Q2 2024 Boyd Gaming Corp Earnings Call
Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily until that time your lines will remain on music hold thank you for your patience.
[music].
Speaker Change: Good afternoon, and welcome to the Boyd gaming second quarter 'twenty 'twenty four earnings conference call.
My name is David Straube, Vice President of corporate Communications for Boyd gaming I will be the moderator for today's call, which we are hosting on Thursday July 25th 'twenty 'twenty four.
At this time all lines are in listen only mode. Following our remarks, we will conduct a question and answer session.
If at any time during this call you require immediate assistance. Please press Star then zero for the operator.
Our speakers for today's call are Keith Smith, President and Chief Executive Officer, Josh Herzberg, Executive Vice President and Chief Financial 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 statements there are certain risks and uncertainties, including including those disclosed in our filings with the SEC that may.
It impacts our results.
During our call today, we will make reference to non-GAAP financial measures for a complete reconciliation of historical non-GAAP to GAAP financial measures. Please refer to our earnings press release, and our form 8-K furnished to the SEC today, both of which are available at investors that Boyd gaming dotcom we.
We do not provide a reconciliation of forward looking non-GAAP financial measures due to our inability to project special charges and certain expenses.
Today's call is being webcast live at Boyd gaming Dot com and will be available for replay in the Investor Relations section of our web site. Shortly after the completion of this call.
With that I will now turn the call over to Keith Smith Keith.
Thanks, David and good afternoon, everyone.
The company delivered a solid performance in the second quarter as our nationwide operations performed in line with our expectations.
During the quarter, we saw strength from our core customer segment and continued stability in retail play across the country.
Vegas locals segment, the overall market improved from the first quarter and we achieved sequential improvement in our year over year results. Importantly, we also grew our market share in this segment during the quarter.
Our downtown Las Vegas segment delivered strong growth during the quarter consistent with our expectations for downtown is visitation recovered from a temporary decline in the first quarter.
In our Midwest and South segment continued to produce steady results during the quarter.
As a result of these solid performances across all three segments of our operations second quarter property revenues were even with the prior year.
At the same time, our operating teams continue their successful focus on managing the business efficiently during the quarter as we achieved property margins of nearly 41% consistent with the last several quarters.
Also during the quarter, we opened our new land based casino at treasure chest on June six and while it is still early our new property is off to a great start with revenues nearly double the prior year's since it opened.
And we continue to produce strong results in both our online and managed in other businesses during the quarter.
Speaker Change: It all we were pleased with our company's performance in the second quarter.
In terms of operating performance by segment during the quarter.
Speaker Change: Conditions across the Las Vegas locals market improved both in total and on a same store basis, when compared to the first quarter.
The Orleans and Gulf Coast continued to face competitive pressures similar to those we outlined during our first quarter call.
Absent these competitive pressures our Las Vegas locals properties performed in line with the same store market.
Looking at the segment more broadly we saw encouraging customer trends across our locals business in the quarter.
Speaker Change: Play from our core customers grew during the quarter, while retail play trends improved compared to the first quarter.
We saw healthy growth in our non gaming business is food and beverage and hotel revenues increased nearly 6% year over year.
And we achieved EBITDA margins of approximately 49% during the second quarter, reflecting our ability to make maintain strong operating efficiencies.
All we are pleased with the direction of our Las Vegas local segment as our focus on driving play from our core customers and maintaining operating efficiencies produced solid results.
Next our downtown Las Vegas segment delivered a strong performance in the second quarter, achieving a year over year growth. We expected this year as visitation significantly improved over the first quarter.
Hawaiian visitation recovered zephyrs normalized from the elevated levels that occurred in the first quarter well pedestrian traffic in the downtown area also improved from the first quarter.
And we continued to benefit from our investments downtown including our recently completed renovation and expansion of the Fremont and the remodel of main Street station Hotel.
For both our Las Vegas locals and downtown Las Vegas segments. The continued strength of the southern Nevada economy gives us reason for optimism.
More than 41 million people visited Las Vegas over the last 12 months.
Two 6% from the prior year.
Over 58 million passengers traveled through the Las Vegas Airport over the same period setting a record for the city.
Southern Nevada gaming revenues exceeded $13 $5 billion over the 12 past 12 months also an all time record.
Note monthly gaming revenues in Clark County have been above the billion dollar Mark for 23 of the last 24 months.
And the local job market continues to strengthen.
Total unemployment increased more than 3% on a year over year basis in June and the Las Vegas Metropolitan area has been the fastest growing major job market in the country for eight consecutive months.
As economic trends remained stable across southern Nevada, we remain confident in the long term prospects for our southern Nevada operations.
Moving next to our Midwest and South segment, we were pleased with the overall performance of this business in the second quarter.
During the quarter play from our core customers continue to grow while retail play was stable.
As noted in public revenue reports regional markets across the country were surprisingly soft in April however.
However, this softness was short lived.
This levels recovered in May and June and as a result, we were able to post modest revenue growth in the Midwest and South segment during the quarter.
And in early June we opened our new land based facility a treasure chest casino near New Orleans.
This project replaced a 30 year old riverboat casino with a modern land based facility offering a single level expanded casino floor for new restaurants meeting space and improve parking.
Well it is still early customer demand for our new product has been very strong.
And in the month of June revenues, nearly doubled the treasure chest on a year over year basis.
Next our online segment achieved healthy revenue and EBITDAR growth in the second quarter.
Our industry, leading partnership with <unk> continues to produce strong results for our company and as a result, we are increasing our expectations for the online segment to <unk> $65 million to $70 million in EBITDAR for the full year.
Speaker Change: And as we've noted before our 5% equity interest in <unk> remains a valuable strategic asset for our company that continues to grow in value as we participate in the ongoing growth sports betting nationwide.
Speaker Change: Finally in our online I'm, sorry, finally in our managed and other business. We continue to benefit from the exceptional performance of Sky River Casino in Northern California.
Nearly two years after opening demanded Sky River remained strong as the property continues to post year over year growth.
But sky River solid performances through the second quarter, we now expect our managed and other business to generate approximately $90 million in EBITDAR for the full year.
Building on Sky Rivers continued success, the Wilton Rancheria tribe recently broke ground on a major expansion of this property.
The first phase will expand Sky rivers casino floor with an additional 400 spots and enhanced properties access with a new 1600 space parking garage.
Following the completion of the first phase next summer work will begin on a significant expansion of Sky rivers non gaming amenities, including a 300 room hotel two additional food and beverage outlets day Spa and an entertainment and event center.
We share the Wilton Rancheria tribe surprised at the success of Sky River and are confident this expansion will help drive continued long term growth of this property following its completion in early 2027.
So in all second quarter was a solid performance for our company with sequential improvement over the first quarter and our property operations and encouraging customer trends across the country.
Same time, we continue to demonstrate our confidence in the long term prospects of our business through our balanced capital allocation program.
An important part of this program are the investments we are making in our operations to drive future growth.
We saw the promising results of these investments during the second quarter Fremont is now performing at record levels and while it is still early business. The treasure chest is up significantly from its previous baseline.
Having demonstrated our ability to drive incremental growth through capital investments. We are now beginning work on the next projects in our growth pipeline.
In Missouri, we're beginning an expansion of our meeting and convention space at <unk>, St Charles allowing us to capitalize on significant unmet demand for our product there.
When combined with our ongoing hotel renovation at <unk>. This investment will expand this property's appeal to new and existing customer segments driving additional long term growth at the property. Following its completion in the fourth quarter of next year.
And in Southern Nevada were finalizing is finalizing design work for cadence crossing casino new property located in the southeast portion of the Las Vegas Valley.
We expect to begin construction on this project late in the year with expected completion by early 2026.
This new property will be built on a 15 acre site that currently hosts our existing jokers wild casino and is directly adjacent to the master planned community of cadence.
This community will have more than 12000 homes upon final buildup with 5200 homes already built.
In its initial phase cadence crossing will feature a 10000 square foot casino with 450 slots several dining options and live entertainment.
While we are starting with a modest investment the property will be designed for future expansion. This cadence grows with the ability to add a hotel additional casino space and more amenities during future phases of development.
Speaker Change: Combined we anticipate investing $100 million between the <unk> and cadence crossing projects.
<unk>, we are continuing our program of refreshing and upgrading our properties across the country. This.
This program includes new and refreshed food and beverage offerings and renovating many of our hotel rooms across the portfolio.
Renovations of our hotel rooms at Gulf Gulf Coast, <unk>, St Charles and Blue Chip will wrap up over the next several months.
And following the completion of these projects we will begin work on our hotels at the Orleans, IP and Valley Forge.
In addition to.
To investing in our properties, we remain committed to returning capital to our shareholders in the second quarter, we repurchased $176 million in stock and we remain committed to our ongoing share repurchase program of $100 million per quarter supplemented by our dividend program.
We also remain committed to maintaining a strong balance sheet. Our total leverage today is just two four times, providing our company with significant flexibility to execute on our capital allocation plans.
So as we look back at the second quarter. We are pleased with the performance of our business we.
We delivered total property level revenues, even with prior year results with encouraging customer trends throughout the country.
Speaker Change: Our leadership teams efficiently managed our operations delivering property level margins of nearly 41%.
Our nutrition just casino is off to a great start marketing the latest success in our ongoing property investments.
We continue our commitment to returning capital to our shareholders with over $300 million in share repurchases and dividend payments since the start of the year.
Speaker Change: I want to thank our leadership teams and our team members for their contributions to our success their hard work and their commitment to memorable guest service are the bedrock of our company.
Thank you for your time today I would now like to turn the call over to Josh.
Thanks Keith.
As noted in the second quarter was a solid performance for our company.
For the remainder of the year, we expect our second quarter commentary regarding customer trends and market conditions to continue.
In terms of our operating segments for the rest of the year and Las Vegas locals, we expect the Orleans and gold coast will continue to face competitive pressures similar to those we have experienced over the last six months.
Overall market conditions are expected to remain stable.
Speaker Change: And our downtown business, we expect positive trends to continue.
However, remember the fourth quarter of this year, we'll be comparing against a record fourth quarter downtown last year.
Speaker Change: In our Midwest and South segment, we expect continued stability in same store revenue with incremental contributions from our new property at treasure chest.
Treasure chest is off to a great start, but it will take several months of operating the new facility before we know what to realistically expect for revenue and EBITDAR.
<unk> earlier remarks, he provided full year EBITDAR guidance for our online segment of $65 million to $70 million and managed of approximately $90 million.
Speaker Change: For managed we expect EBITDAR contributions of approximately $21 million for each of the next two quarters.
Recall, the fourth quarter last year was a very good quarter for the company with each segment of our business performing very well so that will create a difficult comparison for the last quarter of the year.
Next turning to a few additional items from the quarter.
Our online segment.
The tax pass through them out was $104 million.
Third to $63 million last year in the second quarter.
Excluding the tax pass through them out companywide margins for the second quarter. This year would have been approximately 40% or about 420 basis points above the margin with reported.
In terms of capital expenditures, we invested $114 million Terence.
Excluding our investments in the treasure chest land based project.
<unk> invested $204 million in capital expenditures year to date and continue to project total capital expenditures of $400 million to $450 million for this year.
Our annual capital program can be thought of in three buckets.
The first bucket is recurring maintenance capital, which is expected to be approximately $200 million to $250 million per year.
The second bucket is incremental maintenance capital associated with the room remodel projects that were delayed due to COVID-19. This spending is not recurring we expect these investments to be approximately $100 million in each of 2024 and 2025.
Speaker Change: And finally for the third bucket beyond maintenance related capital, we have allocated a recurring $100 million per year for growth capital projects.
In 2024 for example, this $100 million includes capital investments to complete treasure chest as well as starting both the am Aerostar, St. Charles Convention Center expansion and cadence crossing casino.
Following the completion of the Aerostar and cadence projects, we would expect to announce another set of projects.
Of this recurring growth capital has a pipeline of projects that we choose from each year in order to invest about $100 million per year and growth.
It'll.
Accounting for each of these three buckets you should expect total capital of about $400 million to $450 million in both 2024 and 2025.
Before stepping down to $300 million to $350 million.
And beyond following the completion of our hotel renovations.
These property investments are owners of our capital allocation plan.
Element of our capital allocation philosophy is returning capital to shareholders in the form of dividends and share repurchases.
Speaker Change: We currently pay a quarterly dividend of <unk> 17 per share representing $16 million in the second quarter.
Also during the quarter, we repurchased $176 million in stock acquiring $3 1 million shares at an average price of $55 88 per share.
As previously stated we remain committed to repurchasing a $100 million in shares each quarter.
However, we have the financial flexibility to do more as reflected in our actions during the second quarter.
Turning capital to shareholders is an important part of our capital allocation philosophy.
When combining our share repurchases with our dividend program, we have returned $313 million for our shareholders through the first half of 2024 and are on pace to return a total of approximately $550 million. This year are nearly $6 per share.
Since we began our capital return program in late 2021, we've returned $1 5 million, sorry, $1 $5 billion to shareholders in the form of dividends and share repurchases, resulting in a reduction in our overall share count by nearly 18%.
As of June 30, there were $92 3 million actual shares outstanding and we have $545 million remaining under our current repurchase authorizations.
Also important to us is maintaining a strong balance sheet, which provides us the flexibility to continue to invest in our existing business, while returning capital to shareholders.
We ended the quarter with total leverage of two four times lease adjusted leverage of two eight times consistent with recent quarters.
With low leverage no near term maturities and ample borrowing capacity under our credit agreement, we have the strongest balance sheet in our company's history.
Combined with the significant free cash flow our operations generate our company has a strong foundation to continue a balanced approach to capital allocation.
David that concludes our remarks, and we're now ready to take any questions.
Speaker Change: Thank you Josh we will now begin our question and answer session. If you would like to ask a question. Please press Star then one on your Touchtone phone you will hear a three ton prompt acknowledging your request.
Should you wish to withdraw your request. Please press Star then two.
If you are using a speaker phone. Please use your handset when asking your question will.
We will pause for a moment, while we compile our list of questioners.
Speaker Change: Our first question comes from Steve <unk> of Stifel. Steve. Please go ahead.
Hey, guys. Good afternoon, So let me start with a question.
You're probably not going to answer but.
Obviously theres been a lot of rumors out there.
Across the gaming space about M&A M&A activity in your name has obviously been mentioned a lot. So.
Speaker Change: Let me ask this in a way maybe Youll give me an answer but just wondering if you could give us your your current appetite for.
Maybe large scale M&A versus maybe one off type acquisitions, and where you would feel comfortable from a leverage perspective.
You did go down a an M&A path.
Thanks for the question.
So look if you look back over the history of our company. We have obviously the majority of our growth obviously has come through.
M&A and I think we've developed great expertise added we know how to buy properties right companies right and we know how to extract value out of these companies once they are part of our portfolio.
Look we've always been willing is not new news to take a hard look at opportunities that arise.
And so we will continue that will continue to do that.
In terms of how we May finance, a particular transaction.
It's totally dependent on the specific facts and circumstances around the transaction and so it's hard to speculate on how we might how we might do that.
Thing I would add to that Steve is that to the extent that we were to leverage up to do some sort of transaction or pursue some sort of opportunity where there was a development opportunity or acquisition or anything of that nature. We have set a long term leverage target of below three times traditional leverage in the neighborhood of where we are today.
And so we would.
Have the objective of getting back to that level very quickly.
So.
Okay, that's actually more of an answer but I thought you had given so I appreciate that.
And then second question I wanted to just ask Josh maybe about the promotional environment in the locals market and I know last quarter.
You mentioned there were a couple of what we would call kind of nonpublic bad so called players in the market who were overly aggressive on the promotional front and just wondering if you've seen that level of promotions from from those guys essentially settled down.
Yes. Thanks this is Keith so.
Hoping it used the term bad actors, but nonetheless.
The promotional environment, particularly surrounding the Gulf coast and our liens.
In the second quarter very similar to the first quarter and so we continue to see pressure from some of the private operators operating around those two properties didn't change much the rest of the market remains very rational very stable.
The.
Properties and companies kind of doing what they've done historically.
But we continue to feel pressure around those two properties.
Understood. Thanks, guys appreciate it.
Our next question comes from David Katz of Jefferies. Please go ahead.
Hi afternoon, Thanks for taking my questions.
I wanted to talk about the locals market in New Orleans.
In particular.
And just get your thoughts on sort of strategies for mitigating the impact that you're seeing right.
The competition is looking to grow.
And even expand.
How do you how how.
How do you and how much can you sort of offset that over a period of time.
Well I think when we look at the locals market.
Well I'd say a couple of things one as it relates to.
The competitive pressures around New Orleans, and the gold coast.
It is.
We've been at this a long time, it's really a matter of being patient.
So the strategy is patients we can chase it.
And it would not be profitable, we don't believe what competitors are doing.
A long term sustainable program and so we just need to be patient and wait it out.
In terms of broader strategies.
And how we compete with.
Additional competition in the locals market.
Look we've been in we've been at this a long time, we know our customers well, we know how to talk to our customers. The reason, we haven't seen a significant impact as a result of the most recent new competitor opening is because we do have specific strategies in specific tools to talk to our customers.
And they they enjoy the relationships I've built with our team members they enjoy the facilities and the products that we offer.
And so we'll just kind of continue to do what we've been doing.
Look to go any further to go any deeper would simply be providing.
Competitors are pathways to how we think about the business and so I'm going to stop there.
Okay.
I don't want you to tell us anything.
We won't tell anybody, but but but it sounds like is that there is an initial.
An initial wave of competition trying to induce trial.
And that may ebb and flow back overtime.
Is that a fair.
Victor <unk>.
That is a good way to think about it.
Okay. Thanks.
Yes.
I would add just a few things to think about also is an underlying what Keith mentioned is we're not responding.
Dollar for dollar with what's going on we're staying focused on our strategy, we're not being aggressive in terms of marketing in fact, our overall marketing as a percentage of revenue has remained very consistent and you can see even at with consistent levels of reinvestment, we have been able to grow share we don't think its a.
A profitable strategy to kind of go head to head to that level of competition that we're seeing.
And so we stay focused on our core customer we stay focused on pursuing profitable business and that's how we think about our business going forward even in the face of when the competitive environment started to change in this dynamic.
Yes.
Okay. Thank you very much.
Yes, Sir.
Our next question comes from Joe Greff of J P. Morgan Joe. Please go ahead.
Good afternoon guys.
Maybe this is an indirect way of asking an M&A related question.
Keith Josh have you had the board's view on sort of the propco Opco model changed and can you talk about that a little bit.
And has your view changed with respect to utilizing that model.
On your large scale M&A versus just kind of looking at it as a way to sort of optimize the capital structure for your existing portfolio.
Yeah look as we.
As we talk or think about kind of Opco propco, we still prefer from an M&A standpoint to buy holdco assets that is more difficult today, because most assets are.
Part of an Opco propco structure and so we're certainly willing to do that we did it with the clinical assets that we bought several years back.
Speaker Change: So it's not an impediment to acquire.
Speaker Change: Looking at Opco assets, not an impediment to growing or buying additional assets look in terms of.
Monetizing our existing real estate, if you will.
We have the same view I think we've always had we have the opportunity to do it if there were a transaction where it made sense we enjoy.
Retain great flexibility by owning our own real estate.
We think we can finance and.
Less expensive ways than trying to monetize our real estate so.
Look we think about all of these things with respect to any M&A opportunity and once again, we're not opposed to looking at Opco assets.
Okay, great. Thanks for that Keith.
And then.
Keith you mentioned before.
The Midwest and South segment in <unk>.
Speaker Change: April was soft and then May and June recovered.
Can you talk about what you think happened with your consumer May and June versus April.
Behaviorally in.
How much maybe of that improvement might be related to things like calendar or.
Speaker Change: Year over year weather or things like that.
Thats all for me thanks.
Yes, that's a fair question.
Probably more about April Joe April was particularly soft.
We lost a Saturday and Sunday on the calendar, although Easter.
Each was in April last year was in March this year, we thought we'd benefit from the move of Easter and it just didn't turn out I would say that may and June were more in line with what we expected some slight growth in revenues and April was just softer than we had anticipated once again, we knew the calendar shift was happening, but we thought we'd pick it up with the move of Easter just didn't.
So.
Other than that I wish I had a better explanation for you Joe but.
<unk>.
We've been scratching our head over April since it happened.
Great. Thank you.
Our next question comes from Barry Jonas of Truest Berry. Please go ahead.
Hey, guys.
What's the negative impact so far from the Durango opening relative to that $20 million to $25 million impact.
Previously guided and is that range still valid.
Yes, so very I would say that the.
20% to 25 is is still intact from our perspective I would say.
I think we.
We believe the mix has changed.
Because it's coming more from kind of a kind of an indirect impact from around the Orleans and gold coast that we've spoken about.
Got it got it and then.
I guess as you think about the outlook in Midwest and South and locals just curious to get your perspective on when you think EBITDA could return to growth for both segments year over year growth.
So look I think we tried to lay that out and in my remarks I think.
We think of.
The Las Vegas locals market for us kind of continuing to deal with those competitive pressures around the Orleans and gold coast for the rest of this year, we're starting to see some kind of lessening in declines year over year in the lower end of the database and so that's encouraging.
And that's similar to what we saw although it was on a different time scale in terms of what was happening in the Midwest and South I think it was late in 2022 I think in 2020, maybe it was late 2023.
By late 2022, and throughout 2023, sorry give my timeframe mixed up there, we're dealing with the Midwest and south before kind of Flatlined and that's what that's where we are from a retail customer.
In that particular segment so.
I would say.
We believe that the Midwest and South will continue to kind of bounce around being stable.
For the rest of this year based on what we're seeing in the customer trends and then hopefully start to pivot to growth at some point, but next year, but I think.
I would characterize Midwest and south is more stable.
And flattish at this point, obviously, excluding treasure chest and then.
And then LVL.
Speaker Change: Still starting to flatline, a little bit before we start to see growth might be sometime early next year.
That's really helpful. Thanks, I appreciate it.
Okay.
Our next question comes from Carlo Santarelli of Deutsche Bank Carlo. Please go ahead.
Hey, Keith Josh Thank you.
I wanted to just follow up on something you said earlier.
As it pertains to the locals market.
I think partially what Davis might have been asking about earlier as well. If you guys. I think Keith you said, if you take out the Orleans and gold coast. The rest of the portfolio is performing kind of in line with the market.
I guess my question is was that statement like revenue in line EBITDA in line. What are you kind of see as the way the market is performing.
Yeah.
Take a shot at that Carlo and then Keith can correct me or add to it.
Val.
Basically I think we think the Las Vegas market as best we can estimate is down slightly.
Lower you could describe it as almost flattish, but kind of down about 1% or so and so when we look at our overall portfolio.
Including some of the impact quite honestly at the Orleans and gold coast, we start to try to dissect how much was competitive and how much was market and thats the level of that that's what we are saying we performed in line with was take out the impact that we estimate.
Was competitive related to the Orleans and gold coast and what are you left with there and what's going on with the rest of the business and you kind of get something thats pretty close to what's going on in the overall market generally.
That's how we.
That's what we were trying to say in those few words, Okay, and then if I could Josh in terms of.
Lapping some some expense increases that occurred in 2023 is that are we kind of there now in the second half of this year, where we should start to see kind of the opex.
Reduced from a year over year growth perspective.
I'm going to say it's.
A lot of the changes happened during Q3 that certainly affect it so.
We've disaggregated this in the past and I'll do a little bit of it to the extent I can remember.
Speaker Change: Las Vegas wage wage growth in Las Vegas really.
Increased during Q3 of last year, so we're going to need to get through Q3, largely before we are on a comparable basis same thing with property taxes and property.
And utilities and things like that that was a broader base comment across the entire portfolio. So I'd say some time in the Q3 period as we move into Q4 as when you would start to be on a kind of apples to apples basis.
Thank you Josh yes, absolutely. Thank you.
Yes, Sir.
Yes.
Our next question comes from Jordan Bender of JMP Securities Jordan. Please go ahead.
Great. Thanks for taking my question.
Jordan Maxwell Bender: Skilled nursing in terms of kind of the rumors out there just more of a strategic question, but with Boyd interactive now ramping for a few years could you see yourself get bigger within that business either through M&A or stepping in and investing more just given the learnings over the last few quarters to years.
Yes look I would say that we're.
We were pleased with where point interactive is.
In terms of its growth and where it is and kind of our expectations operating well in Pennsylvania, and New Jersey growing the business.
I don't see any material M&A on the horizon to all of a sudden.
You have that grow in any significant fashion.
Once again, when we started that business a couple of years ago, we talked about having a regional strategy not a national strategy, but our regional strategy that allowed us to speak to the customers in the states, where we do business.
Importantly, and in some of the surrounding states, where we draw large portions of our customers that remains our strategy.
And what is going to be pretty pleased with how it's rolling out at this point and really don't see a need to.
To do anything significant to move it along.
I would add that.
Our approach is not to kind of estimate the Tam and expect we're going to get a percentage of that and apply our margin its really as Keith mentioned kind of build on a bottom up from our existing customers and end markets, where we bring our draw customers from we're not in the business of <unk>.
Making big investments and losing a lot of money to get market share. That's just not our philosophy others may have a different strategy, that's just not our strategy.
Okay, Great and then on the follow up just touching on the capital allocation piece here for a second.
You stepped up share repurchases in the quarter here, obviously above your $100 million.
My question here is just why is the $100 million still a tenant that target number could we see that go up just given some of the visibility that you do have.
On some of your Capex spend here for the next couple of years. Thank you.
The 100 million that we've been using for.
Maybe going on two years now or at least 18 months, it's really meant to anchor the investment community on what we're committed to.
As Josh said in his prepared remarks, we certainly have the financial flexibility to do more we certainly don't want do not want to drive expectations higher and so we continue to say look you can expect us to do this level.
$100 million a quarter.
We're just not at a point, where we're going to reset expectations to a different number.
Great. Thank you very much.
Sure.
Our next question comes from John Decree of CB R. E. John Please go ahead.
John G. DeCree: Good afternoon, guys. Thanks for taking my questions maybe.
Maybe a follow up at a.
A point of clarity if I heard correctly in the prepared remarks, I think you mentioned, maybe gaining a little share I think in reference to the locals market. If I heard that correctly. Just wondering if you could just maybe if I did hear that correctly put it in context of what youre seeing at the promotional or competitive pressures at gold Coast and Orleans.
And some of the other comments you've made on the locals so far.
Sure. So you heard it correct.
We're able to grow share in the second quarter and the Las Vegas locals market.
But to be Crystal clear. It was we grew share over the first quarter not year over year, obviously with the addition of a new competitor it would be very difficult to grow share year over year. So we grew it quarter over quarter Q2 versus Q1, but it did grow.
John G. DeCree: In terms of the competitive environment once again absent what we've discussed around the Orleans and gold coast. It remains relatively stable.
And really nobody stepping out in any particular.
Particular fashion doing anything odd as I've said on prior calls those that got aggressive.
Post Covid, where over the last couple of years remain aggressive those that have remained disciplined.
We remain disciplined in the.
The promotional environment, you could call stable rational.
It really hasnt changed outside of what's happening around Gulf Coast in Orleans.
Got it thanks for that clarity on on share gains sequentially, maybe one more keith or Josh on the on the locals market.
Sure.
Historically pre pandemic have notice seasonality.
In the locals market from <unk> into <unk>, but it's been a little harder to read the last couple of years for various reasons.
Yeah, I know, we're only a couple of weeks into July but.
Do you have expectations for seasonality, it's particularly hot in Las Vegas, given where you are your assets on or do you expect some normal seasonality or.
Any thoughts there would be helpful and Thats all for me thanks, guys.
Yes, John it's a good question yes.
Speaker Change: Yes, we do I mean short answer to the questions. We expect seasonality I think if you look back at the trends that we've seen going from Q2 to Q3, or however, you want to analyze it.
It's been pretty consistent over the last couple of years since 2020.
<unk>.
So I think that.
Speaker Change: What you can largely.
That's what we're expecting and even going back into pre co.
Covid.
The trends seasonality I think or what.
Ah.
Kind of what is what we're seeing today so.
Josh: Thanks, Josh.
Yes.
Our next question comes from Brent on tour of Barclays. Brent. Please go ahead.
Thanks, Good afternoon.
Evening.
Thanks for taking my question I'm curious on downtown Las Vegas.
<unk> ago.
There was a you.
You guys called out soft foot traffic and you didn't.
Back then you didn't really have an idea.
Why it had softened wondering if you'll learn more about that if it came back.
Blue or inexplicably.
And then just sort of how you think about Las Vegas strip has been has been quite strong.
Supply coming out of this trip I have to imagine that it can't hurt you guys in the downtown area for that so just curious an update on that part of that business.
So as we look at our downtown business in Q2.
We saw one a significant rebound in our Hawaiian play that we've talked about and we've talked in the first quarter call with.
The price of Airfares and first one most of the first quarter, mostly driven by Super Bowl.
We had less occupancy than we typically do that rebounded in Q2 that drove.
Big portion of our increase.
That and probably some pent up demand from the Hawaiian.
<unk> typically visit US I think the traffic on the street or the traffic in downtown generally seen more robust in Q2 than it did in Q1 Youre right historically.
Speaker Change: <unk> percentage of the people who visit the strip visit downtown we didn't see that as much in Q1 and whether that was once again, a result of Super Bowl and the activities occurring somewhere else.
And just not enough going on downtown.
We just didn't see that traffic downtown I can't articulate I think in any more detail why there's more traffic downtown in Q2 versus Q1, but for there is or there was I should say.
Better traffic flow in the downtown area in Q2 versus the flow in Q1.
Yes.
Okay, Great. That's helpful. And then just sorry to split hairs in a circle back on the locals share question. Because I was also trying to square your comments. So if you grew in line with the market ex those two properties that you mentioned.
But then you gained share overall does that imply that you.
Bought back a little bit on those two properties, even though promotions.
The same.
I guess is that am I thinking about that right.
It was you Paul.
Did you say Paul.
Will you thought back you gained a little bit of share on those two properties, even though promotions were the same.
Yes.
I think I think it was basically that that youre exactly right.
We did a little better relative to competition, but we also kind of yes.
That's what happened the rest of the market was or the rest of our assets performed pretty much in line with the market overall.
Maybe a little bit better, but we're just kind of calling it all.
There's estimates on all of this so.
That's the best I can tell you.
Fair enough. Thanks, so much guys.
Okay.
Our next question comes from Dan <unk> of Wells Fargo. Dan. Please go ahead.
Hey, good afternoon, everyone first question treasure chest.
It's still early but June was very strong out of the gate, how should we think about the ramp of this property going forward was June maybe an outlier in strength or are we kind of just getting started here in terms of what your what youre expecting.
So look since it's opened over the last seven weeks or so.
Early early July.
As I said in my prepared remarks revenues have doubled.
And I would say that we are.
Im pleased with revenues doubling in the first six or seven weeks of operation.
Where it settles in look we'd be ecstatic if it stayed double.
We're not fully expecting it to stay double.
So.
And then as Josh I think talked about we have to then work through the normal inefficiencies of opening a new property to dial in the EBITDA completely. So I don't think we're going to ramp up from here.
<unk>.
Josh: Forecast that we're going to go beyond double that was under expectations. When we built the property.
It will probably settle in at something less than double.
But even if it settles in it.
50, or 60% above the prior year I think we don't see that as a great success.
Got it thanks, and then just in terms of the M&A line of questioning obviously theres been some more activity in the market.
I mean does it feel like maybe the environment loosening up a little bit in the financing available availability is maybe improving and then if you could maybe just kind of remind us what your maximum leverage would be for any transaction that you may or may not for sale.
Yes so.
I would.
I would say for us when we it's not really about the financing markets that drives our ability to execute and transaction I'm sure at some point it could come to that I think really for us. It's about the same things we've talked about before.
Acquiring assets that have a strategic rationale the rationale.
Josh: Acquisition that generates free cash flow and the valuation makes sense for us and so once it gets through that filter. Then we can start to think about financing alternatives and leverage and all of those things and really.
No.
Josh: I think it's all of those things that get mixed together that then determine whether we should move forward or not so to say theres, a maximum leverage level I'm not going to be able to say that because it's going to be.
Based on market conditions, it's going to be based on the value creation or the opportunities that we see from an acquisition and so just as we've done historically, we've tried to be very disciplined in how we think about acquisitions and how we execute on that.
<unk>.
Yes.
That's all I can give you a framework to kind of think about it in terms of answering your question around leverage.
That's very helpful. Thanks, so much.
Our last question comes from Chad Beynon of Macquarie Chad. Please go ahead.
Afternoon, Thanks for taking my question.
With respect to the cadence crossing announcement.
You mentioned that and that Henderson sub community.
There continues to be development and rooftops going up so.
Hey, how did you come up with the size and scope of that of that market given its going to take a little bit of time and in the market.
The number of homes micro and then separate from that any update in terms of Eastside cannery and opportunities in that region. Thank you.
Sure.
Let me say cannery really no change in our <unk>.
Thinking around that the market.
Around that particular.
Product, which once again is right next door Samsung Las Vegas property.
Hasnt changed significantly and therefore, we just don't have any further views on.
And when something May happen there.
With respect to cadence crossing we've been watching that.
Pretty good.
Unity develop for a long time, because it's in our backyard are jokers casino sits on the existing site, where we're building cadence crossing today.
Joe Kurzweil casino is a slightly smaller footprint and a slightly smaller operation.
And so we have a sense of how we can build that business.
Going forward.
So we are opening what I'd call a modest investment with.
The square footage in the slots and the food outlets that I described.
Josh: But clearly with the opportunity to expand it we'll be able to keep jokers, while open while we build a new property and then when we opened a new property will be able to shut it down so we won't lose any EBITDA in the process.
Josh: But clearly have the expansion opportunity as the community grows we can grow with it based on demand. So we feel pretty good about the opportunity once again modest investment on day, one opportunity to grow into the future.
Thanks, and just a follow up on that so that third bucket of Capex.
Are there other.
Entitled Land opportunities or adjacent opportunities in LVL or is this third bucket again, it could be an additional hotels somewhere else Convention center.
Any view on on where that focus would be for that third bucket of capex geographically.
We have a list of projects that we have prioritized and that we continue to review.
As they start to kind of come next in line. Josh described the next too. We believe those are the two highest ROI projects. We have the most important at this moment in the company's life.
Got several more behind that and once these to get further down the line, we will start to evaluate those.
To your point look we do have a lot of land adjacent to our existing operations here in Las Vegas, whether it be at the Orleans with the gold Coast Samsung Ali I would tell you we have opportunities all those properties to continue to expand the footprint there if demand warranted that in what we are.
Once again plenty of opportunities outside of Nevada properties like <unk>, St. Charles that extremely strong producers have extremely strong demand that we can build into so number of projects.
Not ready to disclose anything other than what we disclosed already but but we have lots of additional opportunities in the pipeline.
The only thing I would add is we have more than enough projects is finding the ones that generate the returns we need and then just kind of pacing spreading those out and pacing them.
That's all.
Thank you both very much I appreciate it.
Sure.
This concludes our question and answer session I would now like to turn the call over to Josh for concluding remarks. Thanks.
Thanks, everyone for dialing in today, if you have any other questions.
Thank you.
Feel free to reach out to the company.
You can feel free to disconnect.
Okay.
Okay.
Yes.