Boyd Gaming Corporation — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; unaudited. Amounts below are in U.S. dollars. Comparisons are with Q1 2020 unless otherwise noted.
Business context
Boyd operated 28 gaming properties across 10 states. At quarter-end, 26 properties were open subject to health, safety and occupancy restrictions; two Las Vegas properties remained closed, with no reopening dates set. The company also operates online gaming and sports wagering offerings, including through its FanDuel partnership.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 / prior date |
|---|---|---|
| Total revenue | $753.3 million | $680.5 million; up 10.7% |
| Operating income (loss) | $193.7 million | $(137.8) million |
| Net income (loss) | $102.2 million; $0.90 per diluted share | $(147.6) million; $(1.30) per diluted share |
| Adjusted EBITDAR | $292.6 million | $144.4 million |
| Cash provided by operations | $216.7 million | $23.6 million |
| Capital expenditures | $35.5 million | $48.0 million |
| Cash and cash equivalents | $730.9 million | $519.2 million at Dec. 31, 2020 |
| Debt principal outstanding | $3.945 billion | $3.950 billion at Dec. 31, 2020 |
Restricted cash was $17.4 million. The revolving credit facility had no borrowings and $1.022 billion of remaining contractual availability, net of letters of credit. Current maturities of debt were $35.9 million; long-term debt, net of current maturities and issuance costs, was $3.860 billion. Operating lease liabilities included $846.5 million reported as noncurrent, with $91.2 million included in accrued liabilities.
Gaming revenue rose 21.2% to $617.9 million; gaming represented about 82% of revenue versus 75% a year earlier. Food and beverage revenue fell 50.9% to $44.1 million, and room revenue fell 44.4% to $26.0 million. Other revenue increased 91.2% to $65.3 million, primarily reflecting online gaming growth and reimbursements of gaming taxes paid on behalf of online partners.
Departmental margins were: gaming 62.4% versus 53.2%; food and beverage 11.8% versus 0.1%; rooms 53.5% versus 50.7%; and other 35.8% versus 37.2%. Management attributed improved margins to a more focused operating model, cost controls and reduced lower-margin offerings. Q1 2020 included a $171.1 million asset impairment charge; Q1 2021 had no impairment charge.
Operating cash flow improved substantially year over year, reflecting the prior-year property closures, the revised operating model and working-capital timing. Investing cash flow was a $2.5 million inflow, including $31.3 million of hurricane insurance proceeds and $6.7 million of reimbursed Wilton Rancheria project expenses. Financing cash flow was a $5.9 million outflow, mainly Term Loan payments. Cash increased $213.3 million during the quarter.
Material changes and segment results
- The Q1 2020 comparison was affected by property closures beginning in mid-March 2020 and a $171.1 million impairment charge. The 2021 improvement therefore reflects both the comparison base and operating performance after reopening.
- Las Vegas Locals revenue was $182.4 million, up 0.9%; Adjusted EBITDAR was $90.6 million, versus $46.8 million.
- Downtown Las Vegas revenue was $21.4 million, versus $54.1 million; Adjusted EBITDAR was $2.4 million, versus $10.0 million. Management cited restrictions on travel to and from Hawaii, a key customer market.
- Midwest & South revenue was $549.5 million, up 23.3%; Adjusted EBITDAR was $218.1 million, versus $105.8 million, reflecting gaming growth, online gaming and the revised operating model.
- Net interest expense increased by about $6.0 million to $57.4 million. Management cited higher average debt and a higher average interest rate, partly related to the $600 million 8.625% senior notes issued in May 2020.
Outlook, risks and contingencies
- Management expects available cash, operating cash flow and revolving-credit capacity to fund operations and liquidity needs for the next 12 months. It estimated annual maintenance and refurbishment capital requirements of $150–$170 million.
- The company gave no specific revenue or earnings guidance. It said the pandemic’s duration and effects on demand, operations, staffing and business partners remain uncertain and could materially adversely affect results. Further closures, occupancy limits and reduced amenities remain possible.
- The quarterly dividend and share repurchase program remained suspended to preserve liquidity. No shares were repurchased and no dividends were paid in Q1 2021.
- Financial covenants under the bank credit agreement were waived during a relief period, subject to specified termination conditions, including a compliance certificate for the quarter ending June 30, 2021. Boyd stated it believed it was in compliance with debt covenants at March 31, 2021.
- About 22.6% of long-term debt was variable-rate; management estimated a 100-basis-point rate change would alter annual interest costs by approximately $8.9 million.
- Construction of the Wilton Rancheria Sky River Casino began in Q1 2021, with opening expected in the second half of 2022; the partner secured third-party construction financing. Ordinary-course legal proceedings were not believed to pose a material adverse risk. No material subsequent events were reported.
Important facts for investors to verify
- Reopening status, capacity restrictions and demand at the two still-closed Las Vegas properties, as well as any continuing pandemic-related operating effects.
- Whether the sharp improvement in Adjusted EBITDAR and margins persists, and the extent to which it reflects sustainable operating efficiencies versus pandemic restrictions or the prior-year comparison.
- The quality and sustainability of operating cash flow, including working-capital timing and hurricane insurance proceeds; confirm the non-GAAP Adjusted EBITDAR reconciliation.
- Debt maturities, interest-rate exposure, covenant-relief terms and actual available revolver capacity as the covenant relief period approaches its stated conditions.
- Progress and funding arrangements for Sky River, maintenance capital needs, and the timing or conditions for restoring dividends or share repurchases.