Q3 2024 Boyd Gaming Corp Earnings Call
Speaker Change: Good afternoon and welcome to the Boyd Gaming 3rd Quarter 2020 for earnings conference call.
David Strow: My name is David Strow, Vice President of Corporate Communications for Boyd Gaming I will be the moderator for today's call which we are hosting on Thursday, October 24, 2024.
Speaker Change: 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.
Speaker Change: Our speakers for today's call, Keith Smith, President and Chief Executive Officer, Josh Hirsberg, Executive Vice President and Chief Financial Officer.
Speaker Change: Our comments today will include state that our forward-looking statements within the private securities litigation reform act.
Speaker Change: All Ford-looking statements in our comments are as of today's date, and we undertake no obligation to update or revise the Ford-looking statement.
Speaker Change: Actual results made different materialy from those projected in any forward-looking statement. There are certain risks and uncertainties, including those disclosed in our filing with the SEC, that may impact our results.
Speaker Change: During our call today, we will make reference to non-gap financial measures.
Speaker Change: For a complete reconciliation of historical non-gap to gap financial measures, please refer to our earnings press release in our form 8K. For this, the SEC today, in both of which are available at investors. Boygaming.com
Speaker Change: We do not provide reconciliation afford looking on gap financial measures due to our inability to project special charges in certain expenses.
Speaker Change: Today's call is being webcast live at boygaming.com and will be available for replay in the investor relations section of our website shortly after the completion of this call. So with that, I would now like to turn the call over to Keith Smith. Peace.
Keith Smith: Thanks for having me, and have a good afternoon everyone.
Keith Smith: The third quarter was another solid performance for our company.
Keith Smith: A recent property investments produce strong results, driving growth in our downtown Las Vegas and Midwestern South segments. Our online and managed businesses both delivered excellent performances continuing to prove the value of our developer diversified business model.
Keith Smith: We maintain operating efficiencies throughout our portfolio with property level margins exceeding 39% during the quarter.
Keith Smith: and our underlying customer trends remain stable in the third report.
Keith Smith: Backed overall play volumes have been essentially flat on a year-of-year basis throughout the last four quarters with the exception of the weather challenge first floor.
Keith Smith: Now let's review each of the operating settings.
Keith Smith: Starting with our Las Vegas Local segment, our results for the third quarter require friends similar to what we saw throughout the first half of this year.
Keith Smith: While the Orleans Gold Coast continued to be impacted by competitive pressures in their immediate area during the quarter, the remainder of our Las Vegas Local segment performed in line with a broader, same-store market friends in the third quarter.
Keith Smith: We also continue to successfully maintain a operating efficiency at these properties.
Keith Smith: Excluding our lanes in Gold Coast, he bent our margins were 49% during the quarter. The testament to our team's ability to successfully manage expenses in the current environment.
Keith Smith: Lastly, hotel revenues are local segment continued to grow as we benefit from increased room demand across the broader market.
Keith Smith: Next in downtown Las Vegas, we delivered another strong quarterly performance driven driven by our recent property investments in growing poinvestation. The segment was led by the Fremont, which posted a record third quarter revenue and a third quarter revenue.
Keith Smith: and we benefited from continued strength and pedestrian traffic throughout the downtown area during the summer.
Keith Smith: As we look at the Southern Nevada Market more broadly, the fundamentals of the Southern Nevada economy remain sound.
Keith Smith: Visitation remains strong with nearly 42 million people visiting the Las Vegas Valley over the past 12 months. The Las Vegas airport is operating at record levels, hosting nearly 59 million passengers over that same period.
Keith Smith: Beyond the tourism sector, the broader Southern Nevada economy is also performing well. As the last fancaz area has been one of the fastest growing job markets among major US metro areas all year.
Keith Smith: This job growth has been brought based with increases in almost every major employment sector. And it has been long lasting with job gains for 42 consecutive months.
Keith Smith: Groza has been particularly strong in the construction sector, increasing 7% year over year as the local construction pipeline remains robust.
Keith Smith: In terms of local population, Las Vegas Valley has surpassed 2.3 million residents.
Keith Smith: and in response to this ongoing growth, home building activity has accelerated into Las Vegas Valley. More than 14,000 new residential units were permitted over the past 12 months, it increased 23% year or year.
Keith Smith: Now, moving outside of Nevada, our Midwest and South segment benefit from a record third quarter before it's at Treasure Chesapeake, which opens its new land-based facility in June.
Keith Smith: As your chastis delivered strong revenue growth since the new facility opened, and we are already on pace to exceed our target even to our return.
Keith Smith: Excluding treasure chest, both Revenant and Ebedar for the rest of this segment, we're essentially even on a year-old-year basis during the pool.
Keith Smith: We also continue to successfully maintain operating efficiencies in the segment with margins of 38% during the corridor.
Keith Smith: Next, our online segment had another great performance in the third quarter as we continue to grow from our market access agreements across the country.
Keith Smith: The largest contributor to our online results is a partnership with Fandal, which continues to strengthen its position as the nation's leading sports betting company.
Keith Smith: Beyond the revenue and need of our growth, we are seeing from our market access agreement with Fandle. We also continue to benefit from Fandle success through a 5% equity interest.
Keith Smith: from the country, the Fandles Leadership position in online gaming continues to grow and with it, the value of our equity state.
Keith Smith: Based on our strong performance during the third quarter, we are raising full year EBITDA our guidance for our online segment to $75 million from our continuing operations.
Keith Smith: This is up from the 65 to 70 million dollars we previously done.
Keith Smith: Also during the quarter, we acquired the New Jersey Operations of Resort's Digital Gaming.
Keith Smith: Well this was a small acquisition to represent another step in building out a regional light gaming business.
Keith Smith: Finally, our managed business recorded another strong quarter. With another solid performance at Sky River, our managed business remains on track to generate approximately $90 million in need of it to our this year.
Keith Smith: Earlier this month, the Wilton Rancher Reattrod received final regulatory approvals and closed on financing for the expansion of Sky River.
Keith Smith: With these final steps complete, work as now begun on the first phase of the expansion that will add four in its slots and a sixteen on its base parking garage to the property.
Keith Smith: Following the opening of this first phase in early 2026, we will commence work on the second phase of the expansion that will add a 300-room hotel, two additional food and beverage outlets, a day spa and an entertainment and events center.
Keith Smith: For An Complation of Phase 2 in late 2027, the suspension will further strengthen Sky River's position as one of Northern California's leading gaming entertainment destinations.
Speaker Change: So now this is another South of Porterburg Company.
Speaker Change: Over the last several years, we have significantly improved our operating efficiency, enhanced our free cash flow, lower our leverage, strengthen their balance sheet.
Speaker Change: The livered consistently solid performances. Our improved performance has allowed us to return nearly $1.7 billion to our shareholders over the last three years.
Speaker Change: At the same time, actively investing in our properties to enhance the competitive positioning of our portfolio nationwide.
Speaker Change: For example, we're now completing major hotel renovations of Blutcha, the Maristar St. Charles and Gold Coast, and we're starting the projects at IP, Orleans and Valley Fort.
Speaker Change: and we've introduced for the 19 new restaurants and bars across the country over the last year.
Speaker Change: In Las Vegas, we have an extensive proper-to-air renovation now underway at the Sun Coast. We unveiled a new modern sports-book and early September to strong customer response. The opening of this new sports-book was the OPEC of the High Limit Room. We'll be meeting the state council at the Sun.
Speaker Change: S.man said position the sun coast to compete more effectively in the local's market and holds its own in the face of the opening of a new competitor late last year.
Speaker Change: And over the next 12 months, we will continue this project at the Sun Coast with the complete renovation of the casino floor, the introduction of a new food hall and expanded meeting space.
Speaker Change: Beyond our recent property and assets, broken investments are another key part of our development pipeline. One such project that is now underway is that a Mayor St. Charles will be on a major expansion of our meeting in convention center.
Speaker Change: with his Ford Diamond-rated hotel, expansive amenities, and Maristars received strong demand from meeting planet for years, but its current convention space is insufficient to accommodate it.
Speaker Change: Once complete in the fall of 2025, its expansion will allow us to capitalize on that unmet demand.
Speaker Change: and in the three months since we announced this expansion, initial bookings are already exceeding expectations, all from business that we would have been unable to accommodate with our current footprint.
Speaker Change: In the here in Las Vegas, we continue to make progress on our planned development, Aden's Crossing Casino. A project that will replace our Joker's wild casino with a modern and upgraded gaming experience.
Speaker Change: We plan to bake ground in this project next month and open the doors of Cain's Crossing in early 2026. Cainful begins a smaller development with 450 slots and several restaurants.
Speaker Change: But this will be a project designed to grow with a master plan community of cadence, which will have more than 12,000 homes upon final buildup.
Speaker Change: Skating SXman's, so will our property. With future plans that I'll tell the additional casino space and more amenities to serve the growing Cain's community.
Speaker Change: A third quarter results at the treasure chest and free month clearly demonstrate our ability to deliver strong returns from these type of investments. And we are confident we will see similar success for projects at the Maristars Angels in Cadence Crossing.
Speaker Change: Once we have completed work on cadence crossing and the MRSTR St. Charles, who plan to pursue additional opportunities as part of our pipeline of growth projects.
Speaker Change: In addition to these projects, we have secured an opportunity to develop a commercial casino resort property in the city of Norfolk, Virginia, one of the largest underserved gaming markets in the Mid-Atlantic region.
Speaker Change: This is an exciting opportunity for us to expand our geographic footprint into a new market of 1.8 million residents.
Speaker Change: After receiving final approval from the City Council earlier this month, we plan a break around on this project next week. As part of the development process, we expect to open a temporary casino facility at the location in late 2025.
Speaker Change: The facility that will follow will be a best in market resort property featuring a 200 room hotel, 8 food and beverage outlets and a casino with 1500 slots and 50 table games.
Speaker Change: Expect to open his permanent facility in late 2027.
Speaker Change: including the temporary facility, we estimate total price of costs of approximately $750 million, construction and development costs are still being finalized. These costs will be fully funded by our company.
Speaker Change: While our investment pipeline is important part of our approach to creating share of the value, we also remain committed to managing our leverage and returning capital to our shareholders.
Speaker Change: In the third quarter, we repurchased $200 and $2 million in stock, and we remain committed to our ongoing share repurchase program of $100 million per quarter supplemented by our dividend program.
Speaker Change: Our total leverage at the end of the third quarter is 2.5 times providing our company but significant flexibility to execute on growth while continuing our capital return for a flat.
Speaker Change: So as we reflect in the third quarter, we are encouraged by our solid performance nationwide.
Speaker Change: Our underlying customer transfer main consistent during the quarter.
Speaker Change: We successfully maintain operating efficiencies with property level operating margins exceeding 39% during the quarter.
Speaker Change: We continue to see excellent results from our diversification strategy with strength in both our online and managed businesses.
Speaker Change: Our $100 million per year in growth investments delivers stronger turns during the quarter as evidenced by the record performances of treasure tests in free-mount. We're building on a success with a pipeline of new growth opportunities nationwide.
Speaker Change: We remain diligent in our search for ways to grow the company that discipline matter, securing an opportunity to develop a best and market resort to Sino in Virginia.
Speaker Change: We also remain committed to a strong balance sheet with low leverage ending the quarter with leverage at 2.5 times.
Speaker Change: We continue to return capital or shareholders with nearly $1.7 billion in share of purchases and dividends over the past three years.
Speaker Change: With significant free cash flow, a strong balance sheet and a growing pipeline of opportunities. We are confident in our ability to continue to drive long-term growth, retain a balance approach to capital allocation and create long-term shareholder value.
Speaker Change: I'm going success is a tribute to the hard work and dedication of thousands of boy team members nationwide. I'd like to thank all of them for the contributions to our company and our shareholders.
Speaker Change: Thank you for your time today and I would like to turn the call over to Josh. Josh.
Josh Hirsberg: Thanks, Keith. Our company delivered a solid performance in the third quarter, with the year-over-year customer trans consistent with the last several quarters.
Josh Hirsberg: and as we think about the fourth quarter we expect year over year if a dark comparisons will be challenging.
Josh Hirsberg: The fourth quarter last year, as you may recall, benefited from an unusually large number of favorable expanse adjustments at your end, especially in the Midwest and South Segment.
Josh Hirsberg: We expect the contribution from treasure chest in the fourth quarter this year, largely offset the absence of those favorable adjustments in the Midwest and South segment.
Speaker Change: As Keith mentioned, we expect our online segment to generate run rate Ibadare for full year 2024 of $75 million. Inclusive contributions from resort digital, which we acquired in September.
Speaker Change: Also during the quarter, we received non-recurring market access fees of $10 million.
Speaker Change: and we expect to record an additional $20 million in non-recurring fees in the fourth court.
Speaker Change: As a result, for 4-year 2024, we expect our own line segment to produce $105 million in EBITDAAR, including 75 million of run rate EBITDAAR, and $30 million of one time incremental market access fees.
Speaker Change: For our managed and other business, we expect approximately $90 million in Ivador as a result of our continued strength at Sky River Casino.
Speaker Change: Recall that Sky River recorded one time items in the fourth quarter of 2023, which positively impacted our managed and other results during that quarter.
Speaker Change: Young. During the third quarter, the tax passed through a amount, lighted to our own line revenue share agreements was $13 million.
Speaker Change: Compaired to $71 million last year in the third quarter.
Speaker Change: excluding the tax pass through a mile company wide margins for the third quarter this year would have been approximately 39%. More than 420 basis points of the margin would be worth.
Speaker Change: In terms of capital expenditures, we invested $85 million in the third quarter, bringing year-to-date capital spend $289 million.
Speaker Change: Based on capital spending to date, we are updating to a slightly lower projected total expenditures number for 2024, a 425 million dollars.
Speaker Change: This estimate includes maintenance capital over approximately 225 to $250 million.
Speaker Change: Approximately $75 million in incremental maintenance capital for room renovations.
Speaker Change: and a hundred million dollars in recurring growth capital for our property investments.
Speaker Change: We believe the record results we are delivering a treasure chest in free month. Clearly demonstrate the long potential of our $100 million of annual recurring growth capital.
Speaker Change: In 2024, this growth cap will include the completion of the Treasure Chest Project, as well as starving the Amaristar St. Charles Conventures Convention Center expansion and the cadence crossing development of loss in Las Vegas.
Speaker Change: The estimated $750 million in capital related to our Virginia development will be in addition to our annual maintenance and recurring property investments.
Speaker Change: John, these investments we remain committed to returning capital to our shareholders through our repurchases and dividends.
Speaker Change: We paid our quarterly dividend of 17 cents per share during the third quarter.
Speaker Change: Additionally, we repurchased $202 million in stock during the third quarter, acquiring $3.5 million shares at an average price of $58.37 per share.
Speaker Change: We remain committed to repurchasing $100 million in Shares each quarter.
Speaker Change: When combining our sheery purchases with our dividend program, here today through the third quarter we have returned $531 million for our shareholders.
Speaker Change: Early on pace to return nearly $650 million this year, more than $7 per share.
Speaker Change: As of September 30th, we had $343 million remaining under our current repurchase authorizations.
Speaker Change: and the actual number of shares outstanding quarter-end was 88.8 million shares.
Speaker Change: Since October 2021, we have returned nearly $1.7 billion in capital to our shareholders in the former share repurchases and dividends.
Speaker Change: Reducing our share account by more than 20% over that time period.
Speaker Change: As Keith mentioned, we ended the quarter with total leverage of 2.5 times and Lisa just a leverage of 2.9 times.
Speaker Change: We have no near-term maturities, an ample borrowing capacity under our credit agreement.
Speaker Change: and the strongest financial position in our history.
David Strow: and David that concludes our remarks and we're now ready to take 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 touch tone phone. You will hear a three-tone prompt acknowledging your request.
Speaker Change: The Jewish Troop Guarder Quest pleats press star then too.
Speaker Change: If you're using a speaker phone, please use your handset when asking your question.
Speaker Change: We'll pause for a moment while we compile our list of questions.
Speaker Change: The
Speaker Change: Hirs' question comes from Sean Kelly of Bank of America. Sean, please go ahead.
Sean Kelly: Hey, good afternoon everyone. Thank you for taking my questions.
Sean Kelly: and...
Sean Kelly: If we could start with maybe the Midwest and South just to make sure we have the right baseline here. Last year obviously there were some noise in the way I think expensive fell between Q3 and Q4 and Josh. It seems like you're calling that out. Can you just help everyone with a little bit of magnitude here? And if I'm understanding that puts takes is right to read you as roughly flat-ish. If we take those one time good guys into account for last year versus the upside you're seeing a treasure chest? [inaudible]
Josh Hirsberg: Yeah, Sean, I think you largely have the gist of it. When you look at, let me talk about this quarter first.
Josh Hirsberg: In terms of the third quarter this year, if we exclude treasure chest, our business pretty pretty much performed on a stable basis year over year.
Josh Hirsberg: and we look at...
Josh Hirsberg: with Quater because we don't have the benefits of the reduced expenses from last year. That's that benefited largely offset by the addition of treasure chest growth.
Josh Hirsberg: The Cod of Sweet Eat.
Josh Hirsberg: from the third quarter, without treasure chest, since South was essentially even year over year. And then we'll all set the benefit of lower expenses that we benefited from in the fourth quarter as a result of the contribution. And that will give you the order of magnitude.
Speaker Change: Thank you and if I could just do one quick follow up on Virginia, obviously a new and exciting development there in the Hampton Norfolk area. Could you, Keith maybe, could you give us a sense of the scope and scale there? 750 million is it's a pretty large increase from a lot of the initial up proposals and obviously scope and scale seems like it's come down from some of the initial underwriting. So could you walk us through just a little bit of your early thinking about ROI in the market and go to how, you know, with the higher project cost, we can offset, you know, a little bit lower scale. So room to grow into that over time or how do you think about it on the position count side? Thank you.
Keith Smith: So, look, we developed this project really not...
Keith Smith: Not looking at what had been previously drawn. We're very excited about this opportunity. You know, it is an underserved market There's one casino in the immediate area of Portsmouth as I think everybody knows This is a great location, you know 1.8 million people in the area
Keith Smith: The scope and scale that we disclosed, you know, 1,500 slots, 50 tables, 200 rooms and some restaurants
Keith Smith: and other amenities, you know, at $750 million,
Keith Smith: We talk about getting a return or targeted return of the 15 to 20 percent range, and we're confident that we will get our targeted return on this investment. So again, it may be different than what a prior developer had talked about.
Keith Smith: But we didn't have anything to do with that prior developers plans. You know, these are our plans. We're confident in them We think it fits the market and we're building it for the market and are really looking forward to getting this project started
Keith Smith: Thank you very much.
Speaker Change: Thank you. Our next question comes from
Speaker Change: Hey Josh, hey Keith, thank you for the color. Just quickly on the Midwest and South, obviously you know Louisiana
Speaker Change: is a key element of your story. Josh, could you perhaps maybe talk about, I understand the treasure chest bump in the quarter and the success that Properties had, but just overall, if you looked at your Midwest and South region margins outside of Louisiana, how they looked in the period and how much is Louisiana contributing to the outperformance in the quarter?
Josh Hirsberg: Yeah, so...
Josh Hirsberg: basically
Josh Hirsberg: If you remove treasure chests, margins actually improved in the remainder part of our business.
Josh Hirsberg: Treasure Chest, remember, is opened in June.
Josh Hirsberg: and is, the performance has been ramping up, but we're kind of managing through the expenses of a start-up organization.
Josh Hirsberg: So...
Josh Hirsberg: That's what's really kind of, you know, kind of contributing to the results for the Midwest and South in terms of the margins overall. So, once again, if you excluded Treasure Chest, the margins for the rest of our business would actually have improved slightly.
Speaker Change: Great, thank you. And then if I just think about kind of the local segment, seasonality appears, you know, fairly similar to
Speaker Change: prior years. Obviously fourth quarter, presumably there will be some noise.
Speaker Change: with the election and whatnot in November. But are you guys kind of expecting a normal seasonal 4Q and clearly you'll anniversary some competition in the quarter. Is there anything else you guys would call out as we think about closing out this year in Las Vegas?
Speaker Change: No, I would caution you, we don't really anniversary competition until we get into 2025 because a lot of the kind of
Speaker Change: increased marketing that occurred happened later in Q4 of last year and so you know it'll be into into 2025 before we actually kind of
Speaker Change: on a comparable basis to that. Outside of that, I don't think there's anything else.
Speaker Change: unusual going on in Q4, as you said, outside of any
Speaker Change: You know, election activity that disrupts, you know, customers from getting out and visiting the, you know, visiting our properties over, you know, whether it's now or the weeks leading up until the election, so.
Speaker Change: But, once again, competition will remain there. There is one other thing. We haven't talked about this a lot.
Speaker Change: You know on these calls, but
Speaker Change: You know, the Tropicana I-15 interchange project, which has been going on for years.
Speaker Change: It was just announced that that project is now going to extend into 2025, and it is the main thoroughfare for our customers coming in from out of town to get to the Orleans. And so that has had some impact on the property over the years. We were hopeful that was...
Speaker Change: going to be resolved in Q4 this year. It's actually probably at its most impactful point during Q3, Q4 and early next year, so they'll likely have some small impact on the business also.
Speaker Change: Great. Josh, if I could just circle back. Relating back to the Midwest and South, I know
Josh Hirsberg: Yeah, so Q3 last year was definitely not a bright spot for us. I actually don't, I don't, I think it, that had more to do with just
Josh Hirsberg: The expenses related to like property insurance going into effect and things like that. And then as we kind of went in from Q3 to Q4.
Josh Hirsberg: Those expense levels stay the same but then we got the benefit of literally just almost every adjustment.
Josh Hirsberg: that we made at year-end kind of going in our favor. And so it was really broad-based around a lot of different categories that contributed to the kind of, especially in the mid, it was.
Josh Hirsberg: Midwest and South have benefited us. It helped us a little bit in other two segments as well.
Josh Hirsberg: but it was primarily, or to the larger extent, in the Midwest and South. I think Q3
Josh Hirsberg: It's really just, you know, all the expenses that we had talked about at that time around property taxes, utilities and seasonality, some labor increases as well, that contributed to what was happening in Q3 of last year, if I remember correctly.
Speaker Change: Appreciate it. Thank you guys.
Speaker Change: Yep.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Joe Greff of J.P. Morgan. Joe, please go ahead.
Joe Greff: Good afternoon guys. I think I know what you mean by what you had in the press release in terms of
Joe Greff: The Las Vegas locals performing, excluding Orleans and Gold Coast.
Joe Greff: you perform similarly with you know the same store performance of the market there what does that mean down 5% down 3% what can you help us help us understand what you mean by that exactly
Speaker Change: Right, so when we do the math, obviously taking a stab at what we think the new competitor generated, you know, we think the same store market probably shrunk low to mid single digits.
Speaker Change: We were less than that, so we were both single. We performed frankly in line or better than our kid, best as we can tell.
Speaker Change: great
Speaker Change: Thanks. And Josh, I know you probably had some things in...
Speaker Change: that aren't completely firmed up. But as you sit here in late October and think about capital commitments for next year, can you help us understand, how are you thinking about it now, including the Virginia development? Thanks.
Josh Hirsberg: Yeah, so...
Josh Hirsberg: I think
Josh Hirsberg: I think the number that we have for this year, in terms of where we were originally thinking of 400 to 450, is now kind of 400 to 500.
Josh Hirsberg: I think that's probably a good place to start for next year.
Josh Hirsberg: We're still.
Josh Hirsberg: firming up the budgets and everything and the timing related to Virginia. And so it's a little bit hard to know at this point exactly how much...
Josh Hirsberg: will be spent next year.
Josh Hirsberg: Virginia but I think it's going to be in this 150 area or so and just need a little bit more time to refine that and come back to you with our when we have our fourth quarter call.
Speaker Change: Thank you very much.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Barry Jonas of Truist Securities. Barry, please go ahead.
Speaker Change: Hey guys, Patrick Keoghan for Barry. Can you hear me okay?
Speaker Change: Sure, well this goes back to, you know, our acquisition of Palette Interactive that's been rebranded Boyd Interactive a year or two ago, you know, small acquisition then with our strategy of developing a regional gaming, iGaming product, something that would be profitable.
Speaker Change: Resorts Digital is a complement to that. It's a small acquisition that helps bolster that business.
Speaker Change: We have a successful operation in Pennsylvania, Stardust iCasino, and one in New Jersey also. So this helps to expand the database in New Jersey, and a lot of those customers are from Pennsylvania. So it's all part of the regional iGaming strategy.
Speaker Change: and we'll, you know, try to position ourselves so that when other states do approve iGaming, we're positioned and we're ready to expand. Once again, we're not trying to be a national leader. We want to make sure that we're a leader in the states where we do business and surrounding important states to us.
Speaker Change: That's great. Thank you for the color. And for my follow-up, you've announced Cadence Crossing and now a new project in Norfolk. Are you exploring further organic expansion opportunities or would you say your plate's more or less full for now? Thank you.
Speaker Change: Well, we certainly have a lot going on, but we have worked extremely hard over the last several years.
Speaker Change: to position our company such that we can do multiple things.
Speaker Change: We are maintain our focus on having a strong balance sheet and low leverage
Speaker Change: We can do these projects and continue our capital return program.
Speaker Change: And so we'll continue to keep our eyes open for other opportunities when they come along.
Speaker Change: It's not like we're not answering the phone any longer. We continue to answer the phone and look for good opportunities, whether they're organic.
Speaker Change: whether it is, you know, building out an existing property. We have spare land here in Las Vegas and a number of our properties, New Orleans and Suncoast.
Speaker Change: We have other internal opportunities. We have an opportunity...
Speaker Change: In our Paradise location, East Peoria, Illinois, to do something similar to Treasure Chest, you know, Paradise has, once again, an older riverboat, stories, it's not as competitive today's world.
Speaker Change: And so we have the opportunity to have a more compelling entertainment product there. So a number of opportunities we're looking at. We are disciplined. We're not going to layer it all on at once.
Speaker Change: These are projects that will get rolled out over the course of the next several years so that we're careful to maintain our balance sheet, maintain a good leverage level, but continue to take advantage of opportunities as they present themselves.
Speaker Change: That's great, thanks so much and congrats on the quarter.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Steve Wozinski of Stiefel. Steve, please go ahead.
Steve Wozinski: Hey guys, good afternoon. So, I want to start with the online segment.
Steve Wozinski: Josh, let me just make sure I have the math right here first. So if we strip out the the 10 million of non-recurring fees in the third quarter, that's going to imply, you know, let's call it about 16 million of EBITDA for the third quarter. So, you know, as we think about the fourth quarter without the non-recurring fees, that would be, what, 20, 21, 22 million somewhere, you know, somewhere in that range.
Steve Wozinski: So as we think about 2025 for online, I assume we should be thinking about the 75 million baseline and then grow that number from there. I just want to make sure I have all that right.
Josh Hirsberg: You got it, Steve. You're right on.
Speaker Change: Second question, when did they go to the locals market in Vegas and I know for the last couple months or even the last couple quarters you know you've kind of called out some you know it's called non-public bad players in that market who have been you know overly aggressive on the promotional front and I'm just you know just wondering you know at this point have you seen that level of promotion from those folks?
Speaker Change: you know, settle down, is it intensifying? You know, any kind of color there would be helpful.
Speaker Change: Well,
Speaker Change: To correct the record, we didn't call it any bad players. We talked about some people in the neighborhood who were
Speaker Change: spending at a very aggressive level.
Speaker Change: That spending at a very aggressive level has continued, has not abated.
Speaker Change: and it was high. People doubled down kind of in December of last year and for the most part it has remained at that elevated level since that point in time. As I said earlier, we don't really kind of lap that or get to good comparisons until early 2025, maybe the second quarter of 2025. So yeah, I wish it had abated.
Speaker Change: It has not, and we're simply not going to jump into that game. We've been at this too long to understand what happens. There's really no upside for us to jump in, so we just have to be patient and wait for it to run its course.
Speaker Change: Okay, gotcha. Thanks guys, really appreciate it.
Speaker Change: Thank you.
Speaker Change: Our next question comes from David Katz of Jeffries. David, please go ahead.
David Katz: Afternoon, everyone. Thanks for taking my questions.
David Katz: I wanted to just go back to Norfolk.
David Katz: for a minute. You know, having sort of been down there, you know, there is, right as I think, Keith, you touched on it, a meaningful property that, you know, separated by a bit of a body of water but relatively close by. Can you just talk about the expected or anticipated
David Katz: You know, tax structure or, you know, puts and takes that, you know, give you, you know, some of the comfort that you expressed and how well that, you know, property is expected to do.
Speaker Change: I think it can probably sum it up in two comments.
Speaker Change: 1.8 million residents in the area.
Speaker Change: and, you know, one, maybe two other casinos, you know, casino in Portsmouth, one being developed in St. Petersburg, St. Petersburg being, you know, an hour plus away.
Speaker Change: And if you think about the Las Vegas locals markets.
Speaker Change: where we have, you know, two-plus million residents.
Speaker Change: And we have a heck of a lot more than three casinos.
Speaker Change: So that gives me pretty high confidence that this is going to be successful.
Speaker Change: Got it. And then if we could, you know, Josh, Keith, or either or both.
Speaker Change: Just, you know, update us or remind us. I know the boundaries for your M&A appetite have been relatively consistent and productive over the years.
Speaker Change: If you could just talk for a minute about, you know, appetite for leverage, appetite for risk, and sort of how you're thinking about that opportunity set in the market.
Speaker Change: at the moment.
Speaker Change: I commented a little bit earlier that, you know, we've structured the company such that we can do a lot of things at once and maintain a strong balance sheet. You know, leverage today in the kind of the mid twos is where we think on a long-term basis that we're comfortable running the company. We'll be flexible and allowing leverage to rise above that.
Speaker Change: level with acquisitions or other development like Virginia as long as we see a path back to our current levels in short order. So once again M&A is all about
Speaker Change: right opportunity at the right price and right markets and we've been very disciplined around it.
Speaker Change: past and very patient.
Speaker Change: and so
Speaker Change: We're only going to execute as if it meets those criteria.
Speaker Change: We'll be patient, we'll be disciplined as we always have.
Speaker Change: We've developed a great expertise over the years in M&A. We know how to kind of identify those properties. We know how to buy them at the right price. We know how to run them better and extract more EBITDA out of these properties. And so continue to be patient, disciplined. We're not going to allow leverage to get too high. Once again, I believe today's level is the level, long-term run rate level that we want to get back to.
Josh Hirsberg: if it does elevate. Josh, anything? You got it, Keith.
Josh Hirsberg: Okay, yes you do. Thank you very much.
Speaker Change: Thank you. Our next question comes from Stephen Grambling of Morgan Stanley. Stephen, please go ahead.
Stephen Grambling: Hi, thanks. Another follow-up on Norfolk. I was hoping you could clarify the structure of the project as we think about your economics. Are you 80% or 100% of that 15 to 20% return range that you're talking about? And then any color you could give us on what the temporary facility might look like in terms of its scale versus the final project.
Speaker Change: Yeah, Stephen, we'll give you the information that we can today. You know, we expect to own at least 80% of the venture.
Speaker Change: and we would expect to get, obviously, entered economics from that ownership over time.
Speaker Change: We are going to finance ourselves the full project cost, currently we're estimating that to be $750 million. And that will be, since this is a commercial casino, it will be secured by the assets of the casino.
Speaker Change: paid from the operations of the casino.
Speaker Change: So that's the thinking.
Speaker Change: You know the temporary is meant primarily to be
Speaker Change: regulatory requirements to have something open very quickly so you know expectations should be we're going to get something small open quickly and the real economic engine will come from
Speaker Change: Maybe just to add, while some of the temporary casinos in Virginia have been on a larger scale and quite productive, you should not be thinking of them as temporary.
Speaker Change: But that model here, we have a smaller site, therefore we have limited land to build a temporary, so this will be a much smaller scale casino than some of what's been built.
Speaker Change: Ten other locations.
Speaker Change: And hold that slide while we're putting it up.
Speaker Change: The temporary will be building the permanent at the same time.
Speaker Change: That's helpful. As an unrelated follow-up, maybe you talked about this in your introductory remarks, but what what drove that one-time
Speaker Change: step up in the digital segment. Is that something that could happen again, maybe not next year, but at another point in the future based on certain milestones, or any details you can give would be helpful?
Speaker Change: It is just as Josh described, some this quarter, some next quarter. You know, we have a number of market access agreements throughout the country, and we get fees for those.
Speaker Change: Some of those have terminated early. That's what this was. People were just wrapping up shop and deciding not to, you know, not to continue. So as they wrap up early, these are long-term agreements and they just have to pay us to get out of them. And so that's all this is.
Speaker Change: termination of some market access agreements that we had with other companies other than FANDL.
Speaker Change: I didn't, and it doesn't. Thank you.
Speaker Change: The only thing I would add to that, Stephen, is that our
Speaker Change: The $75 million that we set for full year 2024 and then answering Steve's question about growing off of that base number, you know, we're basically replacing any lost revenue kind of in the shorter term with growth from FanDuel and other revenue share arrangements but also the addition of Ford's Digital.
Speaker Change: Clear. Thank you.
Speaker Change: Thank you. Thank you. Our next question comes from Jordan Bender of Citizens JMP. Jordan, please go ahead.
Jordan Bender: Good afternoon, everyone. I know the window is a little bit shorter for you, but anything you can opine on in terms of the group and convention business across your local properties heading into 2025.
Speaker Change: Yeah, I can't, I don't have any real visibility to that today, you know, we do have a fair amount of square footage at the Orleans and some of our other properties that is generally always full and we do a pretty good business, but we don't have enough square footage to have a real sense of that, so I can't really, can't help you with any direction on that unfortunately sitting here today.
Speaker Change: Okay, no worries. And then on the fall, I think you said EBITDA margins 49% X or a lean thing called COSA. I'm not sure if I missed it, but is there any way to compare that to like the prior year level of just directionally, you know, maybe the health of margins on a year-over-year basis?
Speaker Change: Yeah, so I'll have that Jordan. So the 49% this year for OVL excluding Orleans and Gold Coast is equal to compares to the 50% last year.
Speaker Change: Perfect. Thank you very much.
Speaker Change: Sure.
Speaker Change: Thank you, our next question comes from Ben Chaykin of Missouho. Ben, please go ahead.
Ben Chaykin: Hey, just one. Thanks for taking my question. So, Treasure Chest has been open for a few months, and I think, at least from a top-line perspective, is surpassing most expectations. As you reflect on this,
Ben Chaykin: What's surprising you most about this property or investment? Is there anything you can bring to future ROI projects? And I kind of ask that in a related tangent in that I think you mentioned that there was also a potential option at Paradise if I heard that correctly. So is this purely your decision or are there any regulatory hurdles?
Ben Chaykin: Need it. Thanks.
Speaker Change: So the treasure chest has been an extremely successful operation since we opened it.
Speaker Change: I think we expected that we would draw some new business. It's a very strong market for us, we've been there for a long time.
Speaker Change: And we're probably just surprised by, you know, the overwhelming demand. It's a great product and it's not over the top. It's a very, I think, right-sized product for the market. But, yeah, just strong demand. If anything, maybe it reflects that.
Speaker Change: You know, three-level river boats are no longer a competitive product for consumers looking for a type of entertainment.
Speaker Change: which is why we turned to Paradise, where we have an older three-story riverboat.
Speaker Change: There's no regulatory impediments. It's probably the opposite. It's encouraged by the regulators to do something more modern. We're taking a look at that to see what it looked like, what it would cost, and exactly what that product would be, but nothing stands in our way.
Speaker Change: Yeah, I think there's a number of things. One is we have a number of projects in the pipeline and we have committed to being disciplined and not overspend at any one given year.
Speaker Change: to it takes a while to design and draw these and so treasure chest just opened we've seen a success and so, you know should assume there's work being done looking at paradise and But drawing the drawing the building and getting the designs done and getting them
Speaker Change: construction ready and bid out just takes some time so it's nothing that look I wish we could move faster I wish we started next month
Speaker Change: We can't so it's it's a pipeline that's something taking a hard look at just nothing's going to happen to you
Speaker Change: or in the near term, the near term being 2020.
Speaker Change: Got it. Understood. Thank you.
Speaker Change: Jump.
Speaker Change: Thank you. Our next question comes from Dan Pulitzer of Wells Fargo. Dan, please go ahead.
Speaker Change: Yeah, look, as you look at the first kind of three weeks of October, you know, it's hardly a trend, but I would say we haven't really seen any discernible changes.
Speaker Change: Consumer Behavior
Speaker Change: Clearly, you know, there's a lot of noise out there related to the election, and frankly it's beyond the election. There's a lot of noise out there in the world generally, whether it's with wars or anything else. And so, is that impacting the consumer? Will that continue to impact the consumer? i.e. staying at home, watching TV, paying more attention, not going out as much?
Speaker Change: Hard to know.
Speaker Change: But in the first couple of weeks, I haven't noticed anything that I would call a discernible change.
Speaker Change: One way or the other, good or bad.
Speaker Change: Got it. And then just quickly on my follow-up, Treasure Chest, I know sometimes there's properties in Louisiana or New Orleans specifically that might have a different tax treatment. So is there anything kind of nuanced that you call out on Treasure Chest and maybe the margins in the quarter as it related just from the gaming taxes there?
Speaker Change: Now if we have a normal gaming text there, what are the, you know, the...
Speaker Change: The differences in Louisiana is if you have a horse race track, which we do, we own Delta Downs and Evangeline Downs in the state of Louisiana. They have a different tax rate because there's a tax for purse supplement. I'm not familiar with the tax rate in the downtown casino, but generally there's a standard tax rate for all of the non
Speaker Change: horse track facilities in the state of Louisiana. So nothing unusual with treasure chests. It's been the same for
Speaker Change: 20 years.
Speaker Change: Got it. Thanks so much.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Brant Montour of Barclays. Brant, please go ahead.
Brant Montour: Thanks. Good evening, everybody. Thanks for taking my question. So on Treasure Chest, just to follow up there, you know, we can all see the state reports seems to be doing a nice sort of 12 million GGR per month. I'm just curious, you know, when you look at that asset and how it's ramped or how it started off, if that's the sort of the right
Brant Montour: Do you think there's further traffic or capacity or ramp to go or how do you kind of look at it from a revenue perspective?
Speaker Change: expansion or pre land-based. I think we're more than pleased with that and no, I don't think it grows any higher than that. I think, you know, the building is pretty full most of the time to hit plus 80 percent.
Speaker Change: You know, over the baseline. So I don't think it grows beyond that. I think, you know, our challenge will be to continue to keep those customers coming back day after day and week after week and make sure that they have a great experience. So, I think it's probably a good number to use. I wouldn't wouldn't anticipate it going.
Speaker Change: much higher, if any at all.
Speaker Change: Great, that makes sense. And then, just a quick follow-up, you know, you guys didn't really call out hurricane impact. Several of your markets were in the path or near Louisiana, especially, right? I'm just curious if there was an impact, and maybe you just didn't want to call it out, or what sort of happened with that in the quarter?
Speaker Change: Yeah, look, I think there are a number of impacts throughout the quarter that we didn't talk about. There was, you know, the big hurricanes that hit Florida did not have an impact on us. There was an impact, you know, from the earlier hurricane. I think it was Francine that impacted Amelia Bell that got closed for a number of days and impacted some of our business at Treasure Chest.
Speaker Change: There are a number of other things that happened during the corridor, whether it was the hottest summer on record in Las Vegas that maybe kept people closer to home, or any number of other things. We just didn't call them out.
Speaker Change: Yeah, because we just...
Speaker Change: Yeah, it's really hard to tell you what they cost us. Do they have an impact on the business? Absolutely.
Speaker Change: Got it. Fair enough. Thanks so much, everyone.
Speaker Change: Thank you.
Speaker Change: Our next question comes from John Decree of CBRE. John, please go ahead.
John Decree: Hey, thanks guys. Josh, sorry if I missed it earlier. I think I you did mention it but financing for Virginia, I don't know if you've specified how you're thinking about that. Would that be kind of single asset project financing and you'll have to have a temporary open there so perhaps that's an avenue or are you thinking of doing that on balance sheet or out of cash flow?
Josh Hirsberg: Yeah, so the financing for the project would come from cash flow from our business and any incremental that we needed would come from availability under our credit facility. That's the current contemplation.
Speaker Change: Thanks, Josh. And maybe one broad kind of operational question about the consumer. So, you know, we talked about the gaming business, but the F&B and the room business, I guess particularly for Las Vegas locals, but if there's anything worth calling out, Midwest and South, I'd be curious if you could give us a sense of what's kind of
Speaker Change: What's happening there in terms of pricing versus volume? Are you seeing good demands in terms of number of covers?
Speaker Change: Is it price per cover and then on the room side, are you seeing occupancies up or stable or is growth really coming from increased pricing? So where are you seeing non-gaming kind of pricing relative to volume?
Speaker Change: Yeah so for us it's a little complicated only because we had a number of rooms out of service last year as we were in the middle of remodels whether it was Gold Coast or Main Street but overall here in
Speaker Change: We have higher occupancies. We rented more rooms in Las Vegas than we did last year, And so, you know, and there were more cash rooms in Las Vegas than we did in Las Vegas.
Speaker Change: when we look at kind of the total occupied room so we feel pretty good about that. We look out of state once again it's a little complicated because
Speaker Change: of room projects, room remodel projects that were in cycle, but I would say nothing unusual.
Speaker Change: in our out of or non-Nevada type hotel business.
Speaker Change: You know, food and beverage, I would say nothing unusual to call out. We're maintaining prices. We're able to keep up with increases in the cost of groceries by, you know, monitoring or adjusting prices, not seeing, you know, a lot of pushback.
Speaker Change: You know, and when we do make those adjustments. So, yeah, I'm not saying that there's, you know, complete elasticity there. There is, but, you know, unable to keep up with adjusting price of groceries. So, nothing unusual.
Speaker Change: Good or bad. Great.
Speaker Change: Thanks, Keith. That definitely answers my question. Appreciate it. Thanks, Josh.
Speaker Change: Thanks.
Speaker Change: Our final question comes from Chad Beynon of Macquarie. Chad, please go ahead.
Chad Beynon: Josh, Keith, thanks for taking my question. I wanted to ask about the share repurchases in the last two quarters. It has positively disconnected from the hundred million baseline that you had been running at, so you've acquired
Chad Beynon: 6% to 7% of the company just in the past couple quarters. Should we still think about this $100 million repo per quarter as the baseline, or has this increased given a number of different factors internally? Thanks.
Speaker Change #101: No, we'd encourage you to continue to think about the $100 million as a baseline. That's what we have kind of baked into our modeling.
Speaker Change #101: Um...
Speaker Change #101: and you know, our kind of going above that is just, you know, based on any specific facts during the quarter and what we have going on, projects in the pipeline, you know, and opportunities for where the stock is priced also. So, you know, we have the financial flexibility to take opportunities if there's a dislocation in the price.
Speaker Change #101: which is frankly why, you know, you've seen it, as Josh, I think, indicated. The average price of the shares we bought back in Q3 was $58. So...
Speaker Change #102: Just please stay anchored in 100 because we don't want you to be surprised if it's 100 in Q4 and once again that's what we're committing to we're not committing to anymore.
Speaker Change #103: Okay, perfect. Thank you. And then lastly, in LVL.
Speaker Change #104: road diversions, construction, you know, locals just staying away from certain areas in the locals market and then also downtown if you saw anything and if we could see a reversal of that in this Q4. Thank you.
Speaker Change #105: So I think it was well-reported last year. Look, F1 was not a positive business experience.
Speaker Change #105: in either the locals market or downtown.
Speaker Change #105: chaos was going to be and the real benefit occurred on this strip you know this weekend f1 will be stronger only because there's a home Raiders game that weekend
Speaker Change #105: I don't suspect any real change downtown or in the locals market, you know, just on a pure basis from F1.
Speaker Change #105: So I think if you're thinking of it, apples, you know, year over year, it'd be apples and apples, but once again, there will be a Raiders game in town, and so that will boost the weekend overall.
Speaker Change #106: Thank you very much. Nice results.
Speaker Change #107: Thank you.
Speaker Change #108: Thank you. This concludes our question and answer session. I'd now like to turn the call over to Josh for concluding remarks.
Josh: Thanks everyone for joining.
Josh: Some times during the call that I've had trouble hearing what we were saying. If you have questions around that or anything else that wasn't clear, feel free to call and I'll try to clarify that.
Josh: Thanks for joining.