Bullish for Boyd; Abbott does Texas two-step; D.C. remorse

Bad economy? Not if you’re Boyd Gaming. The regional giant significantly improved third-quarter income, from $843 million in 3Q21 to $877 million this year. Said CEO Keith Smith, “Continuing into October, customer spending has been very consistent with the trends we’ve seen throughout this year. While there are clearly headwinds in the economy, we haven’t seen any meaningful change in our customers’ behavior.” Rated play was up 5%, compensating for a faling-off of unrated, stimulus-driven spending. Hotel revenue was also up 5% and occupancies up 6%, those rooms being filled with what Smith characterized as high-value guests (10% higher gaming win). Food and beverage was a revenue geyser, jumping 11% and nowhere was business better than in Sin City’s Downtown, where earnings leapt 17.5% to $49.5 million, driven by the reopening of Main Street Station and by the return of business from Hawaii, a Boyd mainstay.

The lone blemish was in Las Vegas locals casinos, down 2.5%, although Boyd’s cost-cutting seems to have compensated, as company margins were better than ever. Midwestern and Southern casinos brought in $602 million, a 5.5% improvement, helped by management fees from recently opened Sky River Casino, reported to be drawing bang-up business from the Sacramento area. Smith predicted that “gaming revenue will return to more normal growth in 2023 and our ability to manage costs will result in continued high levels of operational efficiency.” That normalization will include $30 million from sports betting this year and, it is hoped, more next year.

Wall Street analysts liked what they heard, with J.P. Morgan‘s Joseph Greff dismissing expectation of Vegas locals revenue as “a tad aggressive as this segment’s EBITDA was right in line with us.” He added, “In short, we think BYD’s outlook commentary contained few surprises and were consistent with broad U.S. gaming trends discussed at company meetings we held at G2E earlier this month.” He predicted a 10% same-store revenue decline in 2023 and a flattening in 2024, but liked Boyd’s high (above 10%) free cash flow. Boyd put some of that into share repurchases, buying back $135 million in shares rather than the $100 million Greff anticipated.

Deutsche Bank analyst Carlo Santarelli reiterated his “Buy” recommendation, saying Boyd “eclipsed our forecasts … while management reaffirmed prior commentary around stability within its operating trends as it pertains to demand, cost disciplines, and marketing and promotional strategies.” Cash flow of $338 million was $19 million above Santarelli’s prognosis. He described Boyd as “well positioned, amongst peers, from both a fundamental and strategic perspective, while also offering strong relative value amongst peers.” He described Sky River as “well ahead of expectations” with Boyd collecting $10 million in managerial fees so far.

Weak performance in Louisiana and Indiana kept Boyd from hitting pre-pandemic benchmarks overall. At least promotional outlays are “stable” outside of Pennsylvania. The company appears to be refraining from the marketing wars that characterized 2019. The $170 million Pala Interactive purchase has almost closed, providing a platform for Boyd’s Stardust i-gaming software. The latter is only available in New Jersey and Pennsylvania at present. As for the $100 million Treasure Chest makeover, its completion has been pushed back into early 2024.

Finally, Truist Securities analyst Barry Jonas joined the chorus of praise. “We continue to like BYD for its lower leverage, profitable Digital business, [free cash flow] generation, capital returns, real estate ownership and a very undemanding valuation.” He, too, restated a “Buy” on the stock. Not a bad day at the office for Smith.

Texas Gov. Greg Abbott (R) seems to be cruising to reelection but he must be feeling some sort of heat, possibly from pal Tilman Fertitta. Why else would he suddenly waffling about casinos? Abbott’s spokeswoman said, “We don’t want slot machines at every corner store, we don’t want Texans to be losing money that they need for everyday expenses, and we don’t want any type of crime that could be associated with gaming. But, if there is a way to create a very professional entertainment option for Texans, Gov. Abbott would take a look at it.” That’s just about the most noncommittal ‘promise’ we’ve ever heard. Abbott is tantalizing the electorate with the possibility of casinos but could equally as easily “take a look at it” and toss it in the shredder. We don’t want rampant slot routes or gaming-related crime either but, from his record, we’ll believe Abbott when he actually takes a positive stance.

Like most things in the District of Columbia, monopoly sports-betting operator GameBetDC is hopelessly dysfunctional, glitch-prone and unremunerative. Which may drive the city council, kicking and screaming, into allowing other at-large operators. Three years ago the council bet big on Intralot and has lost ever since. Longtime dissenter Elissa Silverman (I) put it well: “Residents deserve an online app that works, taxpayers deserve a program that brings in money for the District, and we all deserve a system where we don’t hand huge contracts to a preferred company and its subcontractors without even looking at the competition.”

But expect stiff resistance from backers of juiced-in Intralot. Said D.C. Lottery Director Franco Suarez, “Not only would changing the model to privately operated mobile and online model be riskier, and provide a lower share of sports wagering profits to the District, but it would also increase regulatory costs.” Considering that regulatory costs come with the territory and profits have been scant ($1.5 million this year, projected), we see no reason for fixing something so obviously broken.

Jottings: Facing certain defeat on November 8, backers of Proposition 27 (i.e., Big Gaming) are determined to drag tribal Proposition 26 down with them. Voters have seen through the PR mouthwash about Prop 27 being “Homeless and Mental Health Solutions” but are comparably turned off by hundreds of millions of dollars in attack ads on behalf of Prop 26. The latter has only 31% voter support, compared to just 27% for Prop 27. How symmetrical … Japan can barely implement terrestrial casinos but Heaven forfend anyone who bets online. The National Police Agency has announced that Internet gambling is a crime, subject to fines and imprisonment. Now when are they going to do something about pachinko parlors? … Virgin Hotel in Las Vegas evidently needed a branding boost. It’s now Mohegan Casino Las Vegas. Vital VegasScott Roeben always said the place was struggling to find its footing. Mohegan Sun at Pocono Downs has also been rebranded Mohegan Pennsylvania … Bad news for rival casinos in the Hoosier State. Year-old Hard Rock Northern Indiana in Gary has made its state-leading casino floor even bigger … Like a bad penny (and Silvio Berlusconi) gaming exec (late of shambolic Barrick Gaming) Stephen Crystal keeps coming around. Now he’s heading Symplify U.S., a European-born entity trying to crack the United States market … Alabama Attorney General Steve Marshall beat the rap on a lawsuit involving the confiscation of $224K in gambling revenue. It must be nice to be able to hide behind executive privilege … Even degenerate gamblers win sometimes. John “Mattress Mack” McIngvale bet $10 million on the Houston Astros to win the World Series. Now they very just might, in which case McIngvale pockets a cool $75 million. WynnBet, Caesars Sportsbook and Barstool Sportsbook are among those undoubtedly feeling a newfound enthusiasm for the Philadelphia Phillies.

Quote of the Day: “If these corporations wanted to be helping homeless people and mentally ill people, they could use their foundations, which they all frickin’ have.”—Western Regional Advocacy Project Executive Director Paul Boden on the backers of California‘s Proposition 27.

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Mike McNamara

Mike McNamara

A Las Vegas Realtor since 2008. Mike has a wide range of knowledge around all things Las Vegas.

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