Boyd Gaming Corporation (NYSE:BYD) Q3 2024 Earnings Call Transcript

Boyd Gaming Corporation (NYSE:BYD) Q3 2024 Earnings Call Transcript October 24, 2024

Boyd Gaming Corporation beats earnings expectations. Reported EPS is $1.52, expectations were $1.38.

David Strow: Good afternoon, and welcome to the Boyd Gaming Third Quarter 2024 Earnings Conference Call. My name is David Strow, Vice President of Corporate Communications for Boyd Gaming. I will be the moderator for today’s call, which we are hosting on Thursday, October 24, 2024. At this time, all lines are in listen-only mode. Following our remarks, we will conduct a question-and-answer session. [Operator Instructions] Our speakers for today’s call are Keith Smith, President and Chief Executive Officer; Josh Hirsberg, Executive Vice President and Chief Financial Officer. Our comments today will include statements that are forward-looking statements within the Private Securities Litigation Reform Act. All forward-looking statements in our comments are as of today’s date, and we undertake no obligation to update or revise the forward-looking statement.

Actual results may differ materially from those projected in any forward-looking statement. There are certain risks and uncertainties, including those disclosed in our filings with the SEC, that may impact our results. During our call today, we will make reference to non-GAAP financial measures. For a complete reconciliation of historical non-GAAP to GAAP financial measures, please refer to our earnings press release and our Form 8-K furnished to the SEC today, both of which are available at investors.boydgaming.com. We do not provide reconciliation of forward-looking non-GAAP financial measures due to our inability to project special charges and certain expenses. Today’s call is being webcast live at boydgaming.com and will be available for replay in the Investor Relations section of our website shortly after the completion of this call.

So with that, I would now like to turn the call over to Keith Smith. Keith?

Keith Smith : Thanks, David, and good afternoon, everyone. Third quarter was another solid performance for our company. Our recent property investments produced strong results, driving growth in our downtown Las Vegas and Midwest and South segments. Our online and managed businesses both delivered excellent performances, continuing to prove the value of our diversified business model. We maintained operating efficiencies throughout our portfolio, with property level margins exceeding 39% during the quarter. And our underlying customer trends remain stable in the third quarter. In fact, overall play volumes have been essentially flat on a year-over-year basis throughout the last four quarters, with the exception of the weather challenge first quarter.

Now let’s review each of the operating segments. Starting with our Las Vegas local segment, our results for the third quarter reflect trends similar to what we saw throughout the first half of this year. While the Orleans and Gold Coast continued to be impacted by competitive pressures in their immediate area during the quarter. The remainder of our Las Vegas local segment performed in-line with the broader same-store market trends in the third quarter. We also continue to successfully maintain our operating efficiencies at these properties. Excluding Orleans and Gold Coast, EBITDA margins were 49% during the quarter, the testament to our team’s ability to successfully manage expenses in the current environment. Lastly, hotel revenues in our local segment continued to grow, as we benefited from increased room demand across the broader market.

Q&A Session

Next, in downtown Las Vegas, we delivered another strong quarterly performance driven by our recent property investments and growing Hawaiian visitation. The segment was led by the Fremont, which posted a record third quarter revenue and EBITDAR performance. And we benefited from continued strength in pedestrian traffic throughout the downtown area during the course. As we look at the Southern Nevada market more broadly, the fundamentals of the Southern Nevada economy remain sound. Visitation remains strong with nearly 42 million people visiting the Las Vegas Valley over the past 12 months. The Las Vegas airport is operating at record levels, posting nearly 59 million passengers over that same period. Beyond the tourism sector, the broader Southern Nevada economy is also performing well, as the Las Vegas area has been one of the fastest growing job markets among major US metro areas all year.

This job growth has been broad-based, with increases in almost every major employment sector, and it has been long-lasting, with job gains for 42 consecutive months. Growth has been particularly strong in the construction sector, increasing 7% year-over-year as the local construction pipeline remains robust. In terms of local population, Las Vegas Valley has surpassed 2.3 million residents. And in response to this ongoing growth, home building activity has accelerated in the Las Vegas Valley. More than 14,000 new residential units were permitted over the past 12 months, an increase of 23% year-over-year. Now, moving outside of Nevada, our Midwest and South segment benefited from a record third quarter performance at Treasure Chest Casino, which opened its new land-based facility in June.

Treasure Chest has delivered strong revenue growth since the new facility opened, and we are already on pace to exceed our targeted EBITDAR return. Excluding treasure chests, both revenue and EBITDAR for the rest of the segment were essentially even on a year-over-year basis during the quarter. We also continue to successfully maintain operating efficiencies in the segment with margins of 38% during the quarter. Next, our online segment had another great performance in the third quarter, as we continue to grow from our market access agreements across the country. The largest contributor to our online results is our partnership with FanDuel, which continues to strengthen its position as the nation’s leading sports-betting company. Beyond the revenue and EBITDAR growth we are seeing from our market access agreements with FanDuel, we also continue to benefit from FanDuel’s success through a 5% equity interest.

In the country, FanDuel’s leadership position in online gaming continues to grow, and with it, the value of our equity stake. Based on our strong performance during the third quarter, we are raising full year EBITDAR guidance for our online segment to $75 million from our continuing operations. This is up from the $65 million to $70 million we previously guided. Also during the quarter, we acquired the New Jersey operations of Resorts Digital Gaming. Well, this was a small acquisition to represent another step in building out our regional iGaming business. Finally, our managed business recorded another strong quarter. With another solid performance at Sky River, our managed business remains on track to generate approximately $90 million in EBITDAR this year.

Earlier this month, the Wilton Rancheria Tribe received final regulatory approvals, enclosed on financing for the expansion of Sky River. With these final steps complete, work has now begun on the first phase of the expansion that will add 400 slots and a 1,600 space parking garage to the property. Following the opening of this first phase in early 2026, we will commence work on the second phase of the expansion that will add a 300-room hotel, two additional food and beverage outlets, a day spa, and an Entertainment and Event Center. Upon completion of Phase 2 in late 2027, this expansion will further strengthen Sky River’s position as one of Northern California’s leading gaming entertainment destinations. So in all, this is another solid quarter for our company.

Over the last several years, we have significantly improved our operating efficiency, enhanced our free cash flow, lowered our leverage, strengthened our balance sheet, delivered consistently solid performances. Our improved performance has allowed us to return nearly $1.7 billion to our shareholders over the last three years. At the same time, we are actively investing in our properties to enhance the competitive positioning of our portfolio nationwide. For example, we are now completing major hotel room renovations at Blue Chip, Ameristar St. Charles, and Gold Coast. And we are starting new projects at IP, Orleans, and Valley Forge. And we’ve introduced more than 20 new restaurants and bars across the country over the last year alone. In Las Vegas, we have an extensive property-wide renovation now underway at the Suncoast.

We unveiled a new modern sportsbook in early September to strong customer response. The opening of this new sports was the [open by limit room] (ph), premium steakhouse of the Suncoast — the investments have positioned the Suncoast to compete more effectively in the locals market and hold its own in the face of the opening of a new competitor late last year. And over the next 12 months we will continue this project at the Suncoast with the complete renovation of the casino floor, the introduction of a new food hall, and expanded meeting space. Beyond our recent property enhancements, growth investments are another key part of our development pipeline. One such project that is now under way is at Ameristar St. Charles, where we have begun a major expansion of our meeting and convention center.

With this four diamond rated hotel, expansive amenities, Ameristar has received strong demand from meeting planners for years, but its current convention space is insufficient to accommodate it. Once complete in the fall of 2025, this expansion will allow us to capitalize on that unmet demand. And in the three months since we announced this expansion, initial bookings are already exceeding expectations, all from business that we would have been unable to accommodate with our current footprint. And here in Las Vegas, we continue to make progress on our planned development, Cadence Crossing Casino, a project that will replace our Jokers Wild Casino with a modern and upgraded gaming experience. We plan to break-ground on this project next month and open the doors of Cadence Crossing in early 2026.

Cadence will begin as a smaller development with 450 slots in several restaurants, but this will be a project designed to grow with the master plan community of Cadence, which will have more than 12,000 homes upon final build out. Cadence expands, solar property, with future plans to add a hotel, additional casino space and more amenities to serve the growing Cadence Community. Our third quarter results at the Treasure Chest and Fremont clearly demonstrate our ability to deliver strong returns from these types of investments and we are confident we will see similar success for projects at Ameristar St. Charles and Cadence Crossing. Once we have completed work on Cadence Crossing and at Ameristar St. Charles, we plan to pursue additional opportunities as part of our pipeline of growth projects.

In addition to these projects, we have secured an opportunity to develop a Commercial Casino resort property in the city of Norfolk, Virginia, one of the largest underserved gaming markets in the mid-Atlantic region. This is an exciting opportunity for us to expand our geographic footprint into a new market of 1.8 million residents. After receiving final approvals from the City Council earlier this month, we plan to break ground on this project next week. As part of the development process, we expect to open a temporary casino facility at the location in late 2025. The permanent facility that will follow will be a best in market resort property featuring a 200 room hotel, eight food and beverage outlets, and a casino with 1,500 slots and 50 table games.

Expect to open this permanent facility in late 2027. Including the temporary facility, we estimate total project costs of approximately $750 million, construction and development costs are still being finalized. These costs will be fully funded by our company. While our investment pipeline is an important part of our approach to creating shareholder value, we also remain committed to managing our leverage and returning capital to our shareholders. In the third quarter, we repurchased $202 million in stock, and we remain committed to our ongoing share repurchase program of $100 million per quarter supplemented by our dividend program. Our total leverage at the end of the third quarter was 2.5 times, providing our company with significant flexibility to execute on growth while continuing our capital return program.

So as we reflect on the third quarter, we are encouraged by our solid performance nationwide. Our underlying customer trends remain consistent during the quarter. We successfully maintained operating efficiencies, with property-level operating margins exceeding 39% during the quarter. We continue to see excellent results from our diversification strategy with strength in both our online and managed businesses. Our $100 million per year in growth investments, delivered strong returns during the quarter, as evidenced by the record performances of Treasure Chest and Fremont. We are building on this success with a pipeline of new growth opportunities nationwide. We remain diligent in our search for ways to grow the company in a disciplined manner, securing an opportunity to develop a best-in-market resort casino in Virginia.

We also remain committed to a strong balance sheet with low leverage, ending the quarter with leverage at 2.5 times. We continue to return capital to our shareholders with nearly $1.7 billion in share repurchases and dividends over the past three years. With significant free cash flow, a strong balance sheet, and a growing pipeline of opportunities, we are confident in our ability to continue to drive long-term growth, retain a balanced approach to capital allocation, and create long-term shareholder value. Ongoing success is a tribute to the hard work and dedication of thousands of Boyd team members nationwide. I’d like to thank all of them for their contributions to our company and our shareholders. Thank you for your time today. And now I’d like to turn the call over to Josh.

Josh?

Josh Hirsberg : Thanks, Keith. Our company delivered a solid performance in the third quarter, with year-over-year customer trends consistent with the last several quarters. And as we think about the fourth quarter, we expect year-over-year EBITDAR comparisons will be challenging. The fourth quarter last year, as you may recall benefited from an unusually large number of favorable expense adjustments at year-end, especially in the Midwest and South segment. We expect the contribution from Treasure Chest in the fourth quarter this year largely offset the absence of those favorable adjustments in the Midwest and South segment. As Keith mentioned, we expect our online segment to generate run rate EBITDAR for full year 2024 of $75 million, inclusive of contributions from Resorts Digital, which we acquired in September.

Also during the quarter, we received non-recurring market access fees of $10 million and we expect to record an additional $20 million in non-recurring fees in the fourth quarter. As a result for full year 2024, we expect our online segment to produce $105 million in EBITDA and including $75 million of run rate EBITDA and $30 million of one-time incremental market access fees. For our managed and other business, we expect approximately $90 million in EBITDAR as a result of our continued strength at Sky River Casino. Recall that Sky River recorded one-time items in the fourth quarter of 2023, which positively impacted our managed and other results during that quarter. During the third quarter, the tax pass-through amount related to our online revenue share agreements was $103 million compared to $71 million last year in the third quarter.

Excluding the tax pass-through amount, company-wide margins for the third quarter this year would have been approximately 39% or more than 420 basis points of the margin [Technical Difficulty]. In terms of capital expenditures, we invested $85 million during the third quarter bringing year-to-date capital spend to $289 million. Based on capital spending to-date, we are updating to a slightly lower projected total expenditures number for 2024 of $400 million to $425 million. This estimate includes maintenance capital of approximately $225 million to $250 million, approximately $75 million in incremental maintenance capital for room renovations and $100 million in recurring growth capital for our property investments. We believe the record results we are delivering a treasure chest in Fremont clearly demonstrate the long-term potential of our $100 million of annual recurring growth capital.

In 2024, this growth capital includes the completion of the Treasure Chest project as well as starting the Ameristar St. Charles Convention Center expansion and the Cadence Crossing development in Las Vegas. The estimated $750 million in capital related to our Virginia development will be in addition to our annual maintenance and recurring property investments. Beyond these investments, we remain committed to returning capital to our shareholders through share repurchases and dividends. We paid our quarterly dividend of $0.17 per share during the third quarter. Additionally, we repurchased $202 million in stock during the third quarter, acquiring 3.5 million shares at an average price of $58.37 per share. We remain committed to repurchasing $100 million in shares each quarter.

When combining our share repurchases with our dividend program — year-to-date through the third quarter, we have returned $531 million to our shareholders, currently on pace to return nearly $650 million this year or more than $7 per share. As of September 30, we had $343 million remaining under our current repurchase authorizations, and the actual number of shares outstanding at quarter-end was 88.8 million shares. Since October 2021, we have returned nearly $1.7 billion in capital to our shareholders in the form of share repurchases and dividends, reducing our share count by more than 20% over that time period. As Keith mentioned, we ended the quarter with total leverage of 2.5 times and lease adjusted leverage of 2.9 times. We have no near-term maturities and ample borrowing capacity under our credit agreement, placing our company in the strongest financial position in our history.

David, that concludes our remarks, and we are now ready to take questions.

A – David Strow: Thank you, Josh. We will now begin our question-and-answer session. [Operator Instructions] First question comes from Shaun Kelley of Bank of America. Shaun, please go ahead.

Shaun Kelley: Hi, good afternoon everyone. Thank you for taking my questions. Josh, Keith, if we could start with maybe just the Midwest and South, just to make sure we have right baseline here, last year, obviously there was some noise in the way I think expenses fell between Q3 and Q4 and Josh, it seems like you’re calling that out. Can you just help everyone with like a little bit of magnitude here? And if I’m understanding the puts takes, is it right to read you, as roughly flattish if we take those one-time good guys into account from last year versus the upside you’re seeing at Treasure Chest.

Josh Hirsberg: Yes, Shaun, I think you largely have the gist of it. It is — when you look at — let me talk about this quarter first, in terms of the third quarter this year, if we exclude Treasure Chest, our business pretty much performed on a stable basis year-over-year. And when you look at fourth quarter because we don’t have the benefits of the reduced expenses from last year, that benefit is largely offset by the addition of Treasure Chest growth. So you can kind of see from the third quarter without treasure chest, West and South was essentially even year-over-year and then we’ll offset the benefit of lower expenses that we benefited from in the fourth quarter as a result of the contribution and that will give you the order of magnitude.

Shaun Kelley: Thank you. And if I could just do one quick follow-up on Virginia. Obviously, a new and exciting development there in the Hampton Norfolk area. Could you — Keith, maybe could you give us a sense of the scope and scale there, $750 million is pretty large increase from a lot of the initial proposals and obviously, scope and scale. Seems like it’s come down from some of the initial underwriting. So could you walk us through just a little bit of your early thinking about ROI in the market and sort of how with the higher project costs, we can offset a little bit lower scale? Is there room to grow into that over time? Or how do you think about it on the position count side? Thank you.

Keith Smith: So look, we developed this project really not looking at what had been previously drawn. We are very excited about this opportunity. It is an underserved market. There’s one casino in the immediate area in Portsmouth, as I think everybody knows. This is a great location, 1.8 million people in the area. The scope and scale that we disclosed, 1,500 slots, 50 tables, 200 rooms and some restaurants and other amenities at $750 million, we talk about getting a return or a targeted return of the 15% to 20% range, and we’re confident that we will get our targeted return on this investment. So it’s going to may be different than what a prior developer had talked about, but we didn’t have anything to do with our prior developers plans. These are our plans. We’re confident in them. We think it fits the market, and we are building it for the market and are really looking forward to getting this project started.

Shaun Kelley : Thank you very much.

David Strow: Thank you. Our next question comes from Carlo Santarelli of Deutsche Bank. Carlo, please go ahead.

Carlo Santarelli: Hi, Josh. Hi, Keith. Thank you for the color. Just quickly on the Midwest and South. Obviously, Louisiana is a key element of your story. Josh, could you perhaps maybe talk about — I understand the Treasure Trust bump in the quarter and the success that properties had. But just overall, if you look at your Midwest and South region margins outside of Louisiana, how they looked in the period? And how much is Louisiana contributing to the outperformance in the quarter?

Josh Hirsberg: Yes. So basically, if you remove Treasure Chest, margins actually improved in the remainder part of our business. Treasure Chest remember, is opened in June and is the performance has been ramping up, but we’re kind of managing through the expenses of a startup organization. So that’s what’s really kind of contributing to the results for the Midwest and South in terms of the margins overall. So once again, if you exclude Treasure Chest, the margins for the rest of our business would actually have improved slightly.

Carlo Santarelli: Great. Thank you. And then if I just think about kind of the local segment, seasonality appears fairly similar to prior years. Obviously, fourth quarter presumably, there will be some noise with the election and whatnot in November. But are you guys kind of expecting a normal seasonal 4Q? And clearly, you’ll anniversary some competition in the quarter. Is there anything else you guys would call out as we think about closing out this year in Las Vegas?

Keith Smith: No. I would caution you, we don’t really anniversary competition until we get into 2025 because a lot of the kind of increased marketing that occurred happened later in Q4 of last year. And so it will be into 2025 before we actually kind of are — on a comparable basis to that. And outside of that, I don’t think there is anything else unusual going on in Q4. As you said, outside of any election activity that disrupts customers from getting out and visiting our properties over whether it’s now or the weeks leading up until the election so. But again, competition will remain there. There is one other thing we haven’t talked about this a lot on these calls, but the Tropicana I-15 interchange project, which has been going on for years, it was just announced that project is now going to extend into 2025.

And it is the main thoroughfare for our customers coming in from out of town to get to the Orleans. And so that has had some impact on the property over the years. We were hopeful that was going to be resolved in Q4 of this year. It’s actually probably at its most impactful point during Q3, Q4 and early next year. So that will likely have some small impact on the business also.

Carlo Santarelli: Great. Josh, if I could just circle back. Relating back to the Midwest and South, I know in the fourth quarter last year, you guys benefited from some accruals that you took as you referenced earlier in the call. Was the 3Q last year kind of over-accrued and perhaps that created a little bit of a more favorable dynamic this year and that will juxtapose in the 4Q?

Josh Hirsberg: Yes. So last — Q3 last year was definitely not a bright spot for us. I actually don’t — I don’t — I think that had more to do with just the expenses related to like property insurance going into effect and things like that. And then as we kind of went in from Q3 to Q4, those expense levels stay the same, but then we got the benefit of literally just almost every adjustment that we made at you’re in kind of going in our favor. And so it was really broad-based around a lot of different categories that contributed to the kind of — especially in the — it was especially in the Midwest and South that benefited us. It helped us a little bit in other two segments as well in the fourth quarter, but it was primarily or to the larger extent in the Midwest and South.

I think Q3 is really just all the expenses that we had talked about at that time around property taxes, utilities and seasonality, some labor increases as well. they contributed to what was happening in Q3 of [last year,] (ph) if I remember correctly.

Carlo Santarelli: Appreciate it. Thank you guys.

David Strow: Thank you. Our next question comes from Joe Greff of JPMorgan. Joe please go ahead.

Joe Greff: Good afternoon, guys. I think I know what you mean by what you had in the press release in terms of the Las Vegas Locals performance, excluding Orleans and Gold Coast you performed similarly with the same-store performance of the market there. What does that mean down 5%, down 3%? Can you help us understand what you mean by that exactly?

Keith Smith: Right. So when we do the math obviously, taking a stab at what we think the new competitor generated, we think the same-store market probably shrunk low to mid-single digits. We were less than that. So we were low-single digits. We performed, frankly in-line or better than market best as we can tell.

Joe Greff: Great. Thanks. And Josh, I know you probably had some things in — that aren’t completely firmed up. But as you sit here in late October and think about capital commitments for next year, can you help us understand how are you thinking about it now, including the Virginia development? Thanks.

Josh Hirsberg: Yes. So I think the number that we have for this year in terms of where we are originally thinking kind of $400 million to $450 million now, kind of [$400 million –] (ph) think that’s probably a good place to start for next year. We’re still firming up the budgets and everything and the timing related to Virginia. And so it’s a little bit hard to know at this point exactly how much will be spent next year? Are there some one-time initial payments and things of that nature that will largely front-end load the spend. So for right now, I would be a little cautious around giving some guidance around what to expect for Virginia, but I think it is going to be in this 150 area or so and just need a little bit more time to refine that and come back to you with our — when we have our fourth quarter call.

Joe Greff : Thank you very much.

David Strow: Thank you. Our next question comes from Barry Jonas of Truist Securities.

Patrick Keough: Hi guys. Patrick Keough on for Barry. Can you hear me okay?

Josh Hirsberg: Yes, Patrick. Can you hear us Okay, probably better right?

Patrick Keough: Great. Loud and clear. Congrats on the quarter. Two, if I may. First, you mentioned the acquisition of Resorts Digital in the quarter. Can you spend a second talking about the strategy there? And more broadly, your positioning and interactive ahead of, hopefully, new iGaming space coming online.

Keith Smith: Yeah, this goes back to our acquisition of Pala Interactive that’s been rebranded Boyd Interactive a year or two ago, a small acquisition then with our strategy of developing a regional gaming iGaming product, something that would be profitable. Resorts Digital is a complement to that. It is a small acquisition that helps bolster that business. We have a successful operation in Pennsylvania [Stardust Casino] (ph) and one in New Jersey also. So this helps to expand the database in New Jersey, and a lot of those customers are from Pennsylvania. So it is all part of the regional iGaming strategy. and we are trying to position ourselves so that when other states do approve by iGaming, we’re positioned, we’re ready to expand. Once again, we’re not trying to be a national leader, want to make sure that we’re a leader in the states with business and surrounding important [stage tools] (ph).

Patrick Keough: That’s great. Thank you for the color. And for my follow-up, you’ve announced Cadence Crossing and now a new project in Norfolk. Are you exploring further organic expansion opportunities? Or would you say your plates more or less full for now? Thank you.

Keith Smith: Well, we certainly have a lot going on, but we have worked extremely hard over the last several years to position our company such that we can do multiple things. We are maintaining our focus on having a strong balance sheet and low leverage. We can do these projects and continue our capital return program. And so we’ll continue to keep our eyes open for other opportunities when they come along. So we haven’t — it’s not like we’re not answering the phone any longer. We continue to answer the phone and look for good opportunities, whether they are organic, whether it is building out an existing property. We have spare land here in Las Vegas at a number of our properties, Orleans and Suncoast. We have other internal opportunities.

We have an opportunity in our Paradise location, East Peoria, Illinois to do something similar to Treasure Chest. Paradise has once again an older river boat stories, it’s not as competitive in today’s world. And so we have the opportunity to have a more compelling entertainment product there. So a number of opportunities we’re looking at. We are disciplined. We’re not going to layer it all on at once. These are products that will get rolled out over the course of the next several years so that careful to maintain our balance sheet, maintain a good leverage level but continue to take advantage of opportunities as they present themselves.

Patrick Keough: That’s great. Thank you so much and congrats on the quarter.

David Strow: Thank you. Your next question comes from Steve Wieczynski of Stifel. Steve, please go ahead.

Steve Wieczynski: Hi guys. Good afternoon. So I want to start with the online segment. Josh, let me just make sure I have the math right here first. So if we strip out the $10 million of non-recurring fees in the third quarter, that’s going to imply let’s call it about $16 million of EBITDA for the third quarter. So as we think about the fourth quarter without the non-recurring fees, that would be, what, $21 million, $22 million, somewhere in that range. So as we think about 2025 for online, I assume we should be thinking about the $75 million baseline and then grow that number from there? I just want to make sure I have all that right.

Josh Hirsberg: You got it, Steve. You’re right on.

Steve Wieczynski: That’s shocking for once. Okay. So second question, when in the — go to the locals market in Vegas. And I know for the last couple of months or even the last couple of quarters, you’ve kind of called out some, let us call them non-public bad players in that market who have been overly aggressive on the promotional front. And just wondering, at this point have you seen that level of promotion from those folks settled down? Is it intensifying? Any kind of color there would be helpful.

Keith Smith: Well, to correct the record, we didn’t call out any bad players. We talked about some people in the neighborhood who were spending at a very aggressive level that spending at a very aggressive level has continued, has not abated. And it was high. People doubled down kind of in December of last year. And for the most part, it has remained at that elevated level since that point in time. As I said earlier, we don’t really kind of lap that or get to good comparisons until early 2025, maybe the second quarter of 25%. So Yes, I wish it had abated. It has not, and we’re simply not going to jump into that game. We’ve been at this too long to understand what happens. There’s really no upside for us to jump in. So we just have to be patient and wait for it to run scores.

Steve Wieczynski : Okay. Got it. Thanks guys. Really appreciate it.

David Strow: Thank you. Our next question comes from David Katz of Jefferies. David please go ahead.

David Katz: Afternoon everyone. Thanks for taking my questions. I wanted to just go back to Norfolk for a minute. Having sort of been down there — there is, right, I think, Keith, you touched on it, a meaningful property that separated by a bit of a body of water, but relatively close by. Can you just talk about the expected or anticipated tax structure or puts and takes that give you some of the comfort that you expressed and how well that property is expected to do?

Keith Smith: I think it can probably sum it up in two comments. 1.8 million residents in the area and one, maybe two other casinos, casino in Portsmouth, one being developed in St. Petersburg, St. Petersburg being an hour plus away. And if you think about the Las Vegas Locals market, where we have 2-plus million residents, and we have a heck of a lot more than three casinos. So that gives me pretty high confidence that this is going to be successful.

David Katz: Got it. And then if we could, Josh, Keith or either or both just update us or remind us, I know the boundaries for your M&A appetite have been relatively consistent and productive over the years. If you could just talk for a minute about appetite for leverage, appetite for risk and sort of how you’re thinking about that opportunity set in the market at the moment.

Keith Smith: Commented a little bit earlier that we’ve structured the company such that we can do a lot of things at once and maintain a strong balance sheet. Leverage today in the kind of the mid-2s is where we think on a long-term basis that we are comfortable running the company. We’ll be flexible in allowing leverage to rise above that level with acquisitions or other development like Virginia as long as we see a path back to our current levels in short order. So once again, M&A is all about right opportunity at the right price in the right markets, and we’ve been very disciplined around it fast and very patient. And so only going to execute as if it meets those criteria, frankly, why we haven’t executed to date in the last several years.

So we’ll be patient, we’ll be disciplined, as we always have. We’ve developed a great expertise over the years in M&A. We know how to kind of identify those properties. You know how to buy them at the right price. We got to run them better and extract more EBITDAR out of these properties. And so continue to be patient and disciplined. We’re not going to allow leverage to get too high once again today’s level is the level long-term run rate level that we want to get back to if it does elevate. Josh, anything?

Josh Hirsberg: No you got it, Keith.

David Katz : Okay, yes you do, thank you very much.

David Strow: Thank you. Our next question comes from Stephen Grambling of Morgan Stanley. Stephen, please go ahead.

Stephen Grambling: Hi, thanks. Another follow-up on Norfolk. I was hoping you could clarify the structure of the project as we think about your economics? Are you 80% or 100% of that 15% to 20% return range that you’re talking about? And then any color you could give us on what the temporary facility might look like in terms of its scale versus the final product?

Josh Hirsberg: Yes, Stephen, we’ll give you the information that we can today. We expect to own at least 80% of the venture, and we would expect to get obviously, insured economics from that ownership over time. We are going to finance ourselves to full project cost ultimately — currently we’re estimating that to be $750 million, and that will be since this is a commercial casino, it will be secured by the assets of casino and pay from the operations of the casino. So that’s the thinking. The temporary is meant primarily to meet regulatory requirements to have something open very quickly. So expectations should be — we’re going to get something small open quickly. And the real economic engine will come from [time] (ph).

Keith Smith: And maybe just to add, while some of the temporary casinos in Virginia have been a larger scale and quite productive, you should not be thinking that model here. We have a smaller site, therefore, we have limited plan to build a temporary, so this will be a much smaller scale casino than some of what’s been built in other locations.

Josh Hirsberg: And on that side, while the temporary, we’ll be building a permanent at the same time.

Stephen Grambling: That’s helpful. As an unrelated follow-up, maybe you talked about this in your introductory remarks, but what drove that onetime step up in the Digital segment. Is that something that could happen again maybe not next year, but at another point in the future based on certain milestones? Or any details you can give would be helpful.

Keith Smith: It is just as Josh described it some this quarter, some next quarter. We have a number of market access agreements throughout the country, and we get fees for those — some of those have terminated early. That’s what this was. People just wrapping up shop and deciding not to continue. So as they wrap up early, these are long-term agreements, and they just have to pay us to get out of them. And so that’s all this is. Termination of some market access agreements that we had with other companies other than FanDuel.

Stephen Grambling: Got it. Thank you.

Josh Hirsberg: And the only thing I would add to that, Steve, is that our — the $75 million that we set for full year 2024 and then answering Steve’s question about growing off of that base number, we were basically replacing any lost revenue kind of in the shorter term with both from FanDuel and other revenue share arrangements, but also the addition of [Boyd’s digital] (ph).

Stephen Grambling : Clear. Thank you.

David Strow: Thank you. Our next question comes from Jordan Bender of Citizens JMP. Jordan please go ahead.

Jordan Bender: Good afternoon everyone. I know the window is a little bit shorter for you, but anything you can opine on in terms of the group and convention business across your locals properties heading into 2025?

Keith Smith: Yes. I can’t — I don’t have any real visibility to that today. We do have a fair amount of square footage at the Orleans and some of our other properties that is generally always full, and we do a pretty good business, but we don’t have enough square footage to have a real sense of that. So I can’t really can’t help you with any direction on that, unfortunately sitting here today.

Jordan Bender: Okay. No worries. And then on the follow-up, I think you said EBITDAR margins 49% ex Orleans and Gold Coast, I’m not sure if I missed it, — but is there any way to compare that to like the prior year level just directionally, maybe the health of margins on a year-over-year basis?

Josh Hirsberg: Yes. So I’ll have that, Jordan. So the 49% this year for [OBL] (ph) excluding Orleans and Gulf Coast, is equal to — compares to the 50% last year.

Jordan Bender : Perfect. Thank you very much.

David Strow: Thank you. Our next question comes from Ben Chaiken of Mizuho. Ben, please go ahead.

Ben Chaiken: Hi, just one. Thanks for taking my question. So Treasure Chest has been open for a few months, and I think at least from a top-line perspective is surpassing most expectations. As you reflect on this — what’s surprising you most about this property or investment? Is there anything you can bring to future ROI projects? And I kind of ask that related tangent in that I think you mentioned that there was also a potential option at Paradise if I heard that correctly. So is this purely your decision? Are there any regulatory hurdles needed? Thanks.

Keith Smith: So Treasure Chest has been an extremely successful operation since we opened it I think we expected that we would draw some new business. It’s a very strong market for us. We’ve been there for a long time. And we’re probably just surprised by the overwhelming demand. It’s a great product, and it’s not over the top. It’s a very, I think, rightsized product for the market. But yes, just strong demand. If anything, maybe it reflects that three-level riverboats are no longer a competitive product for consumers look for type of payment, which is why we turn to Paradise where we have an older 3-story riverboat, there’s no regulatory impediments, it’s probably the opposite that was encouraged by the regulators to something more modern, taking a look at that to see what it looks like cost and exactly what that product would be, but nothing stands in our way –.

Ben Chaiken: Got it. And I guess just on the back of that I mean, given the results of Treasure Chest, why wouldn’t you move forward with Paradise sooner? Is it just because you’ve got a slate of other ROI projects that are set to go? Or what’s holding you back?

Keith Smith: Yes. I think there’s a number of things. One is we have a number of projects in the pipeline, and we have committed to being disciplined and not overspend in any one given year. Two, it takes a while to design and draw these. And so Treasure Chest just opened. We’ve seen the success. And so I should assume there’s work being done looking at Paradise and — but drawing the building and getting the designs done and getting them construction-ready and bid out just takes some time. So it’s nothing that — okay, I wish we could move faster. I wish we started next month, but we can’t. So it’s a pipeline that’s something we’re taking a hard look at, just nothing that’s going to happen immediately or in the near-term being [2025] (ph).

Ben Chaiken : Got it. Understood. Thank you.

David Strow: Thank you. Our next question comes from Dan Politzer of Wells Fargo. Dan, please go ahead.

Dan Politzer: Hi, good afternoon, everyone. I was wondering if you could talk maybe about the fourth quarter to date trends — have you noticed any discernible change in behavior among consumers just as we go into this election cycle, which seems maybe more distracting than years past?

Keith Smith: Yes. Look, as you look at the first kind of three weeks of October, it’s hardly a trend, but I would say we haven’t really seen any discernible changes in consumer behavior. Clearly, there’s a lot of noise out there related to the election. And frankly, it is been on the election. There’s a lot of noise out there in the world, generally, whether it is with wars or anything else. And so is that impacting the consumer? Will that continue to impact the consumer i.e. staying at home watching TV, paying more attention, not going out as much. Hard to know. But in the first couple of weeks, I haven’t noticed anything that I would call a discernible change, one way or the other, good or bad.

Dan Politzer: Got it. And then just quickly on my follow-up, Treasure Chest, I know sometimes there’s properties in Louisiana or New Orleans, specifically that might have a different tax treatment, so is there anything kind of nuance that you call out on Treasure Chest and maybe the margins in the quarter as it related just from the gaming taxes there?

Keith Smith: No, we have a normal gaming tax there. One of the differences in Louisiana is if you have a horse race track, which we do, we own Delta Downs and Evangeline Downs in the state of Louisiana, they have a different tax rate because there is a tax for a first supplement I’m not familiar with the tax rate in the Downtown casino, but generally, it’s a standard tax rate for all of the non-horse track facilities in the state of Louisiana. So nothing unusual at Treasure Chest, it’s been the same for 20 years.

Dan Politzer: Got it. Thanks so much.

David Strow: Thank you. Our next question comes from Brandt Montour of Barclays. Brandt please go ahead.

Brandt Montour: Thanks, good evening everybody. Thanks for taking my question. So on Treasure Chest, just a follow-up there. We can all see the state reports seem to be doing a nice sort of 12 million GGR per month. just curious, when you look at that asset and how it’s ramped or how it started off, if that’s the sort of the right rate — monthly rate settle in here with that asset, do you think that there’s further traffic or capacity or ramp to go? Or how do you kind of look at it from a revenue perspective?

Keith Smith: So it has been amazingly consistent since it opened at 70% to 80% higher than pre-expansion or pre-land based. I think we’re more than pleased with that. And no — I don’t think it grows any higher than that. I think the building is pretty full most of the time to hit plus 80% over the baseline. So I don’t think it grows beyond that. I think our challenge will be to continue to keep those customers coming back day after day and week after week and make sure that they have a great experience. So I think it’s probably a good number to use. I wouldn’t anticipate it going much higher, if any, at all.

Brandt Montour: Okay. That makes sense. And then just a quick follow-up. You guys didn’t really call out hurricane impact, several of your markets were in the path or near Louisiana, especially right? I’m just curious if there was an impact and maybe you just didn’t want to call it out? Or what sort of happened with that in the quarter?

Keith Smith: Look, I think there are a number of impacts throughout the quarter that we didn’t talk about. There was — the big hurricanes that hit Florida did not have an impact on us. There was an impact from the earlier hurricane, I think it was Francine that impacted Amelia Belle, that got closed for a number of days and impacted some of our business at Treasure Chest. There are a number of other things that happened during the quarter, weather was the hottest summer on record in Las Vegas that maybe kept people closer to home or any number of other things. We just didn’t call them out because we just — yes. It’s really hard to tell you what they cost us. Do they have an impact on the business, absolutely. Well tell you how much [Technical Difficulty].

Brandt Montour : Got it. Fair enough. Thanks so much everyone.

David Strow: Thank you. Our next question comes from John DeCree of CBRE. John, please go ahead.

John DeCree: Hi, thanks guys. Josh, sorry if I missed it earlier, I think you did mention it, but financing for Virginia, I don’t know if you’ve specified how you’re thinking about that, would that be kind of single asset project financing, maybe you’ll have a temporary open there. So perhaps that’s an avenue? Or are you thinking of doing that on balance sheet or out of cash flow?

Josh Hirsberg: Yes so the financing for the project would come from cash flow from our business and any incremental that we needed would come from availability under our credit facility. That’s the current contemplation.

John DeCree: Yeah, thanks Josh. And maybe one broad kind of operational question about the consumer. So as we talked about the gaming business, but the F&B and the room business, I guess, particularly for Las Vegas Locals, but if there’s anything worth calling out Midwest and South. And I’d be curious if you could give us a sense of what’s kind of happening there in terms of pricing versus volume? Are you seeing good demand in terms of number of covers, is it price per cover? And then on the room side, are you seeing occupancies up or stable? Or is growth really coming from increased pricing. So where are you seeing non-gaming kind of pricing relative to volume?

Keith Smith: Yes. So for us, it is a little complicated only because we had a number of rooms out of service last year as we were in the middle of remodels, whether it was Gold Coast or Main Street. But overall here in Las Vegas, we have higher occupancies. We rented more rooms in Las Vegas than we did last year at kind of a flattish average rate. And so — and there were more cash rooms when we look at kind of the total occupied room. So we feel pretty good about that. We look out of state, once again, it’s a little complicated because of room projects or remodel projects that were in cycle, but I would say nothing unusual in or out of our non-Nevada-type hotel business. Food and beverage, I would say nothing unusual to call out.

We’re maintaining prices. We’re able to keep up with increases in the cost of groceries by monitoring or adjusting prices, not seeing a lot of pushback and when we do make those adjustments. So I’m not saying that there’s complete elasticity there is, but been able to keep up with just in price of groceries. So nothing unusual I would — good or bad.

John DeCree : Great. Thanks, Keith. That definitely answers my question. Appreciate it. Thanks, Josh.

David Strow: Thanks. Our final question comes from Chad Beynon of Macquarie. Chad, please go ahead.

Chad Beynon: Josh, Keith, thanks for taking my question. I wanted to ask about the share repurchases in the last two quarters. It has positively disconnected from the $100 million baseline that you had been running at. So you’ve acquired 6% to 7% of the company, just in the past couple of quarters. Should we still think about this $100 million repo per quarter, as the baseline? Or has this increased given a number of different factors internally? Thanks.

Keith Smith: No, we encourage you to continue to think about the $100 million as a baseline. That’s what we have kind of baked into our modeling. And our kind of going above that is just based on any specific facts during the quarter and what we have going on, projects in the pipeline and opportunities for where the stock is priced also. So we have the financial flexibility to take opportunities if there is a dislocation in the price which is frankly why you’ve seen it as Josh, I think, indicated the average price of the shares we bought back in Q3 was $58. So just stay please, stay anchored in [$100] (ph) because that we don’t want you to be surprised if it’s [$100] (ph) in Q4. Once again, that what we’re committing to. We’re not committing to any more.

Chad Beynon: Got it. Perfect. Thank you. And then lastly, in LVL, could you remind us if there was any noise in Q4 ’23 related to F1 positively or negative, whether it was road diversions, construction, locals just staying away from certain areas in the locals market and then also downtown if you saw anything and if we could see a reversal of that this Q4. Thank you.

Keith Smith: So I think it was well reported last year. Look, F1 was not a positive business experience in either the locals market or downtown, customers stayed away. They don’t want to deal with what the reported chaos was going to be and the real benefit occurred on the strip. This weekend, F1 will be stronger only because there’s a home raiders game that weekend. I don’t suspect any real change downtown or in the locals market just on a pure basis from F1. So I think if you were thinking of it apples year-over-year, it would be apples-and-apples. But what’s going to will be a Raiders game in town. And so that will boost the weekend overall.

Chad Beynon : Thank you very much. Nice results.

Josh Hirsberg : Thank you.

David Strow: Thank you. This concludes our question-and-answer session. I’d now like to turn the call over to Josh for concluding remarks.

Josh Hirsberg: Thanks, everyone, for joining. Some times during the call that I’ve had trouble hearing what we were saying. If you got questions around that or anything else that wasn’t clear, feel free to call, and we’ll try to clarify that. Thanks for joining.