Boyd Gaming Corporation (BYD) — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Results are unaudited. Boyd operates 28 gaming properties across 10 states, owns online gaming businesses, and manages Sky River Casino in California. Twenty-seven properties were open; Eastside Cannery remained closed.
Financial performance
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $964.0 million | $860.7 million | +12.0% |
| Operating income | $284.9 million | $251.1 million | +13.5% |
| Net income | $199.7 million | $162.9 million | +22.6% |
| Diluted EPS | $1.93 | $1.45 | +$0.48 |
| Operating cash flow | $282.2 million | $233.7 million | +$48.5 million |
| Capital expenditures | $96.1 million | $46.6 million | +$49.5 million |
| Adjusted EBITDAR | $367.1 million | $338.8 million | +8.4% |
Gaming revenue was $664.3 million, down 0.5%; online revenue was $122.9 million, up $67.8 million; food and beverage rose 12.3% to $71.6 million; room revenue rose 18.1% to $50.1 million. Management fee revenue was $20.0 million, primarily for managing Sky River. Reported online revenue includes reimbursements of gaming taxes and other partner expenses: such reimbursements totaled $96.0 million in Q1 2023, versus $41.9 million in Q1 2022. The filing attributes $54.1 million of the year-over-year online revenue increase to higher reimbursements, which also increase online expenses.
Departmental margins were 62.4% for gaming (62.6% prior year), 17.2% for food and beverage (15.4%), 65.9% for rooms (62.3%), and 17.0% for online (16.5%). The company’s Adjusted EBITDAR is a non-GAAP measure; it increased overall, while Midwest & South declined 6.4% to $198.7 million, mainly reflecting weakness in Louisiana and Mississippi. Las Vegas Locals rose 6.2% to $126.2 million; Downtown Las Vegas rose 21.6% to $22.4 million; Online reached $20.6 million, up $11.7 million.
Balance sheet, debt and liquidity
- Cash and cash equivalents were $263.5 million at March 31, down from $283.5 million at year-end; restricted cash was $14.8 million.
- Working capital deficit was $134.8 million, compared with $107.9 million at December 31, 2022. Boyd says it generally operates with minimal or negative working capital.
- Debt principal was $3.006 billion, down $82.9 million from year-end; net balance-sheet debt, including current maturities and issuance costs, was approximately $2.969 billion. Credit Facility borrowings were $1.105 billion, with $1.167 billion of remaining contractual availability. Boyd reported compliance with debt covenants.
- Operating cash flow of $282.2 million less capital expenditures of $96.1 million implies approximately $186.1 million of cash flow after capital expenditures, before other investing and financing activity. Cash, cash equivalents and restricted cash decreased $16.8 million during the quarter.
- Financing outflows included $106.3 million of share repurchases, $15.5 million of dividends paid, and net credit-facility repayments of $82.8 million.
Material changes and unusual items
- Revenue growth was driven substantially by online expansion—including Ohio and Kansas launches and the Pala Interactive acquisition—and Sky River management fees. Online results and management fees were presented separately, and prior-year segment and revenue information was recast for comparability.
- Operating results benefited from a $20.1 million reduction in the expected-loss allowance on the Wilton Rancheria note, recorded in project development, preopening and writedowns, and $14.3 million of interest income from releasing the related interest allowance. Boyd received $17.3 million of principal and $5.1 million of interest on the note during the quarter; $99.5 million of principal and interest remained outstanding at quarter-end.
- Q1 2023 included a $4.5 million goodwill impairment in Managed & Other. Q1 2022 included a $12.7 million gain on asset dispositions and a $3.3 million loss on debt extinguishment/modification, making comparisons affected by different unusual items.
- Interest expense was $43.9 million versus $37.7 million, while interest income increased to $18.1 million from $0.4 million. The company cited higher rates as a driver of increased interest expense. About 36.8% of long-term debt was variable-rate; a 100-basis-point rate change would affect annual interest costs by approximately $11.1 million at quarter-end debt levels.
Outlook, risks and contingencies
- Boyd expects cash on hand, operating cash flows and available credit to fund operations and maintenance capital needs for the next 12 months. It estimates annual maintenance capital expenditures of $240–$260 million and expects to spend approximately $100 million in 2023 on the Treasure Chest land-based casino project and Fremont improvements, in addition to maintenance spending.
- Management emphasized targeted marketing, customer loyalty, cost discipline, investment in the business and shareholder returns. No specific earnings or revenue guidance was provided.
- Risks highlighted include economic conditions, inflation and interest rates; competition and gaming-market expansion; regulatory approvals; technology and information-security risks; debt refinancing and covenant capacity; and execution of development and growth plans.
- Boyd said ordinary-course legal claims, if adversely decided, were not expected to materially affect the company. It reported no material change in previously disclosed risk factors or off-balance-sheet arrangements.
- After quarter-end, the board authorized an additional $500 million for the share repurchase program, bringing total authorization to $1.3 billion. A $0.16-per-share dividend was declared for payment in July 2023.
Important facts for investors to verify
- How much of online growth and reported revenue reflects underlying gaming activity versus pass-through tax and expense reimbursements.
- Whether the Wilton Rancheria note’s expected full repayment is supported by sustained casino cash flows and the amended financing arrangements, and whether allowance reversals recur.
- Operating trends in Louisiana and Mississippi, and whether growth in Las Vegas and online can offset continued softness in those markets.
- Capital spending, project timelines and returns, alongside the planned buybacks and dividends, debt service and variable-rate exposure.
- Adjusted EBITDAR reconciliation and the effect of nonrecurring items on comparisons with prior periods.