Boyd Gaming (BYD) Q2 2025 Earnings Call Transcript

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Date

Thursday, July 24, 2025, at 5 p.m. ET

Call participants

• President and Chief Executive Officer — Keith Smith
• Executive Vice President and Chief Financial Officer — Josh Hirsberg
• Vice President of Corporate Communications — David Stroud

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Takeaways

• FanDuel equity sale-- Agreement to sell Boyd Gaming(BYD -0.30%) 5% equity interest in FanDuel to majority owner Flutter Entertainment (FLUT 0.34%) for $1.755 billion in cash; net after-tax proceeds from the sale are estimated at $1.4 billion, expected to be received within several weeks.
• Leverage reduction-- Pro forma leverage is projected to decrease by approximately one turn to below two times as debt is repaid with sale proceeds, based on fiscal second quarter 2025 results (period ended June 30, 2025), compared to 2.8 times reported at the end of the fiscal second quarter 2025 (3.2 times lease-adjusted at period end).
• Annual interest expense savings-- CFO Hirsberg indicated an “estimated interest expense savings of approximately $85 million on an annualized basis” due to the debt reduction following the FanDuel transaction.
• Market access agreements-- FanDuel market access agreements extended through 2038 with an adjusted (reduced) fee structure taking effect July 1, 2025, pending regulatory approvals.
• Revenue growth-- Revenues excluding tax pass-through rose 4%; EBITDAR (non-GAAP) also increased 4% to $358 million, attributed to company-wide and multi-segment gains.
• Property-level margins-- Margins at the property level exceeded 40%, a rate maintained since 2021, with the Las Vegas Locals segment achieving a margin of nearly 50% and the highest property-level revenue and EBITDAR growth in more than three years.
• Las Vegas economy and local segment-- In Southern Nevada, employment continues to grow, and average weekly wages are up more than 5% over the prior year.
• Downtown segment performance-- Downtown Las Vegas segment’s revenue and EBITDAR for the first six months of 2025 grew more than 1%, despite a challenging prior-year comparison in the fiscal second quarter 2024 from unique Super Bowl impacts.
• Midwest and South segment-- Despite flood closures and the Easter shift, this segment delivered revenue and EBITDA gains of more than 3%, led by Treasure Chest's continuing strong results.
• Online segment outlook-- The online (including Boyd Interactive) segment is projected to deliver $50 million-$55 million in EBITDAR (non-GAAP) for full year 2025; EBITDAR is expected to decline to $30 million in 2026 due to new commercial terms.
• Capital investments-- $124 million in capital invested, totaling $251 million year-to-date; full-year 2025 capital expenditure guidance is $600 million-$650 million, including specific property-level renovation and development projects.
• Shareholder returns-- $105 million in buybacks (1.5 million shares at $70.94 average), and $15 million in dividends paid; capital return program since 2021 totals nearly $2.4 billion.
• Increased repurchase plan-- The quarterly stock repurchase target was raised from $100 million to $150 million per quarter starting with the third quarter, with Board approving an additional $500 million authorization (totaling $707 million in share repurchase authorization available as of the end of the fiscal second quarter 2025).
• Future capital return guidance-- Expected annual capital return run rate is around $700 million, or $9 per share, combining increased repurchases and quarterly dividends (as stated by management for the go-forward period beginning after the fiscal second quarter 2025).

Summary

The FanDuel divestiture will shift the company’s capital structure, lowering leverage and funding an expanded capital return program, while updating market access economics. The transaction is expected to close and proceeds are expected in the fiscal third quarter 2025. Management emphasized that no near-term merger or acquisition is in process as a result of this transaction and reiterated a disciplined capital allocation philosophy. Margin consistency persisted across segments, driven by operational efficiency even as the company navigated challenges such as flooding, shifting event calendars, and ongoing renovation disruptions in key properties. Management expects annual run-rate capital returns to reach approximately $700 million, underpinned by a strengthened balance sheet and flexible liquidity. This figure represents the anticipated annual capital returns to shareholders going forward, as stated by management. Property reinvestment, new development, and return of capital to shareholders remain central, with investment criteria and project prioritization unchanged post-transaction.

• CEO Smith described the FanDuel monetization as unlocking “significant value” for shareholders and said, “Our stock price does not properly reflect the true value created by this investment.”
• CFO Hirsberg stated, “Our future results will reflect the economics of the new market access agreements, which are effective July 1, pending regulatory approvals.”
• Rising contributions from “unrated” and “retail” customer segments in both Las Vegas and regional markets represented a shift in demand patterns, with management noting, “showed up and kind of pivoted retail to being a much more improved segment.”
• Room rate declines in Las Vegas were attributed to competitive and seasonal factors, though the company affirmed it would “not chasing room rates down,” signaling ongoing pricing discipline.
• Tax legislation enacted during the quarter included new deductions and favorable provisions for key customer demographics, with CEO Smith estimating that “roughly 40% of our customer base is [age] 65 and older,” who “over-index in terms of their spend.”
• Online segment strategy remains focused on select regional casino markets, with CEO Smith reiterating, “We're not looking to have a national product or be a national leader in the online business.”

Industry glossary

• EBITDAR: Earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs; often used in gaming to evaluate property-level profitability and operating performance.
• Market access agreements: Legal contracts granting an online gaming operator the right to operate in a jurisdiction using the physical license of a land-based property owner.
• Tax pass-through amount: Amount of tax collected and remitted on behalf of online gaming partners that is passed directly through and excluded from reported net revenue figures.

Full Conference Call Transcript

David Stroud: Good afternoon, and welcome to the Boyd Gaming Corporation second quarter 2025 earnings conference call. My name is David Stroud, Vice President of Corporate Communications for Boyd Gaming Corporation. I will be the moderator for today's call which we are hosting on Thursday, July 24, 2025. At this time, all lines are in listen-only mode. Following our remarks, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star then zero for the operator. Our speakers for today's call are Keith Smith, President and Chief Executive Officer, and Josh Hirsberg, Executive Vice President and Chief Financial Officer.

Our comments today will include statements that are forward-looking statements within the Private Securities Litigation Reform Act. All forward-looking statements in our comments are as of today's date, and we undertake no obligation to update or revise the forward-looking statements. Actual results may differ materially from those projected in any forward-looking statement. There are certain risks and uncertainties, including those disclosed in our filings with the SEC, that may impact our results. During our call today, we will make reference to non-GAAP financial measures. For a complete reconciliation of historical non-GAAP to GAAP financial measures, please refer to our earnings press release and our Form 8-Ks furnished to the SEC today, both of which are available at investors.boydgaming.com.

We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to project special charges and certain expenses. Today's call is being webcast live at boydgaming.com and will be available for replay in the Investor Relations section of our website shortly after the completion of this call. So with that, I would now like to turn the call over to Keith Smith. Keith?

Keith Smith: Thanks, David, and good afternoon, everyone. Before discussing our second-quarter results, let me first touch on our recent FanDuel announcement. We announced two weeks ago we reached an agreement to sell our 5% equity interest in FanDuel to Flutter Entertainment for $1.755 billion in cash, unlocking the significant value that we have created through our partnership with FanDuel. Part of this transaction, we extended our market access agreements with FanDuel through 2038 and adjusted our market access rates. We expect this transaction to close and receive the proceeds in the next several weeks. Net proceeds will be used to pay down debt, reducing our leverage below two times.

As a result of this transaction, our company is in an even stronger financial position to continue executing our strategy of investing in our properties, pursuing attractive growth opportunities, returning capital to shareholders, and maintaining a strong balance sheet, consistent with our focus over the last several years. Now moving on to second quarter results. We delivered a strong performance in the second quarter. For the quarter, revenues excluding tax pass-through amounts grew 4% while EBITDAR also increased 4% to $358 million. These results were driven by broad-based growth across our operating segments, including both our online and managed segments, demonstrating the value of our diversified business model.

On a property-level basis, year-over-year revenue and EBITDAR growth was the strongest in more than three years, while property-level margins once again exceeded 40%, a level we have consistently delivered since 2021.

Across the portfolio, our results were supported by continued strength in play from our core customers as well as improving trends among retail customers. Turning to segment results, the Las Vegas Local segment had a strong quarter, delivering its first year-over-year revenue and EBITDA growth in more than two years while maintaining segment margins of nearly 50%. This performance was led by growth in play from our core customers, as well as continued improvements in retail play. Growth in play among our local guests more than offset softness in play for out-of-town customers. While the Las Vegas Strip has recently seen softer demand trends, there are signs of continued strength in the local economy.

In Southern Nevada, employment continues to grow, while local income is increasing with average weekly wages up more than 5% over the prior year, well above the national average. Southern Nevada's cost of living remains below the national average, ranking among the most affordable of the nation's 30 largest metropolitan areas. The Las Vegas Valley has nearly $11 billion in construction activity currently underway, reflecting continued strength in this critical economic sector. The recent tax bill passed by Congress includes several provisions that will benefit both our Southern Nevada operations and our Midwest and South operations. These provisions include a tax deduction for tips and overtime, a new deduction for seniors, and a larger standard deduction for taxpayers.

Given these positive factors, we remain confident in the prospects for the Southern Nevada economy and the future of our locals business. Next, our Downtown Las Vegas segment delivered a solid quarterly performance against the challenging prior year comparison.

As you may recall, last year's second quarter benefited from significant pent-up demand from our Hawaiian customers who did not visit in the first quarter of last year due to higher airfares related to the Super Bowl. Importantly, the underlying performance of our downtown business remains stable. Through the first six months of the year, both revenue and EBITDAR in the Downtown segment were up more than 1% over the prior year. Next, our Midwest and South segment, which was impacted by both flood-related closures and the shift of Easter into April, delivered revenue and EBITDA gains of more than 3%. This marked the segment's highest quarterly revenue and EBITDAR in nearly three years.

Growth in this segment was led by continued strong performance at Treasure Chest, which marked its one-year anniversary on June 6. Similar to the Las Vegas locals segment, we continue to see strength in play from our core customers during the second quarter while play from retail customers also improved. Next, in our Online segment, both revenues and EBITDA increased, driven by Boyd Interactive and modest growth from our market access agreements. Finally, our managed business continues its strong performance with ongoing growth and management fees from Sky River Casino. Given Sky River's ongoing success, we remain optimistic about the future potential of the expansion currently underway at this property.

The first phase of this expansion, set for completion early next year, will address the need for more gaming capacity by adding 400 slot machines as well as a 1,600-space parking garage. The second phase will further diversify Sky River's offerings with a 300-room hotel, three new food and beverage outlets, a full-service resort spa, and an entertainment and event center. Once complete in mid-2027, this expansion will further strengthen Sky River's position as one of Northern California's leading gaming entertainment destinations. So in all, we delivered strong results in the second quarter, reflecting the strength of our customer base, the quality of our property amenities, and the benefits of our diversified business.

Moving next to our capital investment program, we continued our work in the second quarter, highlighted by hotel renovations at several of our properties as well as the ongoing improvements at the Suncoast.

During the quarter, we completed a hotel room renovation at Valley Forge and continued to work on a room renovation project at the IP. We plan to start hotel renovations at the Orleans in the coming months. In addition, our property-wide renovation of the Suncoast is continuing and is now in its most disruptive stage, with large portions of the casino floor under renovation. We are on track to complete the Suncoast renovations in the first quarter of next year. Given the strong response we have already seen to the new amenities we recently added, we are confident in the long-term potential of this project.

On property enhancements, we have several projects underway to strengthen the long-term growth profile of our business. These investments are part of our $100 million in annual recurring growth capital. In Missouri, we are on track for a late August completion of our meeting and convention center in Ameristar St. Charles. We expect this project to drive strong returns given the encouraging pre-bookings the property has already secured for the new space. Importantly, more than 90% of these pre-bookings are from entirely new customers, a strong indication that this project will further expand Ameristar's customer base and drive incremental growth of the property. Also, progress is being made on our Cadence Crossing Casino in Southern Nevada.

The adjacent community of Cadence is one of the fastest-growing master-planned communities in the nation, creating a compelling long-term growth opportunity for our company. On track to open in mid-2026, Cadence Crossing will replace our existing Joker's Wild Casino with a modern gaming entertainment facility designed to appeal to the thousands of new residents throughout the area. We are well-positioned to keep pace with continued residential growth in the area with future plans for a hotel, additional casino space, and more non-gaming amenities. Beyond these investments, we are developing plans for the next phase of projects to further strengthen our long-term growth profile.

In Illinois, we are working through the final design and regulatory approval process for a modern new entertainment facility that will replace our existing Riverboat Casino at Paradise. Assuming regulatory approvals are received later this year, we expect this project to begin in 2026. In Norfolk, we are on track to open our transitional casino in November of this year while construction is progressing on our $750 million permanent resort, which is scheduled to open in late 2027. Once complete, this resort will include a 65,000-square-foot casino, a 200-room hotel, eight food and beverage outlets, live entertainment, and an outdoor amenity deck.

In addition to being the leading gaming resort in the market, our property will be the most convenient gaming destination for much of the Hampton Roads metropolitan area, one of the largest underserved markets in the mid-Atlantic region, with nearly 1.8 million people. We also expect to draw tourists from nearby Virginia Beach, a destination that attracts nearly 15 million visitors each year. Offering a best-in-market experience, with compelling amenities and easy access, we believe our Norfolk Resort will deliver strong returns for our company in the coming years. In all, our capital investment program is an important part of driving growth and creating long-term shareholder value.

At the same time, we are investing in our properties and developing projects to support our long-term growth, we remain committed to returning capital to our shareholders. In the second quarter, we repurchased $105 million in stock and paid $15 million in dividends. Since we began our capital return program in 2021, we have returned nearly $2.4 billion to our shareholders. With the recent FanDuel transaction, we have increased flexibility to continue our capital return program. As a result, we plan to increase our target for share repurchases from $100 million per quarter to $150 million per quarter starting with the third quarter.

While the proceeds from this transaction will initially be used to reduce debt, our proven track record of making smart capital allocation decisions gives us confidence in our ability to deploy these proceeds toward attractive, higher-returning investments in the future. In closing, the combination of an attractive growth pipeline, ongoing property investments, a strong financial position, and our ability to deliver consistent results all position us well to continue creating long-term shareholder value. Before I turn the call over to Josh, I want to thank our team members who are key to our ongoing success. Every day, they provide our guests with memorable and distinctive service, providing a unique experience that builds loyalty to our brand.

Thank you for your time today. I would now like to turn the call over to Josh.

Josh Hirsberg: Thanks, Keith, and good afternoon, everyone. In light of our recently announced transaction to sell our 5% interest in FanDuel to Flutter, I wanted to take a few moments to review the financial impacts for our company. This transaction further enhances our financial flexibility, strengthens our already strong balance sheet, and is accretive to free cash flow. As Keith noted, we expect to receive $1.755 billion in total proceeds in the next several weeks. We estimate after-tax proceeds of approximately $1.4 billion, or more than $17 per share. Initially, we intend to use the proceeds to completely repay the debt outstanding under our credit facility.

Total leverage at the end of the second quarter was approximately 2.8 times, or 3.2 times on a lease-adjusted basis. Pro forma for this transaction, we estimate leverage will be reduced by approximately one turn. As a result of reduced debt balances, we estimate interest expense savings of approximately $85 million on an annualized basis. As noted in our press release announcing the FanDuel transaction, our future results will reflect the economics of the new market access agreements, which are effective July 1, pending regulatory approvals. We estimate our online segment will generate $50 million to $55 million in EBITDAR for the full year 2025, followed by $30 million in EBITDAR in 2026.

To summarize the impacts of this transaction, leverage is lower, our market access agreements are extended through 2038 with a reduced fee structure, free cash flow is increased, and we are in an even stronger position to execute our strategy. Now let's take a few moments to review the second quarter. Results for the quarter were strong across the company, growing revenue and EBITDAR while property-level margins were once again 40%. Property-level margins have consistently remained at or above this level, a reflection of our continued focus on maintaining operating efficiencies. During the quarter, we continued to see strength in play from our core customers and improving trends in play from our retail customers.

The tax pass-through amount for our online segment was $134 million during the second quarter, compared to $104 million in the year-ago period. Excluding the tax pass-through amount for this quarter, company-wide margins for the second quarter of this year would have been 515 basis points above the margin we reported. With respect to capital expenditures, we invested $124 million in capital during the second quarter, bringing year-to-date capital expenditures to $251 million. We continue to project total capital expenditures for the full year of $600 million to $650 million.

These capital plans include approximately $250 million in maintenance capital, $100 million related to our hotel room projects at IP, Valley Forge, and the Orleans, $100 million in growth capital for the meeting and convention space at Ameristar St. Charles, and the new Cadence Crossing development here in Las Vegas, and finally, $150 million to $200 million for our casino development in Virginia. In terms of our shareholder capital return program, we paid a regular quarterly dividend of $0.18 per share during the second quarter, totaling $15 million. Also during the quarter, we repurchased $105 million in stock, acquiring 1.5 million shares at an average price of $70.94 per share.

Actual shares outstanding at the end of the quarter were 80.5 million shares. Year-to-date, we have repurchased 5.9 million shares at an average price of $72.98 per share. As Keith noted earlier, we intend to increase our share repurchase program to $150 million per quarter, supplemented by our regular quarterly dividend. Considering this higher rate of repurchase activity in conjunction with our quarterly dividend, going forward, our annual run rate of capital returns to shareholders is expected to total approximately $700 million, or about $9 per share. Since we began our capital return program in October, we have returned nearly $2.4 billion in the form of share repurchases and dividends, reducing our share count by 28%.

Following the end of the second quarter, our Board of Directors approved an additional $500 million share repurchase authorization, providing the company a total repurchase authorization of $707 million. In conclusion, with strong play from our core customer, improving trends among our retail customers, efficient operations, robust free cash flow, and the strongest balance sheet in our company's history, we have outstanding flexibility to continue executing our strategy for creating long-term shareholder value. With that, I will now turn it to David to open the call for questions.

David Stroud: Thank you, Josh. We will now begin our question and answer session. You will hear a prompt that your hand has been raised. If you wish to withdraw your request, please press star then two. If you are using a speakerphone, please use your handset when asking your question. We will pause for a moment while we compile our list of questioners. Our first question comes from Steve Wieczynski of Stifel. Steve, please go ahead.

Steve Wieczynski: Yeah. Hey, guys. Good afternoon. So Keith or Josh, I guess one of the questions we have gotten a lot since this transaction was announced is, what is Boyd Gaming Corporation going to do with the proceeds? And you guys, I think, have made it pretty clear that you are going to be reducing leverage, taking up your quarterly buyback, all that kind of stuff. But what does this mean now for what I would call kind of other opportunities? And I guess what I am trying to understand is, does this take away material M&A transactions or maybe a better way to ask that is, what do growth opportunities mean for you guys?

Keith Smith: Sure, Steve. I will take a shot at this. We assumed that there would be some discussion on the FanDuel transaction on this call. So let me provide some context for you. First, I will go ahead and say it upfront, this FanDuel transaction is not a precursor to another transaction. Flutter and FanDuel have done a remarkable job over the last seven years or so becoming the industry leader in online sports betting and casino. They have created tremendous value both for themselves and for us. Over the last seven years, our partnership with FanDuel has continued to grow in value and represents a significant asset for our company.

Between our market access fees over the last seven years and our 5% equity interest in FanDuel, we have created nearly $2 billion in value for our shareholders, all from a $10 million investment. Pretty fair return, I think. As we analyze our equity value, Boyd's equity value, it is our belief that our stock price does not properly reflect the true value created by this investment. As a result, we determined that as we are approaching the end of this partnership, now is an appropriate time to monetize this investment and to focus the proceeds on future growth. So now it is our turn to take advantage of the investment and invest in the future of our company.

While we are initially reducing debt, our goal is to deploy this new capital in attractive high-returning investments to support the long-term growth of our company. We commented on that in our prepared remarks, and we are confident in our ability to do so. This transaction does not change our strategy of having a balanced approach to capital allocation. That balanced approach includes investing in our business and pursuing attractive growth opportunities as well as returning capital to shareholders and maintaining a strong balance sheet. This transaction does not change the cadence of our current investment strategy or our views on capital deployment or potential M&A.

We have a successful track record of disciplined capital allocation that has served us and our shareholders well, and we remain committed to this approach. This transaction merely allows us to continue our strong track record of making sound capital allocation decisions from a stronger position. I hope these comments answer some of the questions. I am sure they do not answer all your questions. If you have additional questions, feel free to reach out to either Josh or Amir after the call is over. We would appreciate staying focused on Q2 earnings for the rest of the questions.

David Stroud: Our next question comes from Barry Jonas of Truist Securities. Barry, please go ahead.

Barry Jonas: Great. Thank you. I appreciate all the comments there. Maybe just at a high level, philosophically, now that leverage is going to be around two times, what do you think philosophically is the optimal level that leverage should be for Boyd Gaming Corporation?

Josh Hirsberg: So I think, Barry, before this transaction, we would have said leverage was going to be, we were going to run our company at around two and a half times leverage. I would say it always said if by chance there was a transaction that caused us to leverage up, we would have the intention of coming back down to two and a half times. So I would say today, our expectation is obviously leverage will be lower than two and a half times.

We will probably run the company not necessarily with the objective of staying below two and a half times, but that is probably where we are going to kind of run the company for the team as we figure out where best to allocate the capital to get the returns. I do not think we are going to kind of go out of our way to do something just to get leverage back up to a level where it should be. I think we are going to continue to be disciplined in how we think about pursuing capital investment within our own company.

One thing we have said before, and I will reiterate it here, is just because we have a ton of flexibility does not mean we are going to go out and try to do something that does not make sense. We have been really disciplined. Keith made that comment in his remarks. We think it has paid off for our shareholders. We will continue to approach allocating capital in that way.

Keith Smith: Yeah. Look, I think the way we think about this is as a result of the transaction, we end up with leverage sub-two in the high ones. But it is simply a point in time. The history of the company. We do not expect that it is going to stay there. It is our job to take that and invest in higher-returning assets, simply higher returning than paying down, you know, 6% debt. We understand that is our mission and our goal. We will endeavor to do that. So the sub-two times leverage is just once again, it is a level we are at today as a result of the transaction.

In the longer term, I suspect, as Josh indicated, we will be more in the two and a half range long term.

Barry Jonas: That is great. And then just as a follow-up, any comments you can give in terms of the promotional environment in kind of your key markets? We have certainly heard some chatter from some about ramping promos in some select markets. So curious what you are seeing and how you are responding if that is true. Thank you.

Keith Smith: Sure. It sounds like this is simply on replay, but over the last several years, including in Q1 and Q2, the promotional environment has been relatively stable, both here in Las Vegas as well as in our Midwest and South markets. I have said in the past, and I will say it again, those properties that have been promotional for the last couple of years remain promotional. Those properties that have been more disciplined have stayed more disciplined and, you know, whilst some property is always stepping out a little bit, they do it for a month or so, and then it comes back to normal. So there is not a heightened promotional environment anywhere where we operate.

Josh Hirsberg: And, Barry, the only thing I would add to that, you ask, you know, how are we responding? We are not. If you look at our reinvestment rate as a percent marketing reinvestment rate as a percent of revenues, it has been very stable since we came out of COVID. You can see that reflected in our overall margins for the company over the last five years as well.

Keith Smith: I would say that includes not getting into, you know, room rate war here in Las Vegas where room rates are extremely low. We are not chasing room rates down. We are being disciplined, so we will just continue to work our way through that.

Barry Jonas: That is great. Thank you so much for all the color.

David Stroud: Our next question comes from John DeCree of CBRE. John, please go ahead.

John DeCree: Can you hear me? John, please go ahead.

David Stroud: Yes. We can hear you.

John DeCree: Fantastic. Hi, Josh. Hi, Keith. Alright. Wanted to ask a question about the pickup in retail that you have seen. It sounded like kind of unrated play picked up in locals and regionally and curious if you could give us any more color on that. I know that is a segment that is a bit harder to track, and I guess kind of interested in sustainability and kind of the trend over the last couple of quarters leading to, you know, what seems like some growth in that segment finally?

Josh Hirsberg: Yeah, John. It is a good question. I think that first of all, when you think about, you know, I will primarily touch on the Midwest and South and Las Vegas locals when I talk about the trends we are seeing in unrated. So first, starting with the Midwest and South, we combine unrated into our what we call our retail segment. In the Midwest and South, I think, retail as a whole, including the low end of our database as well as retail, has been pretty stable for well over a year, I will say. You know, kind of not really growing, but not declining. Starting in the second quarter, we began to see a pickup in unrated play.

We attribute that largely to customers staying closer to home, i.e., drive-in business and truly local customers even in the regional business, you know, kind of not traveling or not taking that extra trip. Whether it is sustainable or not, I think we are going to need to see another quarter or two. But there is no doubt that is what showed up and kind of pivoted retail to being a much more improved segment of our customer base. In Las Vegas, and Keith alluded to this earlier with his comment on room rates, we have seen a real kind of softness, and you are seeing it in the strip as well, I think.

In destination business, we are seeing it in our own business in terms of, in particular, a place like Orleans, where we have a significant room inventory. We are just not seeing the same level of demand that we have seen historically from destination business, but that has been more than made up by retail and drive-in business. Once again, showing up in that unrated segment. For our business to work, we have had a very consistent core customer, and we have been waiting for the retail customer to really kind of come back into the fray. I would say the second quarter, largely driven by unrated businesses, is where they showed up.

Now whether it will continue or not, I think I do think we need another quarter or two before we can kind of say we are back to normal, so to speak. Keith, I do not know. Is there anything you want to add to that?

Keith Smith: No. I think that fairly summarizes what we saw in the second quarter.

John DeCree: That is helpful. I appreciate the color. Maybe a quick follow-up on the online gaming strategy from here. That you have kind of sold your 5% stake in FanDuel? Is there any change in how you approach online gaming kind of under the new commercial agreement that you have with FanDuel? Is it an area that you might look to invest in more aggressively than you had in the past or any change in strategy on the digital front?

Keith Smith: Yeah. No real change in strategy. You know, we bought Pala Interactive several years ago, now known as Boyd Interactive. It has grown nicely over the last several years. We did a small bolt-on acquisition last year to bolster the New Jersey part of that business. It is performing well. But when we bought Pala, we described what we call the regional strategy. We wanted to be able to make sure we had a compelling and competitive product in the markets where we operate and in some of the important surrounding states where we draw customers, though we were not looking to have a national product or be a national leader in the online business. That remains the same today.

None of that changes with respect to the transaction with FanDuel. We will continue to be focused on a regional online casino strategy. While we are waiting for other states to legalize this product, we will just continue to make sure that we improve our core product and that it is ready when various legislators around the country approve this.

John DeCree: Very good. Thanks, Keith.

David Stroud: Thank you. Our next question comes from Shaun Kelley of Bank of America. Shaun, please go ahead.

Shaun Kelley: Great. Thank you, everyone. Josh, maybe to switch gears again on you. A lot of the questions that I had have been asked and answered. You know, the tax bill, you highlighted some of the implications here, but I was kind of curious more on the company level. There were some changes in everything from bonus depreciation to interest deduction. Obviously, you are delevering, so maybe the interest deduction thing is not as big. But sort of to your cash tax rate and your free cash flow conversion, is there any impact? Have you kind of done your first take on what some of the legislative changes might be for you at the corporate level?

Josh Hirsberg: Yeah. So we have gotten preliminary estimates. I am actually not that comfortable kind of telling you what it is just yet. I think we need to do a little bit more work around it. But the biggest impact or benefit to us will be from, and I think this is probably obvious, the bonus depreciation, 100% of depreciation that is placed in service. I think that you are right. We will not get much in the way of benefit from further interest expense deductibility because we already kind of qualify that in fully. Many of the other things that we have evaluated really are either not material or if they are going or negative, they are pretty small.

But I am hesitant to give a number just yet until we go through fully the bonus depreciation calculation. That will be where we get the biggest benefit, and we kind of rushed it to be ready for this call, and I just want to have time to kind of double-check it. But that is where the benefit will be.

Shaun Kelley: Great. And then, Keith, maybe just going back to the online strategy point because I do think it is important. Right? You know, you lost a sort of a material growth lever, which I think we all appreciate. You were going to lose or renegotiate anyways as it relates to market access. But just to can you help us think through, you know, kind of Boyd's approach high level, right, as the sort of Internet and online gaming has come for lots of other brick-and-mortar sectors, it has been highly disruptive. Now we sort of have, you know, other areas like prediction markets and things that are sort of, you know, at the gate as well.

So just strategically, you know, do you think it is important for you to have a presence here on this side? And kind of how do you think about and really talking kind of medium to long term, you know, that, you know, just having something here as a bit of a hedge as it relates to kind of the broad brick-and-mortar piece of the business.

Keith Smith: Yeah. Look, we bought Pala Interactive a couple of years ago to kind of stake out on our own, if you will, the online casino side for that very intent. We thought having both an online product as well as a brick-and-mortar product was important. I think we articulated that, and we continue to articulate that. Look, our customers go home at night, and they may want to still continue to gamble and enjoy this. If it is legal in the state, we want to make sure we have a product that they can enjoy when they are not on premise. We have that in New Jersey right now where it is both legal online and legal on-premise.

It is a great product because it is fully integrated with our land-based rewards program, and so the player gets all benefits when they are playing online as they would as if they were playing in the building. So we do want to be ready. We think it is important. We think they are clearly complementary to each other. Long term, you need to have both products as part of your portfolio. Having said that, you know, online sports betting is a different beast. We have a presence, obviously, here in Nevada where we run ten sportsbooks ourselves and have for more than 40 years now. Quite successful in doing that.

As you may have noted in the press release, we will begin to transition into running our own sportsbooks outside of Nevada sometime next year. Once again, we have tremendous experience in doing that. Once again, that will not be a very heavy lift for us. But we do not think that is as important to us, the sports betting side, as in running our own books or having our own, quote-unquote, national presence there as it is on the casino side for our customers to be able to participate with us. So I think we are well-positioned, very happy with the product we have, happy with the growth of Boyd Interactive and what it is doing.

I think when other states start to approve this, that we will be in a very strong position to capture a big share of the market in the states where we do business.

Shaun Kelley: Thank you both.

David Stroud: Thank you. Our next question comes from David Katz of Jefferies. David, please go ahead.

David Katz: Hi. Afternoon. Thanks for taking my question. So a couple of things have changed since the last time I have asked this question, which is probably one of many times I have asked the question, but at the moment, there seems to be a little bit better outlook in regional gaming. You know, stocks are just a bit better. Yours, you know, to some degree included. Is there any update you can give us on the boundaries or the criteria that you are thinking about in terms of acquisitions you would consider? Anything changing with respect to hurdles or size, you know, what you might be seeing? Any update there would help. Thanks.

Keith Smith: Sure. I would say nothing has really changed in how we view M&A, you know, regional acquisitions. The size and the scale are important. The quality of the asset will be important. Obviously, given the size of our company, in order to be meaningful and move the needle and make it worth our time, it has got to be significant enough. We have said in the past, we continue to be somewhat agnostic on markets as long as it is a strong market with, you know, stable regulatory environments, stable tax environments, and there are a number of those out there.

So those are all things we have talked about in the past as key to us as we look at acquisitions, and that all remains the same today. I do not really have anything to update on.

David Katz: Okeydoke. Thanks, Dave.

David Stroud: Thank you. Our next question comes from Ben Chaiken of Mizuho. Ben, please go ahead.

Ben Chaiken: Hey. Good afternoon. Thanks for taking my question. Now that no tax on tips and overtime is official, is there any work you have done trying to quantify the tailwind, whether quantitative or even, you know, anecdotal? Thanks. And one follow-up.

Keith Smith: So we have done some work around this. I do not think we are in a position to go out and talk about what we think that means to the company, but certainly, it impacts a lot of our customers here in Las Vegas as well as, you know, customers around the country who visit our property. So it clearly is a positive for us. We will just once again, we will wait and see how it all plays out. But no tax on tips, no tax on the reduced tax on tips and reduced tax on overtime.

Look, as well as the deduction for seniors, in a different in new tax brackets, it is all going to benefit us going forward. We are just not sitting here today in a position to quantify that for you.

Ben Chaiken: Sure. Understood. And you may not, you know, want to answer the question, but just, like, in the spirit of the conversation, any high-level thoughts on maybe, like, what percentage of the customer base might be subject to those, including the seniors in there?

Keith Smith: Well, look. From a senior standpoint, got a 65 and older, you know, roughly 40% of our customer base is in that age group. The good news for us there is they over-index in terms of their spend or their total value to us. So, you know, we will clearly derive some benefits from that group.

Ben Chaiken: Got it. And just one quick on repurchases. You repurchased $105 million in the quarter. You know, I guess you clearly are signaling that you want to buy back more stock. The new run rate is $150 million of the increased authorization. I guess the question is, you know, you repurchased multiples of that in Q1, presumably at higher prices. So definitely not being critical here, but just is there anything preventing you from buying more in the Q2 when I would suspect your stock was pretty depressed?

Keith Smith: Look, I mean, there are times we are in blackouts where we are not, you know, allowed to be in the market repurchasing stock, and, you know, there is always a lot of just, you know, a lot of factors that go into those decisions. As we sit and decide when and how much to buy back. So it is not, you know, kind of a straightforward decision as we go through that process. But, you know, part of Q2 was blackout as it relates to the FanDuel transaction, quite frankly.

Ben Chaiken: Understood. Thank you.

Josh Hirsberg: Thank you.

David Stroud: Our next question comes from Jordan Bender of Citizens. Jordan, please go ahead.

Jordan Bender: Hey, everyone. Good afternoon. I want to double-click on the room rate shipping in Las Vegas comment you made earlier on the call. Yeah. We have heard this commentary or we have seen some of the data out of Las Vegas, so it might be good to just touch on the locals market here. But is the dip that you are seeing a function of summer seasonality, or is there really anything sticking out as to why maybe it is declining more than historical summers? Thank you.

Keith Smith: Okay. I cannot comment on how and why, you know, properties in Las Vegas change the room rates. Summer room rates right now are lower than they were last year. Summer room rates are always low compared to the, you know, the other seasons. This year, they are lower than last year. In many cases, by quite a bit. So I do not know why, you know, people are doing that. Obviously, it does impact properties like the Orleans, which have nearly 1,900 hotel rooms. In terms of our ability, we are not offering $19 hotel rooms, and we are not going to offer $19 hotel rooms.

But I do not sit in their boardrooms or their marketing meetings or their hotel meetings. So I actually cannot tell you.

Jordan Bender: Alright. And then on the follow-up, I just want to circle back on the share repurchases. So you upped it by $50 million a quarter. I guess, why did $150 million make sense? And does any of that play into kind of getting back within your historical leverage targets from kind of what you see in the business today? Thank you.

Josh Hirsberg: Yeah. It is a good question, Jordan. I think, you know, just as the $100 million was a level that was set that you can expect from us, sometimes we will do more. But you could expect $100 million in the past. I would say that is the spirit in which we approached setting the $150 million. It is a level that we are comfortable with setting the expectation from the market and people who follow us, and we feel comfortable doing that in the context of not putting any pressure on other decisions that we are trying to make or influence our balanced capital allocation approach.

So it is a level that we are comfortable with and feel comfortable we will be able to continue to achieve without people trying to get too far ahead of us, basically.

Jordan Bender: Great. Thank you very much.

Keith Smith: Welcome.

David Stroud: Our next question comes from Brandt Montour of Barclays. Brandt, please go ahead.

Brandt Montour: Hello, everybody. Thanks for taking my question. So a question for, I think, for Josh, I mean, your comments on, you know, regional customer feeling better, staying close to home, doing a few less trips, showing up at your door helped things clearly. You know, when you think when you look at that customer, I am assuming a lot of those customers are unrated play. If those folks are not going on trips, does that mean that they would have a higher than average spend versus your other average customer? Is that the way we could think about that customer or not necessarily?

Josh Hirsberg: Yeah. So first of all, I am not sure that we ever since they are unrated, we do not know a lot about that bucket of customers. I would say that you should not think of them in one light or the other, meaning they are not necessarily customers that are not worth a lot, and they are not necessarily customers that are worth a lot. It is a portfolio of customers just like maybe anything else that we talk about. So I do not know that you can extrapolate anything from, you know, that it is a higher quality customer spending more money in that segment or not.

I think all we can say is that the volume, i.e., the overall play that we received from our unrated customers, has improved since Q2 last year and sequentially as well.

Brandt Montour: Okay. Hopefully, that is helpful.

Josh Hirsberg: That is helpful. And just a follow-up on the locals market. You know, I think heading into this past quarter, you know, we were looking out at the year for locals and sort of expecting, you know, less bad comps over time. You guys still had competitive pressure. You just did a pretty good quarter, but I do not know maybe you know what the broader market grew and if you lost share in the second quarter or if we are sort of past that promotional environment pressure, with the caveat that we know that summer room rates are low and affecting Orleans. From a different side now. I wonder if you could square those thoughts.

Keith Smith: Sure. So as you look at the Las Vegas locals market and only have data through May, June data will come out, I think, next week in Las Vegas. But if you and we look at it in three-month increments to take out, you know, some of the variations or movements, over the last three months, we have performed either in line or slightly better than the overall market. So our market share has generally stayed the same, maybe gone up just a smidge. So we feel pretty good about the overall performance both of the market, as well as our own performance.

Josh Hirsberg: It works for one thing. Brandt, that I would ask to your question is this that, you know, we talked about kind of the competitive pressures just getting less bad throughout 2025. Obviously, we do not give individual property-level information, but that is exactly what is continuing to happen. There is some push and pull based on our comments earlier. Right? We are talking about primarily the Orleans, so that is the property that also would be affected by, you know, a softer destination consumer. But generally, it is trending in the direction that we talked about. Then overall, the entire segment was benefited by this pickup in unrated play.

So the trends that we talked about before are continuing, if not feel a little better with the support of unrated play. With the exception of maybe a property like the Orleans that is feeling this with this right pressure. So I know it is a lot of pieces, but just wanted you to know that, like, the competitive environment from our perspective is trending along just like what we expected. It is just getting better and better with the passage of time.

Brandt Montour: That makes perfect sense. Thanks for that, guys.

Josh Hirsberg: Sure. Thank you.

David Stroud: Our next question comes from Steve Pizella of Deutsche Bank. Steve, please go ahead.

Steve Pizella: Good afternoon. Thank you for taking our questions. On the cost side, just curious about what you are seeing in terms of the operating expense environment currently in both the Midwest and South and local segments?

Josh Hirsberg: So Steve, thanks for the question. I would say that, you know, cost for us are, I mean, we always see pressure from cost and cost increase, but I think we are doing a really good job of managing those costs. You can kind of really see it in the consistency of our margins, both in Las Vegas and the Midwest and South and for that matter downtown. So despite, say, in the Midwest and South having some issues with the shift in the calendar and the flooding, you know, our margins were essentially have been stable. In Las Vegas, we talked a lot about some of the pressures from competitive issues and things of that nature.

Our margins also are continuing to be very stable. So from my perspective, we always wring our hands around costs and are trying to manage them more efficiently and trying to offset increases, but our guys are doing a really good job of doing that. So that is what is showing up in the results, quite honestly.

Steve Pizella: Okay. Thanks. And just wanted to look further into non-gaming spend if we could. Have you seen any changes in spending your F&B and entertainment?

Josh Hirsberg: Not really. With the, I would say, if you look at our results, you will see F&B was up. That is reflective of not only our core customer continuing to be stable and growing, but also now the kind of the retail customer showing up in the second quarter. Then on the hotel side, that was largely Las Vegas through the destination-related comments that we made earlier. So there is not really, I think the spending from our customers is in conjunction with what we are seeing for their demand on the gaming floor.

Steve Pizella: Okay. Great. Appreciate it. Thanks.

David Stroud: Thank you. Our next question comes from Stephen Grambling of Morgan Stanley. Stephen, please go ahead.

Stephen Grambling: Thanks. You touched on this a couple of different ways of putting together your commentary around investing into growth. Do any subsegments or regions stick out in offering potential for the best returns on invested capital in this backdrop? How might that rank order compare to investing in digital or greenfield markets?

Keith Smith: Yeah. Look. I think as we think about any type of M&A investment, whether it be on the digital side or whether it be greenfield or whether it be an actual acquisition of an existing asset, obviously, a lot of factors go into play here. We do not think about year one or year two return. We think about it over a longer period of time. But all depends on what is going to the price and the quality of the asset. So we do not necessarily force rank them.

We do have hurdle rates that we look at and we want to achieve in order to make an investment regardless of, you know, which of those buckets we make an investment regardless of, you know, which of those buckets we are going to invest in.

Josh Hirsberg: Yeah. The only thing I would add to that is it, you know, M&A is one alternative. Reinvesting in our portfolio is another. You have seen us do that quite successfully with Treasure Chest. Now with the coming online with the meeting space at Ameristar St. Charles and Cadence Crossing. So it is really trying to find the best alternative among all the different choices that we have. I mean, Virginia is kind of in the pipeline that is going to be a good investment as well.

So, you know, we are really evaluating all the time kind of M&A from a strategic perspective, but also a return perspective weighed against development opportunities, weighed against opportunities to reinvest in our existing portfolio, and then buying back our shares as well absent higher returning alternatives. So hopefully, this starts to sound like a broken record because we believe we are, you know, kind of adding the same or executing on the same approach from our capital allocation perspective that we have been doing for quite some time. So, you know, hopefully, this sounds familiar to people.

Stephen Grambling: Yeah. I guess I meant more around organic growth, not M&A. You know, as you think about renovations or where you are spending, whether I mean, you gave a couple of different examples there, but are there more likely to be spent within locals, the South and Midwest, you know, digital is another one of those. Is anything sticking out as you look at these different markets based on either the trends you are seeing or the competitive dynamic?

Josh Hirsberg: Yeah. I mean, I would just jump in and say not really. I mean, we have a, you know, online is going to grow as opportunistically as maybe smaller acquisitions opportunities come along or as it grows organically. I think from the perspective of reinvesting in different segments of our business, you know, it could be that the highest returning next opportunity is in the Midwest and South. Just because of, you know, whatever that particular opportunity is. I do not think we purely do it based on an economic return of where we can get the best return as opposed to force ranking it.

Oh, Las Vegas is a better market than Missouri or just picking one out of the air. Right? It is where we can get the best return for the incremental dollars. So that is how we think about it.

Stephen Grambling: Fair enough. Thank you.

David Stroud: Our next question comes from Dan Politzer of JPMorgan. Dan, please go ahead.

Dan Politzer: Hey, good afternoon, and thanks for taking my question. I wanted to just focus on the Midwest and South for a bit. You know, this was the highest quarter of GGR growth, at least from the publicly reported data we have seen. Sometimes, despite starting to lap Treasure Chest, so, you know, to the extent it sounds like you are attributing this to unrated play, you know, what should not that be showing up in the margin structure? Or were there any other kind of one-offs to think about in the quarter, whether it is a promotional environment or mix of revenues?

Josh Hirsberg: Are you saying because it was unrated play, we should have a higher margin? Is that what you are saying?

Dan Politzer: Well, yeah. I mean, I think that usually that does come with higher margin, and this, you know, the flow-through in this quarter versus other quarters just given the revenue growth. Yeah. I would think just given that comment on the unrated play would have been a little bit higher, but that is why I am asking if maybe there is something I am missing.

Josh Hirsberg: Yeah. The only thing I would point out is the margins have been consistent, number one. Number two is we did have flooding that took two properties out of commission for basically two each a week and then the shift of Easter. That is basically it. There is nothing else really going on in the segment.

Dan Politzer: Got it. And then just kind of one higher-level one in terms of the quarter and the cadence. You know, it seems like trends did improve throughout the quarter. Is there any kind of comment on what you are seeing quarter to date as we look into July here?

Josh Hirsberg: So I would say, and Keith jump in and anything that I might leave out, would be that, you know, first of all, you know, we have been burned by trying to answer this question in the past because, you know, it is a limited snapshot of what is going on. It has literally been three weeks, and three weeks do not make up a trend or a quarter. But so just note that disclaimer. For if things were to change in the future. But basically, I would say the trends that we saw in Q2 are continuing into Q3. That being has historically been the case.

The core customer has continued to be a consistent source of business for us and has continued to grow. On the retail side of things, we continue to see the unrated play contribute to that segment. So, you know, the first three weeks are just like the quarter we just came out of.

Keith Smith: And I do think you have to be careful and look at this kind of by the segments that we operate in, in Las Vegas versus downtown versus MSR. While I think the trends are generally consistent with what we saw in Q2 as it relates to core and unrated. You know, here in Las Vegas, we talked about the renovation project at Suncoast going on. It is being in its most disruptive phase, so we have to take that into account when we think about Q3 and Q4. We have done a great job, and our customers have kind of hung with us so far this year at the Suncoast and performing very well.

But we are entering a very disruptive period of time. Then, you know, the softness on the strip, which impacts the Orleans mainly. We will see how that continues to play out. You know, downtown, some softness. As it relates to just visitation to downtown because if the strip is soft, then downtown tends to be a little soft also. In the MSR, more normal. I mean, once again, the benefit of, you know, Treasure Chest has anniversaried itself, but still performing well. As people are not traveling maybe as much, we are getting the benefit of them staying closer to home and visiting our properties in the Midwest and South regions.

But, you know, I think it is probably as much color as we have. But as Josh said, it is three weeks worth of data. So we are kind of cautious about talking about it.

Dan Politzer: Got it. Makes sense. Thanks for the detail.

Keith Smith: You are welcome.

David Stroud: Our last question comes from Chad Beynon of Macquarie. Chad, please go ahead.

Chad Beynon: Hi. Good afternoon. Thanks for taking my question. I wanted to ask about the overall CapEx, Josh. You ran through that in your prepared remarks. I know it was about three months ago when the tariff announcements were announced, and there has been some volatility there. It does not sound like there was any change in terms of your spend, but I know you were talking about maybe mitigating some of the potential impacts that could happen. So can you help us think about maybe any, I do not know, guaranteed contracts? Or are you more comfortable now versus three months ago when the news was, you know, just kind of coming across the desk? Thanks.

Josh Hirsberg: Yeah, Chad. Thanks for the question. I think, you know, if you look back at our remarks in the first quarter, we had done a lot of work around understanding what we could do to mitigate tariffs on the operating expense side, but also a capital expense side. Whether it was finding alternative sources, pre-ordering stuff, ordering stuff from different countries, all that kind of, you know, acrobatics. I think that now that we have been at it for another three months or so, we feel much more comfortable that we can kind of manage through it. Obviously, you know, we do not know the final picture with respect to tariffs.

But I just think we have gotten better at it. We have gotten more comfortable with how to kind of manage through it. In Q1, we said, you know, we are comfortable with the risk, and our budgets are, we do not believe our budgets are at risk. From a capital perspective. We did not, you know, our costs may go up. We felt like we had enough contingency and enough flexibility with respect to timing we work in those procurements. Processes, where those projects were, and we were going to be able to manage through it. I would say that really has not changed.

If anything, we have just gotten more and more comfortable with our ability to manage through it. I think it is really important to say this as well, is, you know, back then, we were approaching a potentially uncertain environment at two and a half times leverage. Now it is one point eight times leverage or whatever. So, you know, we are probably in a much better position than the company has ever been in to deal with any kind of uncertainty, whether it is man-made or otherwise. So we, you know, we come at it from a position of real strength. I think that is what, you know, we have tried to communicate to the investment community.

The reason we want to run at a lower leverage is so that we have the flexibility to tell you here is what we are going to do, and in most cases, or a large number of cases, be able to execute that and not change direction because of something that is going on out of our control. So, you know, the FanDuel transaction took us to a level, a lower level of leverage than maybe we thought we would be at. But the same philosophy applies. So hopefully, that gives you some help.

Chad Beynon: Yep. Makes sense. Thank you very much. Appreciate it.

David Stroud: Welcome. This concludes our question and answer session. I would like to turn the call over to Josh for concluding remarks.

Josh Hirsberg: Thanks, David, and thanks to everyone for joining our call today. If you have any follow-up questions, including anyone related to the FanDuel transaction, please feel free to reach out to Amir or myself, and we will be happy to try to help you out. Thanks so much.