Boyd Gaming Corporation Q2 FY2025 earnings call

• Announced sale of 5% equity interest in FanDuel to Flutter Entertainment for $1.755 billion in cash, with net proceeds to be used to pay down debt and reduce leverage below 2x. - Second quarter results: Revenues (excluding tax pass-through amounts) grew 4%, EBITDAR increased 4% to $358 million, driven by broad-based growth across operating segments. - Capital investment program: Continued work including hotel renovations at several properties, ongoing improvements at Suncoast, nearing completion of meeting and convention center in Ameristar, St. Charles, progress on Cadence Crossing Casino in Southern Nevada, and development plans for projects in Illinois and Norfolk. - Shareholder return: Repurchased $105 million in stock and paid $15 million in dividends during second quarter, with plan to increase share repurchase target to $150 million per quarter starting from third quarter.

1. Las Vegas Locals segment: Had a strong quarter, delivering first year-over-year revenue and EBITDAR growth in over 2 years while maintaining segment margins of nearly 50%. Growth led by core customer play and retail play improvement. 2. Downtown Las Vegas segment: Delivered solid quarterly performance against challenging prior year comparison, with both revenue and EBITDAR in the first 6 months of the year up more than 1% over prior year. 3. Midwest and South segment: Impacted by flood-related closures and Easter shift, delivered revenue and EBITDAR gains of more than 3%, marking the segment's highest quarterly revenue and EBITDAR in nearly 3 years. 4. Online segment: Both revenues and EBITDAR increased driven by Boyd Interactive and modest growth from market access agreements. 5. Managed business: Continues strong performance with ongoing growth in management fees from Sky River Casino, with expansion underway at Sky River Casino.

• Expect the FanDuel transaction to close and receive proceeds in next several weeks, with net proceeds used to pay down debt and reduce leverage below 2x. - Plan to increase share repurchase target from $100 million to $150 million per quarter starting with the third quarter. - Estimate online segment will generate $50 million to $55 million in EBITDAR for full year 2025 followed by $30 million in EBITDAR in 2026.

• Market competition risk: Promotional environment changes and competitive pressures in various markets. - External factors risk: Impact of tariffs and other external factors on capital expenditures and operating costs. - Regulatory risk: Uncertainties related to regulatory approvals for various projects and initiatives.

Q: What is Boyd going to do with the proceeds from the FanDuel transaction?

A: Initially, proceeds will be used to reduce debt, with goal to deploy new capital in attractive higher-returning investments to support long-term growth.

Q: What is the optimal level of leverage for Boyd?

A: Previously aimed for around 2.5x leverage, currently leverage is sub-2x due to the transaction, but long-term likely to be more in the 2.5% range.

Q: Comments on the promotional environment in key markets?

A: Promotional environment relatively stable, with properties either remaining promotional or disciplined, no heightened promotional environment.

Q: Color on pickup in retail play?

A: In Midwest and South, unrated play picked up starting in second quarter, attributed to customers staying closer to home, but need another quarter or two to determine sustainability.

Q: Impact of tax bill on company?

A: Biggest benefit expected from bonus depreciation, but need to fully calculate bonus depreciation to determine exact impact.

Q: Online gaming strategy?

A: Bought Pala Interactive to have online casino product complementary to brick-and-mortar, will continue regional online casino strategy, ready for other states to legalize online casino.

Q: Acquisitions criteria?

A: Size and scale of asset important, strong market with stable regulatory and tax environments key, no significant changes in criteria.

Q: Quantification of tax on tips and overtime impact?

A: Done some work but not in position to quantify, but clearly a positive for the company.

Q: Share repurchases?

A: There are blackout periods and various factors in deciding when and how much to repurchase, $150 million per quarter target set comfortably without pressure on balanced capital allocation.

Q: Room rate dip in Las Vegas?

A: Summer room rates lower than last year, but can't comment on specific reasons as not involved in other properties' meetings.

Q: Why $150 million share repurchase target?

A: Level comfortable with and in line with balanced capital allocation approach, not putting pressure on other decisions.

Q: Unrated play customer spend?

A: Can't extrapolate if unrated play customers have higher-than-average spend, just know volume of play from unrated customers has improved.

Q: Las Vegas Locals market share?

A: Over last 3 months, performed in line or slightly better than overall market, market shares generally stable.

Q: Operating expense environment?

A: Costs managed efficiently, margins consistent despite various pressures.

Q: Best returns on invested capital?

A: Evaluate based on economic return of where best return can be achieved, not force ranking segments.

Q: Midwest and South growth and margins?

A: Margins consistent, no one-offs other than flooding and Easter shift, trends continuing into Q3.

Q: CapEx and tariffs?

A: More comfortable managing through tariffs now, with enough contingency and flexibility in procurements, in better position to deal with uncertainty due to lower leverage.