momentum of our record 2021.
Our continued focus on our core customer enhanced capabilities and streamlined cost structure, all contributed to record revenues EBITDAR and operating margins in the first quarter.
Company wide revenues were up more than 14% year over year EBITDAR grew nearly 16% and operating margins surpassed last year's record by more than 50 basis points.
This growth was broad based as each of our three operating segments posted new first quarter EBITDAR Records.
In our Las Vegas locals business revenues were up nearly 25% EBITDA rose, 31% and margins reached a new first quarter record of more than 52%. This marks the fourth consecutive quarter that our locals margins have been above 50%.
Our downtown Las Vegas business continued its recovery delivering record first quarter, EBITDAR and margins of 37%.
And outside of Nevada, Our Midwest and South segment continues to perform well.
Our revenues and EBITDAR over last year's record performances.
While January got off to a slow start due to COVID-19 and the omicron variant we saw business levels gradually return during the quarter as both case counts and concerns around Covid began to subside.
Overall customer trends during the first quarter remained consistent with the third and fourth quarters of last year, including rated guest counts frequency and spend on.
Unrated play trends also remained consistent with the last several quarters.
Sure.
While some macroeconomic challenges are present today as we look at the first three weeks of April we have not noticed any meaningful shift in customer behavior as business trends continue at the levels, we have seen throughout each of the last three quarters.
Looking at the remainder of the year, we anticipate there will be opportunities to further grow our business.
One opportunity for continued growth is through our hotel business.
Due to labor constraints, we are currently unable to accommodate all of the demand we have from our core customers.
The labor market normalizes, we will be able to host more of these known players in our hotels, providing the opportunity for incremental growth in both gaming and non gaming revenues.
Also as travel continues to recover nationwide, we expect to see further recovery in our mid week destination and meeting and convention business, particularly at our Las Vegas properties.
And 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 throughout both the downtown and the broader Las Vegas markets.
In addition, we're also investing in longer term growth opportunities in both our land based and online operations.
In the Louisiana, we plan to begin construction. This summer on a land based facility at treasure chest, which will replace our existing riverboat casino.
We expect to complete construction and open this facility in late 2023.
For more than 25 years <unk> has been a consistently strong performer for our company by significantly enhancing its gaming and non gaming offerings. We will provide a more attractive entertainment experience that will further expand our customer base, while increasing its appeal to our loyal customers.
We're also investing in downtown Las Vegas, we have started work to expand the free months casino space and dining options.
Expanding our gaming floor will help us better leverage our location in the heart of the busy Fremont Street experience, especially during weekends.
We are also enhancing the free months appealed by adding a food Hall concept that will include six quick service restaurants, including several nationally known brands.
Once complete early next year, we are confident these enhancements to the Fremont will drive further growth in our downtown segment.
And in Northern California construction work continues on Sky River Casino, which is on budget and on schedule to open early this fall with 2000 slot machines 80 table games, and 17 food and beverage venues we.
We have a seven year management agreement with the Wilton Rancheria tribe to managed Sky River and we will receive a management fee typical for these types of arrangements.
With a compelling entertainment product in an ideal location just south of Sacramento. We are confident this project will be a tremendous step forward for the Wilton tribe and realizing our vision of self sufficiency, we look forward to opening Sky rivers doors in the coming months.
In addition to these land based investments we advanced our online gaming strategy during the quarter with our announcement to acquire pilot interactive.
The acquisition of <unk> will position us to take a direct approach to the emerging <unk> gaming opportunity.
With our geographic distribution strong loyalty program and significant database, we are confident in our ability to build a profitable regional online casino business.
This acquisition will provide us with both the operational and marketing expertise and technology, we need to create a successful online casino business.
<unk> technology includes a proprietary player account management system, and a full suite of <unk> products, including our games studio.
As we execute our gaming strategy, we remain fully committed towards sports betting partnership with <unk> by leveraging the <unk> brand and the expertise of one of the nation's clear leaders in online sports betting we have built a profitable sports betting business that will contribute approximately $30 million in EBITDAR to our results this year.
And through our 5% equity ownership in <unk>, we have the opportunity to participate in the expansion of sports betting across the country.
While we actively invest in the future growth of our land based and online operations a robust free cash flow allows us to balance these investments with our ongoing program to return capital to our shareholders.
We resumed our quarterly dividend in April 15th with a <unk> 15 per share payment, which is more than double our previous dividend payment of <unk> <unk> per share at the same time, we are continuing our programmatic approach to stock buybacks targeting $100 million per quarter in share repurchases.
They also make opportunistic share repurchases from time to time.
Our capital return program is an important part of our commitment to creating long term shareholder value and we remain on track to return approximately $500 million to our shareholders. This year.
As we continue to create value for our shareholders. We also remain committed to benefiting our stakeholders through our ESG initiatives.
Later this quarter, we will share detailed information on our progress with the release of our annual ESG report.
In this report we will provide updates on our ESG efforts, including environmental diversity responsible gaming and corporate giving initiatives. We look forward to sharing this information with you on our ESG report is published.
Before I conclude I want to take a moment to thank our team members who have played a vital role in our success over the last two years.
Our team has overcome repeated challenges since the pandemic first began in early 2020, despite COVID-19 related restrictions and labor shortages. Our team members have come through and delivered consistently memorable service to our guests that level of service is an important reason why we have built such a strong loyalty with our core customers.
We're grateful for everything our team has done.
And as part of our long standing commitment to the wellbeing and professional fulfillment, we continue to invest in our team members and meaningful ways.
Earlier this year, we announced that we will be increasing our minimum wage for all non tipped team members to $15 per hour.
We have already started implementing this program and expect it to be completed over the next 12 months.
This follows the payment of two appreciation bonuses over the last nine months with more than $20 million paid towards nonexecutive team members.
These investments are in addition to the many other benefits and offerings, we have extended our team members as part of our commitment to being an employer of choice.
In summary, 2022 is off to a great start as our business continues to perform at a remarkably consistent level with opportunities for growth throughout 2022 and 2023, we're confident in our company is well positioned for continued success. Thank.
Thank you for your time today I'd now like to turn the call over to Josh.
Thanks Keith.
This was another successful quarter for our company as we maintained our operating momentum from 2021 with record first quarter revenue and EBITDA.
Companywide margins also improved over the record first quarter, we delivered last year and remain well ahead of pre pandemic levels.
The customer trends, we saw throughout the second half of 2021 are continuing with strong growth in business volumes from our core customers and consistency in our unrated business.
Looking ahead. It is important to remember that second quarter year over year comparisons will be more challenging due to the impacts last spring from significant government stimulus and the improving COVID-19 trends during that time.
This challenging comparison does not reflect a change in the direction of our business. The positive trends of the first quarter are continuing into April with business volumes similar to what we've seen throughout the last three quarters.
With continued strength in our operations substantial free cash flow and the lowest leverage in our company's history. We are able to continue executing our capital return program balanced with strategic investments in our portfolio.
We repurchased $132 million in stock during the quarter, representing two 1 million shares at an average price of $62 86.
The actual share count at the end of the quarter was $109 6 million shares.
Since since commencing our repurchase activity last October we have repurchased three 4 million shares through the end of March for a total of $213 million, leaving.
Leaving a $149 million under our current board authorizations.
We plan to continue a programmatic approach to share repurchases of $100 million per quarter and expect those repurchases to be supplemented with opportunistic buybacks from time to time.
We intend to request additional authorization from our board as necessary to continue our programs.
We also resumed quarterly dividend payments earlier this month with a <unk> 15 per share payment on April 15th and.
In total our dividend and share repurchase programs are on track and we expect to return approximately $500 million to shareholders. This year.
At the same time, we continue to invest and maintain.
Invest to maintain and grow our business, we expect to spend approximately $250 million. This year on maintenance capital expenditures and an additional $50 million on the Fremont and treasure chest projects that Keith spoke about.
During the first quarter total capital expenditures were $47 million.
Separately, we have also agreed to acquire Paula interactive for $170 million in cash and expect this transaction to close by the first quarter of next year.
We ended the first quarter with leverage at two two times and lease adjusted leverage of two seven times as.
As we move forward, we will remain focused on maintaining our strong operating performance and growing our business through thoughtful investment in our existing portfolio and building our online presence.
Sam that concludes our remarks, and we're now ready to answer any questions from participants on the call.
Yes.
Thank you.
I will begin the Q&A session.
To ask a question. Please press star one on your telephone keypad and if for any reason you'd like to remove that question. Please press star two.
A reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question.
First question comes from Barry Jonas with <unk> Securities.
They proceed.
Great. Thank you.
I actually had a question on the downtown segment to start for those of US who've been following you guys for some time I think it's interesting to note no impact from higher gas prices.
We're noted maybe talk about the charter business and the strategy there going forward.
Sure. Thanks for the question. So downtown has performed exceptionally well over the last several quarters and Hawaiians are continuing to show up at our properties and our operations and strong numbers, we actually are not running our own.
Charter currently and so we are not kind of subject to the fluff.
Fluctuations in gas prices, we've modified that model and now are.
Buying seats on Hawaiian Airlines and several other airlines and so we don't we're not subject to that risk of fuel price changes.
Got it got it and then.
I know that you Didnt mentioned void pace I'm just curious if you can give any updates there maybe any comments on what youre seeing in terms of adoption and if you think it's driving higher spend or play levels.
Yes, so I would I would say and I think I, probably said this last quarter. It continues to be a very slow modest rollout it is active.
In 13 of our properties through.
Through today, we are launching or have launched it at one of our properties in Nevada on table games, and so we continue to expand it and roll. It out we continue to kind of work through some of the early Kinks in the software that always happens with these types of products, we haven't done a major marketing push or launch yet. So it continues to one's going to be kind of a slow adoption, but it.
Positive adoption the people that have used it or that are continuing to use it like it.
I can't tell you that theyre, playing at a significantly higher level, but.
Do enjoy it enjoys the ease and the convenience of it so something that I think will take just a little more time to rollout and be fully adopted by the customer.
Got it alright, thank you and nice quarter.
Thank you.
Thank you Barry. The next question is from Steve <unk> with Stifel. Please.
Please proceed.
Yeah, Hey, guys.
Good afternoon, so so Keith or John just wanted to ask about your your April commentary, which sounds like business trends continue to be very strong.
Obviously, there is certainty there is certain.
Concerns out there about the consumer potentially weakening.
I guess my question would be have you seen trends remained strong across the whole portfolio.
Or have you seen any changes across any markets or even across your database in terms of low end customer spend versus the mid or high tier customers.
Yes, so as we look at the portfolio overall.
I think the term.
Terms, we used in our prepared remarks was consistent to remarkably consistent and that's what we've seen the higher end of the database.
The higher worth customers continue to perform at an exceptionally high level and perform extremely well the mid tiers performing well from.
From an age demographic standpoint.
Older customers.
The chronic COVID-19 counts started to drop kind of mid Q1.
<unk> performed extremely well and are coming out.
And big numbers, but the younger demographic that kind of 45 to 65 age group is also continues to perform extremely well the trends are really consistent look we assume that there is some.
Falloff for degradation and play with some of our customers, but honestly, it's not discernible as we analyze the database to.
To the extent that they are falling off on the unrated side, there being <unk>.
Replaced with additional players on the unrated side, but when we look at.
Our core customers throughout a database it's been remarkably consistent.
So so that kind of leads into my second question I'm going to sound, probably a little bit.
Pessimistic here again, so excuse me for that but.
In terms of your return of capital program. It Josh you went through and kind of said youre still kind of sticking to that $500 million a year.
This year to shareholders and I guess kind of given there's much smarter people out there that meet that.
Believe me could be.
Heading into a correction in terms of the economy does that change your thinking at all meaning do you start to essentially hold more cash versus returning cash to shareholders.
Yes, Steve.
The way we think about it is is that we've built in.
The flexibility around our programs and the plans that we've made and discussed.
With.
The investment community to contemplate potential.
Potential risks to our business I mean, that's one reason we're running at the leverage levels we are at.
And we're not using every dollar of free cash flow that we have available to us to return to shareholders in dividends and share repurchases. We have flexibility there we're not our growth capital programs arent geared toward using up every dollar that we're generating is free cash flow. So I think as we look at.
Kind of where we are today understanding.
<unk> not being naive about potential risk in the business. We've tried to build it in in terms of having a flexible balance sheet, a strong balance sheet and understanding that we have flexibility in decision, making as we go forward but.
We feel like we've built in some cushion in the way, we're thinking about it in and executing on these programs at this point.
Okay, great. Thanks, guys really appreciate it.
Yep.
Thank you Steve.
Next question is from Shaun Kelley with Bank of America, Sean. Please go ahead.
Hey, good afternoon, everyone.
Just maybe to start Josh one gate kind of go back to the to the core consumer that Steve asked about a little bit.
I think Jim.
If we break down specific markets could you just give us a sense of.
Maybe some of the patterns you saw and maybe just the core regional side of the business I think there.
Some concern that maybe in March things slowed down a little bit relative to trends seen.
Earlier in the year certainly in the back half of last year. So could you just talk about maybe what you saw across some of the core regional markets and some of the behaviors there.
Yes look I think that certainly in March we didn't.
And as Keith mentioned in his remarks going into April .
The business actually in our mind at least as we were looking at our trends in our business continued to build through the quarter as we came away from Omicron February was good.
And then a continued into March now you do have to realize certainly we started to see some of the stimulus benefits start to roll out in late March in our Midwest and South business kind of really kicked in at a pretty high level pretty quickly.
And then Las Vegas came in a little bit behind that so, but when we look at the general health of the business and look at the trend sequentially as Keith mentioned in his remarks.
Some people have heard me say this as well its just been it continues to be a consistent business, we don't see.
C.
Sure.
Uniqueness is in one market versus the other.
We did have kind of one off issues and some of the Midwest and south markets that we operate in but that was exogenous that wasn't related to customer trends that was more of other things going on in those markets. So I think we generally feel pretty good about where things are trending today and acknowledging I think.
That.
And some of the unrated play may be there is softness there, but it's being replaced by other customers our unrated business is.
It has been very consistent as a percentage of the overall volume of our business. So maybe just to emphasize two things one as Josh said the quarter actually strength as we went through January was impacted by my omicron, but it got stronger as case counts went down and is masked mandates at least here in Nevada came off so that's important to understand that.
Secondarily as we move into the second half of March and April and May.
Yes, it is about a sequential improvement or sequential trend not year over year, because clearly the year over year comparisons are tougher in the second half of March and April because of the stimulus that was in the economy last here. So we've we have or are transitioning to looking at this sequentially from Q1 to Q2 and as we mentioned a number of times.
As we look sequentially over Q3 Q4 Q1, the business continues to perform at a very high level. We continue to see strong growth in our database and strong performers. So strong performance from the upper tiers of our database.
Great and just my follow up would be obviously, the other area, where there is a lot of question marks out there kind of remains the margin sustainability and really.
Broad or inflation backdrop.
Could you just comment a little bit Keith I think you mentioned getting back to a $50 or getting to a $15 minimum wage.
Maybe give us a sense either how much your how much of your cost structure.
That could impact or just help us get a sense, maybe broadly for where you think your what kind of headwind you may have from the.
On the labor side of the business.
Progress through 2022.
Sure so.
As we've talked about for probably a year now.
These elevated margins that are now just part of our business and part of our core business, while we will not maintain 100% of the increase that we have generated we do expect to maintain the majority of the increase so we do expect over time, some payroll to come back into the business and some marketing costs to come back into the business. So we expect.
<unk> maintained very high margins, but not every point of what we've achieved over the course of the last couple of years.
Built into our thinking and built into our commentary is.
<unk>.
The raising of our minimum wage to $15 an hour and so well.
Yes.
It is not insignificant it has been kind of built into our estimates and we believe that there are offsets as we are able to attract more team members as we were able to run less over time by attracting more team members at $15 an hour as we have less turnover in the business. It all nets out so it's not a material.
Will impact to the overall margin profile of any one of our properties are in one of our regions.
And the one other thing I would add to it as I think about adding flavor back it really falls into two categories. One is labor that we.
We need to add back to relieve the strain of our team members were were just too short in terms of the amount of labor. We have and then on the other side is there is there are revenue opportunities associated with bringing some of that labor back as well and then Keith and his remarks talked about.
The hotel the opportunity on the hotel side of things so.
I think we continue to have an opportunity on the non gaming side as this business continues to.
Return over time.
And also on the gaming revenue side as well because it's not just about filling those hotel rooms with hotel guests to pay a cash ADR, it's about filling them with really high quality casino customers that were turning away. Today. So there are elements of costs that are going to come back into the business.
And I'm sure there are some unanticipated costs that we haven't aren't aware of today, but at the same time. There is also revenue opportunities that we have.
Have the ability to capture over time as well so it's not just on one side of the ledger. So to speak that we will see pressure theres also opportunities.
Thank you very much.
Thank you Sean.
The next question is from Carlo Santarelli of Deutsche Bank Carlo. Please proceed.
Hey, guys. Thank you.
Josh and Keith you guys talked a little bit about the labor front, just in terms of broader cost pressures and acknowledging clear.
Clearly lithium or gaming taxes are the vast majority of our expenses, especially in the regional markets are you seeing any other signs of kind of cost inflation.
Other utilities.
Designs that are meaningful in any way.
Well I think you captured it labor marketing and gaming taxes are the largest share of the expenses. When we look at the P&L, but certainly utility costs are up when we look quarter over quarter and year over year. So there are incremental cost.
I think Josh was just alluding to it we will see.
Incremental costs going up in the business.
Are they having a material impact no, but they are clearly up year over year outside of utilities and food.
<unk> costs being up with food costs being up are also being offset by increased menu prices and increase average check and so there is there is a lever that we can pull as cost of food goes up Utah.
Utilities.
Hard to offset so that's just a pure.
The impact to the bottom line, so it's something we're monitoring and watching but.
Outside of those two issues Josh.
Nothing is coming to mind, where we're seeing significant incremental costs.
Thank you and Carlo hit them, all really a flavor and marketing related items that are our biggest cost.
Particularly focused on and utilities have gone up as well I think what.
<unk>.
Taking some comfort in at least is our ability to kind of maintain our margins. While we're we're facing some of these cost increases and so our operations teams are doing a really good job of balancing trying to get labor into the business facing some of these costs on the food side on the utility side.
But I think what we're also seeing it is just our core customer and that focus on that core customer continue to kind of help us be successful in this environment and we've just gotten a lot better as a company really central reopening since being closed for Covid I think we were working on this pre COVID-19 , but just getting really better.
It kind of.
Being focused on that.
Loyal core customer and continuing to try to drive that business from them.
Is helping us offset some of these cost pressures.
That's helpful guys. Thank you and if I could just a follow up kind of on that same theme.
Do you think about kind of your non gaming tax related to Opex in the first quarter and then I think I believe it was down in several of the regions with some seasonality and then you just kind of think about overtime seasonally the way that that opex has kind of.
Trended.
Given kind of the minimum wage increase and given some of the other more real time kind of inflationary pressures that may exist or some of the smaller stuff that you guys just kind of call.
Is there is there a reason to believe that.
The seasonality of that Opex changes materially off of the first quarter relative to how it's trended in prior years normalized years, obviously going back to 19 and prior.
So Carlo just to make sure I understand your question you are saying if you took the Q1 opex excluding taxes.
That is there seasonality related to that as you move through the year.
Your question Im, saying with the seasonality be dramatically different than it's been in prior years. If we went back and looked at those numbers now 17, 18, 19 and kind of ran it from there on a quarterly sequential basis do you think there is a material change in the way that that moves throughout the year. This year.
Given some of the things that you are seeing presumably on the cost side this year.
Yes.
Look.
Im not sure. If this is going to answer your question. So obviously ask it again, if I missed the point of your question, but I think ultimately.
That.
If I look back at <unk>.
You typically look back at 2019 as a year to to use for our base and look at that seasonality and use that to think about 2022.
So there is some seasonality, but I think it's not dramatic.
I've noticed some but not hugely variable.
Yes.
And that was kind of what I got to I guess, what I was saying was that more so this year, if youre, putting the minimum wage and youre seeing.
They're kind of costs that are going up in real time.
Those things enough to kind of disrupt what has been the historical seasonality I guess youre waiting to ask I think.
Yes, I hear what you are saying so I think if you just looked at isolated cost you would say that.
There could be some increased seasonality associated with those costs in other words, you may have higher costs as you progress through the year, because youre, bringing on more labor and you are having those people those folks at a higher wage potentially.
But I also want to point out and I am not.
There are offsets to that that that are going on in the business, where there where we're getting away from either temporary labor that we had higher or either COVID-19 related costs that are no longer in the business as well. So I think it's not as clear cut as Oh, we're going to add back labor, it's going to be at a higher cost and thats going to grow.
Over time, there are some puts and takes that are happening not only in the first quarter, but continue to happen throughout the.
For the year as well that will I don't know if they'll totally offset it but they will mitigate some of that so Carlo if you were looking at it opex in isolation using 19 has a seasonality basis. Yes, you would expect there to be some incremental cost as you went through 2022 because of the increased minimum wage increased utility coal.
Cost.
We're not maybe aren't fully baked in yet, but then once again you have to pull back and as Josh said there'll be revenue opportunities there'll be other offsets right now we may be using some contract labor that'll be converted at a lower cost in house labor.
So it's hard just to think about op ex in isolation without thinking about the kind of the whole.
<unk> property or the whole picture if you will.
Yes that makes sense guys Thats Super helpful. I appreciate it thank you.
Thank you Carlo and the next question comes from David Katz from Jefferies. David. Please proceed.
Hi afternoon, everyone. Thanks for taking my question.
Covered a lot of detail.
And so look I think one of the topics we've talked about in the past is the degree to which.
Strength on the strip drives locals business.
And potentially there is any.
What's the what.
What the co existence or cohabitation, our interaction is between the strip and your locals business.
Because at times it is not and I'm wondering whether there is any change to that.
I think that as the strip has performed well as Las Vegas.
Hit it kind of peaked.
Peak demand that our locals business has also performed extremely well because we do get whether it's overflow pricing from the strip as the strip hotel rooms fill up we're able to price our hotel rooms, higher or whether it's just increased visitation as in the case of downtown Las Vegas, where a large percentage of visitors to the strip.
Downtown Las Vegas, and so we get the benefit of that so there's always been somewhat of a symbiotic relationship between both downtown our locals properties on the strip because.
Because we don't have as much pricing power if the strip is in full.
So it exists today.
Maybe a decade ago it wasn't quite as strong, but I'd say at least for the last decade, it's been a fairly.
Strong relationship as they do better we do better is more out of town guests are in town as people are traveling as more people are coming through the airport is meeting and convention business rebounds.
We end up doing better in our locals properties.
Okay.
And just as a follow up.
Given the financial flexibility that you have.
Is.
As a strip asset.
<unk> ability and your future under the right circumstances.
We're going today, we are.
Are intensely focused on our core operations kind of continuing to fine tune and maximize the results and the performance of these properties and making sure that we are focused on the future.
Have all the amenities and the physical assets, we need to continue to perform at this level and that's why we are doing.
Your chest in the Fremont.
A handful of other smaller projects could follow along once those are further into development. We've grown a lot as we've talked about on prior calls through M&A and it's something that.
We have our eyes open to but.
Last time on this call.
Somebody said it may have been Josh just because you can do something doesn't mean, you should do something and so we've always been a very disciplined acquirer will continue to be extremely disciplined but I got to tell you. Our main focus now is on running our core business and extracting everything we can out of that and making sure that.
We find our way through this inflationary environment, we're in and continue to have a strong business going forward.
Perfect. Thanks, a lot.
Yeah.
Okay.
Thank you David.
The next question is a follow up from Joe grasp of Jpmorgan. Please go ahead.
Hey, everybody.
I guess most of our everybody's focus on today's call is what's going on with the lower end consumer.
How youre thinking about margin.
Going forward in those two topics have been discussed enough. So the only thing I really have at this point late in the call is.
When we think about the <unk>.
Capex going into treasure chest into downtown Las Vegas.
Anticipate and can you help us understand what sort of disruption you might have in the near term before the things open up.
Yeah. Good question, Joe So if you think about the Fremont first the actual.
Construction of the new.
Food outlets.
Food Hall, if you will is happening.
Where the buffet used to be in on a piece of land that was vacant right behind the building thats being incorporated in and so up until recently when we hung some steel people didn't even though there was construction going on at the property. So it really is.
To a large extent seamless as we build out that food facility, there and so thats a real benefit as part of that we're also building out.
Some additional casino square footage, which once again is behind the wall and so has no impact on our existing operations. So that project should be largely.
Not impactful to the free months of operations in the case of treasure chest separate land based facility on a separate piece of land the existing riverboat operation will stay fully in business and producing.
Full results until it's time to move over some of the gear in late 2023.
So really no impact as you think about 'twenty, two or even early 'twenty three on on the treasure chest business, because it's a whole separate building kind of across the way from the existing facility.
And Josh how much capex for these two projects in 2023.
In 2023.
Large Italy.
I'm trying to think.
Let me see if I have that.
Spent $20, so it's about $60 million or $65 million for treasure chest, I think like $10 million or $15 million remaining for Fremont because it will largely be finished.
Later this year first quarter of next and treasure chest will take into late 2023. So what's happening is Fremont largely gets done this year finishes up first quarter next year, probably at 10 or $15 million and then treasure chest largely gets started probably later this year.
And mainly gets done and does get done in 2023 and opens in 2020. So I'll look at that as probably a $60 $65 million spent at that point and then.
We'll be probably in the works planning something out the next project to come online to take the place of say the Fremont as long as it has adequate return.
Relative to our alternatives so.
That's how to think about it and.
And that would be on top of marginal maintenance time.
Got it and then one final thing with regard to the Sky River Casino opening in the fall.
Can you remind us what sort of advantage you have out with the tribe.
Your anticipation.
The timing of that recovery of that event.
Yes, Joe so.
Right now we have it's about $105 million advanced that's about $75 million or so of actual advances and then the rest is interest that's been accruing all of those advances over the last several years that we've been supporting the tribe to get them to the point, where they could then arrange their own.
Financing and develop the project.
So that $105 million, we will continue to earn interest until.
We are reimbursed from cash flow from operations and so obviously, that's a little dependent on how well it does should be a good project and so we would expect to be reimbursed.
Over the first several years of that project.
Separately from that as you probably know we earn a management fee that's about 25% of effectively of pre tax income that we earn once the project starts opening our doors opened rather and so those are the two components of cash flow. The company will start seeing once the project opens.
Sure.
Okay. Thank you very much.
Thank you Joe.
Next questions from Dan Pulitzer of Wells Fargo, Dan go ahead.
Hey, good afternoon, everyone and thanks for taking my questions.
So I think a few months ago you guys mentioned there was not much reason to think 2022 EBITDA wouldn't be at least equal to 2021 levels.
Given youre out to a $45 million or so head start after the first quarter, but now there's additional concerns out there on the consumer and on the cost side.
How are you thinking about this and what are you seeing across your portfolio that could maybe be the puts and takes this.
Well Dan.
I think look I think.
When we look at it.
And I don't really think our.
It's hard to have a different view today.
When we look at our business except to be obviously cognizant of.
What everyone's worried about it's a natural thing to be worried about right in terms of inflation a war and all of those those things that could weigh on the consumer.
I think where we continue have continually have confidence is and the underlying trends, we're seeing in our consumer which had been and I hate to be a.
A broken record, but have been has largely not changed since we reopened in fact.
Our core customers just continue to grow throughout all of this even in periods of time, when we had all micron and the business took a little bit of a step back because of that.
Within that framework for core customers continuing to grow so.
That's the only thing we have in our pocket that we can count on today.
I think the second everything else is a concern that we just.
We'll deal with as we come to it if we ever come to it.
We can all be rational and reasonable to expect that to happen at some point, but maybe it doesn't.
I'd say the other thing to think about at least as we think about it as Q2 last year was.
It was really good we don't expect to replicate that but what we expect to do over time is make up some of that difference through the growth in Q1, Q3 and Q4.
We expect naturally to happen.
It depends largely on how successful we are in Q2, how we make up that those differences over time, but that's how we think about the business today, we're not naive to the risks that are inherent in it.
We still have some opportunities.
Expect to the topline.
Aspects that we've talked about and we're kind of working through every day our operations guys are doing.
Great job of managing the expenses and staying very tight and focused on executing our business and I think that's what gives us the confidence and kind of how and where we where we sit today.
Really know how else to really answer that question.
Yes, Josh.
Opportunity.
This growth opportunities that he highlighted in terms of Las Vegas, and the return of meeting and convention business here, just returned about a town or destination travel to Las Vegas, certainly offset by things like.
Higher wages and inflationary aspects and so how does all that net out at the end of the day.
Hopefully it nets out to zero and we ended up where we were last year, but.
We will work our way through it every day and every week as we move forward.
Got it and then just just for my follow up on Paula Interactive I mean.
Given the focus is going to be on the high gaming.
How should we think about the revenue and maybe the EBITDA opportunity should we be thinking about there.
An additional investment.
On technology or integration or on your rewards program just to integrate all of these things together.
Yes, I wouldn't anticipate any significant additional cost I mean, we bought pollo because it gave us both a technology that we needed to roll this out as well as the operational and marketing expertise to run this business and the management team is staying intact and becoming part of US we don't see any other significant.
<unk> costs, yes will their team will have to develop an interface with our loyalty program, that's not a very big lift and in terms of rolling it out it's really more about other states.
Proving this are adopting this legislatively.
Taking a regional approach focused on the 10 states, where we do business and maybe a few adjoining states, where we get a lot of customers from so we're not out there looking to have a national presence as much as a regional presence.
So no significant incremental costs as we go forward no.
No no anticipated additional acquisitions to be able to move this forward.
Understood. Thanks, so much for all the color.
Yep.
Thank you Dan.
Our next question comes from Thomas Allen with Morgan Stanley . Please go ahead.
Thanks.
Prior cycles, you guys have benefited from higher oil and gas prices are you seeing that cycle.
At certain properties.
Yes, I mean, we've actually seen it in some of the Louisiana assets.
Thats contributing to our results but.
It's not.
<unk>.
Outsized I would say when we look at the trends of the business. There are just trending up.
Theyre getting benefit, but it's like it's not outsized relative to the performance that we're seeing in the rest of the business.
If that makes any sense.
Hey, Doug.
And then just my follow up so in Louisiana.
The retail sports betting was legalized.
Our launch in the fourth quarter of last year online launch.
In the first quarter.
Any observations over the past few months.
No look you've seen it most of the properties, we will until we launched the <unk> Sports book, you will retail at each one of our five Louisiana properties. So each one of the properties has a retail location up and running.
And online is up and running it's been incrementally positive as we've seen new customers come to the properties.
It's not.
All incrementally positive I don't really have any other color im trying to think if theres anything else interesting to add but I don't.
I don't think so Thomas.
Okay. Thank you.
Youre welcome.
Thank you Thomas next question is from Joe Stauff with Susquehanna. Please proceed.
Thanks, I was wondering if you can.
Maybe update us on the promotional environment.
And your various segments.
It goes south Midwest and if you see any competitive responses that you have to match.
Just wondering where that is now.
So I think just globally kind of.
Over across all the markets that it has been relatively stable many of our competitors post COVID-19 opened up at a very high level either at or in some cases, even slightly above pre pandemic levels are for the most part they've stayed there.
We obviously have not in some of our competitors like us have taken a more conservative approach to marketing going forward.
Most people have kind of stayed where they started some of that in slightly more aggressive in some of the gross ones that maybe you pulled back a little bit but for the most part I would say the promotional environment for the last several quarters has been.
Kind of very neutral if you will nothing has materially changed.
And the business, whether it be here in Las Vegas.
Or whether it be in the south or whether it be in the Midwest.
Okay.
I see thank you.
Youre welcome.
Thank you Joe.
No further questions waiting at this time, so I'd like to hand, the call back over to Josh for closing remarks.
Thank you Sam and thank each of you for your thoughtful questions. If you have any follow up feel free to reach out to the company and we will.
Try to.
Facilitate getting those questions answered.
Everybody stay well thank you.
That concludes the Boyd gaming first quarter 2022 conference call. Thank you all for your participation you may now disconnect your lines.