Key Points
- 2 Las Vegas segments lost $8 million of adjusted EBITDAR, but thanks to the Online and Managed units chipping in, the damage wasn’t quite as bad as you might think.
- CFO Josh Hirsberg did a little reality check in August, let’s just say it was a big disappointment compared to July.
- Boyd Gaming also managed to buy back $164 million of its own shares and trimmed its 2026 capital spending plans to about $650 million.
It’s true that Boyd Gaming’s 2 Las Vegas units took it on the chin pretty good, they lost $8 million in adjusted EBITDAR, but that wasn’t the final picture, other units picked up a big chunk of the slack. However, these units are small enough that they’re pretty easy to overlook.
Boyd Gaming reported Q3 revenue of $990.5 million back on Oct 22nd, a 1.4% dip from the year before. Net income attributable to Boyd Gaming was a healthy $124.9 million, but you have to keep in mind that the year before was a real anomaly, they made a cool $1.4 billion after tax on the sale of their FanDuel stake. On top of that, the year before included $65.1 million in non-cash impairment charges. Meanwhile, adjusted EBITDAR at the company level slipped to $319.6 million from $321.8 million. So which units helped fill the gap, and why did the CFO seem so darn cautious about predicting a bounce back?
The Las Vegas Unit Takes a Shot
Revenues in the Locals segment dropped to $207.4 million, and Downtown took a 10.9% hit, down to $47.4 million. The adjusted EBITDAR figures really tell the story, Locals lost $4.7 million, while Downtown lost $3.3 million. Together, the two segments took an $8.0 million hit. But keep in mind that adjusted EBITDAR is a made-up number, so don’t get too hung up on the specifics.
Even with the FanDuel anomaly removed from the picture, earnings per share fell to $1.67 from $1.72. That’s a pretty clear indication that the weakness wasn’t just a one-time blip.
August Was a Tough Month
When asked about the Q3 results, CFO Josh Hirsberg had this to say about August: “Now I know that August was not a good month, both in the Midwest and South and right here in Las Vegas.”
July had been a solid month, and September felt more like normal. But unfortunately, September’s little improvement didn’t quite make up for August’s lacklustre showing. So the timing of the slowdown really did play a role in the quarter’s results.
And Downtown, well, they had a bit of an extra challenge on their hands, a lot of their customers are from Hawaii, and guess what? Hawaii got hit by 4 storms in the last six weeks of the quarter. Not to mention airfares from Hawaii shot up like a rocket. CEO Keith Smith had to clarify that he just can’t tell the difference between the effect of the storms and the impact of higher airfares.
The Locals Are Healthy, And That Is the Catch
Not all Las Vegas casinos faced tough times in the summer quarter. This comparison of the weaker and stronger performers is key to understanding Boyd’s performance.
Excluding the Orleans and Suncoast, revenues grew 3% along with 3% EBITDAR, while the gaming revenue jumped 3.5%. Margins were 47%, equaling those achieved in the same quarter of each of the last two years.
According to Hirsberg’s memory, Cadence Crossing represented almost one third of this revenue increase. Additionally, he noted that revenues at this new property exceeded expectations.
Smith stated that core customers grew their spending by mid-single digits or even better.
Online and Managed Properties Offsetting 62%
The Midwest and South, Boyd’s largest segment, showed $201.6 million of adjusted EBITDAR, flat from the year-ago quarter. Boyd reported that the growth was 2.5% adjusted. This point is significant since the adjustment shows the figures differently from the reports.
In addition to that, online operations generated an additional $1.5 million while the Managed & Other unit generated $3.5 million. As a result, these operations brought in $5.0 million, offsetting about 62% of the $8.0 million decrease in the two Las Vegas segments. But this amount did not cover the whole reduction.
Smith would like investors to focus on the adjusted figures, which eliminate the effects of the Tunica casino closure, the sale of Shreveport casino, increased Kansas Star casino taxes and reduced tax pass-throughs.
The July Forecast Which Got Reversed
Three months earlier, Boyd sounded more optimistic about its Las Vegas operations. At its 23 July call, management expected an impact of $3 million due to destination softness in Q3.
As Hirsberg noted, this outlook could be described as “less bad”, which meant some comfort about the direction of the business. At the same meeting, management projected capital expenditure in 2026 at $650 million to $700 million including $300 million for the Virginia resort.
By October, this outlook changed, however. Hirsberg mentioned that the destination softness became worse than the trend over the prior four quarters.
What Happens Next?
Smith is counting on hotel rooms being brought back into service at the Orleans following a yearlong renovation to turn things around for the business. He said that around 300 rooms a day have been out of service, and about 350 of those will return in the fourth quarter. They’re mainly hoping that will help fill the rooms on weekends and holidays.
The Orleans is about 30 years old and desperately needs a major update starting next year, in fact Smith acknowledged that it’s not as competitive as it used to be. He said “It just isn’t as competitive today as it was in the past.”
Suncoast meanwhile has finished the work on its public spaces but over 400 rooms won’t be ready until early 2027. Hirsberg is expecting a bit of growth in the local crowd in 2027, but he’s linked that to a pickup in people coming to the destination.
Boyd has lower expected capital spending for 2026, down to $650 million, including $275 million for the Virginia project. This is down from their initial range. The Norfolk resort is still on track to open in November 2027.
Boyd has spent $164 million on buying back shares in the last quarter, which left them with $2.7 billion in debt and $297.2 million in cash in September. They ended up with a share count of 71.2 million, down 9.4% from the same time last year.
The net income and buying back shares aren’t directly comparable, net income is an accounting thing while the buybacks happened with cash. Management is saying that they’ve got a good grip on free cash flow and a leverage of 2.2 times to back up their financial position. They’re planning on refinancing some of that debt now or early in 2027 when it comes due.
Expert Analysis
We think that Boyd puts way too much weight on its adjusted numbers. They’ve gotten rid of a chunk of revenue from places like Tunica and Shreveport that aren’t coming back, and their reported EBITDAR in the Midwest and South has stayed steady. It’s fair to show what adjustments have been made, and they do that, but those adjustments are making the quarter look a lot better than it actually is, even though their total adjusted EBITDAR went down.
We’re also getting mixed signals from the same earnings call, Smith is saying the return of hotel rooms is a big deal while Hirsberg won’t say anything about things getting better. And even Smith admitted that his outlook includes a bit of old-fashioned optimism.
Boyd is saying it’s got a balanced approach but three priorities are competing for the same pool of cash, spending $650 million on capital projects, buying back shares to the tune of $150 million a quarter and eyeing some acquisitions. It all comes down to whether destination demand picks up, and that’s something they’re saying they can’t predict.
Orleans rooms coming back may fill some of the gaps on weekends and holidays, but Hirsberg won’t say that it’s a recovery yet. If August’s dip was just a summer thing, the fourth quarter should be better. But if things stay the same, they could be looking at another $8 million drop. Which way are the company’s next results going to point?
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