Driven by the company’s diversified nationwide portfolio

Boyd Gaming reports strong Q4 results as it considers Fremont casino expansion

As free cash flow continues to grow, the company sees expanding the casino at the Fremont in downtown Las Vegas as one of two potential capital expense options.
2020-02-26
Reading time 6:10 min
As reported by Boyd Gaming, every segment of the company’s business achieved growth in same-store revenues and Adjusted EBITDAR. Company-wide revenues rose 5%, adjusted EBITDAR grew 9%; and net income was up 6%.

Boyd Gaming reported last week financial results for the fourth quarter and full-year ended December 31, 2019.

"Our diversified nationwide portfolio continued to generate strong results in the fourth quarter of 2019, as every segment of our business achieved growth in same-store revenues and Adjusted EBITDAR,” said Keith Smith, President and Chief Executive Officer.

Boyd Gaming reported fourth-quarter revenues of $833.1 million, up 5.2% from $791.6 million in the fourth quarter of 2018. The company also saw a net income of $24.3 million, or $0.21 per share, for the fourth quarter of 2019, compared to $22.9 million, or $0.20 per share, for the year-ago period. 

Fourth-quarter 2019 pretax income was impacted by charges of $34.2 million related to early extinguishments of debt. Project development, preopening and writedown expenses decreased $10.4 million in the fourth quarter of 2019 versus prior year due primarily to the inclusion of acquisition-related expenses in the fourth quarter of 2018.

"In our Midwest & South region, strong same-store gains were complemented by exceptional performances at the recently acquired Ameristar and Belterra properties, which grew combined Adjusted EBITDAR at a double-digit pace while improving operating margins by more than 350 basis points," Smith continued. "In our Las Vegas Locals segment, revenue growth remained consistent with trends we saw throughout the year, though EBITDAR growth slowed, primarily due to a difficult comparison to a strong fourth quarter of 2018."

Total Adjusted EBITDAR was $227.6 million in the fourth quarter of 2019, up 9.1% from $208.6 million in the fourth quarter of 2018. Adjusted Earnings for the fourth quarter of 2019 were $57.4 million, or $0.50 per share, compared to Adjusted Earnings of $37.0 million, or $0.32 per share, for the same period in 2018.

Results for both the current and prior-year quarters include contributions from Ameristar Kansas City, Ameristar St. Charles, Belterra Resort and Belterra Park, acquired by the Company on October 15, 2018.

"On the sports-betting front, our newly opened FanDuel Sportsbooks helped attract new customers to our properties in Pennsylvania, Indiana, and Iowa," Smith added. "As we enter the new year, the underlying trends in our nationwide business remain strong, and we are confident in our prospects for 2020."

Las Vegas Locals

In the Las Vegas Locals segment, fourth-quarter 2019 revenues were $223.9 million, up from $222.6 million in the year-ago quarter. Fourth-quarter 2019 Adjusted EBITDAR was $73.3 million, compared to $73.0 million in the fourth quarter of 2018.

Fourth-quarter Adjusted EBITDAR reached its highest levels since 2005, slightly exceeding last year's strong operating performance, as segment margins exceeded 32%.  While revenues grew in-line with recent quarters, Adjusted EBITDAR growth slowed due largely to a difficult comparison to a strong fourth quarter of 2018, when segment EBITDAR increased more than 13% and margins improved over 350 basis points.

Downtown Las Vegas

In the Downtown Las Vegas segment, revenues were $69.6 million in the fourth quarter of 2019, rising from $67.3 million in the year-ago period.  Adjusted EBITDAR was $19.6 million in the current period, up 6.5% from $18.4 million in the year-ago quarter.

The Downtown Las Vegas segment achieved a quarterly Adjusted EBITDAR record for the fifth consecutive quarter.  The Company's Downtown properties benefitted from ongoing growth in visitation throughout the downtown area, as well as continued strength in business volumes from the Company's Hawaiian customer segments.

Midwest and South

In the Midwest and South segment, revenues were $539.7 million, up from $501.8 million in the fourth quarter of 2018.  Adjusted EBITDAR increased 11.1% to $157.4 million, compared to $141.8 million in the year-ago period. Prior-year Adjusted EBITDAR for the segment included a favorable property tax benefit of $2.7 million at Kansas Star.

Results reflect strong same-store revenue and Adjusted EBITDAR growth throughout the segment. Additionally, the newly acquired Ameristar and Belterra properties posted strong operating performances, growing combined Adjusted EBITDAR by 14% while improving operating margins by more than 350 basis points over their standalone results in the prior year.

Full-Year 2019 Results

For the full year ended December 31, 2019, Boyd Gaming reported revenues of $3.33 billion, compared to $2.63 billion for the full year 2018. Total Adjusted EBITDAR for the full year 2019 was $896.7 million, up from $681.3 million for the full year 2018.   Full-year 2019 net income was $157.6 million, or $1.38 per share, compared to $115.0 million, or $1.00 per share, for the full year 2018.

The Company's full-year 2019 pretax income was impacted by charges of $34.9 million related to early extinguishments of debt.  Project development, preopening and writedown expenses decreased $24.0 million in the full year 2019 versus 2018 due to the prior-year inclusion of acquisition-related expenses and the launch of the Company's redesigned player loyalty program.

Full-year 2019 Adjusted Earnings were $203.6 million, or $1.79 per share, up from Adjusted Earnings of $152.9 million, or $1.33 per share, for the full year 2018. 

Results for the full year 2019 include contributions from Ameristar Kansas City, Ameristar St. Charles, Belterra Resort and Belterra Park, acquired on October 15, 2018; Valley Forge Casino Resort, acquired on September 17, 2018; and Lattner Entertainment, acquired on June 1, 2018.

 

FREMONT CASINO EXPANSION

As free cash flow continues to grow, the Las Vegas company sees expanding the casino at the Fremont in downtown Las Vegas as one of the two potential capital expense options, the Las Vegas Review-Journal reported last week.

"We don’t have specific parameters at this point, but we’d be thinking about the casino," Smith said. "We’ve owned a piece of land kind of on the backside of the Fremont for a while; we’ve looked at a number of different projects there. The casino is at capacity many nights a week and what we really need there is additional casino space. We’re thinking about it as a very modest expansion."

The Fremont expansion is one of two prospective cap-ex projects Smith noted in a conference call relating to the fourth quarter results. Another is to take advantage of new legislation passed in Louisiana that allows casino companies to transform riverboats to land-based casinos, an option for Boyd’s Treasure Chest property.

Smith listed no cost estimates or preference to projects during the call. He also said the company could consider further reducing debt or increase shareholder value with stock buybacks or higher dividends.

Boyd reported record adjusted cash flow numbers for its three downtown properties and adjusted numbers for its Southern Nevada locals markets were the highest since 2005.

The company reported net income of $24.3 million, 21 cents a share, on revenue of $833.1 million for the quarter that ended Dec. 31. A year earlier, the company had net income of $22.9 million, 20 cents a share, on revenue of $791.6 million.

A survey of 12 analysts had projected earnings on average of 47 cents and revenue of $825.6 million.

Smith said Southern Nevada’s robust economy has improved the company’s fortunes as has an increased customer base due to the popularity of sports betting.

Smith cited a 1,000-room expansion in downtown Las Vegas with the expansion of the Downtown Grand this summer and the opening of Circa in December. He also applauded the expansion of the Las Vegas Convention Center, March’s return of the massive ConExpo-Con/Agg construction industry trade show, April’s NFL Draft event in Las Vegas and the relocation of the Raiders from Oakland to Las Vegas for their 2020 season as drivers of the local economy.

"When we look at the calendar generally and you think about a convention like that (ConExpo) coming in town that has been in town for awhile and you think about the Raiders. It’s just more activity in town overall. It complements an already strong locals environment," he said. "We run pretty high occupancies and pretty good room rates as it is. Obviously, when the town’s full we’re able to leverage it out even further, but it isn’t just about one event. It certainly is helpful, but it isn’t driven just by that."

Gaming industry analyst Barry Jonas of Atlanta-based SunTrust Robinson Humphrey told investors in a Thursday report that he doesn’t expect the opening of Circa to hurt Boyd’s profitability.

"While we could see some modest headwinds from initial trialing around the Circa property once opened late this year, ultimately we think Boyd’s unique Hawaiian model is fairly sticky and likely sees limited impact," said Jonas, referring to the company’s heavy marketing influence that draws Hawaii residents to Boyd’s downtown properties.

Additional traffic

Smith said sports betting has driven additional traffic in the company’s Midwest and South properties, and it isn’t the winning bets driving revenue.

"The strong underlying trend we’re seeing in our Midwest and South segment have been further strengthened by this year’s introduction of sports betting at five of our regional properties’ — Blue Chip, Belterra Resort (in Indiana), Diamond Jo Dubuque, Diamond Jo Worth (in Iowa) and Valley Forge (Pennsylvania) — sportsbooks attracting new faces and expanding our customer base,” Smith said. “Once they’re on property, these new customers are doing more than placing a wager on the game. They’re visiting our restaurants and our bars and playing in our casinos."

Boyd partners with the daily fantasy sports company FanDuel to operate regional casino sportsbooks. It is considering opening a sportsbook at the company’s Par-A-Dice casino in Illinois.

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