John DeCree: Understood. Thanks Keith. Thanks Josh. Appreciate all the questions and commentary.
David Strow: Thank you. Our next question comes from Dan Politzer of Wells Fargo. Dan, please go ahead.
Dan Politzer: Hey, good afternoon everyone. Thanks for taking my questions. So just want to hit on Midwest and South a bit. Revenue there has been down the past four quarters in a row. And I know you guys don’t have a crystal ball, but I guess as you look at your portfolio you think about the dynamics of core versus retail, impact of new competition, and maybe lapping some of those easy comparisons in Louisiana and Mississippi. How do you think about revenue, the possibility of this starting to last on this easier comps and maybe being flat or even up modestly going forward?
Josh Hirsberg: Yes, Dan. I think what’s driven kind of the softness in the Midwest and South has really been, I guess, two things that we’ve talked about. One is for the last couple of calls we talked about Mississippi and Louisiana. And they just have progressively kind of year-over-year variances have continued to kind of improve. They’re still down, but down less sequentially each quarter if that makes sense. And even for Q3, they’re down, but just down less and so that’s becoming less and less of a topic for us. The other kind of theme that was a step for Midwest and South was a step down in the retail consumer which really started late last year. I think in order for us to kind of either be flat or to start to see some growth is as we need to make sure that that retail consumer, while it’s been consistent since Q4 of last year, need to make sure it’s not stepping down further in Q4 of 2023.
It doesn’t feel like it is. But at that point, once we know that, then I think we can be comfortable with saying the business should begin to start to stabilize. And so – and then the other thing is just to note and these are kind of not meant to be justifications for the point. I mean, we do have one-off kind of impacts throughout the portfolio in the Midwest and South. In particular, in Q3, we had issues with room supply at Ameristar St. Charles because we were starting the room construction there. And that required us, actually unexpectedly take out more rooms than we had expected, created kind of a ripple effect in terms of how we manage those rooms and who are in the rooms during the third quarter, which will fix or has been fixed going forward.
So there are some one-off kind of things that are happening in the quarter just like with anything else. But I think to get directly answer your questions, I think we really need to see the retail consumer just confirm on a year-over-year annualized basis once we kind of get to Q4 of this year that it is, in fact continues to be stable. And then I think you’re at a point to say the Midwest and South should continue to be stable. I don’t think you’re at a point to say it should grow at this point.
Dan Politzer: Got it. And then just for my follow-up quickly, in terms of the CapEx, how should we kind of think about that project CapEx? Is it going to be similar to the $100 million you’re spending in 2023 given that you’re kind of talking high level about the projects there?
Keith Smith: Yes. I think as you, as we’re thinking about it today, it’s probably the right way to think about it until we’re able to talk more about it as same size projects as we’ve announced in the past with Fremont and Treasure Chest, those were each in the $100 million range.
Josh Hirsberg: Yes. So Fremont was a $50 million project. Treasure Chest was a $100 million project. They obviously all weren’t done within a one-year timeframe. So the whole concept has been as those kind of come off the conveyor belt to take similar sized projects that are on the conveyor belt and, or put those on the conveyor belt whatever the analogy is. And end up in about the same place and the projects will be kind of 12 months to 18 months in life so that it kind of ends up to be about a similar amount. It’s going to be a ballpark in the same range. Sometimes you’re a little bit more, sometimes you’re a little bit…
Dan Politzer: Thanks so much.
David Strow: Thank you. Our next question comes from Stephen Grambling of Morgan Stanley. Stephen, please go ahead.
Stephen Grambling: Hey thanks. I’ll sneak one more in, which is as we look at the retail weakness or the unrated play weakness, when you look back over time, has that tended to lead any other segments of the consumer? Is there any protocol that you look at to say there’s been a window where you can see sustained strength in your rated play while the unrated play has been weak for a prolonged period? Thanks.
Keith Smith: Yes, I would say we haven’t seen that. I would not say that weakness that we’re seeing in the retail customer at this point or the unrated play is a precursor to anything, again, for the last four quarters, we’ve seen a little bit of weakness in retail, but we’ve seen continued growth in our rated – in our core customers. So yes, there’s today’s world, post-COVID and not much of a correlation going on.
Josh Hirsberg: Yes. And I’d tell you, it’s really hard to hearken back to any period of time just given how different the business is today than it was, say, pre-2019. Even in 2008, where you had obviously both segments of the business, core retail core continued was stable and strong even in that environment. It was just the retail consumer wasn’t spending at the levels that they had historically. And ultimately, that – that’s what we persisted during that period of time. So it definitely was not a precursor to what was going on. But ultimately, we do have to recognize the business is very different today than it was.
Stephen Grambling: Got it. And you also mentioned the normalization, and I realize I was trying to kind of get at this, but as we look at normalization in margins, is there any thought about what kind of structural changes then you do feel like have been made to kind of bracket where margins could end up in a normalization if that continues in the direction that you’re alluding to.
Josh Hirsberg: Yes. Ultimately, I think the margins that you’re seeing today, while still very respectful and strong for the company, I think do have the inefficiency of retail of a weaker retail consumer and some costs that I hope are not representative of the long-term cost structure of the business. But we’ll have to see how that plays. And ultimately, I think we would expect to see growth in revenue on the gaming side of things. And so all of those things would suggest that the margins we have today are – well, really good and enviable can be better in an environment where you don’t have as much economic impact.
Stephen Grambling: Fair enough. Thanks so much.
Josh Hirsberg: Yes.
David Strow: Our last question today comes from Chad Beynon of Macquarie. Chad, please go ahead.
Chad Beynon: Evening. Thanks for taking my question. Josh, in terms of the buyback, you’ve been pretty consistent over the past, I guess, four or five quarters, repurchasing $100 million about 1% of the shares outstanding, and the stock has kind of been in the $60 to $67 levels. Is there a level where you would consider increasing that amount on kind of a quarterly basis, just given some dislocation in the market, you’ve talked about the sandal stake and stability in the business. Just wondering if there’s a number where you would kind of step up that $100 million repo number? Thanks.
