Good afternoon, ladies and gentlemen. Thank you for attending the Boyd Gaming Third Quarter 2021 Conference Call. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end. I will now pass the conference over to your host, Josh Hirsberg, Executive Vice President and Chief Financial Officer of Boyd Gaming. You may proceed.

Thank you, Operator. Good afternoon, everyone. And welcome to our third quarter conference call. Joining me on the call this afternoon is Keith Smith, our President and Chief Executive Officer. Our comments today will include statements that are forward-looking statements within the Private Securities Litigation Reform Act. All forward-looking statements and 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-K furnished to the SEC today and both of which are available in the 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 also 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?

Thanks, Josh and good afternoon, everyone. The third quarter was another outstanding quarter for our company, as we achieved our fifth straight quarter of exceptional results since reopening our properties last spring. This sustained level of strong performance is the direct result of the fundamental changes we made to our operating philosophy last year. Upon reopening, we sharpened our focus on driving play from our most loyal guests. We streamlined our cost structure and we adopted a more efficient approach to doing business that touched every part of our operations. Our record third quarter performance and our results over each of the last five quarters attributes to the transformation of our business model and the disciplined approach we have taken to operating our business. These exceptional results have significantly enhanced our free cash flow and strengthened our balance sheet with our leverage declining to 2.75 times at the end of the third quarter. As a result of our strong financial position and our prospects for continued growth, our Board of Directors has authorized a share repurchase program of $300 million, allowing us to return a portion of our robust free cash flow to our shareholders. So, let’s review the operating performance that helped make this possible. For the second straight quarter, revenues exceeded both 2019 and 2020 levels, setting a new third quarter record. Strong flow through resulted in adjusted EBITDAR of more than $340 million, also a third quarter record. Our quarterly EBITDAR was 42% higher than the third quarter of 2020 and 60% higher than the third quarter of 2019. And our companywide operating margins exceeded 40% for the second straight quarter. Our third quarter margin grew nearly 400 basis points over last year’s record and is up more than 1,400 basis points from 2019. Every segment of…

Thanks, Keith. Our results for the third quarter and year-to-date have been truly outstanding. Our performance reflects a transformed operating philosophy that we implemented after reopening our properties in the third quarter of last year, focused on building loyalty and efficiently serving our core customer. This operating philosophy structurally changed how we execute our business, including reevaluating our approach to marketing, as well as scrutinizing every other facet of our operation. And as you have seen in our results, we have consistently executed this strategy for five quarters, generating revenues that are now surpassing 2019 levels, with significantly higher EBITDAR across our business. And as Keith mentioned, we are optimistic about our future, as we have multiple avenues for continued growth, as well as confidence that we will continue to operate at higher levels of margin. Today, we are financially a much stronger company than at any point in our history. Total EBITDAR over the last 12 months surpasses $1.2 billion and leverage at the end of the third quarter was 2.75 times and expected to further decline by year end. As a result of our strong operational performance, we are now generating robust levels of free cash flow, approaching $700 million over the past 12 months. To reflect our confidence in the company’s future, our Board authorized a $300 million share repurchase program. This amount is in addition to $61 million remaining from our prior approval. Given our sizable and growing free cash flow, we will also continue to invest in opportunities that generate high returns for our company. These growth opportunities will be balanced with returning capital to shareholders and maintaining current levels of leverage over the long-term. Operator, that concludes our remarks and we’re now ready to take any questions.

Absolutely. [Operator Instructions] The first question is from the line of Carlo Santarelli with Deutsche Bank. You may proceed.

Hey, Keith and Josh. Thank you. Josh, maybe this one’s best for you, as you kind of think about and I know Keith alluded to it in terms of bringing staffing back on to kind of better optimize the hotels and bring some of your rooms online in your assets. When you think about kind of the magnitude of labor that returns relative to kind of what was extracted during the -- obviously during the pandemic. I think you guys had said in the past something about potentially bringing back about 20% of that cohort. Has that thinking changed at all as you guys have gone through and gotten more accustomed to operating with kind of current levels and things like that or is that perhaps exactly what you thought it would be?

Yeah. Carlo, so thank you for the question. I think, ultimately, our labor has been significantly reduced from a pre-COVID level and I don’t think that we’ve ever suggested that we’re going to bring about 20% back. I think it was more in line with as we introduce amenities we expect to bring some labor back within the operating environment. I think on the order of magnitude, pre-COVID we had something like 24,000 to 25,000 team members. Today we’re operating at around 14,000 team members and it is the general expectation that we will add back team members over time, but nowhere near the order of magnitude of the amount of staffing that’s been reduced as a result of coming out of COVID. So we do expect some labor, not on the order of magnitude of adding back 20%, however.

Yeah. I guess, I was referring to 20% of the 10,000, so kind of a 14,000…

Oh! I see.

… 15,000 number? Okay. Does that sound…

Yeah.

… roughly appropriate?

Yes. I believe that’s remains in line with how we’re thinking about our business going forward over the next several quarters.

Yeah. Carlo, just importantly, and I think you alluded to this, that will come along with increased revenues as we are able to staff and occupy or open up more hotel rooms and open up more shifts at our restaurants and other things. And so it’s not just a labor increase, it will come associated with revenues and profit.

Yes. Thank you, Keith, and for sure, I get that part. I guess, just a quick follow-up, as it pertains to the buyback authorization and you guys have certainly done buybacks in the past. As you think about the growth opportunities Keith that you outlined, obviously, that are within the plan right now, including Treasure Chest and some other things that you mentioned. How are you kind of balancing the buyback decision versus some of those ROI opportunities versus, perhaps, something outside of kind of the realm of Boyd that would be you think would be additive to the future of the company and how aggressive should we necessarily anticipate you will be with that that authorization?

So I think the way we think about it is, the $300 million was sized based on all the other things you mentioned. We took a look at the investments we need to make in our properties, things like Treasure Chest. We took a look at as Josh indicated maintaining leverage at around current levels or slightly lower. We expect to be closer to 2.5 at the end of the year and I think that is where we want to run the business long-term and then that’s basically putting all of that in the hopper is how we signed the $300 million. So you should expect that we will execute on the $300 million and that when we’re done with that, we will take a look and see where we’re at and see what our next step is. But we can continue to invest in our business, just keep our leverage where it is and execute on the $300 million. It is a balanced approach.

Great. Thank you. Thank you very much guys.

Yeah. You’re welcome. Thanks, Carlo.

Thank you, Mr. Santarelli. The next question is from the line of Barry Jonas with Truist. You may proceed.

Hey. Maybe just following up on the return of capital question, how are you thinking about resuming the dividend here? What would you like to see first?

Well, obviously, our Board, as we just announced authorized the share repurchase. We believe that that is the most efficient and flexible way to return capital to our shareholders and that was a decision that was made of some others decision was made in the future then we will certainly report on it. But that’s all we have to report for now.

Got it. Okay. Then can you talk a little bit about the promotional environment how that’s been trending across your market and maybe specific to the Las Vegas Locals market? I believe some competitors have talked more about targeting that customer. So curious what your forward expectations might be there?

Sure. It’s a good question. So as we think about Las Vegas Locals specifically, I would say that, it hasn’t significantly changed over the last quarter or two that the -- our main competitor and larger operators are being disciplined and kind of maintaining their focus. Some of the smaller operators, frankly, several quarters ago, had fallen back to, what I would call, kind of pre-COVID levels of marketing and being aggressive. So we haven’t seen the landscape change. Those that got more aggressive several quarters ago have stayed aggressive. Those that remain disciplined have stayed disciplined. And I expect that will continue, as we think about 2022, we expect that will continue through 2022. As we think about or as we look at, I should say, our Midwest & South properties, largely the same. Those people that have stuck to and remain disciplined with respect to marketing spend have generally stayed there. There are a number of properties in the Midwest & South once again that went back to pre-COVID levels of spending, have gotten very aggressive. They haven’t changed. They’re continuing to be aggressive. We monitor, we watch it, we try not to react to it and we know we have remained disciplined throughout it, and once again, we expect through 2022 that those that are disciplined will stay that way. Those that have already gotten aggressive are going to stay aggressive. We don’t expect a significant change in the promotional landscape, whether it would be here in Nevada or outside of Nevada.

Perfect. Thanks so much, guys.

Sure.

Thank you, Mr. Jonas. The next questioner is from the line of David Katz with Jefferies. You may proceed.

Hi. Evening, everyone. Thanks for taking my questions. I appreciate all the color and information, but I wanted to just ask about updated boundaries around M&A. Company has had a history of being opportunistic in certain situations. And I’d love some color on whether corporate would be in bounds or out of bounds, OpCo PropCo would be in bounds or out of bounds or how you’re thinking about all that in terms of a very attractive leverage profile at this point?

Yeah. I will start, and then, obviously, Keith can jump in. I think when we look about -- when we think about M&A and OpCo PropCo, I think we do it in the context of the same way we have done historically. That is we view owning real estate as important to the company. It gives us optionality with respect to flexibility down the road should we ever feel like we need to execute on that. But as you mentioned, our balance sheet is significantly stronger today and our cash flow generation capabilities are significantly stronger. So I am not sure how that makes sense for us in the current environment. I think more broadly in terms of M&A, I don’t -- we’re not going to do a deal just because we’re low lever -- lowly levered in generating free cash flow. It’s still -- we will retain the same discipline that we have had throughout the history of the company, even though the company has a long history of making acquisitions. I think we believe we’ve been disciplined, strategic and value oriented in terms of pursing those acquisitions and that will not change. So I think just as we have a, what I would call, a refined or transformed view of how we’re executing our business, same thing applies to our balance sheet. But it does not mean that we’re changing our philosophy about how we’re pursuing growth in terms of acquisitions. Keith, I don’t know if there’s anything you add to that.

No. I think Josh just summarized it well. We’ve grown historically through M&A and I think we’ve done a good job. As you said, we’ve been very disciplined and we will remain disciplined. And the acquisitions need to be strategic and priced right. But other than that, Josh summarized it well.

Perfect. Thank you very much.

Sure.

Thank you, Mr. Katz. The next question is from the line of Joe Greff with JPMorgan. You may proceed.

Hello, everyone. Maybe this is a question for you, Josh. Was there a big delta in property level EBITDAR margins at the end of the quarter versus how the quarter started? I guess how do exit rates compare versus June, July level and then when you think about Midwest & Southeast excluding any kind of bad weather impact in Louisiana, Mississippi?

Yeah. Not really. I would say that, we were able to maintain our margins really throughout the quarter. We did have challenges with periods of softness kind of toward the middle of the quarter, but -- and related to the factors you mentioned primarily hurricanes, but also, obviously, the increase awareness around the Delta variant as well played a role in it. But our guys did a really good job of managing expense levels during those periods of time. We adjusted accordingly. So it was unlike margins fell off the chart as a result of softness in revenues or anything of that during that period of time. I would rather say that the margins were fairly consistent throughout the entire each month throughout the quarter.

Great. And I guess, where are you in terms of the NOL balance and when do you start becoming a cash taxpayer?

Yeah. So we still have an NOL balance left. It’s one of the things I probably should have checked before this call that I typically do and just didn’t do this time. But I think, it will most likely run out sometime in 2022, and obviously, that depends on the performance of the properties and our company through next year. But we will have an NOL balance I expect coming into year end.

Great. Thank you, guys.

Sure.

Thank you, Mr. Greff. The next question is from the line of Steve Wieczynski with Stifel. You may proceed.

Hey, guys. Good afternoon. So, Josh, I guess the next time you report, it’s obviously going to be your year-end report in the past, it would be a time where you gave us guidance for the upcoming year and who knows if you will or will not give guidance for next year and that’s not really my question here. But Josh, if you if you had to theoretically kind of give us a view of what the next 12 months would look like today. And I guess what I am trying to get out here is, maybe some high level thoughts as to some of the potential headwinds or even tailwinds if there are any that you would be looking at, if you were trying to model your business out today?

So you are asking for guidance for next year?

I knew that’s where you’re going to -- you’re -- no. I just more kind of some high level kind of thought maybe around whether it’s margin pressures or opportunities even on the revenue side. I mean anything that you kind of give us from a high level perspective that you might be kind of watching at this point?

So, Steve, I think, as we think about 2022 and we think about the business, we try to allude to this in our comments that we believe there are still a number of revenue opportunities for us as we move into 2022. As the labor market recovers and we’re able to rent all of our hotel rooms, as we’re able to open up more of our amenities if you will and we believe there’s revenue opportunities. And as COVID restrictions begin to get lifted, as an example, walking into this meeting, I got a note that in Louisiana, they’re lifting the mask mandate tomorrow. Here in Nevada, we still have a mask mandate and hopefully by mid-November that will run its course. But we think we still have the opportunity to grow the business kind of across the U.S., out of town travel will continue to grow here in Nevada. Meaning convention business will continue to grow across the U.S. and so there are still, I think, very good revenue opportunities for us. Look, on the flip side, we will be adding back some labor as we talked about it and we’ve talked over the prior quarters that, over the course of time that some marketing will come back into the system. It’s why we talk about maintaining much of the margin improvement we’ve seen, but not all of it, but much of it, because we know that there will be some incremental expense flow into the business. The team today is doing a great job dealing with inflationary pressures, whether it be on cost of goods or other products or wage inflation, and we’re not seeing it really have an impact on the margins, because of the work the team is doing. So, as we think about 2022, we net-net see continued upside.

The one thing I would add to it, I think is that, underlying -- underlies this thought process is that, when we look at what’s happened so far in 2021, there’s really only been one quarter that we would feel like had some outsized really tailwinds to it and that was Q2. Underlying Q1, even Q3 and the greater -- and the performance of Q2 is, I think, a level of business that we think is sustainable based on the customer trends that we’re seeing both among our -- be connected customers, as well as our unrated customers. And so we expect those trends to underlie our business as we go into 2022 with the added benefits of what Keith mentioned and maybe a little pressure here or there, but not really outweighing the opportunities that we see for our business.

Okay. Got you. That’s perfect color. I appreciate all that. And then second real quick question, Josh or Keith and maybe I missed this in your prepared remarks, but your older demographic in terms of your database, just trying to gauge what that demographic look like during the quarter and if there was any material improvement from those folks?

Yeah. So that -- as we think about our 55 plus, 65 plus customer continue to grow in the third quarter, whether you look at visitation or trips or guest counts or theo, they all continue to grow in the quarter. So those customers continue to return to us in good numbers. We continue to see good results of them, especially through our core customer base and particularly at the high end.

Okay. Great. Thanks, guys. Appreciate it.

You’re welcome.

Thank you, Mr. Wieczynski. The next question is from the line of Shaun Kelley with Bank of America. You may proceed.

Hi, everyone. Good afternoon. Josh or Keith, maybe just to stick with the last area you were just talking about on the color you gave on the over 65 a super helpful. Have you seen any change in the unrated play behavior, I mean, is obviously a profitable segment, one that we’ve asked about pretty much every quarter for the last five years. But, yeah, just any change on that pattern as the quarter progressed?

Yeah. The short answer is, no change. It has been remarkably consistent and stable since reopening last year and so no change in trends during the quarter.

Great. And then, just maybe my follow up, I did change directions a little bit. Keith, I feel like in each one of these calls, you give us a little bit more on digital, every -- kind of every quarter. And I am just kind of curious if you could either remind us of what it would take to either increase your own direct kind of online casino presence through Stardust or take back over some of the responsibility for that from FanDuel? I think you have that optionality, but I also know you’re -- you sound more than pleased with your relationships. If you could just talk about sort of where you want to take that maybe medium-term in terms of your own control versus obviously having a very strong partner, that would be helpful?

Yeah. So I think in the longer term that we believe it is important that, we control a little more of that as we move forward. And you’re right, we have a great relationship with FanDuel. It’s been a very profitable relationship and continues to work very well for us. We’re able to leverage their technical expertise not only from a software and product standpoint, but from a marketing standpoint as they understand the business very well. So we’re learning, we’re getting educated and longer term we will take more control of that product. But in the short-term we’re very pleased with how it’s going and where we’re at. So I don’t think you would expect to see any real change here in the short-term.

Thank you very much.

Thank you, Mr. Kelley. The next question is from the line of Thomas Allen with Morgan Stanley. You may proceed.

Thanks. In your prepared remarks, Keith, you highlighted how you launched Boyd Sports in Nevada and you have the largest betting menu in the market. Can you just talk about how you put that together and the importance of that? Thank you.

So we’ve had an online sports product here for years and we took the opportunity in working with our partners at FanDuel and with some upgraded technology to switch providers to simply re-launch it as a much more -- having a much more fulsome betting menu. We’ve once again seen what FanDuel has been able to provide out of state and so we took some learnings from that and leveraged off of them and we were just able to have a better selection of not games, but of options than other people in the state and it’s just a learning from our partner.

That’s helpful color. And then just this has been asked a few different ways on pro-level, as you got into October, we’re nearing the end of the month. Have revenue and demand trends been relatively consistent with what you saw in the third quarter, are they slowed, accelerated? Thank you.

You cut out for a second there, Thomas. I think you’re asking our trends is the same in October as we saw through Q3. Is that the question?

Exactly. Did that accelerate, decelerate or it is the same? Thanks.

Yeah. I would say that, as Josh mentioned, there was a little bit of softness kind of in mid-Q3 with the Delta variant, but as we exited the quarter the last several weeks of September, we’re back to normal and the trends we’re seeing thus far in October are very much similar to what we saw at the end of Q3.

Helpful. Thank you.

You’re welcome.

Sure.

Thank you, Mr. Allen. The next question is from the line Dan Politzer with Wells Fargo. You may proceed.

Hey. Good afternoon, everyone. Thanks for taking my questions. So I want to follow up on the increase in labor that you guys expect to bring back along with the rated player base. Given the margin expansion that you’ve seen in the Local segment versus the Midwest & South, how should we think about you bringing back the non-gaming amenities and increasing your labor expenses?

Yeah. So, Dan, thank you for the question. I think, from the perspective of amenities, the way we think about it is, our approach was perhaps different that some of our peers where we slowly reintegrated non-gaming amenities in particular and then started to expand hours and offerings in that way. I think other than hours, we’ve largely gotten to the place where our amenities are largely open. So labor on the F&B side, as I think about it, and Keith, obviously, jump in if you disagree, is more about finding people to fill open positions, which has been difficult. On the hotel side of things it’s about finding people to fill open positions as well to backfill kind of the level of employment that we want, but associated with that particular staffing will be obviously occupancy that’s from known kind of gaming customers that we know they’re worth. So I think, it’s a little bit of filling open positions across the Board. But as Keith mentioned earlier, in response to an earlier question, it’s generally associated with revenue, either expanding hours on the F&B side or hosting gaming customers that have some work that we know that we have -- that we can’t serve today. So we feel like in each of these cases we will be able to kind of staff and backfill where we need to relieve some of the pressures in our existing workforce and serve more customers and drive incremental revenue. Not so much just adding labor back, that’s an incremental expense without any kind of offset associated with it.

Got it. Thank you. And a follow-up on your share repurchase, definitely nice to see. But I guess, as you think of that, you think longer term, even with that share repurchase and exhausting the digital portion, you’re going to see well below your historical target 4 times to 5 times leverage range. So has there been a fundamental shift in that target range or -- and I guess how should we think about getting back there over time, what would be the key levers?

Yeah. So I think there has been a fundamental shift where pre-COVID, we were comfortable running the business in the 4 times to 5 times range. I think, quite frankly, towards right before COVID, we were talking about being comfortable in the low 4s and that’s where we wanted to run the business. Today, we’re at 2.75 times now and likely 2.5 times at the end of the year. We think that is the new range for us that is where we will continue to target over the long-term running the company, obviously, being flexible in any given quarter or any given year. But that is long-term where we want to see the leverage for our company be in that kind of 2.5-ish range.

Got it. And then if I could just squeeze in one housekeeping question, CapEx for the quarter and any guidance for CapEx for next year?

Yeah. No guidance yet for CapEx for next year, because we’re kind of in the middle of that process. But for this year we’re still pretty much on track for about $200 million. We spent about $40 million in Q3.

Got it. Thanks so much, everyone.

Sure.

Thank you, Mr. Politzer. There are no additional questions at this time. I will now pass it back to Josh Hirsberg back for any further remarks.

Thank you, Tia, and thanks for everyone joining today. And if anyone has any follow up questions still, please feel free to reach out to the company and we will try to answer those questions for you. Everybody stay well. Thank you again.

That concludes today’s conference call. Thank you and have a great day.