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Operator: Good afternoon. Thank you for attending today’s Boyd Gaming Fourth Quarter Conference Call. My name is Tamia and I will be your moderator for today. All lines will be in mute during the presentation portion of the call with an opportunity for questions-and-answers at the end. It is now my pleasure to pass the conference over to your host, Josh Hirsberg, Executive Vice President and Chief Financial Officer.

Josh Hirsberg: Thank you, operator. Good afternoon, everyone, and welcome to our fourth quarter earnings 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 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 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 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?

Keith Smith: Thanks Josh. Good afternoon everyone. We began 2022 with the ambitious goal of surpassing 2021’s record results. One year later, we have clearly met that challenge as we sustained the operating momentum we built throughout 2021. We once again delivered a record performance with revenues of $3.6 billion and EBITDAR of $1.4 billion in 2022. And the fourth quarter was a strong conclusion to the year with record company-wide revenues of $923 million and record EBITDAR of $360 million. We also maintained our operating efficiency with company-wide operating margins of 39% for both the fourth quarter and full year. Our results for 2022 are a tribute to our operating teams as we remain focused on growing revenues and building loyalty among our core customers while successfully managing expenses in the current environment.

While 2022 was another record performance, we did experience headwinds at times during the year, and that continued in the fourth quarter with some year-over-year softness in our Midwest and South markets. However, the softness in our Midwest and South region was more than offset by strong performances from our two Nevada segments, growing contributions from online gaming and management fees from Sky River Casino. Now, let’s review each segment in more detail. In Nevada, we finished the year with record fourth quarter EBITDAR performances in both our Las Vegas Locals and Downtown Las Vegas segments. Starting with the Locals segment, revenues and EBITDAR both grew 2% over last year’s records with particularly strong gains in our non-gaming business, including hotel, food and beverage, and entertainment.

Throughout our Locals properties, growth was strongest among out-of-town customers as we benefited from increased tourism across the Las Vegas Valley. Play from our core customers remained healthy, but was offset by declines in retail play. Our teams did an outstanding job during the quarter, delivering strong flow-through on revenue growth with margins in our Locals segment exceeding 52%. We are clearly benefiting from a strong Las Vegas economy as travel and tourism to Southern Nevada continues to increase. In 2022, we nearly 39 million people visited Southern Nevada, up more than 20% from the prior year, and airport passenger counts reached all-time record levels. Convention business continued to recover as well with the convention and meeting attendance more than doubled 2021 levels.

And with more than 5,000 hotel rooms in the Southern Nevada market, our company is well-positioned to capitalize on these growth trends. Looking ahead, 2023 has gotten off to a good start in our Locals segment with January performing well. We have seen no meaningful changes in our Locals business in the early part of 2023. Next, in Downtown Las Vegas, we delivered an impressive performance, beating last year’s fourth quarter EBITDAR record by nearly 38%. We continue to see strong demand throughout the Downtown Las Vegas market as pedestrian traffic and guest counts increased throughout the area. At the same time, our core Hawaiian business has fully recovered and is now exceeding pre-pandemic levels. Additionally, our recent hotel remodel at the Fremont has put us in excellent position to meet growing demand, allowing us to drive further growth in hotel revenues while broadening the property’s appeal.

Going forward, we will also benefit from Fremont’s recently opened casino expansion. This expansion includes incremental slot capacity, a FanDuel branded sportsbook, and a new contemporary food hall. We are encouraged by the early results from this expansion with strong growth in both gaming and non-gaming volumes at the Fremont since the expansion was completed in mid-December. Next, in the Midwest and South, we achieved fourth quarter records for both revenue and EBITDAR, thanks to growing contributions from online gaming as well as management fees from Sky River. However, the performance of our land-based operations was below prior year for the quarter, partially due to December’s severe winter weather and difficult year-over-year comparisons in our Louisiana and Mississippi properties.

Additionally, we experienced some softness in play early in the fourth quarter, although these trends improved later in the quarter and into January. Turning to our online business. Our partnership with FanDuel, the nation’s number one sports betting company, continues to deliver impressive results. We generated approximately $17 million in EBITDAR from online gaming during this quarter, up more than 100% over the prior year, as we benefited from a strong football season, new FanDuel operations in Louisiana and Kansas and contributions from Pala Interactive, which we acquired on November 1st. During the quarter, we also earned $21 million in fees from our Sky River Casino management contract, including a one-time development fee of $5 million.

This was Sky River’s first full quarter of operation following its opening last August. With Sky River, our goal is to develop a compelling entertainment destination and build a thriving business that would allow the Wilton Rancheria Tribe to achieve their vision of self-sufficiency. Based on early results, we have clearly succeeded with extremely strong visitation levels at Sky River during its initial opening phase. We have long believed there was significant unmet demand in the market and with the high-quality entertainment experience we have created, we’re starting to realize Sky River’s compelling potential. As a result, we now expect Sky River will generate approximately $50 million in management fees for our company in 2023. So, in all, despite some challenges in our Midwest and South segment, our company achieved record fourth quarter and full year results.

As we move into 2023, the economic uncertainty that persists today makes it difficult to predict where consumer trends are headed. However, we are cautiously optimistic about the trends we saw in January across all three segments of our business. Going forward, we believe there are additional opportunities to drive growth in our business through strategic reinvestments in our portfolio, the continued expansion of our online gaming business, and organic growth in our land-based operations. Starting with our existing portfolio, we see opportunities to drive long-term growth through selective reinvestments in our highest-performing properties and markets. A good example is the Fremont in Downtown Las Vegas, where, as mentioned earlier, we have completed work on a significant property expansion.

In mid-December, we opened 10,000 square feet of new casino space, increasing Fremont’s total slot count by nearly 15%, while creating a more comfortable gaming environment for our guests. We also added a FanDuel-branded Sportsbook in a food hall with six quick-serve restaurants. The expansion is already delivering growth in both gaming and non-gaming revenues at the Fremont. Going forward, this investment will further strengthen our appeal to customers throughout the downtown area, helping us build on our record results in the Downtown segment. And in Louisiana, work continues on our $100 million land-based facility at Treasure Chest casino. Once complete in early 2024, this project will allow us to take full advantage of demand in the suburban New Orleans market by creating a more spacious single-level casino floor, expanding our non-gaming amenities and improving guest parking.

In addition to these land-based growth investments, we expect our online business, including sports, casino, and social gaming, will continue to grow. We took an important step forward in our online growth strategy with our recent acquisition of Pala Interactive, which gives us the talent and technology to begin building our regional online casino business. While online casinos are now limited to just a few states, we believe in the long-term potential from iGaming. Owning and operating our own iGaming operation will allow us to leverage our nationwide portfolio and extensive customer database to create a profitable online casino business. We will start by transitioning our current Stardust Online Casinos in New Jersey and Pennsylvania to our platform over the next several months.

We will also selectively target growth in the B2B segment of the business by adding new B2Bcustomers and enhancing our platform’s products, features and capabilities, which will benefit both us and our partners. On the sports betting side, we remain fully committed to our successful and growing partnership with FanDuel. This partnership recently expanded into Ohio and Kansas with FanDuel launching mobile and retail sports betting in both states. Our partnership with FanDuel now includes all but one states in our Midwest and South region. In all, our online sports betting, casino and social operations generated approximately $40 million in EBITDAR in 2022. And we expect this business will continue to grow as FanDuel ramps up in Ohio and Kansas.

Beyond these growing financial contributions, we will continue to benefit from our 5% equity stake in FanDuel, which grows increasingly valuable as they further strengthened their position as the nation’s leading sports betting company. While the opportunities from online and land-based reinvestments are compelling, we also believe there is upside from continued organic growth in our existing operations, particularly in hotel revenues, meeting and convention business, and other non-gaming revenues. In all, our growth opportunities and our operating momentum are further strengthening our free cash flow, allowing us to return substantial capital to shareholders. We plan to continue targeting $100 million in share repurchases per quarter in 2023, supplemented by dividend payments while we pursue our ongoing growth investments.

Before concluding, I wanted to note our company’s continued progress on ESG initiatives as we recently received prominent national recognition for these efforts. Last month, Boyd Gaming received a five-star rating in Newsweek Magazine’s Annual Listing of America’s Greatest Workplaces for Diversity. We were the only gaming company to receive a perfect rating in this listing, which was compiled through anonymous employee surveys nationwide. Promoting diversity and inclusion is a central part of our company’s culture, and we are honored to have our efforts recognized by Newsweek. So, in conclusion, this record quarter was yet another example of the resiliency and diversification of our portfolio and the strength of our operating model. We set new fourth quarter records for both revenue and EBITDAR, overcoming softness in our Midwest and South markets, with strong results in Nevada and contributions from new growth opportunities.

We closed on the acquisition of Pala Interactive, further positioning ourselves for long-term growth in the online space. We maintained operating margins at some of the highest levels in our history as our operating teams continue to successfully manage through higher costs and economic uncertainty. And we continue to return significant capital to shareholders, while maintaining a strong balance sheet. In all, our record fourth quarter results concluded another strong year for our company as we set full year records for revenue and EBITDAR for the second year in a row. I would like to thank every member of the Boyd Gaming team for their hard work and their contributions to this outstanding performance. And while it is difficult to predict the future direction of the economy, we remain confident in our operating model and our team’s proven ability to successfully manage the business.

Thank you for your time. I’d now like to turn the call over to Josh.

Josh Hirsberg: Thanks Keith. This was another very good quarter for our company with record results in the quarter and for the full year against very strong comparisons to 2021. Recall that our full year 2021 EBITDAR performance was more than 50% higher than our previous record set in 2019 and that we set quarterly EBITDAR records in every single quarter of 2021. And yet we have continued to improve on those baselines. In each of 2021and 2022, EBITDAR approximated $1.4 billion and margins were approximately 40%. And in 2022, adjusted earnings per share exceeded $6 per share. We have accomplished this by focusing on growing our core customer base and managing our business very efficiently. Our operating teams continue to do an excellent job managing our expense structure and maintaining margins.

As we look ahead to 2023, we continue to see opportunities to grow our business, supported by continued focus on our core customers, expansion in our non-gaming revenues and online operations and further contributions from the investments we are making in our existing portfolio. In addition, 2023 will benefit from a full year contribution from our management contract with Sky River, which opened in August 2022. Now let’s discuss a few key items from the quarter. First, our capital return program remains a priority for our company. We repurchased nearly $107 million in stock during the quarter, representing 1.8 million shares at an average price of $58.22 per share. The actual share count at the end of the year was 102.8 million shares. For full year 2022, we repurchased 9.4 million shares at an average price of $57.48 per share, representing$542 million.

We have approximately $240 million remaining under our current repurchase authorization. When combined with our ongoing dividend program, we returned nearly $600 million to our shareholders during 2022. We remain committed to $100 million per quarter in share repurchases, while continuing our dividend program. At the same time that we are returning capital to shareholders, we will continue to strategically invest in our land-based portfolio. Capital expenditures in 2022 were $270 million. We expect to spend approximately $350 million in 2023 for capital expenditures. This includes $250 million in maintenance capital and $100 million in growth capital primarily related to the Treasure Chest project. Turning to the balance sheet. We finished 2022 with total leverage of 2.4 times and lease-adjusted leverage of 2.8 times.

Our target leverage remains 2.5 times traditional leverage. Our balance sheet remains very strong with significant flexibility as we have low leverage, no near-term maturities and ample capacity under our credit facility. So, in all, we finished the year in great shape as a company. Thanks to our operating model and growth initiatives, we continue to produce a substantial and diversified stream of free cash flow, allowing us to balance a robust capital return program with strategic investments in our portfolio. This formula has produced strong results for our shareholders, and we are confident it will continue to create considerable value over the long-term. This concludes our remarks, and we’re now ready to take any questions.

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Operator: We will now begin the Q&A session. Our first question comes from Chad Beynon with Macquarie. Your line is open.

Chad Beynon: Hi, good afternoon. Thanks for taking my question. Josh, Keith, you guys talked about — well, first off, congrats on a nice quarter. You talked about some selective reinvestments and the returns that you guide in the back half of 2022 and kind of what you’re expecting in 2023, 2024. But given your leverage at 2.4 times, how are you thinking about the portfolio and other opportunities to maybe selectively reinvest elsewhere and get these double-digit returns that you’re putting up? Thanks.

Keith Smith: Sure. Good question, Chad. So, we have kind of studied our portfolio, and we do have several other opportunities to continue to build into strong properties in what we think are growing markets or markets with strong demand. And so as future quarters go by, you’ll hear us begin to talk about some of those projects. But we have studied it and we do have additional opportunities. We just don’t have anything to announce today. So, you can expect to hear more in the future. I think we’ve talked about it in the past, and these are smaller-type projects. These are sub-$100 million-type projects, many of them in the $40 million to $60 million range. So, we’re not talking about projects that are hundreds of millions of dollars.

Chad Beynon: Okay. Thanks. And then in the Locals market this year, you guys have averaged roughly about $120 million of EBITDA per quarter. Obviously, some exceptional strength in the fourth quarter here. I wanted to focus on some of that destination business that’s coming back. With CES in January, we’ve seen ADRs across the strip, and I’m guessing right off the strip, up somewhere between 30% and maybe even 60%. I’m guessing you guys are benefiting from more leans. But against that average of $120 million of EBITDA per quarter, can you help us think about what is still not on the table from mainly the convention business not back to where it was mainly for 2022 and where we should see it in 2023? Thanks.

Josh Hirsberg: Yes. So, Chad, this is Josh. I think that when we think about kind of the opportunities for our Locals business, it comes from benefiting from the broader recovery in the Las Vegas market overall. And it’s really not only our Locals business that will benefit from that, but also our Downtown business. So, we look at kind of an emerging or recovering kind of strip meeting business to help drive our own meeting and convention business, our kind of occupancy in our hotel rooms as well, which we still have opportunities to do across the portfolio, again, not only in Las Vegas, but also that drives incremental visitation downtown. And we benefit from the investments we’ve been making with Fremont, but also the other properties that we have there as well. Keith, I don’t know if there’s anything you’d like to add to that.

Keith Smith: No, look, I think it’s pretty well known that convention attendance was up significantly in 2022, more than double the prior year number, but still below 2019 levels. So as that continues to build, we can take advantage of it both at the Orleans and several other of our properties. And as Josh said, Downtown will also improve as overall visitation to Las Vegas and convention attendance improved. So, we definitely will be able to leverage off of that going forward.

Chad Beynon: Thanks. Appreciate it.

Josh Hirsberg: Sure.

Operator: Thank you. The next question comes from Joe Greff with JPMorgan. You may proceed.

Joe Greff: Hey guys. Congratulations on great results here. Keith, I’d love to just follow up with you a little bit, maybe dig deeper onto what you attribute the difference in consumer spend or consumer behavior between Downtown Las Vegas and the Las Vegas Locals market versus the softness you saw in parts of the 4Q in the Midwest and South. I know you called out the destination business is certainly strengthening in the Locals market. Maybe that was slow to come back. And maybe the regional customer has recovered earlier. Where are you seeing the softness? Is it sort of at the lower end of the database, the higher end of the database? I would just love to get how you’re looking at your different subsector of gaming consumer.

Keith Smith: Sure. So look, I think we’ve talked about some of this through our prepared comments, but look, the Locals business, once again, we’ve performed exceptionally well with our out-of-time guests during the quarter as convention attendance and visitation in Las Vegas continued to grow. That also helped boost the Downtown results. And so both of those are doing well. We obviously have a strong Locals component in our Locals segment. We don’t get very many locals to Downtown Las Vegas. And so it’s a different type of a customer. You commented, and we’ve long believed, that in these types of situations where you go through dislocations like we’ve been through with COVID, that the Midwest and South markets do recover a little quicker.

We believe those markets have been recovered longer than the Las Vegas market. And therefore, they’re a Littlemore mature. And so they’re just maybe slowing down a bit before others. And outside of what the December weather that really impacted both the Midwest and the South, some difficult comps that we talked about in our southern properties. When you look at 2022 compared to 2021, there was just some softness. But as I said, the softness was early in the quarter. And in the second half of the quarter, it started to recover and continue to recover through the end of the quarter and into January. So, I don’t think there’s any real negative trend there. It was softness early in the quarter. The ones get started to come back. So, not much more I think I can say.

Joe Greff: Great. And when you think about this year and maybe looking at your internal forecasts or budgets, would you expect that the Las Vegas Locals market would grow in excess of the core Midwest and South net regional, net revenue portfolio?

Josh Hirsberg: Hey Joe, this is Josh. I guess I get to take that one. I think we feel like coming into 2023, I think we step back and look at where the consensus estimates are and they’re coming down about 7% or 8% from where we delivered results in 2022. And I think we feel like our business can do generally in line with that or a little better. I think that we see some opportunities for growth in really both of those segments, but that I’m not so sure we’re ready to say that we’re going to see growth over 2023 in Las Vegas Locals. It will be — if it’s down, it’s down marginally relative to 2022. But it only goes to kind of the uncertainty of how the consumer — what happens with the consumer as we move through the year.

Joe Greff: Thank you.

Operator: Thank you. Our next question comes from Carlo Santarelli with Deutsche Bank. You may proceed.

Carlo Santarelli: Thank you for taking my question. I just wanted to circle back to 1 of the comments, Keith, I believe you made earlier. Sky River fees were $21million, with a $5 million one-time true-up payment or something in there for the management fee, and online was $17 million. If you kind of back that out and then back out half of that $17 million in the 4Q 2020, does it more or less imply or I believe that math more or less implies like a down double-digit EBITDA results for the segment in the fourth quarter? If that’s right, how much would you say, not necessarily the weather, but maybe that broader malaise that you saw early in the quarter relative to kind of where you were run rating for January of that decline, what would you — how would you kind of parse those out?

Josh Hirsberg: Yes. So Carlo, I’ll try to take a shot at it, and it’s a little bit more art than science, as you can probably imagine. I think that what we tried to communicate was we felt like there were some things that we could identify around the weather, around the more kind of robust business that we had seen in Mississippi and Louisiana last year that made the comparison a little more difficult this year. And then there was something kind of leftover that really was more relevant or more visible in the first half of the fourth quarter. And that’s where we really try to dig into our customers and see what was going on. And it was really abroad-based weakness in our customer. That was largely prevalent in the first half of the quarter.

It was something we really hadn’t seen to any extent before. And then as we move — and so — and I would say a lot of the weakness was concentrated in those two markets of Mississippi and Louisiana for us. And then as we move through the quarter, we know we were able to track and see those — that trend got better over time, sequentially improved. And then obviously, the last week of the year was very strong across the board. And as we mentioned before, we also saw kind of contributions from out-of-town business helping drive Las Vegas. So, as we kind of came into January, the trends from the late December continued. Business was really good. We recognize there’s a fairly — there was an easy comparison. So, it’s a little bit like you’re trying to dissect through how good should it be versus the comparison and how good is the business.

What we can tell you is it doesn’t feel like the customers — the customer certainly hasn’t fallen off the deep end. And the general trends of our core customer kind of regained momentum outside of Las Vegas and continue to build through the quarter, and that was encouraging to us. And Las Vegas remained very good for us, although early on, it also had some weakness in our customer base as well, primarily in October. So, it was just a quarter of a lot of different things going on. It ended up heading in the right direction for us. And I would say as we look back over quarters, earlier in the year, there’d be a soft quarter, an okay quarter and then a really strong quarter, and that’s — sorry, soft month, a good month and then a really strong month, and that’s what happened in the fourth quarter as well.

So, I’m not sure we’re at a place where we can extrapolate a lot from the customer trends that we saw in the fourth quarter, but that’s what happened from our perspective.

Carlo Santarelli: Understood, that’s helpful. And then just on the leverage point and tying that back to the buyback, you guys — I want to say, Josh, when you look at your leverage kind of EBITDA relative to your traditional net debt, correct? So, you target the 2.5% range. It would more or less imply, and obviously, numbers moving around and whatnot, but maybe not commensurate with last year’s buyback, but certainly, you would be able to do something similar to last year’s buyback. And that $100 million a quarter that you guys have previously talked about, does that kind of remain the goal on any dislocation get more aggressive? Is that kind of how you’re thinking about it? And then just as an aside to that, you guys, I thought, had development advances to the Tribe that were going to come in this year.

I did notice there was like $14 million to $15 million of an interest payment. And I wanted to understand if those two things were linked or if you still expect cash payments at some point this year.

Keith Smith: So, Carlo, this is Keith. You’re right on the share buybacks. We’ve been communicating for the majority of2022 that we’re targeting $100 million, and we remain targeting $100 million per quarter. If there are some dislocations, given the strength of our balance sheet, strength of our cash flows, then we have the opportunity to do more than that, but we want to continue to anchor people in right around $100 million a quarter. So, we’ll just kind of see how that plays out, but we don’t want to set an expectation that it will be higher than that. And then on top of that, the dividends that we talked about will continue. In terms of development advances, you’re right, we will start to see those being repaid this year. Probably later this year, we’ll start to see those repaid. The property has been off to a great start, and we’ll see that cash flow into the company second half of the year.

Josh Hirsberg: Yes, Carlo, what you were referencing is we had reserved all of our advances that we have made to the Tribe. And so once the casino opened, the risk associated was reduced. And so part of that recovery was shown in interest in — as interest income and the other half was shown down in, I think, the preopening line. So, that’s what got picked up on that was actually out of cash payment to us.

Carlo Santarelli: Great. Thank you guys.

Josh Hirsberg: You’re welcome.

Operator: Thank you. The next question comes from Shaun Kelley with Bank of America. Your line is open.

Shaun Kelley: Hi, good afternoon everyone. Thanks for taking my question. Josh or Keith, just sort of one area for me was you called out the transition of some of the online gaming features, I think, moving over to your in-house platform. And I believe, Keith, you said it was in the next couple of months. Can you just talk a little bit about the economic implications there? Is that — does that transition allow you to consolidate a material amount of incremental EBITDA? Or kind of how is that going to play through as you start to take those operations back in-house?

Keith Smith: Yes. So, we’d expect that transition to occur sometime in the next couple of months, I think midyear in terms of probably when that happens. As you think about 2023 and maybe early 2024, you’d expect — I think what we’d ask you to expect is probably no change in the overall economics as we transition them. With any transition, there’ll be some breakage as we start to move people over to our platform, slight differences and we start to grow it. So, in the first year, probably flat economics, and then it will build from there. We do expect by consolidating it and more fully using our databases that we’ll be able to grow that to a higher level, but not in the near-term. Near-term should be flat.

Shaun Kelley: Great. That’s my only question. Appreciate it everyone.

Keith Smith: Great. Thanks Shaun.

Operator: Thank you. Our next question comes from Steve Wieczynski with Stifel. Please proceed.

Steve Wieczynski: Yes guys. Good afternoon. So, I want to go back to the recovery that you’ve seen or that you saw in the South and the Midwest in January. And I’m not really sure how to ask this, but do you think that January recovery was real? And what I mean by that is, with December an anomaly and the January recovery was tied more to delayed or canceled trips being rebooked into January because of weather, or was January benefiting from whether it’s higher social security payments. I’m just trying to figure out — maybe you can give a little more color on that recovery in January.

Keith Smith: So, Steve, as you think about Q1 and January, in particular, look, in — early in the quarter, frankly, the comparisons are easier because last year, in January, we were coming out of Omicron here in Nevada. We still have some mask mandates. People weren’t fully coming out. And the second half of the quarter, both here in Nevada and across the MSR, the business accelerated. And so in fairness, January comps are a little easier than later in the quarter. I think what we were trying to communicate was set aside year-over-year comparisons and just look at raw customer trends and how the customer is performing, we didn’t see any meaningful differences in how the customer is performing as we look at the second half of Q4 and how they performed in early January. So, kind of ignoring year-over-year comps, just looking — think of it more sequentially is how we think about that.

Steve Wieczynski: Okay. Understood. And then, Josh, just given the Midwest and the South segment now includes the online and management fees in there, just wondering if you could help us think about maybe how margins should trend in that segment moving forward. And if I could also ask two housekeeping questions, I’m not sure if you’ll give it to us, Josh, but maybe help us with corporate expense and interest expense this year?

Josh Hirsberg: Sure. So, in terms of the margins for us, remember, we have this enormous amount of taxes that are essentially a pass-through from FanDuel that we pay on behalf of them because we have the license in the jurisdictions that we operate, and that shows up as revenue and then 100% as an expense as well. So, that dilutes our margins pretty significantly. So, just to put it in perspective, our margins online last year were about 14%. This year, just the online piece, which is the tax pass-through, six weeks of Pala, which is now Boyd Interactive, and then the revenue share, that’s all at about 18% to 20% margins. So, that’s kind of how it is today. And it will all depend on how much that tax pass-through continues to grow because it will dilute our — continue to impact those margins.

I think in terms of — so hopefully, that answers that question, but if there’s other elements you want to note, feel free to ask, and we’ll try to answer. I think in terms of interest expense, we would expect our debt balances — of course, this depends on your projections of EBITDA, but I think we would expect our debt balances largely to remain fairly consistent. So, any changes in interest expense are going to be purely based on your projections of interest rates into 2023. So if you think they’re going up, then our interest expense is probably going to elevate a little bit. But probably, in reality, not to be materially different than where it was in kind of the run rate of Q4. And then in terms of corporate expense, I mean, probably $1 million or $2 million higher than kind of what we saw in 2022 would be a good number to think about for 2023.

So, hopefully, that’s helpful.

Steve Wieczynski: That’s perfect. Thank you guys. Appreciate it.

Josh Hirsberg: Sure.

Operator: Thank you. The next question comes from Barry Jonas with Truist. You m ay proceed.

Barry Jonas: Great. Thanks. Guys, can you maybe just talk broadly about the M&A environment out there? How do you think about sale leaseback as a form of financing given where the capital markets are today? Thanks.

Keith Smith: Well, specific to your question about sale leasebacks, I think that we continue to believe, given our strong balance — well, first of all, given our strong balance sheet and our leverage, we really don’t have a need to transact or look at other forms of financing. If we did, we think they’re probably cheaper forms of financing for us out there, more traditional forms of financing that are pre-payable, that we can pay down. So, we don’t find ourselves kind of looking at that these days. In terms of M&A, I don’t know, from my perspective, it’s kind of quiet out there. But I don’t know, maybe Josh has heard things I haven’t.

Josh Hirsberg: I tell you everything I hear, Keith.

Barry Jonas: Okay, great. And just to follow-up. Nevada results, really strong. Just curious if you think you’re gaining share or just benefiting from market strength. The way the state reports Locals sometimes doesn’t match up exactly. So, curious if you think you’re a share gainer or just sort of seeing tailwinds from the market.

Keith Smith: Yes, I think it is just the strength of the overall Las Vegas market. I don’t think there’s a lot of share changing going on. I think everybody has settled into where they’re at. Promotional environment is relatively stable. Nothing has changed much there. So, it really is the strength of the overall Las Vegas market and increases in visitation and convention attendance.

Barry Jonas: Great. Thanks so much.

Keith Smith: Welcome.

Operator: Thank you. Our next question comes from Dan Politzer with Wells Fargo. Your line is open.

Dan Politzer: Hey, good afternoon everyone. Thanks for taking my questions. First one, Josh, I think you mentioned Louisiana and Mississippi. There’s been some softness there. Has there been any change in the promotional environment? Or is that more just something going on with the customer?

Josh Hirsberg: Yes, I’d say the promotional environment has been stable across the country, including in Las Vegas and in our Midwest and South assets. So, that’s not a driver of — really, we saw outsized performance in Q4 of last year in those assets, really even superior to what we had seen in the earlier quarters of a very strong 2021. And I just — it’s just really a comparison-related issue, could have had something to do with what was going on with weather or hurricanes, but that’s really hard to kind of quantify. So, we just know that kind of sequentially through 2021, Q4 was really strong for those — for a portion of those assets. And that’s what made the setup a little bit more difficult for that region so far in the fourth quarter.

Dan Politzer: Got it. And then I just wanted to clarify something. So, as I think about your growth levers for 2023, higher digital, Sky River, the Fremont return and then obviously kind of just the organic environment, and I think back to your comments on the actual overall EBITDAR for 2023 compared to 2022. I just want to clarify, so when you mentioned the Street was estimated down 7% or 8%, you thought that was overly conservative given the growth levers? Or am I misinterpreting something there?

Josh Hirsberg: I think what I would say is that we feel good relative to where we think our business is going to trend relative to the Street’s consensus just because of the uncertain environment we find ourselves. I think you adequately identified kind of the — where we see opportunities for growth. We get a full year of Wilton. We get kind of some expansion of — on the online side of things. And we’ve got — we’ve had increasing demand for our non-gaming amenities, both hotel and F&B, and we feel like that will continue to be an opportunity as well as depending on how the overall gaming consumer feels and trends for the rest of the year, for 2023, we feel that’s also an opportunity to continue to grow loyalty customer. But I think — and look, I think the other thing that like is easily remiss in our business is we’re making small investments that are generating really good returns that over time, we expect those to accumulate to be something meaningful for us, but we’re not taking big bets.

We’re not committing the company to a large amount of capital in the current environment that we find ourselves. So, all of that gives us some comfort that we’re going to be operating in this level of kind of performance that we’ve been at for the last two years, and that was kind of what we were trying to communicate in our prepared remarks. Hopefully, that makes sense.

Dan Politzer: Yes, that makes sense. And just one last housekeeping one. I think in the past, you’ve talked about segmenting out Sky River and/or the digital stuff. Is that still a consideration?

Josh Hirsberg: Yes. We’re — yes, we’re most likely going to do it in the first quarter, give you some historical perspective as well. We plan to break out online, which will include our revenue share, our tax pass-through and what is to become Boyd Interactive with the acquisition of Pala. And then we’ll have a managed and other, which will include Wilton as well as Lattner Entertainment.

Dan Politzer: Great. Thanks so much.

Josh Hirsberg: Sure.

Operator: Thank you. Our next question comes from David Katz with Jefferies. Your line is open.

David Katz: Hi, afternoon gentlemen and thanks for taking my question. Apologize if you touched on this in the prepared remarks, but I want to make sure as we go through our model, we reflect all the positives you’ve discussed so far, but also just contemplate any points of competition that are out there. Did you mention any? Or could we just touch on those for a moment?

Keith Smith: So, we didn’t talk about competition more broadly. I think as we look at where we’re at today and into 2023, there are probably a couple of areas. So, I think it’s well known that the Horseshoe opened in Lake Charles. It’s a property that had been closed for a while as it was rebuilt from some hurricane damage, opened in December. That obviously competes with our Delta Downs property. It’s been open a little less than 60 days. I haven’t really seen much of an impact, but it is incremental competition. In Indiana at our Blue Chip property, the four wins is opening or expanding a property in South Bend called South Winds, adding a hotel in expanded some casino space last year. We do get some business out of South Bend, so a little bit of incremental competition there.

And then the HHRs in Kentucky have been impacting Belterra Park just outside of Cincinnati, Ohio. They existed there in the second half of 2022. So, we’ll see a little bit of additional impact there in early 2023 from those HHRs. Other than that, no other significant competition throughout the portfolio.

David Katz: Okay, perfect. Thank you very much. Congrats on your quarter.

Keith Smith: Thank you.

Operator: Thank you. The next question comes from Ben Chaiken with Credit Suisse. Please proceed.

Ben Chaiken: Hey, how is it going? You mentioned earlier, basically taking back the Stardust brand in mid-2023, I think you said in a few months in vertically integrating. How do you think about the puts and takes of retaining those customers? So, I guess what I mean is, on 1 hand, they have the wallet established with you. Obviously, the brand loyalty. On the other hand, presumably, FanDuel, who’s been running that, wants those customers as well. So, just like net-net, do you have any idea at retention or care to take a shot?

Keith Smith: No, I do not care to take a shot. Expect that there will be breakage. And when I asked a little bit earlier in the conversation about kind of the economics, once we take this over, that’s why we’re saying, look, in the first year, expect the economics not to change. And that what we made as a revenue share with FanDuel, it will be the same thing we will make operating this 100% on our own because of breakage and ramp-up and learning the business, running it ourselves from a marketing perspective. Hopefully better, but we’re expecting it to be kind of same for the first year, and then we’ll ramp up from there. FanDuel will continue to exist in those markets, certainly a tough competitor, but we’re — we have a large database of customers in the markets we’re going to launch in, and I think we’ll do fine.

Ben Chaiken: That’s helpful. I appreciate it. And then the management fee is going to $50 million in 2023 for Sky River. I believe the previous kind of bogey you guys have thrown out there was $30 million or $35 million, if I’m not mistaken. Did the property sequentially accelerate? Or what was the inflection that made you comfortable this is the right number?

Keith Smith: I think when we had given a $25 million to $30 million or $30 million to $35 million, I think I don’t recall our last specific guidance, it was simply early. The property opened in August. We didn’t have enough time under our belt. Now, that we’ve got a good five months under our belt, and we see where the — kind of the opening has settled in, obviously, the opening month is extremely strong, which is what drove the significant management fees in Q4. But we kind of see where it is settling in, in December and in January. That’s just our current expectation.

Ben Chaiken: Got it. Makes sense. Then the last just housekeeping–

Keith Smith: Said another way, they have been a little conservative last–

Ben Chaiken: Totally appreciate it. Thank you. And then just like the last housekeeping. Did you say that for full year 2022, digital was $40 million of EBITDA? Or did I mishear you?

Keith Smith: No, you heard correctly. So, including social, online, sports betting, the whole bit was $40 million.

Ben Chaiken: Great. Thank you very much.

Keith Smith: Welcome.

Operator: Thank you. Our next question comes from John DeCree with CBRE Securities. Please proceed.

John DeCree: Hi guys. Thanks for taking my question. You covered a lot of ground already, but maybe 1 more on the consumer patterns. I guess as you think about what you saw in the first half of fourth quarter and then exiting the fourth quarter, I know you called out some markets, Louisiana, Mississippi, but have you seen a change maybe across demographic cohorts or just infrequency of visit or spend per visit as the quarter progressed? I guess are those kind of trends pretty consistent with what you’ve seen? Or has there been a shift in the kind of pattern of consumer behavior?

Josh Hirsberg: John, this is Josh. So I think in the first half of the quarter, what we thought — the reason we thought merited calling it out was that we saw a broader softness across really all customer segments. Now, that reverted in the second half to be more like what we had seen in the quarters leading up to Q4 and continued into January. So, again, that’s what makes it hard to determine if like there’s any relevancy to what happened in the first part of the quarter or not because the business really kind of picked back up with the best part of the quarter being the last week of the year and then just has continued into January. But I think what we saw was very concentrated weakness in the southern part of our portfolio, but also something a little bit more than that just across the entire company in like late October and into November around just a broader customer. I don’t–

Keith Smith: Yes, I think if you’re asking about kind of specific components of the database, whether it be by age or worth segment, no specific shifts that occurred that are worth calling out.

Josh Hirsberg: Right. It kind of picked back up where it left off when you kind of got into the second half of the quarter.

John DeCree: Got it. Understood. I appreciate that. Maybe 1 easy follow-up, Josh. Should we expect Sky River gets going and then kind of your online gaming segment for the year? Any reason to expect any seasonality at Sky River? And then should we kind of assume that the online gaming seasonality would kind of mirror that of the big B2C players kind of in conjunction with the sports schedule?

Josh Hirsberg: Yes, I think that’s right. I mean we have seasonality in the revenue share that we received today. So, in that$40 million that we received this year, there was definitely seasonality, with the fourth quarter being really strong, first quarter typically being strong, and then obviously, third quarter being fairly soft. I would expect, just given you’re just getting a percentage of revenue kind of what’s termed in net revenues for Wilton or Sky River, that there probably won’t be much seasonality to that business, I wouldn’t expect.

John DeCree: Understood. That’s really helpful. Thanks guys and congratulations on the great quarter and year.

Josh Hirsberg: Thank you.

Operator: Thank you. The next question comes from Brandt Montour with Barclays. You may proceed.

Brandt Montour: Hey good evening everybody. Thanks for taking my question. We’ve covered a lot of ground. Just one for me. On the Downtown segment, you noted that the Hawaii business fully recovered. I noticed also that you guys had record margins that look really high compared to all of the last three years. My question is, the full segment, do you think that, that’s fully recovered outside of Hawaii? And then from the margin perspective, should we be looking at prior seasonality but benchmark to this new normal maybe that you guys are operating at currently in the fourth quarter?

Keith Smith: Well, look, with respect to Downtown, there clearly is seasonality in that business, much like the Las Vegas business. Summertime tends to be softer and the fall and winter seasons tend to be a little bit stronger. So, you should expect that seasonality to exist. The margins that we produced in Q4, we’re comfortable withgoing forward, yes, significantly higher than a few years ago as we’ve kind of rightsized that business, have gotten out of the charter business. So, margins are probably ones getting in a good place, and there will be seasonality.

Brandt Montour: Okay. I realize it was a convoluted way to ask the question. So, I appreciate the answer. Thanks everyone.

Operator: Thank you. Our final question comes from Joe Stauff with Susquehanna. You may proceed.

Joe Stauff: Thank you. Hi Keith, Josh. Just a question on the levels of, say, core consumer spending that you saw, especially in your Las Vegas Locals and Regional segments. Can you give us those and just in terms of what you saw, given the importance of that segment?

Josh Hirsberg: I can try to give you some color around it, Joe, and hopefully, this point you in the right direction. I think, look, I think we — the Las Vegas Locals, as Keith said in his prepared remarks, really benefited from a strong out-of-town business as well as big demand or stronger demand for our non-gaming amenities, not necessarily opening more amenities, just a growing demand among our customer for that particular aspect of our business. We also saw not only — well, primarily in Las Vegas, we saw kind of a strong core business, again, supported by out-of-town business from our core customer that just continue to get healthier as we move through the quarter. And that’s largely continued into January as well. So, we’re really focused on serving that core customer.

That customer has a lot of worth with us. We watch their frequency and spend, and that’s all kind of remained very consistent as we move through the quarter, if not, improving slightly as we progress through. So, hopefully, that gives you a sense of what was going on.

Joe Stauff: And just final question. Obviously, just kind of like the discussion about choppiness, initial choppiness in the fourth quarter. Is it fair to say like you haven’t really seen that — maybe that level of choppiness elsewhere during 2022? Can you remind me?

Keith Smith: I would — it’s a hard question to answer. I think the — as I alluded to earlier, in any quarter, there’s going to be a soft month. And the issue you hear for us was we called out some items, but we just didn’t want to say that’s the whole explanation of what happened in the quarter. We had some softness early in the quarter. We don’t necessarily know if that is a forbearing to something that’s to come. Second half of the quarter, January seems to kind of offset that belief. But we just wanted people to be aware and investors to be aware that we did have a first soft start to the quarter, and that was something that we wanted to just highlight to folks. That’s all. And I wouldn’t say if you look back at each quarter of this year and even last year, largely, there was at least one month in each quarter that was soft, and then it would come back.

So, anyway, I don’t want to make too much out of it, but I also want to make sure people are aware of it as well. I mean we continue to — as based on our remarks around our expected performance for next year — we expect for 2023, we expect to be able to perform at these levels and continue to do that. But obviously, we need the consumer to kind of be there for us. So–

Joe Stauff: Thanks very much.

Keith Smith: Sure.

Operator: Thank you. There are no further questions at this time. I will now pass it back over to Josh Hirsberg foreclosing–

Josh Hirsberg: Thanks, Tamia. I really appreciate it, and I appreciate everyone participating in the call today with all good questions. If there’s any follow-up, please feel free to reach out to the company. Thank you.

Operator: This concludes the conference call. Thank you for your participation. You may now disconnect your lines.