Boyd Gaming Corporation — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Unaudited results; dollar amounts below are in millions unless noted. Boyd operated 28 gaming properties across 10 states; 27 were open at quarter-end, with Eastside Cannery in Las Vegas still closed due to market demand.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $843.1 | $652.2 | $2,490.0 | $1,542.6 |
| Operating income (loss) | $223.1 | $127.1 | $683.2 | $(97.0) |
| Net income (loss) | $138.2 | $38.1 | $354.1 | $(218.0) |
| Diluted EPS | $1.21 | $0.33 | $3.10 | $(1.92) |
| Adjusted EBITDAR | $340.7 | $238.8 | $1,018.7 | $399.4 |
- Revenue increased 29% in Q3 and 61% for the nine-month period. Comparisons are substantially affected by prior-year casino closures and restrictions during COVID-19.
- Operating margin was approximately 26.5% in Q3 and 27.4% for the nine months, versus 19.5% and negative 6.3%, respectively, in 2020. Net margin was approximately 16.4% and 14.2%, versus 5.8% and negative 14.1%.
- Gaming remained the largest revenue source: $674.2 million in Q3 and $2,019.6 million year to date. Online gaming growth contributed to higher “other” revenue, which also includes partner tax reimbursements.
- Nine-month operating cash flow was $777.7 million, versus $124.0 million. Capital expenditures were $139.2 million; operating cash flow less capital expenditures was approximately $638.5 million. Cash, cash equivalents and restricted cash totaled $588.3 million at September 30.
- Principal debt outstanding was $3.38 billion, down from $3.95 billion at year-end 2020. Cash and cash equivalents were $570.9 million; net debt on that basis was approximately $2.81 billion. The company reported $1.02 billion of remaining revolving-credit availability, with no revolver borrowings and $11.9 million allocated to letters of credit.
- Current assets were $717.3 million and current liabilities $568.2 million, implying working capital of approximately $149.1 million. The filing does not provide a current ratio as a headline metric.
Material changes and notable items
- In June, Boyd issued $900 million of 4.75% senior notes due 2031 and redeemed $1.45 billion of 6.375% and 6.0% notes due 2026. The refinancing lowered the stated coupon on the new notes but generated a $65.5 million nine-month loss on early extinguishments and modifications, including premiums and deferred financing costs.
- Net interest expense declined $17.2 million in Q3 to $44.7 million, primarily reflecting a lower average debt balance and lower average interest rate. The nine-month decline was $15.2 million.
- No asset impairment was recorded in 2021 through September. The prior-year nine-month period included $171.1 million of impairment charges.
- Q3 project development, preopening and writedown expense was $10.6 million, including $8.5 million of project write-offs. Nine-month other operating items included $10.7 million of nonrecurring employee bonus payments.
- On October 21, 2021, the board authorized an additional $300 million share-repurchase program. No shares were repurchased in the first nine months of 2021. The dividend program remained suspended.
Outlook, risks and contingencies
- Management expects to fund operations for the next 12 months with operating cash flow, available cash and, if needed, revolving-credit capacity. It estimated annual maintenance and refurbishment capital needs of $190 million to $210 million. The filing provides no specific earnings or revenue guidance.
- Boyd’s revised operating model emphasizes core gaming customers, targeted marketing, cost discipline and reducing lower-margin offerings. Management attributed improved property profitability and margins in part to this approach.
- Sky River Casino, being developed with the Wilton Rancheria and funded through third-party financing, was expected to open in Q4 2022. Construction began in Q1 2021.
- COVID-19, possible renewed closures or operating restrictions, changes in customer demand, workforce and supplier effects, and the still-closed Eastside Cannery remain uncertainties; management said their potential financial impact could not be reasonably estimated.
- Approximately 26% of long-term debt was variable-rate. A 100-basis-point interest-rate change was estimated to affect annual interest cost by about $8.8 million. Management believed the company was in compliance with debt covenants at September 30.
- Management said ordinary-course legal claims, if adversely decided, were not expected to have a material adverse effect. No material risk-factor changes from the 2020 Form 10-K were reported. Management also concluded disclosure controls were effective.
Important facts for investors to verify
- How much of the strong year-over-year recovery reflects reopened operations and easier comparisons, versus sustained underlying demand and operating efficiencies.
- Whether cash generation and debt reduction continue, particularly after refinancing costs, planned capital spending and any use of the new repurchase authorization.
- Progress on reopening Eastside Cannery, pandemic-related operating conditions, and the timing and financing status of Sky River Casino.
- The contribution, costs and durability of online gaming and sports-betting arrangements, including partner tax reimbursements recorded in other revenue.
- Actual maintenance capital spending against management’s $190–$210 million annual estimate and any effects of interest-rate or covenant changes.