Boyd Gaming Corporation — Q2 2021 Form 10-Q
Business context and reporting period
Quarter ended June 30, 2021. Boyd operated 28 gaming properties across 10 states; 26 were open at quarter-end, while two Las Vegas properties remained closed with no reopening dates set. Comparisons with 2020 are heavily affected by pandemic-related closures in the prior-year period.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $893.6 million | $209.9 million | $1,646.9 million | $890.4 million |
| Operating income (loss) | $266.3 million | $(86.3) million | $460.1 million | $(224.1) million |
| Net income (loss) | $113.7 million | $(108.5) million | $215.9 million | $(256.1) million |
| Diluted EPS | $1.00 | $(0.96) | $1.89 | $(2.26) |
| Adjusted EBITDAR | $385.4 million | $16.1 million | $678.0 million | $160.6 million |
Q2 operating margin was approximately 29.8%; six-month operating margin was approximately 28.0%. Adjusted EBITDAR is a non-GAAP measure. Q2 gaming revenue was $727.5 million; food and beverage $57.4 million; rooms $39.1 million; and other revenue $69.6 million.
Cash flow, debt and liquidity
- Operating cash flow was $499.3 million for the six months, versus cash used of $52.8 million in 2020. Capital expenditures were $96.3 million. Investing cash outflow was $49.4 million, including $40.2 million of hurricane-insurance proceeds.
- Cash and cash equivalents were $334.5 million at June 30, down from $519.2 million at year-end; restricted cash was $21.3 million.
- Debt principal totaled $3.387 billion, down from $3.950 billion at December 31, 2020. The revolving facility had no borrowings; contractual availability was $1.022 billion after letters of credit.
- In June, Boyd issued $900 million of 4.75% notes due 2031 and redeemed $1.45 billion of 6.375% and 6.0% notes due 2026. The transactions generated a $65.5 million early-extinguishment/modification loss. The company reported covenant compliance at quarter-end.
- Annual maintenance capital spending was estimated at $190–$210 million. The company said cash from operations, cash on hand and available revolver capacity should fund needs over the next 12 months.
Material changes and management commentary
- Revenue and earnings rebounded sharply from Q2 2020, when widespread property closures depressed results. Management also cited higher online gaming revenue and a revised operating model focused on gaming, cost control and targeted marketing.
- Q2 Adjusted EBITDAR rose across all three reporting segments: Las Vegas Locals $133.6 million, Downtown Las Vegas $15.4 million, and Midwest & South $260.0 million; corporate expense was $23.6 million.
- Six-month food and beverage revenue was nearly flat year over year, while gaming and other revenue increased substantially. Management attributed improved departmental margins to operating efficiencies and cost controls.
- Other operating items included $10.7 million of non-recurring employee bonus payments in the first half. No asset impairment was recorded in the first half of 2021; the comparable 2020 period included $171.1 million of impairment charges.
Outlook, risks and contingencies
- No specific earnings or revenue guidance was provided. Boyd expects to fund operations and maintenance needs over the next 12 months using operating cash flow, available cash and, if needed, the revolving credit facility.
- Management said the pandemic’s future effects cannot be estimated, citing possible resurgences or variants, changes in customer demand, workforce and supply-chain impacts, and possible renewed restrictions or closures. Future impairment charges are possible if projected asset cash flows are not achieved.
- Sky River Casino, being developed with Wilton Rancheria using third-party construction financing, was expected to open in Q4 2022.
- About 26.1% of long-term debt was variable-rate; a 100-basis-point rate change would change annual interest costs by approximately $8.8 million. Management said ordinary-course legal claims were not expected to have a material adverse effect. No material changes to previously disclosed risk factors were reported.
Most important facts for investors to verify
- How much of the exceptional year-over-year improvement reflects normalization from 2020 closures versus sustainable demand and operating efficiencies.
- Reopening plans and performance at the two closed Las Vegas properties, and the continuing impact of pandemic conditions on customer traffic and amenities.
- Debt reduction, refinancing costs, covenant status and actual use of the $1.022 billion of revolver availability.
- Cash conversion, recurring capital needs, the sustainability of margins and online gaming contributions, and progress toward the expected Sky River opening.
- Whether future results support management’s asset valuations and avoid additional impairment charges.