Q4 2022 Boyd Gaming Corp Earnings Call
Preparations in Louisiana, Kansas and contribution from Pearl Interactive, which we acquired on November one during.
During the quarter. We also earned $21 million in fees from our Sky River Casino management contract, including a onetime development fee of $5 million. This was sky reversed first full quarter of operation following its opening last August .
With Sky River, our goal is to develop a compelling entertainment destination and build a thriving business that would allow the Wilton rancheria tribe to achieve their vision of self sufficiency based on early results. We are clearly succeeded with extremely strong visitation levels that Scott River during its initial opening phase.
We have long believed there was significant unmet demand in the market and with the high quality Entertainment experience. We've created we're starting to realize sky rumors compelling potential as.
As a result, we now expect Sky River will generate approximately $50 million in management fees for our company in 2023.
So in all despite some challenges in our Midwest and South segment, our company achieved record fourth quarter and full year results.
As we move into 2023, the economic uncertainty that persists today makes it difficult to predict where consumer trends are headed however, we are cautiously optimistic about the trends we saw in January across all three segments of our business.
Going forward, we believe there are additional opportunities to drive growth in our business through strategic Reinvestments in our portfolio. The continued expansion of our online gaming business and organic growth in our land based operations.
Starting with our existing portfolio.
See opportunities to drive long term growth through selective reinvestments and our highest performing properties in markets.
A good example is the Fremont in downtown Las Vegas, where as mentioned earlier, we have completed work on a significant property expansion in mid December we opened 10000 square feet of new casino space, increasing three months total slot count by nearly 15%, while creating a more comfortable gaming environment for our guests. We also.
<unk> added a <unk> branded sports book and a food Hall six quick serve restaurants.
The expansion is already delivering growth in both gaming and non gaming revenues at the Fremont.
Going forward. This investment will further strengthen our appeal to customers throughout the downtown area, helping us build on our record results in the downtown segment.
And then Louisiana work continues on our $100 million land based facility at treasure chest casino.
Once complete in early 2020 for this project will allow us to take full advantage of demand in the suburban New Orleans market by creating a more spacious single level casino floor, expanding our non gaming amenities and improving guest parking.
In addition to these land based growth investments, we expect our online business, including sports Casino and social gaming will continue to grow with.
We took an important step forward in our online growth strategy with our recent acquisition of pallet interactive, which gives us the talent and technology to begin building our regional online casino business.
Well online casinos are not limited to just a few states. We believe in the long term potential for my gaming.
Owning and operating our own I gaming operation will allow us to leverage our nationwide portfolio and extensive customer database to create a profitable online casino business. We will start by transitioning our current startups online casinos in New Jersey, and Pennsylvania to our platform over the next several months.
We will also selectively target growth in the <unk> segment of the business by adding new <unk> customers and enhancing our platforms products features and capabilities, which will benefit both us and our partners.
On the sports betting side, we remain fully committed to a successful and growing partnership with handle this.
This partnership recently expanded into Ohio, and Kansas with fans, who are launching mobile and retail sports betting in both states our partnership with <unk> now includes all but one states in our Midwest and South region.
And all our online sports betting casino and social operations generated approximately $40 million in EBITDAR in 2022, and we expect this business will continue to grow as <unk> ramps up in Ohio in Kansas.
Beyond these growing financial contributions, we will continue to benefit from our 5% equity stake in <unk>, which grows increasingly valuable as they further strengthen their position as the nation's leading sports betting company.
While the opportunities from online and land based Reinvestments are compelling. We also believe there is upside from continued organic growth in our existing operations, particularly in hotel revenues meeting and convention business and other non gaming revenues in all our growth opportunities and our operating momentum further strengthening our free cash flow.
Allowing us to return substantial capital to shareholders.
Plan to continue targeting $100 million.
Share repurchases per quarter in 2023 supplemented by dividend payments, while we pursue our ongoing growth investments.
We're concluding I wanted to note our company's continued progress on ESG initiatives as we've recently received prominent national recognition for these efforts.
Last month Boyd gaming received a five star rating in Newsweek magazine's annual list of America's greatest workplaces for diversity.
We were the only gaming company to receive a perfect rating and this listing which was compiled through anonymous employee surveys nationwide.
Promoting diversity and inclusion is a central part of our company's culture and we are honored to have our efforts recognized by Newsweek.
So in conclusion this record quarter was yet. Another example of the resiliency and diversification of our portfolio and the strength of our operating model, we set new fourth quarter records for both revenue and EBITDAR overcoming softness in our Midwest and south markets with strong results in Nevada and contributions from new growth.
<unk>, we closed on the acquisition of pallet interactive further positioning ourselves for long term growth in the <unk>.
Online space.
Maintained operating margins some of the highest levels in our history as our operating teams continue to successfully manage through higher costs and economic uncertainty.
And we continue to return significant capital to shareholders, while maintaining a strong balance sheet.
And all our record fourth quarter results concluded another strong year for our company as we set full year records for revenue and EBITDA for the second year in a row.
I would like to thank every member of the Boyd gaming team for their hard work and their contributions to this outstanding performance.
And while it is difficult to predict the future direction of the economy, we remain confident in our operating model and our team's proven ability to successfully manage the business.
Thank you for your time I'd now like to turn the call over to Josh.
Thanks, Keith this was another very good quarter for our company with record results in the quarter and for the full year against very strong comparisons to 2021.
Recall that our full year 2021, EBITDAR performance was more than 50% higher than our previous record set in 2019 and that we set quarterly EBITDA record every single quarter of 2021.
And yet we have continued to improve on those baselines in each of 2021, and 2022, EBITDAR approximated $1 $4 billion and margins were approximately 40%.
And in 2022 adjusted earnings per share exceeded $6 per share we have accomplished this by focusing on growing our core customer base and managing our business very efficiently.
Our operating teams continue to do an excellent job managing our expense structure and maintaining margins.
As we look ahead to 2023, we continue to see opportunities to grow our business supported by continued focus on our core customers expansion in our non gaming revenues and online operations and further contributions from the investments we are making in our existing portfolio.
In addition, 2023 will benefit from a full year contribution from our management contract with Sky River, which opened in August 2022.
Now, let's discuss a few key items from the quarter.
First our capital return program remains a priority for our company, we repurchased nearly $107 million in stock during the quarter, representing one 8 million shares at an average price of $58 22 per share.
The actual share count at the end of the year was 102 8 million shares.
For full year 2022, we repurchased nine 4 million shares at an average price of $57 48 per share representing $542 million.
We have approximately $240 million remaining under our current repurchase authorization.
When combined with our ongoing dividend program, we returned nearly $600 million to our shareholders during 2022.
We remain committed to $100 million per quarter and share repurchases, while continuing our dividend program.
At the same time that we are returning capital to shareholders. We will continue to strategically invest in our land based portfolio.
Capital expenditures in 2022 were $270 million.
We expect to spend approximately $350 million in 2023 for capital expenditures.
This includes $250 million in maintenance capital and $100 million in growth capital primarily related to the treasure chest project turning to the balance sheet. We finished 2022 with total leverage of two four times and lease adjusted leverage of two eight times our target leverage.
<unk> two five time traditional leverage.
Our balance sheet remains very strong with significant flexibility as we have low leverage no near term maturities and ample capacity under our credit facility.
So in all we finished the year in great shape as a company. Thanks to our operating model and growth initiatives. We continue to produce a substantial and diversified stream of free cash flow, allowing us to balance a robust capital return program with strategic investments in our portfolio.
This formula has produced strong results for our shareholders and we are confident it will continue to create considerable value over the long term.
This concludes our remarks, and we're now ready to take any questions.
We will now begin the Q&A session. If you would like to ask a question. Please press star followed by one on your telephone keypad.
The reason that I would like to just one question. Please press star followed by two again to ask a question. Please press star one as a quick reminder, if you like.
Please remember to take it.
Before asking your question.
Our first question comes from Chad Beynon with Macquarie. Your line is open.
Hi, good afternoon, Thanks for taking my question.
Josh Keith you guys talked about.
First off congrats on a nice quarter.
You talked about some selective reinvestments and the returns that you got in the back half of 'twenty, two and kind of what youre expecting in 'twenty three 'twenty four but given your leverage at two four times. How are you thinking about the portfolio and other opportunities to maybe selectively reinvest elsewhere and get these double digit returns that you are.
Adding up thanks.
Sure. Good question Chad. So we have studied our portfolio and we do have several other opportunities to continue to build into strong properties and what we think are growing markets or markets with strong demand.
So as future quarters go by you'll hear us begin to talk about some of those projects, but we have studied it and we do have additional opportunities. We just don't have anything to announce today. So you can expect to hear more in the future I think we've talked about in the past and these are smaller type projects. These are sub $100 million type projects.
Any of them in the $40 million to $60 million range. So we're not talking about projects that are one hundreds of millions of dollars.
Okay. Thanks, and then in the locals market. This year you guys have average roughly about $120 million of EBITDA per quarter.
Obviously, some exceptional strength in the fourth quarter here wanted to focus on some of that destination business Thats coming back with CES in January we've seen ADR is across the strip and I'm guessing right off the strip up somewhere between 30, and maybe even 60% I'm guessing you guys are benefiting from Orleans, but against that.
<unk> average of $120 million of EBITDA per quarter can you help us think about what what is still not on the table from <unk>.
Mainly the convention business not back to where.
It was mainly for 'twenty two.
And where we should see it in 'twenty three.
Yes.
Chad This is Josh I think that when we think about kind of the opportunities for our locals business. It comes from.
Benefiting from the broader recovery in the Las Vegas market overall, and its really not only our locals business that will benefit from that but also our downtown business. So we look at kind.
Kind of emerging or.
Recovering costs.
Meeting business to help drive our own meeting and convention business.
<unk> kind of occupancy in our hotel rooms, as well, which we still have opportunities to do across the portfolio again, not only in Las Vegas, but also as that drives incremental visitation downtown.
Benefit from the investments, we've been making with Fremont, but also.
Other property that we have there as well.
Keith I don't know, if theres anything you'd like to add to that.
It's pretty well known the convention attendance was up significantly in 2022 more than double the prior year number, but it's still below 2019 levels. So as that continues to build we can take advantage of it both at the Orleans and several other of our properties and as Josh said.
<unk> will also improve as overall visitation to Las Vegas in convention attendance improved so we definitely will be able to leverage off of that going forward.
Thanks I appreciate it.
Sure.
Thank you. The next question comes from Joe Greff with Jpmorgan you May proceed.
Hey, guys congratulations on the great results here.
Keith I'd love to just follow up with you a little bit maybe dig deeper on to what you attribute.
The difference in consumer spend or consumer behavior between.
Downtown Las Vegas, the Las Vegas locals market versus <unk>.
The softness you saw in parts of the <unk> in the Midwest and South.
I know you called out destination business.
Is certainly strengthening in the locals market and maybe that was slow to come back maybe the regional.
Customer has recovered earlier.
Where are you seeing the softness is it sort of at the lower end of the database. The IRI database I would just love to get how Youre looking at your different sub sector of gaming consumer.
Sure. So look I think we've talked about some of this through our prepared comments, but look the locals business once again.
Formed exceptionally well with our out of town guests during the quarter as convention attendance in visitation or Las Vegas continue to grow that also helped buoy.
Boost the downtown results and so both of those are doing well, we obviously have a strong locals component in our local segment, we don't get very many locals to downtown Las Vegas, and so it's a different type of customer.
You commented and we've long believed that in these types of situations, where you go through dislocations like we've been through with Covid.
Midwest and south markets do recover a little quicker we believe those markets have been recovered longer than the Las Vegas market and therefore, they are little more mature and so theyre, just maybe slowing down a bit before.
Others and <unk>.
Outside of what's in the December weather that really impacted both the Midwest and the south some difficult comps that we've talked about in our southern properties.
When you look at 'twenty, two compared to 21, there was just some softness.
But as I said the softness was early in the quarter.
And in the second half of the quarter.
Started to recover and continue to recover through the end of the quarter and into January . So I don't think theres any real negative trend there was softness early in the quarter.
Once again started to come back so.
Not much more I think I can say.
Okay.
And when you think about this year.
Maybe looking at your internal forecast or budget would you expect that the Las Vegas locals market would grow in access.
The core Midwestern net net.
Net revenue portfolio.
<unk>.
Hey, Joe This is Josh I guess I get to take that one.
I think we feel like coming into 2023.
I think we step back and look at where the consensus estimates are and they are kind of down about 7% or 8% from where we delivered results in 2022.
We feel like.
Our business can do generally in line with that or a little better.
Think that we see some opportunities for growth and really both of those segments.
But that I'm not so sure we're ready to say that we're going to see.
Growth over 2023 in Las Vegas locals.
It will be if it's down it's down marginally relative to 2022.
But it only goes to kind of the uncertainty of how the consumer.
What happens with the consumer as we move through the year.
Thank you.
Yep.
Thank you. Our next question comes from Carlo Santarelli with Deutsche Bank You May proceed.
Thank you for taking my question.
I just wanted to circle back to one of the comments Keith I believe you made earlier.
Sky River fees were $21 million with a $5 million, one time true up payment or something in there for the management fee and online was 17. If you if you kind of back that out and then back out half of that 17 in the <unk>.
Does it more or less imply or I believe that math more or less implies like a down double digit EBITDA results for the segment in the fourth quarter.
That's right.
Would you say.
Not necessarily the weather, but maybe that broader malaise that you saw early in the quarter relative to kind of where you are where you were run rating for January .
That decline what would you how would you kind of parse those out.
Yes.
So Carlo I'll try to take a shot at it and it's a little bit more art than science as you can probably imagine I think that what we tried.
Tried to communicate was we felt like there were some things that we could identify around the weather around the more kind of robust business that we had seen in Mississippi and Louisiana last year that made the comparison a little more difficult. This year and then there was something kind of leftover.
That really was.
More element relevant or more.
More visible in the first half of the fourth quarter and Thats, where we.
Tried to dig into <unk>.
Customers and see what was going on and it was really a broad base weakness and our customer.
That was largely prevalent in the first half of the quarter. It was something we really hadn't seen any.
Extent before and then as we move and so and I would say a lot of the weakness was concentrated in in those two markets of Mississippi and Louisiana for us.
Then as we move through the quarter.
We know we were able to track and see those that trend got better over time sequentially improved.
And then obviously the last week of the year was very strong across the board.
And as we mentioned before we also saw contributions from out of town business, helping drive Las Vegas, So as we kind of came into January .
The trends from the late late December continued business was really good we recognize theres a fairly there wasn't an easy comparisons.
It's a little bit like you're trying to dissect through how good should it be versus the comparison and how good is the business. What we what we can tell you is is it doesn't feel like the customers.
<unk> customer certainly hasnt fallen off the deep end.
And.
The general trends of our core customer count have regained momentum outside of Las Vegas, and continue to build through the quarter and that was encouraging to us.
In Las Vegas remains very good for us although early on and it also had some from some.
Some weakness in <unk>.
In our customer base as well primarily in October so.
It was just a quarter of a lot of different things going on it ended up heading in the right direction for us and I would say.
As we look back over quarters.
Earlier in the year.
There'd be a soft quarter, our okay quarter, and then a really strong quarter and thats, our sorry soft Martha.
A good month, and then a really strong month and Thats what happened in the fourth quarter as well so I'm.
I'm not sure we're at a place where we can extrapolate a lot from the customer trends that we saw in the fourth quarter, but.
What happened from our perspective.
Understood. That's helpful and then just the.
Average point in time that back to the buyback.
You guys I want to say Josh.
You look at your leverage kind of EBITDA relative to your traditional net debt correct. So.
You're targeting two five range, it would more or less imply obviously moving around and whatnot, but.
Maybe not commensurate with last year's buyback, but certainly you would be able to do something similar to last year's buyback in that $100 million a quarter that you guys have previously talked about does that kind of remain the goal on any dislocation get more aggressive is that kind of how youre thinking about it and then just as an aside to that.
You guys I thought had development advances to the tribe that we're going to come in this year I did notice there was like $14 million to $15 million of an interest payment and I wanted to understand if those two things were linked or if you still expect cash payments at some point this year.
So Carla this is Keith Youre right on the share buybacks and we've been communicating for the majority of 2022.
We're targeting $100 million and we remain.
<unk> $100 million per quarter. If there are some dislocations given the strength of our balance sheet strength of our cash flows and we have the opportunity.
To do more than that but we want to continue to anchor people in right around $100 million.
$100 million a quarter. So we will just kind of see how that plays out, but we don't want to set an expectation that it will be higher than that.
And then on top of that the dividends that we talked about will continue.
In terms of development advances Youre right, we will start to see those being repaid this year probably later this year, we'll start to see those repaid the property has been off to a great start.
Well, we will see that cash flow into the company second half of the year, Yes, Carla what you were referencing.
And what you are referencing is we had reserved all of our advances.
We have made to the tribe and so once the casino opened the obligations the risk associated with reduced and so part of that recovery was shown an interest in as interest income and the other half was shown down and I think the Preopening line. So that's what got hooked up on that was actually a cash payment.
To us.
Great. Thank you guys.
Welcome.
Thank you. The next question comes from Shaun Kelly with Bank of America. Your line is open.
Hi, good afternoon, everyone. Thanks for taking my question.
Josh and Keith just sort of one area for me was you've called out the transition.
Some of the online gaming features I think moving over to your your in house platform.
And I believe Keith you said it was in the next couple of months.
Can you just talk a little bit about the economic implications there as that.
Does that transition allow you to consolidate.
Consolidate a material amount of incremental EBITDA and kind of how does that kind of play through.
As you start to take those operations back in house.
Yes, so we would expect that transition to occur sometime in the next couple of months think mid year in terms of probably when that when that happens as you think about 'twenty three and maybe early 'twenty four you would expect.
I think what wed ask you to expect is probably no change in the overall economics as we transition them with any transition there'll be some breakage as we start to move people over to our platform.
Differences and we start to grow it so in the first year, probably flat economics, and then it will build from there we do expect by consolidating it and more fully using our databases that we will be able to grow that.
To a higher level, but not in the near term near term should be flat.
Yes.
Great.
That's all.
My question I appreciate it everyone.
Okay, great. Thanks, Sean.
Thank you. Our next question comes from Steve <unk> with Stifel. Please proceed.
Sure.
Yeah, Hey, guys good afternoon.
Let me go back to the the recovery.
<unk> seen or that you saw in the south and the Midwest in January and I'm not.
Really sure how to ask this but.
Do you think that January recovery was what's real and what I mean by that is with December an anomaly.
And in January recovery was tied more to delayed or canceled trips being rebooked into January because of weather or it was January benefiting from whether it's higher social security payments I'm, just trying to figure out.
Maybe if you can give a little more color on that.
Recovery in January .
So Steve as you think about Q1 in January in particular look in Q1. It is really two different quarters early in the quarter frankly, the comparisons are easier because last year in January we were coming out of omicron here in Nevada, we still have some masked mandates people were fully.
Out in the second half of the quarter, both here in Nevada and across the MSR the business accelerated and so in fairness January comps are a little easier than later in the quarter I think what we're trying to communicate was.
Set aside year over year comparisons and just look at raw customer trends and how the customer is performing we didn't see any meaning.
Meaningful differences in how the customer is performing as we look at the second half of Q4 and how they performed in early January so kind of ignoring year over year comps just looking I think of it more sequentially.
This is how we think about that.
Okay understood.
And then Josh just just given the Midwest and South segment now includes the online management piece in there just wondering if you could help us think about.
Maybe how margins should should trend in that segment moving forward and if I could also ask two housekeeping questions I'm not sure. If you can give it to us Josh, but maybe help us with corporate expense and interest expense this year.
Sure so.
So in terms of the.
Margins for US remember we have this enormous amount of taxes that are essentially a pass through from <unk> that we pay on behalf of them because we have the license in the jurisdictions that we operate and that shows up as revenue and then 100% as an expense as well.
Well, so that dilutes, our margins pretty significantly so just to put it in perspective, our margins online last year were about 14%.
This year, just the online piece, which is the tax pass through.
Six weeks of Paula, which is now Boyd interactive and and the revenue share that's all at about 18% to 20% margins.
So that's kind of how it is today and it will all depend on how how much that tax pass through continues to grow because it will dilute our continue to impact those margins.
I think in terms of so hopefully that answers that question, but if there is other elements you want to know feel free to ask.
We'll try to answer I think in terms of interest expense.
Would expect our debt balances of course this depends on your projections of EBITDAR, but I think we would expect our debt balances largely to remain fairly consistent so any changes in interest expense youre going to purely based on your projections of interest rates into 2023. So if you think theyre going up in our interest expenses.
Probably going to elevate a little bit, but probably in reality not.
To be materially different than where it was in <unk>.
Kind of the run rate of Q4.
And then in terms of corporate expense, I mean, probably a $1 million or two higher than kind of what we saw in.
In 2022 would be a good number to think about 2023.
So hopefully that's helpful.
Perfect. Thank you guys I appreciate it.
Sure.
Thank you. The next question comes from Barry Jonas with Jewish you May proceed.
Yeah.
Great. Thanks, guys can you maybe just talk broadly about the M&A environment out there.
How do you think about sale leaseback as a form of financing given where capital markets are today. Thanks.
Well specific to your question about sale leasebacks I think that we continue to believe given our strong balance sheet well first of all given our strong balance sheet narrow leverage we really don't have a need.
Two <unk>.
Transact or look at other forms of financing.
If we did we think theyre, probably cheaper forms of financing for us out there more traditional forms of financing that are pre payable.
We can pay down so we don't find ourselves kind of looking at that these days.
<unk> of M&A.
My perspective is kind of quiet out there.
But.
I don't know maybe Josh is heard things I have.
Tell you everything I hear cases.
Yeah.
Okay, Great and then just a follow up.
Nothing.
Okay great.
Just a follow up in Nevada results really strong.
Just curious.
If you think youre, gaining share or just benefiting from market strength the way the state reports local sometimes doesn't match up exactly I was curious if you think your share gainer or just sort of seeing talents from the market.
Yes, I think it is.
The strength of the overall Las Vegas market I don't think Theres, a lot of share change and going on I think everybody has settled into where they are at promotional environment is relatively stable nothing has changed much there. So.
Is the strength of the overall Las Vegas market.
Increases in visitation and convention attendance.
Great. Thanks, so much.
Welcome.
Thank you. Our next question comes from Dan <unk> with Wells Fargo. Your line is open.
Hey, good afternoon, everyone and thanks for taking my question.
First one Josh I think you mentioned, Louisiana and Mississippi.
There's been some softness there.
It been any change in the promotional environment or is that more just something going on with the customer.
Yes, I'd say the promotional environment has been stable across the country, including in Las Vegas.
In our Midwest and south assets, so that's not a driver of it.
I really we saw outsized performance in.
In Q4 of last year, and those assets really even superior to what we had seen in the earlier quarters of very strong 'twenty.
21, and I just.
Just real.
Really a comparison related issue could have had something to do with.
What was going on with weather Hurricanes, but that's really hard to kind of quantify so we just know that kind of sequentially through 2021, Q4 was really strong for those for a portion of those assets and that's what made the set up a little bit more difficult for that region.
So far in the fourth quarter.
Got it and then.
Just wanted to clarify something so as I think about your growth levers for 2023 higher digital Sky River.
<unk> return and then obviously it kind of it just the organic environment and.
I think back to your comments on the actual overall EBITDAR for 2023 compared to 2022.
I just want to clarify so when you mentioned the street was.
Estimate down, 7% or 8% and you thought that was overly conservative given given the growth levers or am I misinterpreting something there.
No I think.
What I would say is that we feel good relative to where we think our business is going to trend relative to the street's consensus just because of the uncertain environment, we find ourselves I think you adequately.
Adequately identified kind of where we.
Where we see opportunities for growth, we get a full year Wilson, we get kind of some expansion of only one line side of things and we've got we've had.
Increasing demand for our non gaming amenities, both hotel and F&B and we feel like that will continue to be opportunity as well as depending on how the overall gaming consumer feels and trends for the rest of the year for 2023, we feel that's also an opportunity to continue to grow loyalty customer.
But I think look I think the other thing that like as easily missed in our businesses, we're making small investments that are generating really good returns and that over time, we expect those to accumulate to be something meaningful for us but were not taking big bets, we're not committing the company to large amount of capital in the current environment that we see.
Find ourselves so all of that gives us some comfort that we're going to be operating in this level of kind of performance that we've been at for the last two years and that was kind of what we're trying to communicate in our in our prepared remarks, hopefully that makes sense.
Yes that makes sense.
Just one last housekeeping one I think in the past you've talked about.
Segmenting out Sky River or <unk>.
It will stop and that is that still consideration.
Yes.
Therefore, yes, we are most likely going to do it in the first quarter give you some historical perspective as well we plan to breakout online which will include.
Our revenue share our tax pass through and what is to become Boyd interactive with the acquisition of Paula.
And then we will have a managed and other which will include.
Wilson as well as Latin or entertainment.
Great. Thanks, so much.
Sure.
Thank you. Our next question comes from David Katz with Jefferies. Your line is open.
Hi afternoon gentlemen.
And thank you for taking my question.
Yes.
Apologize if you touched on this in the prepared remarks, but I want to make sure as we go through our model.
We reflect all of the positives you've discussed so far but also just contemplate any points of competition that are out there did you mentioned any or could we just touch on those for a moment.
So we didn't talk about.
Competition more broadly I think as we look at.
Where we're at today and into 2023, there are probably a couple of areas. So I think it's well known that the horseshoe opened in Lake Charles It's a property that has been closed for a while as it was rebuilt from some hurricane damage opened in December that obviously competes with our Delta Downs property, Yes, it's been open a little less than <unk> <unk>.
60 days haven't really seen much of an impact but it is incremental.
Competition.
In Indiana, our Blue chip property.
The four winds is opening.
Spanning a property in.
South bend called South wins, adding a hotel they expanded some casino space last year, we do get some business out of southwest South Bend, so a little bit of incremental competition there.
And then the HHR is in Kentucky have.
Been impacting belts are both Terra park, just outside of Cincinnati, Ohio.
They existed there in the second half of.
2022, so we will see a little bit of additional impact there in early 'twenty three from those HHR is other than that no other significant competition.
Throughout the portfolio.
Okay perfect. Thank you very much congrats on your quarter.
Thank you.
Thank you. The next question comes from Ben Chaiken with Credit Suisse. Please proceed.
Hey, How's it going.
You mentioned earlier basically taking back the Starbucks brand in mid 'twenty. Three I think you said in a few months in vertically integrating how do you think about the puts and takes of retaining those customers. So I guess, what I mean is on one hand, they have the wallet established with you obviously the brand loyalty on the other hand, presumably tangible theres been running that once those <unk>.
Customers as well so just like net net.
Do you have any idea.
Retention alright care to take a shot.
I do not care to take a shot.
We expect that there will be breakage, and when asked ask a little bit earlier in the conversation about kind of the economics. Once we take this over that's why we're saying look in the first year expect the economics not to change in that what we made.
As a revenue share with <unk>. It will be the same thing we will make operating this 100% on our own because of breakage and ramp up.
And learning the business running at ourselves from a marketing perspective.
Hopefully better, but we're expecting it to be kind of the same same for the first year and then it will ramp up from there, yes, and we will continue to exist in those markets. So certainly a tough competitor but.
We're we have a large database of customers and the markets are going to launch it and I think we'll do fine.
Yes.
That's helpful. That's helpful. I appreciate it.
Then.
Management fees going to $50 million in 'twenty three for Sky River I believe the previous kind of bogey you guys had thrown out there was 30 or 35, if im not mistaken the property sequentially accelerate or what was the inflection that made you comfortable this is the right number.
And then could we had given a 25% to 30% or 30% to 35 I think.
Recall, our last specific guidance. It was simply early the property opened in August we didn't have enough time under our belt now that we've got a good five months under our belt and we see where the.
Kind of the opening of settled in and obviously the opening months extremely strong which is what drove the significant management fees in Q4, but we kind of see where to settling in in December and January that's just our current expectation.
Yes.
Got it makes sense and then last just housekeeping.
And is that another way, yes, they have been a little conservative last night.
Okay.
Totally appreciate it. Thank you and then just like last housekeeping did you say that for full year 'twenty two digital was $40 million of EBITDA did I Miss area.
No.
Correctly, so, including social online sports betting the whole bit was $40 million.
Great. Thank you very much.
Welcome.
Yeah.
Thank you. Our next question comes from John Decree with TD Securities. Please proceed.
Hi, guys. Thanks for taking my question.
You covered a lot of ground already but maybe one more on the consumer patterns I guess as you think about what you saw in the first half of the fourth quarter and then exiting the fourth quarter and you called out some markets, Louisiana, Mississippi, but have you seen a change maybe across demographic cohorts.
<unk>.
Or just in frequency.
Frequency of visit or spend per visit as the quarter progressed, I guess are those kind of trends pretty consistent with what you've seen or has there been a shift in the kind of pattern of consumer behavior.
John It's Josh.
In the first half of the quarter.
What we thought mirrored the reason we thought merited, calling it out was that we saw a broader softness across really all customer segments.
Now that reverted in the second half to be more like what we had seen in the.
Quarter, leading up to Q4 and continued into January so.
That's what makes it hard to determine if there is any.
Any relevancy to what happened in the first part of the quarter or not because the business really kind of picked back up.
With the best part of the quarter being the last week of the year and then just as continued into January .
But I think what we saw was very concentrated weakness in the southern part of our portfolio.
But also something a little bit more than that just across the entire company and like late October and then in the November around just a broader customer.
Hi.
Yes, I think if you're asking about is kind of a specific components of the database whether it would be by age are worth segment no specific shifts that occurred.
Worth calling out right.
Pick back up where it left off when you kind of got into the second half of the quarter.
Got it understood I appreciate that.
One one easy follow up Josh should we expect.
Sky River gets going and then kind of your online gaming segment for the year.
Any reason to expect any seasonality at Sky River, and then should we kind of assume that.
Online gaming seasonality, you would kind of mirror that of the big B to C players kind of in conjunction with the sports schedule.
Yes, I think Thats right I mean, we had.
We have seasonality in the revenue share that we receive today so in that $40 million that we received this year there was definitely seasonality with fourth quarter being really strong first quarter typically being strong and then obviously third quarter being fairly soft.
I would expect just given where you're just getting a percentage of revenue.
What's termed net revenues.
For Wilton Sky River.
That there probably won't be much seasonality to that business I wouldn't expect.
Understood that's really helpful. Thanks, guys and congratulations.
Another great quarter and year.
Thank you Steve.
Thank you. The next question comes from grant mature with Barclays.
Yes.
Hey, good evening.
Thanks for taking my question.
You've covered a lot of ground just one for me.
The downtown segment, you noted that the Hawaii business fully recovered.
Noticed also that you guys had record margin set.
Look really high comparative.
All of the last three years.
My question is the.
The full the full segment do you see do you think that that's fully recovered.
Outside of Hawaii, and then from a margin perspective should we be looking at prior seasonality, but benchmark to this new normal maybe that you guys are operating at currently in the fourth quarter.
Well look.
With respect to downtown there clearly is seasonality in that business much like the Las Vegas business summertime tends to be softer.
The fall and winter seasons tend to be a little bit stronger. So you should expect that seasonality.
To exist the margins that we produced in Q4.
<unk> with.
Going forward, yes.
Significantly higher than a few years ago as we've.
And right size that business have gotten out of the charter business. So no.
Margins are probably once again in a good place and there will be seasonality.
Okay.
It was a convoluted way to ask the question. So I appreciate the answer thanks, everyone.
Yeah.
Okay.
Thank you. Our final question comes from Joe Stauff with Susquehanna You May proceed.
Thank you.
Hi, Keith Josh just.
A question on.
The levels of say core consumer spending that you saw especially in your Las Vegas locals regional segments can you give us those and just in terms of what you saw given the importance of that segment.
I can try to give you some color around it Joe and hopefully this.
Pointing in the right direction I think look I think we.
The Las Vegas locals as Keith said in his prepared remarks really benefited from a strong out of town business as well as big demand or stronger demand for our non gaming amenities not necessarily opening more amenities just a growing demand among our customer for the for that particular aspect of our business. We also saw.
Not only.
Primarily in Las Vegas, we saw kind of a strong core business again supported by out of town business from our core customer. They just continued to get healthy healthier as we move through the through the quarter.
And that's largely continued into January as well. So we're really focused on serving our core customer that customer has a lot of work with us we watch their frequency and spend and Thats all kind of remained very consistent as we move through the quarter, if not improving slightly.
As we progressed through so hopefully that gives you a sense of what was going on.
And just final question, obviously, just kind of like the discussion about Choppiness initial choppiness in the fourth quarter.
Is it fair to say like you Havent really seen that.
Maybe that level of Choppiness.
Elsewhere. During 2022 can you remind me.
I would.
Yes.
It's a hard question to answer I think.
I alluded to earlier and any quarter, there's going to be a soft month.
And the issue here for US was we called out some items, but we just didn't want to say that's the whole explanation of what happened in the quarter. We had some softness early in the quarter. We don't we don't necessarily know if that.
Before bearing to something Thats to come second half of the quarter January seems to kind of offset that belief but.
We just wanted people to be aware and investors to be aware of that.
We did have a soft start to the quarter and that was.
It's something that we wanted to just highlight folks that's all.
I wouldn't say.
If you look back at each quarter of this year and even last year.
Largely there was at least one month and each quarter that was soft.
And then it would come back so.
Anyway, I don't want to make too much out of it but also want to make sure people are.
Aware of it as well.
We continue to us based on our remarks around our expected performance for next year. We expect for 2023, we expect to be able to perform at these levels.
Continue to do that but obviously, we need the consumer to kind of be there for us.
Thanks very much.
Sure.
Thank you there are no further questions at this time I will now pass it back over to Josh Hirschmann.
Yes.
Thanks to me really appreciate it and appreciate everyone participating in the call today with all the good questions. If there's any follow up.
Please feel free to reach out to the company.
Thank you.
Yes.
This concludes the conference call. Thank you for your participation.