Boyd Gaming Corporation (NYSE: BYD) — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; financial statements are unaudited. Boyd operated 28 gaming properties across 10 states, with 27 open at quarter-end. Eastside Cannery in Las Vegas remained closed due to market conditions.
Key financial results
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Total revenue | $860.7 million | $753.3 million | +14.3% |
| Operating income | $251.1 million | $193.7 million | +29.6% |
| Net income | $162.9 million | $102.2 million | +59.5% |
| Diluted EPS | $1.45 | $0.90 | +$0.55 |
| Adjusted EBITDAR | $338.8 million | $292.6 million | +15.8% |
| Operating cash flow | $233.7 million | $216.7 million | +$17.0 million |
| Capital expenditures | $46.6 million | $35.5 million | +$11.1 million |
Adjusted EBITDAR is a company-defined non-GAAP measure. The filing does not present free cash flow as a reported metric.
Revenue, margins, and segment performance
- Gaming revenue was $668.0 million, up 8.1%; food and beverage revenue was $63.7 million, up 44.5%; room revenue was $42.4 million, up 63.2%; and other revenue was $86.6 million, up 32.7%.
- Reported departmental margins improved for food and beverage (15.4% versus 11.8%) and rooms (62.3% versus 53.5%); gaming margin was 62.6% versus 62.4%, while other margin declined to 34.3% from 35.8%.
- Adjusted EBITDAR by segment: Las Vegas Locals $118.7 million versus $90.6 million; Downtown Las Vegas $18.4 million versus $2.4 million; Midwest & South $223.5 million versus $218.1 million. Corporate expense was $21.7 million versus $18.6 million.
- Management attributed growth to easing COVID-related restrictions, recovering travel and amenities, increased customer activity, and its focus on core customers and cost discipline.
Cash, debt, and liquidity
- At March 31, cash and cash equivalents were $403.0 million and restricted cash was $16.2 million. The working capital deficit was $5.6 million, compared with $49.2 million at year-end 2021.
- Total debt principal was $3.081 billion, including $44.3 million of current maturities; long-term debt, net of current maturities and issuance costs, was $2.990 billion. Debt principal was $3.069 billion at December 31, 2021.
- Boyd entered a new credit agreement on March 2, 2022, including an $880 million Term A Loan and a $1.45 billion revolving facility. Revolver borrowings were zero; $14.2 million was allocated to letters of credit, leaving $1.436 billion of contractual availability. The company said it was in compliance with debt covenants.
- The new Term A Loan and revolving facility mature on the fifth anniversary of closing. Term A amortization of 5% annually begins June 30, 2022. The company reported a 2.1% blended bank-facility borrowing rate at quarter-end.
- Operating cash flow was $233.7 million; investing activities used $26.5 million, including $46.6 million of capital spending and $20.1 million of asset-sale proceeds. Financing activities used $145.1 million, primarily reflecting $131.8 million of share repurchases and $13.6 million of debt financing costs.
Material changes, outlook, and risks
- Net income benefited from higher operating income and a $20.2 million reduction in interest expense, partly offset by a $15.6 million increase in income tax provision. The effective tax rate was 22.7%, versus 24.0%.
- Operating income included a $12.7 million gain on asset dispositions; project development, preopening and writedowns showed a $10.0 million net credit, compared with $1.4 million of expense a year earlier. Debt refinancing and modification generated a $3.3 million loss.
- The board reinstated the quarterly dividend program: $0.15 per share was declared, payable April 15, 2022. Boyd repurchased 2.1 million shares for $131.8 million at an average $62.86 per share; $148.8 million remained authorized under the $300 million program at quarter-end.
- Management said cash, operating cash generation, and revolving-credit availability should fund operations and needs over the next 12 months. It estimated annual maintenance capital requirements of $240–$260 million, plus $50–$65 million of additional 2022 spending for Treasure Chest and Fremont projects. Sky River Casino was expected to open in Q4 2022.
- Boyd agreed to acquire Pala Interactive for $170 million in cash, targeting closing by Q1 2023 subject to customary conditions and regulatory approvals; intended funding is operating cash flow and revolver availability. This is a pending transaction, not a completed acquisition.
- COVID-19 effects remain uncertain, including possible closures, new variants, customer demand, and workforce or supply disruptions. Boyd reported no impairment charge in Q1 but cautioned that unmet revenue or cash-flow expectations could lead to future impairment. Other disclosed risks include competition, regulation, economic conditions, debt refinancing and covenant compliance. The company said ordinary-course legal claims were not expected to have a material adverse effect; no material risk-factor changes were reported.
Investor verification points
- Confirm the drivers and sustainability of revenue and margin growth, including the contribution of the $12.7 million asset-sale gain and the unusually favorable project-cost line.
- Review debt terms, floating-rate exposure, covenant headroom, and the impact of the new facility: a 100-basis-point rate change was estimated to alter annual interest costs by about $8.8 million.
- Track cash generation against maintenance and development spending, shareholder returns, and the planned $170 million Pala Interactive acquisition.
- Monitor COVID-related operating conditions, the closed Las Vegas property, regulatory approvals, and timing of Treasure Chest, Fremont, and Sky River projects.