Q2 2022 Boyd Gaming Corp Earnings Call
There are two important themes worth, noting the stability of our financial performance and the continued strength in our customer trends.
Looking at our financial results in the quarter, we delivered revenue EBITDAR and margin performance is similar to each of the last three quarters.
On a sequential basis comparing to the first quarter of this year EBITDAR was up over 4%, reflecting more normal seasonal patterns in our business, while margins improved to 39, 6% for the second quarter.
Comparing our results to our pre pandemic baseline of 2019 revenue was up 6% EBITDA rose, 52% and margins improved more than 200 basis points versus the second quarter of 2019. These.
These trends for the second quarter are very similar to the trends we saw in our first quarter results importantly.
Importantly, we are seeing the stability across all three of our operating segments.
Lets Vegas locals business revenue grew 4% and EBITDA grew 6% compared to the first quarter of this year margins were 53% during the quarter, marking the fifth straight quarter, our margins have been above 50%.
We're seeing excellent performance in our downtown Las Vegas operations, as well with record EBITDAR and operating margins in the second quarter, and our Midwest and South business continued its steady performance during the quarter revenues and EBITDAR were the highest since the second quarter of 2021, and our operating margin has remained consistent at 38%.
Since then.
Driving this robust financial performance is the stability of our operating trends nationwide led by continued strength among our core customer segments.
During the second quarter play from our core customers was 4% higher than the prior year.
Marketable achievement, considering the historic strength of last year's second quarter.
While unrated play has come down some from last year's peak second quarter. It has been stable over the last four quarters, both in total volume and as a percentage of gaming revenue.
Customer spend is also strengthening in our non gaming amenities with increases in non gaming revenue driven by growing hotel occupancy higher ADR and stronger F&B revenues looking.
Looking ahead, we recognize that we're in a period of economic uncertainty and while there are clearly headwinds facing our business there are positive signals as well.
Unemployment is at or near record lows across the country and customers continue to benefit from strong wage growth here.
Here in Las Vegas total employment recently returned to pre pandemic levels, an important milestone in our largest market.
Nationwide consumers are showing a continued willingness to spend on experiences in entertainment with strength across the leisure sector.
Hotel bookings are running ahead of 2021 levels with no change in cancellation activity to date.
And volumes from our core customers continue to grow driving overall profitability, our customer trends in the second quarter and so far in July remain consistent with what we have seen over the last four quarters.
While these trends are encouraging we recognize there are also challenges in the economy.
The strong job market and growing wages are good for our customers, but they also mean increased labor expense and inflationary pressures related to supply chain issues higher gas prices and utility costs and increases in the cost of goods and services are all impacting both us and the consumer.
Having said that our teams have done an excellent job managing through these challenges and continue to deliver strong results our company wide margins during the second quarter were consistent with the first quarter. Despite the increased cost we are experiencing across the business.
And while we are closely monitoring the current economic environment as of today, we see no compelling reason to believe there will be a significant change in the direction of our business in the near term our operations remained strong and stable. Our management teams are focused and we remain confident in our strategy, our operating model and our ability to to <unk>.
Obligate these uncertain times.
Beyond our continued focus on day to day operations. We're also positioning ourselves for long term growth through strategic Reinvestments in our business.
In Louisiana, We started site work in early July for our new land based facility in a treasure chest casino.
Once complete this project will significantly enhance our gaming and non gaming amenities, creating a more attractive and competitive entertainment experience.
We are confident the all new treasure chest will further expand the properties customer base, while increasing its appeal to our existing customers and drive enhanced results. Following its opening in late 2023.
In downtown Las Vegas, where continues on the expansion of the Fremont Hotel and casino.
By expanding our casino space and adding a selection of appealing quick serve restaurants. This project will help us capture a larger portion of pedestrian traffic throughout the Fremont Street experience, we are making good progress on construction and are on track for completion around the end of the year.
In our northern California, we are preparing to open Sky River Casino by early September on behalf of the Wilton Rancheria tribe we.
We have created a compelling entertainment experience at Sky River with a 100000 square foot Casino 2000 slot machines, 80 table games, and 17 food and beverage venues and thanks to its location just south of Sacramento. This property is well positioned to capture a significant share of the Sacramento and Bay area markets.
We look forward to a successful opening of Sky River and are proud to partner with the tribe as they achieve their vision of self sufficiency. As a reminder, we have a seven year agreement to manage Sky River and will receive a management fee typical for these types of arrangements.
Beyond these capital investments, we also continue to expand our presence in sports betting and online gaming.
Kansas in Ohio recently passed sports betting legislation and with our partner <unk>, We plan to offer retail and mobile sports betting in both states subs.
Subject to regulatory approvals, we expect to launch sports betting in Kansas in the fall and Ohio or on the first of the year expanding our <unk> partnership to eight of our nine regional states, we expect our existing online sports betting partnerships to generate approximately $30 million in EBITDAR this year and this contribution.
Should grow next year of sports betting expands into Kansas in Ohio.
We also remain on track to complete our acquisition of power interactive around the first of the year, allowing us to take a direct approach to the emerging online gaming industry.
Our online gaming strategy is built upon leveraging our geographic distribution loyalty program and customer database to build a profitable regional online casino business.
It will provide us the full suite of products technology and expertise, we need to execute that strategy without the need for additional significant investments or acquisitions.
And of course, our 5% ownership of <unk> is an important strategic asset that will grow more valuable sports betting expands.
<unk> continues to build on its position as the nation's leader in online sports betting.
And both our online and land based operations. We are building a strong foundation for long term growth.
With our steady operational performance attractive growth opportunities substantial free cash flow and commitment to maintaining a strong balance sheet. We are in an excellent position to continue returning capital to our shareholders.
We remain committed to returning $500 million to our shareholders. This year through a combination of share repurchases and dividends.
We've noted before we're targeting $100 million per quarter in recurring share repurchases supplemented by quarterly dividend payments were also creating value through our ESG initiatives in June we published our second ESG report detailing our significant progress to date.
We are proud of the substantial progress we have made over the last several years and we remain committed to being a leader in our industry. When it comes to corporate responsibility and ESG.
I invite you to learn more about our initiatives by visiting our website.
So in all this was another outstanding quarter for our company our business remained.
Stable and robust financial results and the performance of our core customers sequentially in line with recent quarters and well above pre COVID-19 levels. Importantly, these trends are continuing into July.
Exceptional performance is a tribute to our team members, who are dedicated to creating memorable experiences for our guests and strengthening customer loyalty.
And it is a reflection of the skill of our management teams as they sustained strong operating margins despite increased cost pressures in the business.
Our strong diversified free cash flow and balance sheet are enabling us to pursue growth projects in both the land based and online spaces, while continuing to fulfill our commitment to return capital to our shareholders.
We remain committed to our proven operating strategy and we are confident in our ability to navigate today's uncertain economic environment and to continue to create long term value for our shareholders. Thank you for your time today I'd now like to turn the call over to Josh.
Thank you Keith this was another strong quarter for our company the sequential trends in our business continued to be very stable.
The second quarter last year was the best quarter in the company's history benefiting from significant government stimulus limited entertainment options and the lifting of Covid restrictions.
EBITDAR in the second quarter of last year grew 66% over 2019 levels and margins improved almost <unk> hundred basis points.
These dynamics began to normalize in the third quarter of last year and the business has remained extremely stable on a sequential basis. Since then.
The sequential trends demonstrate the strength and consistency of our business.
We are certainly aware of the economic pressures weighing on the U S consumer and while predicting the future is particularly difficult now.
There is no compelling reason today to say that the course of our business is changing.
Consumer trends in July confirmed the continued stability, we have seen for the last year.
Our focus on our core customer and disciplined execution of our business continue to drive our results. Our operation teams are managing through inflationary effects pressuring our business as demonstrated by our second quarter margins, which were consistent with the margins. We have delivered over the last 18 months.
To strengthen our operations substantial free cash flow and strong balance sheet evidenced by the lowest leverage in our company's history enable us to continue to execute our capital return program balanced with strategic investments in both land based and digital assets.
During the quarter total capital expenditures were approximately $52 million, resulting in approximately $100 million of capital expenditures invested year to date.
We expect to spend about $125 million in the second half of this year on maintenance capital and.
And an additional $50 million for the Fremont and treasure chest expansion projects at key previously discussed.
We will also be investing $170 million to acquire Paula interactive and subject to regulatory approval and expect this transaction to close around the first of the year.
During the quarter, we continued our focus on returning capital to shareholders.
We repurchased $168 million in stock representing more than 3 million shares at an average price of $55 66 per share.
This reduced our actual share count to $106 8 million shares at quarter end.
Since commencing our repurchase activity last October we have repurchased approximately six 4 million shares for a total of $381 million.
With our board's recent $500 million increase to our share repurchase authorization, we have $481 million remaining under current authorizations.
We plan to continue targeting $100 million per quarter of share repurchases as part of our recurring program to return capital to shareholders.
We also distributed our second dividend of the year earlier this month with a payment of <unk> 15 per share, which is more than double the amount of the company's previous pre pandemic dividend.
In all we expect to return over $500 million draw.
To our shareholders this year through dividends and recurring share repurchases.
Our balance sheet is the strongest it has ever been we ended the quarter with leverage at two three times lease adjusted leverage of two eight times.
During the quarter, we used a combination of cash and revolver borrowings to retire our remaining balance of 85, 8% notes, resulting in nearly $20 million in annual interest expense savings.
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 and we will continue to maintain a strong balance sheet with a commitment to returning capital to our shareholders.
That concludes our remarks, and we're now ready to answer any questions from participants on the call.
Yes.
Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad if for any reason you'd like to move. The question. Please press star followed by two again to ask a question Press Star one as a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking you.
Question, we will pause briefly as questions are registered.
The first question is from door line of Carlos answer early with Deutsche Bank. Your line is now open.
Hey, guys.
Thanks.
Fine.
I know you guys both months when we do a box that kind of what you've seen over the last year has carried through into July .
Is that.
Kind of representative of what you're seeing both in Las Vegas between our locals and downtown market as well as the.
Marco.
Yes, Carla this is Keith so it is.
Relatively consistent kind of across the portfolio. So the trends in July throughout.
Throughout the different regions are mirroring what we saw earlier in the year, there's really not much of a change.
Okay.
Okay, Great and then.
Obviously, you guys talked about some of the ambiguity that's out there.
The cost pressures in the way you guys are advantaged.
As you look ahead.
If you had the kind of.
Think about where the bigger risk comes from.
And the two buckets, where kind of the health of the consumer the health of the gaming customer versus kind of the competitive aspects whether that is.
Any kind of.
New supply coming to market or whether that is <unk>.
Petitor promotions things of that nature, how would you kind of look at those those two options.
Yes.
Well look sitting here today, the consumer remains healthy in all of the statistics that we see in all of the trends that we see in our own business. It shows that the consumer's healthy they've got strong balance sheets.
While it may be a consumer consumer spending is off a little bit it's coming off of historical highs and so it's still extremely robust.
Competition is always coming into the business, we're operating in a number of obviously different markets, but our team has a lot of history and fending off competition and competing with new entrants into the various markets that we do business in and so they.
They both could be impactful, obviously consumer all of a sudden becomes unhealthy instead of healthy it will impact our business.
Big building goes up next door to one of our major EBITDA producers it will be impactful, but.
I don't.
And it was.
I don't want to be naive here, but.
I think we're confident in the near term that neither of those are significant issues for us.
Great. Thank you very much.
Yep.
Thank you for your question. The next question is from the line of Joe Greff with JP Morgan. Your line is now open.
Good afternoon guys.
My question is probably going to sound like I'm being.
Very negative but.
It's really not meant to be negative is just to get out and understanding of sort of a certain scenario analysis.
Think about it.
Yes next year as an example.
Yes, we are in recession, we are seeing the gaming consumer retrench a bit.
And let's just say in that scenario guys.
That it's more spend per visit than visitation.
You think about the flow through on that.
A declining revenue environment.
Environment.
And the flow through percentage in both the locals and in the Midwest and South.
Yes, Joe.
I think that is the question.
Need to try to answer.
And I think ultimately the way we think about that.
Is trying to measure and understand what flexibility we have in and managing.
Adjustments in revenue quite honestly.
We can certainly scale marketing and labor and some of these other costs based on the levels of revenues that we're seeing at any particular time I think one other things that we have.
Really had.
Kind of learned through Covid and while we were close is just a really good understanding of our cost and how they are and our related and so we feel like that gives us the ability to be in a better position to manage through softness in revenue if that were to come as a result of declines in spend per visit.
We are in a position really to kind of quantify what happens to flow through our margins very effectively it just really be a shot in the dark.
Yes, theres so many variables as if there is a kind of reduction in spend per visit is coming through as a gaming as a non gaming is that hotels that F&B, what's happening to the actual volumes in the building. This of 2008 type recessionary environment or is it a different recessionary environment that we find ourselves in.
Trying to model it out and play what Ifs is very difficult in this environment and probably more difficult on a phone call like this.
Sure.
Thanks for the thoughts guys.
Sure.
Thank you for your question. The next question is from the line of.
<unk> was an SKU with Stifel. Your line is now open.
Yeah, Hey, guys. Good afternoon. So.
This is going to sound very similar to to Joe's question, I think I'm, just going to try to ask this a little bit differently and I think youre, probably going to give you. The same kind of answer is we don't know but.
Yes.
Assume at this point you guys internally have probably run some different scenarios in terms of.
What a recession could look like on your business and I guess as high level as you can give.
How do you go about doing that meaning.
Are you looking at the last couple of recessions and kind of viewing those as what potentially could impact you or are you seeing this.
Probably a little bit more on the economic side of things are you, saying that.
Recession, this time around might not be as bad I guess any kind of commentary around how you're thinking about the impact would be helpful.
Yes, so I think.
Hey.
<unk>.
We do obviously try to mark.
Model different scenarios and you can imagine some are more detailed than others and some are very high level, just assuming different levels of revenue or EBITDA declines just.
Using different levels and run on those through the models and understanding what happens.
And also trying to replicate what happened previously in 2008, even though we understand that today is very different than what happened and what drove 2008.
And so we.
We try to say those are the extremes. If you will I think the other thing that we try to understand is the business today.
At least feels very different than the business, even pre COVID-19 in the sense of who our customer is and our focus on that customer and also how we're marketing to that consumer.
What is particularly.
Sure.
And cycle for us at least today is is that our core customer that we're reinvesting and continues to be very stable and grow I know you've got that message from commentary from other comments that we've made but what's driving our business is really a focus on a very loyal high quality customer.
And Thats whats driving our overall performance and so then when you look at like two key things.
Comments earlier to Joes question, it's like we look at how our different customer segments potentially reacting because maybe it's just the lower end consumer ROI on rate in consumer that falls away and trying to understand those impacts so.
It's a non answer answer that I'm going to try to give you because I'm not going to give you any kind of numerical result of it but.
We are looking at all just blyton assume revenues are down X and see the impact and at the other extreme.
Assume different segments are impacted differently. So.
That's how we're thinking about it and we also obviously are modeling than what we're seeing from cost pressures as well so.
All that just gets put in and we think about it obviously everyday to try to understand what's going to happen and how we're going to react.
So I guess the simple follow up to that to that answer is I guess under any scenario that you guys have.
Potentially modelled out inside the company, what as draconian as you guys.
Think things could get.
I guess the simple answer is how do you feel about your is there any scenario where you don't.
Don't feel comfortable with your financial position at.
At that point I guess, that's the.
The simple.
Question here.
Okay.
I think we've worked extremely hard and diligently over the last couple of years too.
Have the strength of the balance sheet that we have and have extremely low leverage level and all the scenarios we run.
Have is comfortable given our low leverage and.
At least in the near term what things May look like so we are dealing.
In a very uncertain environment.
Uncertain economy.
Again, everything we see says the business is pretty stable, but if something were to happen given our current financial strength.
We're not losing sleep.
Yes, I think.
Part of the whole philosophy of having a lower leverage level.
Access.
The undrawn capacity that we have is to be able to weather uncertain times that we find ourselves in.
And everybody's thinking about and wringing their hands about today.
No.
At this point.
We're kind of.
Just continuing to move through.
Okay, great. Thanks for the color guys really appreciate it.
Sure.
Thank you for your question. The next question is from the line of Barry Jonas with true. Your line is now open.
Hey, great. Thanks, guys I wanted to talk a little bit more about the labor environment is it still fairly tight are you have you been able to still more physicians and with that do you see opportunities to grow revenues as you add more ftes.
Yes, I think labor is still a challenge for us not as much of a challenge is it was a year ago. So we have more team members and we've been successful in adding team members and have more today than we did a year ago I would say that.
Our retention rates are higher our turnover rates are lower today than they were six months ago.
Applicant flow is higher today.
Then it was six months ago, and so things are easier, but it's still a challenge I think we still have the opportunity to add staff and be able to.
So more hotel rooms.
And.
Serve more people in our restaurants, so I still think there is some upside there.
But things are are improved today over a year ago or even six months ago.
Yes.
Great. Thanks, Jonathan and then just as a follow up.
I was thinking about Eastside cannery here I know a competitor is planning on permanently closing some of their closed properties. So just curious how youre thinking about your options here.
Yes, I think we've consistently thought about it in the context of demand.
At this point.
Our view is is that we've been able to kind of leverage the benefit of Sam's town, Las Vegas, which is near Eastside cannery and until we see perhaps more demand or something else to suggest we should consider reopened and eastside cannery for.
For now it will remain closed.
Great Alright, Thank you guys.
Thank you for your question. The next question is from the line of David Katz with Jefferies. Your line is now open.
Hi afternoon, gentlemen, thanks for taking my question I Hope I can ask you something as that.
You can answer.
Which is that the margins chemical came across.
Honestly.
That was not.
Intended it anywhere in particular, the visibility I understand is quite limited for all of us.
With respect to margins they came across.
Better than what we expected.
And assuming that there is no change in business levels in that.
Revenues continue to be approximately straight across or even up a little bit.
How do you see your normalized new World post Covid margins for each of the segments and if you could just give us a little color on each that would be helpful.
Yes, so David.
Your commentary I think that.
It's almost.
And I don't want to be.
Flippant about it but it's almost like what you see is what you get from what the.
Various regions are delivering they've been very consistent really for the last.
18 months or more.
And.
While we have said that we expect a little bit of pressure as a result of incremental marketing over time, a little bit of labor being added back ultimately some of that is associated with revenue growth as well.
So we generally think that the levels that you are seeing today are ones that.
And the neighborhood you should expect to see from us going forward and.
I think thats been a consistent message.
From us for quite some time and we generally feel pretty good about where the business is these days.
In terms of being able to deliver those those levels of margins.
Got it so assuming.
Not a ton changes, which is totally potentially unfair.
Right.
And the locals market of 53% EBITA margin as is the neighborhood downtown 41 and <unk>.
WNS is 38 ish.
That's a good place for us to hang out notwithstanding some major change in the top line.
I think locals as 50 plus percent downtown is high <unk> percent in Midwest and South is high <unk> percent.
Okay.
Helpful. Thank you.
Sure.
Thank you for your question. The next question is from the line of Shaun Kelley with Bank of America. Your line is now open.
Hi, everyone.
Josh Keith just I wanted to ask a little bit about a question we get fairly regularly so kind of in this consumer environment. One thing we're seeing throughout companies reporting in a broader space is sort of a return of promotional activity right across all areas of the consumer that werent promotional over the last couple of years.
We get this question as it relates to gaming and I wanted to kind of turn it to you a little bit.
So the question is really just how would you think about.
A return of more normalized promotional activity impacting gaming.
And I'm just kind of curious first of all is that a lever that you would lean on if you did see the consumer soften or might you react differently. So thats kind of the first part and then the second part is just more of a mechanical how would it play through the P&L I think in general we're thinking about this as a net against revenue.
But just how would you think about it actually playing through revenues versus margin.
Sure let me take a shot at it Shawn and then Josh can jump in I think it will.
We talk about the promotional environment in this industry as we've come out of Covid.
Players have different companies have staked out a position.
Some have gone back to pre COVID-19 levels of spend and they've got their fairly early after reopening after COVID-19 some of actually exceeded pre COVID-19 levels of spending.
Others us being in this camp to stay very disciplined.
With.
We continue to refer to as kind of a new operating model.
And are targeting the customers in different ways.
And we don't see ourselves getting back into these types of marketing wars. Once again, we have competitors in probably every jurisdiction, where we do business that are marketing at pre COVID-19 levels. We have competitors in every jurisdiction, where we do business at a marketing ahead of pre COVID-19 levels and we're standing Pat So I, just don't see us getting back into that game.
If we were to would have a significant impact on margins. Obviously, if we were to get back into that.
That promotional environment I, just don't see us doing it.
Yes, I don't have anything to add.
Perfect.
That's very helpful. And then second question just follow up would be kept on a couple of times cost pressures Barry asked a little bit about the labor side.
I guess the real question here is you know in this environment has been pretty dynamic even over the last quarter.
Is there anything incremental.
That really sticks out I mean, obviously youre always battling against.
Some new cost line and I mean, thats part of the part of the job, but is there is there anything new or new pressure that anybody should be aware of.
Energy and utilities or something of the of the ilk that stands out or is it just sort of normal course, albeit in a much more rapid inflationary environment today.
Yes.
I think there are other cost pressures, but they're just not.
To the order of magnitude when you start talking about labor for instance, so that's why labor is kind of the poster child for it but we see it in the cost of goods sold as Keith mentioned in utilities across the board and our teams have done we've been very fortunate a really good job and manage.
And through those most cost pressures and we continue to stay focused on it and some of it has to do with the business is continuing to come back as well certainly on the hotel side and the F&B side.
And as we've mentioned aspects of our of our gaming.
Customer continuing to grow so that that helps us also offset some of the pressures that we're seeing so.
I Wouldnt say its just one certainly not one line item and our teams are really doing a good job to remain focused on that and staying disciplined around kind of how we think about running the business going forward.
Yes.
It's pretty clear in the results. Thank you very much.
Thanks.
Thank you for your question. The next question is from the line of Dan <unk> with Wells Fargo. Your line is now open.
Hey, good afternoon, Thanks for taking my question.
On the downtown margins they were pretty strong in the quarter as we think about this business I think revenues are still call. It 15% to 20% below 2019, I guess where are we in terms of the recovery.
Is there still more room to go there or was it just a function of.
Unprofitable revenues are.
Low margin revenues being removed from the business.
Yes.
Say, it's a combination.
Both that.
Downtown.
It is largely driven by visitation on the strip.
So as the strip continues to build back as meeting and convention is continue to build back on the strip.
<unk> Air continued to build back we expect there to be some continued growth in the business downtown.
I think Theyre also was at least for Us fair.
Fair amount of.
Unprofitable or marginally profitable business that we're just not catering to these days and so I think as both factors as you describe them, it's not one or the other.
Yes.
And just.
To remind us.
Then just to remind everyone downtown had kind of a later start than the other two segments of our business.
They are just as our other two businesses were battling more difficult comps downtown will start to experience that as well, but it's a business that is kind of coming back and getting to the same level that the rest of our segments are quite honestly and that's that's what we kind of contemplated for for this year from that segment.
Got it and then just.
So a follow up.
It's been pretty clear, you're saying sequentially stable results in the business.
You repurchased I think $165 million plus the stock in last quarter, giving your trading kind of in that same neighborhood is there any reason to expect that.
It shouldnt be above that kind of $100 million bar per quarter that you've thrown out for buybacks.
Yes, it's a fair question, but we continue to reach a target of 100 $100 million a quarter because that is our target.
It could be higher but I wouldn't expect it to be that as that is our goal and that's what we're putting out there could be higher if there is a dislocation and we decided to buy back more but I would not assume we will.
Got it thanks.
Thank you for your question. The next question is from the line of Brent <unk> with Barclays. Your line is now open.
Hey.
Good afternoon, Thanks for taking my questions.
You guys spoke a lot about the growth in your core.
Consumer that was pretty clear I was hoping you could talk through ways in which you're taking pricing in the casino is it the case that there isn't much perceived inflation within the four walls, which is actually helping driving traffic and spend or is it is there also a pricing component that youre able to take.
Yes.
I think we've made any critical pricing adjustments within the four walls of the gaming floor. If you will look we have higher average beds today than pre COVID-19.
But that's about it.
Look on food and beverage we continue to increase prices, where we can hotel rates continued to be up year over year.
We have increases in cash room sales, which are good with higher rates within the four walls of the casino, it's pretty limited.
In terms of what we've done we haven't done anything currently whenever we've done has been in place frankly since we reopened the business.
Okay. That's very helpful. Thanks, and then on the unrated side I caught your comments that it's.
Stable I was just curious maybe if you could unpack that a little bit if youre still seeing a fair amount of turnover, there, but with those numbers being replaced or if that's sort of slowing down at scale a little stickier.
Yes, so unrated, it's really hard to answer with specificity.
But what we what we expect is going on or things going on is similar to what we're seeing in some of the lower tiers year over year, which is we are seeing declines in that part of the business that benefited the most from stimulus and the lack of entertainment options in Covid that was largely at the lower end of the data.
Base, where we saw a lot of activity last year that we are seeing a little bit more softness this year.
Now in the unrated segment, we're assuming that part of that is what's going on as well, but as in Keith's comments. He said it's been stable. So some of that are that softness getting replaced by other unrated business either from increased spanned our new customers coming in we know that we are signing up higher quality.
New customers and Thats contributing to the overall business and that's coming from that unrated pool of customers. So.
It's all kind of.
Kind of.
Writing itself at this point to maintain a stable unrated business.
Great. Thanks, everyone.
Thank you for your question. The next question is from the line of Chad Beynon with Macquarie. Your line is now open.
Thanks. Good afternoon. Thanks for taking my question Keith just to follow up on your position of strength with the two eight times levered balance sheet and the free cash flow I know you talked about $500 million of capital return, but how are you thinking about opportunistic M&A in the regional markets, where you could benefit from an operational improved.
<unk> strategy, and maybe even a long term by gaming license or separately on the strip, where you could send your customers. Thanks.
Yeah sure. So look it in the environment, we find ourselves in today, we really are spending almost all of our time focused on maintaining the strength of our current operations, maintaining the strength of our balance sheet and ensuring that we can.
Maintain returning this $500 million to our shareholders that is kind of a job and priority number one.
Look we've been active over the decades in the M&A space.
But today and I think in the very near term, it's really about running this business.
The optimum level and continuing to produce the results we are producing and ensuring that we can continue to return this capital to shareholders.
Okay. Thanks, and then in terms of Paulo after the deal closes.
How quickly can you be up and running communicating with your customers.
<unk>.
Trying to cross sell them.
<unk> product is that something that can be done within a few quarters or is that something that might take a little bit longer.
Not expect within call it six months of the close of the transaction so.
Able to close and we have got all the regulatory approvals around the first of the year.
Think about middle of 2023, and we should have a product where we're able to offer it to our customers.
Appreciate it congrats on the quarter.
Thank you.
Thank you for your question.
We only have time for one more question. So the last question is from the line of Joe Stauff with Susquehanna.
Okay.
Thanks, Keith Josh two quick ones I was curious.
Our Las Vegas locals perspective.
Certainly can't tell by the results so I'm wondering if.
You've seen any of the California based customers just moderate in terms of their visitation.
If there had been maybe any changes or.
Sure.
Those trends that you saw whether that be in the second quarter.
Or kind of July thus far and then the second question is.
Really that sort of.
Sure.
Capital reinvestment and in particular buying back about $100 million of stock per quarter.
Is there any like are there any discussions possibly to maybe increase the dividend.
More so than than what is roughly a 1% yield.
Yes.
Whether it be at the expense of the buyback or not is there any discussions about boosting the dividend. Thank you.
Sure. So on your last question I think obviously with respect to any conversation about dividends it will be up to our board, but we're only two quarters into the restatement of our dividend and so I think we're we're ways away from revisiting.
What is.
What the trajectory of that is in the future seeing as we've only just last week made the second payment with respect to the California traffic.
Here into Las Vegas is interesting question, we've actually been monitoring it.
Best we can through ZIP codes, where we draw customers and other information.
Able to access.
And even with the increase in gas prices over the last couple of months, we really haven't seen any significant change.
In the business for our properties coming out of California.
It's been quite stable.
Moves around a little bit, but it is not significant so.
It's something we're watching havent seen any significant trends.
Surprising to us, but those are the facts.
And I would imagine that commentary applies thus far in July .
Yes, yes, no change thus far in July .
Okay. Thanks very much.
Yes.
Thank you for your question there are no additional questions waiting at this time, so I'll pass the conference over to Josh Harris for any closing remarks.
Thank you, Matt and thanks to everyone for joining the call today. If you have any follow up questions. Please feel free to reach out to the company. Thank.
Thank you.
That concludes the Boyd gaming second quarter 2022 conference call. Thank you for your participation you may now disconnect your lines.