Good evening. Thank you for attending today's Boyd Gaming Fourth Quarter Earnings Call. My name is Bethany, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end. I would now like to pass the conference over to our host, Josh Hirsberg, Executive Vice President, Chief Financial Officer and Treasurer at Boyd Gaming. Please go ahead.

Thank you, Bethany. Good afternoon, everyone, and welcome to our fourth 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 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'll 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 at investors.boyd.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. 2021 was a record-breaking year for our company, and the fourth quarter was certainly no exception. For the fourth time in a row, we set new quarterly record for EBITDAR and operating margins on a company-wide basis. EBITDAR increased 65% to $347 million as we posted company-wide operating margins of 39.5%, once again proving our ability to deliver strong operating margins. Our fourth quarter operating margin was almost 640 basis points ahead of the fourth quarter record we set 12 months ago and was up more than 1,200 basis points from the fourth quarter of 2019. Just as importantly, our continued operating efficiency did not come at the expense of top line results. Revenues grew more than 38% year-over-year and were up nearly 6% from the fourth quarter of 2019. Every segment of our business contributed to this exceptional performance with 24 of our 27 open properties growing revenues at a double-digit rate during the quarter. And 26 of our properties achieved double-digit EBITDAR increases. The sole exception was our property in Shreveport where we are contending with the new smoking ban. In Las Vegas Locals business, revenues rose 46% over the prior year. EBITDAR was up 76% and margins exceeded 52%. This marks the fourth straight quarter that we have achieved margins of 50% or greater in our Locals business. Downtown Las Vegas had an equally impressive performance, posting record EBITDAR of $20.2 million and margins of nearly 38% for the quarter. And in our Midwest & South segment, revenues grew more than 29%, EBITDAR was up over 42% and margins increased approximately 350 basis points to more than 38%. On a full year basis, we achieved record company-wide revenues of nearly $3.4 billion, EBITDAR of almost $1.4 billion and operating margins of…

Thank you, Keith. Our operating teams generated record results in 2021. We finished the year with EBITDAR approaching $1.4 billion, more than 50% higher than the previous record set in 2019. As a result of our strong operating performance, our leverage has declined significantly from pre-COVID levels. With EBITDA increasing since the end of 2019 by approximately $500 million and debt balances reduced during that same period of time by approximately $850 million, our leverage has been reduced by half from pre-COVID levels. Our current leverage is approximately 2.4x, and lease-adjusted leverage is 2.8x. As of the end of 2021, our NOL balance was $7 million. As a result, beginning in 2022, we'll be a cash taxpayer. Our expected tax rate is 23.5%. We expect our 2022 capital program to be approximately $250 million, which includes amounts for hotel room renovations and conversions of space previously utilized for buffets. We also expect to spend in 2022 an additional $50 million for the Treasure Chest and Fremont projects. Based on the current outlook for our business, we believe after these capital investments, we will have ample free cash flow to return capital to our shareholders. As Keith mentioned, our Board authorized the resumption of our quarterly dividend of $0.15 per share, which is more than double our previous quarterly amount. Also in late October, our Board approved a $300 million share repurchase authorization that was in addition to $61 million remaining from our previous authorization. Since last October, we have repurchased $150 million in stock, representing approximately 2.5 million shares. We have approximately $210 million remaining under our current repurchase authorizations. For this year, assuming our business continues to perform at these levels and subject, of course, to board approval, we currently plan to repurchase on a recurring basis of approximately $100 million per quarter. As was the case in the past three months, we may have additional opportunistic repurchases as well. So in total, with our planned share repurchases and the announced dividend, we expect to return approximately $500 million to shareholders this year. As we move forward, we will remain focused on maintaining our strong operating performance, remaining disciplined in our execution, and growing our business organically through thoughtful investment in our existing portfolio and growing our online presence. Bethany, that concludes our remarks, and we're now ready to answer any questions from participants on the call.

Certainly, we will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Barry Jonas with Truist Securities. You may proceed.

Can you maybe talk about general consumer trends you're seeing across the segments? Any concerns around rising inflation? And then I guess to what extent has the older demographic returned?

Sure. I'll make a few comments see if Josh wants to add anything. I think the consumer trends that we saw through the majority of the quarter were similar to what we've seen over the last several quarters with good attendance from our loyal guests to higher end of our database continuing to grow at significant rates. And so really, until I'd say the end maybe in the last two weeks of the quarter, where the Omicron variant took hold, we saw some softening of the business, but prior to that, consumer trends were pretty normal. In terms of rising inflation, look, I think it's something we've been dealing with for a while now. And our team deals with it on a daily basis, whether it is increases in food and beverage pricing or increases in the cost of other supplies that we use, it is something that is being managed daily. And I think it's reflected in the margins that we produced in the quarter. And so we've been able to, thus far, continue to work our way through it and produce strong results. On the older demographic, frankly, once again, prior to mid-December in the pickup in the Omicron cases, the older demographics, 65-plus, was coming back at stronger rates in other parts of the portfolio. And so, we were seeing good visitation out of that group. It did slow once again in mid-December. And as I said in my prepared remarks, we have seen the business pick up as we move through January.

The only thing I would add to that is just -- as we -- the only thing I'd add, Barry, is as we've moved through January, we continue to see a recovery in all those customer trends, kind of gaining traction back to what we saw kind of pre-second half of December. So, we're encouraged in what we're seeing as we move through January and into February.

Great. And then I was just hoping to get a little more color on the strength downtown and what's driving it. I guess to what extent is the Hawaiian business back to pre-COVID levels?

So the Hawaiian business has continued to build back. Much like the rest of our business in mid-December, it started to tail off as they saw cases increase in Hawaii also. So I think -- while -- I would say our Hawaiian business is not back to 2019 levels, it is on its way back and doing very well, once again, pre this omicron wave. And what's driving downtown business generally, I think it's a couple of things. One, once again, there is a new property down there that is bring drawing people down there in the form of circa. Two, it has always been a value-oriented destination, and people continue to go down there for the value that Downtown represents vis-à-vis the strip. And we just run a very, very strong business down there. So, we're doing well with all the increased visitation to Downtown generally to make it in -- because we have three properties down there, they generally visit one of our three properties when they're in Downtown Las Vegas.

Thank you, Mr. Jonas. Our next question comes from the line of Steve Wieczynski with Stifel. You may proceed.

So you've seen some of your peers get on the path of reinitiating guidance, which I know is still very difficult to do, and you guys aren't doing that obviously at this point. But if you were, Josh, and who knows of the answer this question, just kind of wondering how you guys would be thinking about same-store metrics as we kind of move through the year.

Yes. So, we are not providing guidance, Steve. So that was a very obvious notice that you made there. I think that as we think about the business, going into 2022, the only thing I will say is the second quarter was really strong, and that will be what we're watching in terms of how we perform relative to that strong quarter. Other than that, I think we'll just leave it to you guys. You'll do a really good job of estimating where you think we're going to come out and just kind of go from there. And that's all we're willing to really say at this point.

Okay. Understood. Second question would be about unrated play. And obviously, that seemed like it was pretty strong throughout most of '21. But can you help us understand what that trended like during the fourth quarter and how that's trended so far into this year? And I'm just trying to get a sense of what type of impact there could be as we move into '22 of some of these non-rated customers gravitate elsewhere as other entertainment options come back online.

Yes. So our unrated play has been consistent throughout 2021, whether you look from Q1 to Q2, three, four, and thus far into January, really not much movement at all. And so we haven't noticed -- it may move 1% or 2%, but that's not material. So it's been very, very, very consistent.

Thank you, Mr. Wieczynski. The next question comes from the line of Carlo Santarelli with Deutsche Bank. You may proceed.

Josh, I heard you loud and clear as to not providing guidance. But I did want to ask, as you think about the cadence of 2022, clearly, first quarter is a relatively easy comparison. Second quarter is obviously your hardest of the year, and third and fourth quarters are kind of what they are. But as you look at kind of current consensus has, I think, adjusted EBITDA down about 2% year-over-year, do you see as an area where kind of as you balance everything, whether it's inflation, whether it's kind of changes in the portfolio, just kind of an easy comp in the 1Q where your EBITDA can match 2021 levels? Assuming you're getting kind of a $10 million head start with some of the online stuff as well in there.

So you and Steve are trying to double team me here. Look, I think, when we think about the business, we think that we are coming into a period of time where we have opportunities to grow. And we like to set up in terms of people giving us room for things that may not happen because of the uncertainty of the environment we're in. But we're approaching 2022 from the perspective that we expect to grow off of that base. And we think that there is rationale for that. We think our ability to execute at these levels will continue that this is how we're going to run the business. And so it's not like we are concerned about inflation or pressures from labor or wages or anything like that. Obviously, we are cognizant of those and managing through them, as Keith mentioned. And so we feel like we've done that for over a year now. And all of our amenities are open and -- so it's -- for us, it's just coming in every day and executing on the business. And our perspective is as we expect to grow the business from here. There will certainly be some challenges that we face. And it won't always work out that we're able to do that. But I think that as we kind of move through the year, we think that there is -- there are enough opportunities from like Keith mentioned in his remarks, known gaming customers that we're having to turn away today because we don't have enough labor to clean the rooms, downtown business has opportunities to grow. Our mid-week and convention business have opportunities to continue to come back. Some of our rated business continues to have. And we kind of line those up on one side and then on the other side, the risk associated with maybe some of the unrated play and some of the other challenges that we may face, we see more upside than down, but we're going to have to manage through those. So that's how we're thinking about it.

And Carlo, I would correct you, there's no such thing sitting on our side of the table that's an easy comp. And so you can say that Q1 maybe is an easy setup, but with the current Omicron issues with weather that's running across the country with all the challenges in labor and inflation and just all the general issues that we face, it's one of the reasons we're not providing guidance. There's enough uncertainty out there. There's enough challenges. As Josh said, we think there's plenty of -- there are certain offsets that we have in terms of running the business to handle those. But how that all nets out at the end of the year, we'll see when we get there.

Understood. And then if I could, guys, just some clerical stuff, like -- you talked about the $150 million of buybacks. Josh, could you break that out between kind of what took place in the fourth quarter and then maybe perhaps the maintenance CapEx, cash interest, cash taxes, those types of things for the fourth quarter as well?

Yes, I have some of that. So, we repurchased about -- right at $80 million of stock during the fourth quarter. That would have been from the really the first of November through the end of the year. So the remainder of about $70 million or so has occurred since January 1 through literally today. In terms of CapEx -- what was the question around CapEx, Carlo? What it is around?

Just where did maintenance CapEx and cash interest, and if there were any cash taxes for the year or for the quarter, whatever is easier for you for 2021?

So for the year, capital -- for 2021, capital expenditures was right at $198 million. Interest cash interest usually is pretty close to our reported interest. It's -- the only thing we have is really deferred maintenance -- deferred finance charges, which is about $10 million. --:

Thank you, Mr. Santarelli. Our next question comes from the line of Joe Greff with JPMorgan. You may proceed.

Just maybe ask you a question about margins maybe in a different way that's been asked or how you've discussed it, when you think about 2022 and inflation pressures and finding labor and things that you've talked about, but if we had a scenario where 2022 revenues were exactly flat versus '21 across all segments, how margin degradation would you have relative to fourth quarter '21 annualized or if you want to think about it, the full year 2021?

That's a good -- interesting question. So you're saying if revenues were flat to 2021, is that what you said, Joe?

Right, yes.

Yes. Our margins were -- at the end -- for the full year, we're right at -- we're 40.5%, I believe. And so I think just doing some back of the envelope math, if our kind of expenses with no revenue growth continue through from the second half of '21 into '22, we'd probably have probably 150 basis points of margin degradation as a result of that. I think what makes it hard to do on the fly like this is that we've got a downtown business that effectively has only been in operation maybe one quarter, maybe 1.5 quarters. And that business contributes probably -- at least in Q4, it was a 38% margin business. So I think we could do better than that. But I think just kind of answering the question as you asked, which was flat revenues and kind of annualizing kind of the most recent operating expenses that would include gaming taxes as well. I think it'd be about 100 to 150 basis points is my best guess.

Great. Okay. That's sort of the rough math that we had. We just take OpEx and grow at a 2.5% or 3.5%. But -- and then back to the buyback question, it's great to hear both buyback and dividend and sort of very obvious commitment there. Just as we kind of think about modeling, what's the average diluted share count at the quarter end? I know -- the end of period share count, I know you have the average diluted share count in the release.

Yes. So you want to know the actual number of shares that we...

Maybe the way to answer it is this way, Josh, is of the $80 million that you bought back in the 4Q, what was the average price or what was the amount of stock that you bought back?

Yes. I don't have that in front of me. I can call you after with it, Joe. But I would say, if I -- my memory was -- we probably had about 1.5 million shares that we purchased in the in the fourth quarter. I don't have that information in front of me, but I can call you with it afterwards.

Thank you, Mr. Greff. The next question comes from the line of Dan Politzer with Wells Fargo. You may proceed.

And nice quarter. Just the first question just on the Las Vegas Locals market in terms of what you're seeing, obviously, your numbers indicated was a pretty strong quarter. But to what extent, if any, have you guys seen any impact from the mask mandate, whether it's on visitation or spend per visit?

The mask mandate has been in place for a while now and -- here in Nevada. And so it's hard to really discern what the specific impact is. Look, do customers like wearing masks? The answer is no and the customers that aren't showing up and participating because of masks? Absolutely, what is the impact of that? Hard to really know, once again, the mask mandate has been in place long enough now here in Nevada, where I don't have a good answer for you in terms of, is it a 1%, 5%, 10% impact, hard to determine at this point.

All right. Fair enough. And then on labor expenses, I know you've talked about that a bit on the call. And certainly, I think last quarter, you mentioned you're bringing back, I think, a couple of thousand employees. As we think about 2022 and on Joe's question of kind of how margins should kind of evolve, how should we think about layering in the additional employees that you're looking to hire throughout 2022?

I think as you think about -- as we bring back team members, we're bringing them back to clean more hotel rooms, service more guests in our restaurants, provide more service on the casino floor, which implies that there will be revenue associated with those team members. And so it's not just a purely incremental cost or purely a margin impact conversation. And so we've always said or we have said for the last several quarters, I should say, that we expect to maintain our margins generally around where they're at, not absolutely where they're at, that we expect that over the course of time as we add back a little bit of marketing, a little bit of labor, you'll see a little bit of a decline but we don't expect to see much of a decline. So it's kind of all built into our generic comments. Yes, margins will go down slightly. But as we bring on more team members, it is to add revenue to the business.

Thank you, Mr. Politzer. The next question comes from the line of David Katz with Jefferies. You may proceed.

Actually following up on that, one of the issues that we continue, and I know, Keith, you mentioned it or at least the notion of inflation, generally speaking, labor inflation is one of the issues it seems our whole coverage is dealing with. In part just because of the scarcity and in part because of rising minimum wage. If you could just color us in a bit on what you're seeing and how you're dealing with it that would help, please.

Look, it's not a new phenomenon for us. I think we've been dealing with it for the better part of this year. It is a challenge, not just here in Las Vegas, but across the country, hiring team members. And whether it is just sheer quantum of team members and the sheer quantum of applicants low, or whether it's a price issue in terms of what it costs to attract them, and we've been dealing with it all year. It's something that as you -- once again, it's reflected in our current margins. It's something we continue to deal with. If you look at our margins over the last couple of quarters, they've been relatively stable, but it is built in. As we look into 2022, it's something we expect to continue to deal with. Once again, inflation from whether it'd be cost of groceries, whether it's cost of supplies, whether it'd be inflation and wages, we expect that we will continue to pay through those. But thus far, our team has done a great job of managing this on a daily basis. We've been able to maintain the margins that we want to maintain. And so we'll continue to find ways, whether it's adjusting prices or adjusting staffing levels or being more creative about finding ways through this. We work on it every single day, and that's what we'll continue to do. So, the best I can answer it.

It's perfect. And if I may just follow up quickly. With respect to the notably positive capital return program you've laid out, how should we think about the potential boundaries around acquisitions, right, which presumably might sort of impact or defer or change some of that? Are acquisitions of any size? Do they have some boundaries or possibilities?

Well, I think as we think about it, these are somewhat unrelated. We've worked hard to bring the leverage of the Company down to a point where it isn't a choice between one of these or the others or something else, where it would leverage in the low 2s the type of cash flow we're producing today, we can maintain our properties. We can invest in small growth opportunities like Treasure Chest and Fremont. We can maintain the capital return program. And so we don't see it as a choice. I would say that as we look around the horizon or look over the horizon, we don't see anything -- I don't want to say see anything interesting, we don't see anything out there that is maybe interest us. And so we don't see anything that we're going to be looking at any time soon. But -- we don't think we're going to have to make those types of choices where in order to do something, we'll have to pull back on the capital return program.

I think, David, the only thing -- I would add a couple of things to that. One is I think when you have a low leverage and you're generating a lot of free cash flow, investors are obviously concerned you're going to go out and do something crazy with that money. I would basically tell you that we have this conversation internally all the time just because we can doesn't mean we will. And as Keith mentioned, there are things out there for sale today. And we're just -- we're going to continue to stick to what we know best that's executing on the business primarily, reinvesting in our existing assets. That's basically smaller investments that have great returns. And if something comes along at some point, that's strategic, and makes sense for the Company, that's a different story. But just because we have low leverage, we have a significant amount of free cash flow. We will have these one-off smaller projects that we invest in and have the benefit of low leverage and a lot of free cash flow to return to shareholders. And then the only other aspect I would mention that we mentioned in our remarks is we do want to grow our online presence with a focus on iGaming. It's a regional strategy. It's not a strategy that many of our peers have chosen to pursue. And so you shouldn't expect us to make big investments and incur big losses to be in the online space. But it is something that we want to do, and that will take the form over time, don't have a set time frame for it. We think we have time just given iCasino is likely to roll out much slower. But we'll either build it out, continue to partner with a third party or make some sort of investment in that arena, but we think that's important strategically for the Company longer term. But again, we're not about making big investments, incurring big losses related to that opportunity.

Thank you, Mr. Katz. The next question comes from the line of Chad Beynon with Macquarie. You may proceed.

Given that the foundation of business, as you mentioned, is close to $1.4 billion of EBITDAR, I believe your rent expense is right around $100 million, maybe slightly over, any updates in terms of how you're thinking about considerations for more sale leasebacks given the multiples that we've seen out there in the past couple of months?

Look, I don't think our view has changed. We still view owning our real estate is a strategic asset for us and a strategic option for us. Frankly, we may feel more strongly today, look, with low leverage at kind of trading out debt, we can continue to pay down for permanent hire price debt doesn't seem to make a lot of sense. We wouldn't be in the position we're in if we weren't able to pay down the debt. We just paid down over the course of the last 18 months and cut our leverage in half. So our views really haven't changed. We're certainly aware of what's going on out there. As we've said for the last five years, we paid attention to this. We understand it, we monitor it, we'll make the right decisions on behalf of the Company, but sitting here today, our view hasn't changed.

Yes. I think the ability to generate $1.4 billion of EBITDAR and convert 50% to 60% of that to cash flow is something that we enjoy doing as to having the fixed cost of that lease in between there and growing every year.

And then just asking for a little bit more of a finer point with the $24 million of online EBITDAR bridging up to $30 million, you have a lot of rev share agreements that should probably build on top of the $24 million. But is most of that growth that you're expecting from those rev share agreements in places like Louisiana and the like, is that from the Stardust, I guess, in-house iCasino business that you said you're going to be focusing on even more next or this year?

So it's probably a combination of the lion's share, but it will come out of Louisiana, having five operations in the state as well as the online business. And then we didn't start the iGaming in New Jersey and PA until April. So, it will be a quarter of incremental revenue from that. So, it is a combination of the two.

Thank you, Mr. Beynon. We have time for one last question. The last question comes from the line of Thomas Allen with Morgan Stanley. You may proceed.

On the capital returns, it sounds like when you authorized the buyback program last quarter was that you tend be more measured in your approach? And then this quarter, obviously, you're guiding to $100 million of buyback a quarter and potentially more, and then you interested in dividend. I mean, anything changed? Like what drove the more aggressive stance?

I would say nothing. It reflects just what we expected to do all along. We just want to take it one step at a time. We don't view this any differently than the way we were thinking about it when the share repurchase program was approved. We're generating a lot of free cash flow. And I would say that the stock has been particularly volatile in the quarter in the last three months going from I don't know, a range of probably 54 to 67 or 68, so we just had plenty of opportunities to execute on our program over and above kind of what we thought we would do on a regular recurring basis. And so look, I think that we want to be able to return capital to shareholders, and we want to do it in a way that makes sense. And we announced a program that we want to execute on. We didn't want to announce one that was so big that we didn't have credibility that we wouldn't execute on it, and we want to be able to announce a program and then re-up as soon as possible with an open, just so that people can understand that we think there's real value in our stock and in the ability of our team and our operations teams to execute at these levels. And -- we really have no doubt in that confidence.

And then just my follow-up. Can you just remind us of the structure of the relationship with Flutter around the iGaming business?

Sure. So once again, it is similar to how sport betting is handled and that we are using Flutter's technology and their software to help us run that business, obviously, as well as our expertise. We don't have a deep expertise in that business at this point. So we're leveraging their expertise and their technology and to a large extent, effectively taking the revenue share off of that also.

There are no additional questions waiting at this time. I would like to pass thanks to the management team for any closing remarks.

Thank you, Bethany, and thank you for everyone joining today. If you have any follow-up questions, feel free to please reach out to the Company. Thanks again for joining.

That concludes the Boyd Gaming fourth quarter earnings call. I hope you all enjoy the rest of your day. You may now disconnect your lines.