BOYD GAMING CORP quarterly report, Q1 FY2022

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

MetricQ1 2022Q1 2021Change
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.