Boyd Gaming Posts Strong Q1, Eyes Continued Growth In Hotel Business

Boyd Gaming Posts Strong Q1, Eyes Continued Growth In Hotel Business

Despite a slow start to begin the year, Boyd Gaming ($BYD) managed to end the first quarter with positive margins and an optimistic outlook for the remainder of the year. 

During the company’s earnings call, Keith Smith, president and chief executive officer, told analysts that first-quarter results were a product of the momentum shown in 2021. 

As of writing, shares of $BYD were trading at $61.05.

Boyd Gaming has opportunities for further growth 

Beginning Tuesday’s call, Smith acknowledged the slow start to 2021 was primarily due to continued fears of the COVID-19 pandemic. However, as more and more states cut back on mandates, Smith anticipates there will be growth opportunities. 

According to Smith, one opportunity for continued growth is through the company’s hotel business.

“While January got off to a slow start due to COVID and the Omicron variant, we saw business levels gradually return during the quarter as both case counts and concerns around COVID began to subside.”

Touching on the company’s Las Vegas business, Smith said revenues were up nearly 25% while EBITDAR rose 31%.

As a result, margins reached a new first-quarter record of more than 52%, marking the fourth consecutive quarter that local margins have been above 50%.

But one continued cause for concern is in the labor force.

More labor constraints for Boyd Gaming

At the height of the pandemic, casino companies across the US were forced to cut staff, hoping they would return once things subsided. Unfortunately, employees have been returning at slower rates causing businesses to remain understaffed. 

Smith had this to say:

“Due to labor constraints, we are currently unable to accommodate all the demands we have from our core customers. As the labor market normalizes, we will be able to host more of these known players in our hotels, providing the opportunity for incremental growth in both gaming and non-gaming revenues.”

Earlier this year, Boyd announced it would be increasing its minimum wage to $15 per hour for all nontipped team members. Smith said Boyd has started implementing the program and expects it to be completed in 12 months. 

But the lack of a full workforce has not stopped Boyd from investing heavily in its regional properties. Smith said the company is busy investing in Louisiana, downtown Las Vegas, and Northern California.

In Louisiana, Boyd plans to start construction on a land-based facility at Treasure Chest with a tentative opening in 2023.

As for Northern California, construction work continues on Sky River Casino, which is on budget and on schedule to open early this fall. Owned by the Wilton Rancheria Tribe, the casino located south of Sacramento will have 2,000 slot machines, 80 table games, and 17 food and beverage venues.

Boyd secured a seven-year management agreement with the tribe to manage Sky River and will receive a typical management fee. 

Increasing the online gaming footprint

Another area of growth continues to be the advancement of the online gaming sector. 

Boyd recently announced the acquisition of Pala Interactive. With the deal, Boyd gains access to a player management system and a full stack of iGaming products. 

“The acquisition of Pala will position us to take a direct approach to the emerging iGaming opportunity. With our geographic distribution, strong loyalty program and significant database, we are confident in our ability to build a profitable regional online casino business.”

Key financials and where Boyd goes next

As a regional gaming operator, Boyd has positioned itself nicely by investing in prominent sectors while not overextending in markets like Macau. It’s no secret that casinos anticipate a return to pre-pandemic volume over the next couple of years.

But what’s helping close the gap is the continued advancement of online casinos and sports betting, which continue to spread across the US.  

With Boyd’s free cash flow, the company resumed its quarterly dividend on April 15 with a $0.15 per share payment. This is double the previous dividend of $0.07. 

Smith also touched on the company’s commitment to creating long-term shareholder value. As it stands, Boyd is on track to return approximately $500 million to shareholders this year.

“With opportunities for growth throughout 2022 and 2023, we are confident our company is well-positioned for continued success.” 

Author: Tyler Gutierrez