Boyd Gaming Corporation (NYSE: BYD) — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. The filing is unaudited. Boyd operates 28 wholly owned gaming properties across 10 states, online gaming businesses, and manages Sky River Casino in California.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $960.5 million | $964.0 million | Down 0.4% |
| Operating income | $219.4 million | $284.9 million | Down 23.0% |
| Net income | $136.5 million | $199.7 million | Down 31.7% |
| Diluted EPS | $1.40 | $1.93 | Down 27.5% |
| Adjusted EBITDAR | $330.5 million | $367.1 million | Down 10.0% |
| Operating cash flow | $250.7 million | $282.2 million | Down $31.4 million |
Operating margin was approximately 22.8%, versus 29.6% a year earlier. Gaming revenue fell 4.5% to $634.1 million; online revenue rose 19.0% to $146.2 million, including increased reimbursements of partner gaming taxes and other costs. Food and beverage revenue increased 1.5%, while room revenue decreased 2.2%.
Departmental margins declined year over year: gaming 61.3% versus 62.4%; food and beverage 14.6% versus 17.2%; room 61.8% versus 65.9%; and online 14.2% versus 17.0%. Online partner tax and cost reimbursements increase both online revenue and expense without a corresponding operating-income benefit.
Capital expenditures were $89.6 million. Cash, cash equivalents and restricted cash totaled $288.0 million at quarter-end, down $19.9 million from year-end 2023. Boyd reported a $120.0 million working-capital deficit. Principal debt was $2.90 billion; the credit facility had $1.23 billion of remaining contractual availability. The company was in compliance with debt covenants.
Changes and notable items
- Revenue was nearly flat, but operating income, net income and Adjusted EBITDAR declined materially.
- Management attributed gaming weakness to severe January storms in the Midwest and South, softer retail customers, competitive pressure from a new Las Vegas Locals competitor, and difficult prior-year comparisons in Las Vegas.
- Las Vegas Locals Adjusted EBITDAR fell 12.5%; Downtown Las Vegas fell 20.4%; Midwest & South fell 8.9%. Online Adjusted EBITDAR was generally unchanged, while Managed & Other improved primarily with higher Sky River management fees.
- Q1 2023 included a $20.1 million benefit from releasing an allowance on the Wilton Rancheria note, plus related interest income. The note’s outstanding principal was fully repaid in Q1 2024. Q1 2024 included a $10.5 million noncash impairment of a Midwest & South gaming license right.
- Boyd repurchased 1.66 million shares for $105.5 million, at an average $63.62 per share, and declared a $0.17 per-share dividend. $220.8 million remained authorized under the repurchase program.
Outlook, risks and controls
Boyd expects 2024 capital spending of approximately $400–$450 million, including $200–$250 million for maintenance and refurbishment, approximately $100 million for hotel renovations, and approximately $100 million for growth projects, including the Treasure Chest land-based facility. Management believes cash, operating cash flows and available credit will meet operating and maintenance capital needs for the next 12 months. The filing does not provide specific revenue or earnings guidance.
Key risks cited include economic conditions, interest rates and inflation, competition and online gaming expansion, regulatory approvals, severe weather or other disruptions, cybersecurity and information-system risks, and the ability to service or refinance debt. A 100-basis-point change in rates would change annual interest costs on variable-rate borrowings by approximately $10 million. Management said ordinary-course legal matters were not expected to have a material adverse effect.
Control weakness: Disclosure controls were deemed ineffective as of March 31, 2024 because a previously reported material weakness involving journal-entry preparation, independent review and segregation of duties was not fully remediated. Management reported progress on remediation but said more time is needed to establish that enhanced controls operate effectively. Management stated that the financial statements fairly present results in all material respects.
Important facts for investors to verify
- Whether gaming demand recovered after the January weather disruption, and whether Las Vegas competitive pressure and retail softness persist.
- How much online revenue growth reflects underlying activity versus pass-through partner reimbursements, and the effect on online profitability.
- Execution, timing and funding of the planned $400–$450 million in 2024 capital spending.
- Progress toward remediating the journal-entry control material weakness and any subsequent changes to control effectiveness.
- Debt maturity, variable-rate exposure, covenant headroom and continued access to the credit facility as the company funds investment and shareholder returns.