Good afternoon. Thank you for attending the Boyd Gaming second quarter 2022 conference call. My name is Matt, 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. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to our host, Josh Hirsberg, Executive Vice President and Chief Financial Officer of Boyd Gaming. Josh, please go ahead.
Thank you, operator. Good afternoon, everyone, and welcome to our second 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'll make reference to non-GAAP financial measures. For 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 on our website.
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. With that, I would now like to turn the call over to Keith Smith. Keith?
Thanks, Josh, and good afternoon, everyone. This was another strong quarter for our company as we delivered an exceptional EBITDAR performance that was surpassed only by our record second quarter of 2021 when we benefited from government stimulus, limited entertainment alternatives, and the lifting of COVID restrictions. Thanks to our continued focus on our core customer and our more efficient operations, we are maintaining the strong run of quarterly performances that we have achieved since we reopened our properties more than two years ago. During the quarter, revenues were $894 million, even with the prior year, while company-wide EBITDAR was $354 million, and margins exceeded 39% for the fifth straight quarter. As we look at our business today, there are two important themes worth noting, the stability of our financial performance and the continued strength in our customer trends.
Looking at our financial results in the quarter, we delivered revenue, EBITDAR, and margin performances similar to each of the last three quarters. On a sequential basis, comparing to the first quarter of this year, EBITDAR was up over 4%, reflecting more normal seasonal patterns in our business, while margins improved to 39.6% for the second quarter. Comparing our results to our pre-pandemic baseline of 2019, revenue was up 6%, EBITDAR rose 52%, and margins improved more than 1,200 basis points versus the second quarter of 2019. These trends for the second quarter are very similar to the trends we saw in our first quarter results. Importantly, we are seeing this stability across all three of our operating segments.
In our Las Vegas Locals business, revenue grew 4% and EBITDAR grew 6% compared to the first quarter of this year. Margins were 53% during the quarter, marking the fifth straight quarter our margins have been above 50%. We're seeing excellent performance in our downtown Las Vegas operations as well, with record EBITDAR and operating margins in the second quarter. Our Midwest & South business continued its steady performance during the quarter. Revenues and EBITDAR were the highest since the second quarter of 2021, and our operating margin has remained consistent at 38% since then. Driving this robust financial performance is the stability of our operating trends nationwide, led by continued strength among our core customer segments.
During the second quarter, play from our core customers was 4% higher than the prior year, a remarkable achievement considering the historic strength of last year's second quarter. While unrated play has come down some from last year's peak second quarter, it has been stable over the last four quarters, both in total volume and as a percentage of gaming revenue. Customer spend is also strengthening in our non-gaming amenities, with increases in non-gaming revenue driven by growing hotel occupancy, higher ADRs, and stronger F&B revenues. Looking ahead, we recognize that we're in a period of economic uncertainty, and while there are clearly headwinds facing our business, there are positive signals as well. Unemployment is at or near record lows across the country, and customers continue to benefit from strong wage growth.
Here in Las Vegas, total employment recently returned to pre-pandemic levels, an important milestone in our largest market. Nationwide, consumers are showing a continued willingness to spend on experiences and entertainment with strength across the leisure sector. Our hotel bookings are running ahead of 2021 levels with no change in cancellation activity to date. Volumes from our core customers continue to grow, driving overall profitability. Our customer trends in the second quarter and so far in July remain consistent with what we have seen over the last four quarters. While these trends are encouraging, we recognize there are also challenges in the economy. A strong job market and growing wages are good for our customers, but they also mean increased labor expense.
Inflationary pressures related to supply chain issues, higher gas prices and utility costs, and increases in the cost of goods and services are all impacting both us and the consumer. Having said that, our teams have done an excellent job managing through these challenges and continue to deliver strong results. Our company-wide margins during the second quarter were consistent with the first quarter despite the increased cost we are experiencing across the business. While we are closely monitoring the current economic environment, as of today, we see no compelling reason to believe there will be a significant change in the direction of our business in the near term. Our operations remain strong and stable, our management teams are focused, and we remain confident in our strategy, our operating model, and our ability to navigate these uncertain times.
Beyond our continued focus on day-to-day operations, we're also positioning ourselves for long-term growth through strategic reinvestments in our business. In Louisiana, we started site work in early July for a new land-based facility at Treasure Chest Casino. Once complete, this project will significantly enhance our gaming and non-gaming amenities, creating a more attractive and competitive entertainment experience. We are confident the all-new Treasure Chest will further expand the property's customer base while increasing its appeal to our existing customers and drive enhanced results following its opening in late 2023. In downtown Las Vegas, work continues on the expansion of the Fremont Hotel and Casino. By expanding our casino space and adding a selection of appealing quick-serve restaurants, this project will help us capture a larger portion of pedestrian traffic throughout the Fremont Street Experience.
We are making good progress on construction and are on track for completion around the end of the year. In Northern California, we're preparing to open Sky River Casino by early September on behalf of the Wilton Rancheria Tribe. We have created a compelling entertainment experience at Sky River with a 100,000 sq ft casino, 2,000 slot machines, 80 table games, and 17 food and beverage venues. Thanks to its location just south of Sacramento, this property is well-positioned to capture a significant share of the Sacramento and Bay Area markets. We look forward to a successful opening of Sky River and are proud to partner with the tribe as they achieve their vision of self-sufficiency. As a reminder, we have a seven-year agreement to manage Sky River and will receive a management fee typical for these types of arrangements.
Beyond these capital investments, we also continue to expand our presence in sports betting and online gaming. Kansas and Ohio recently passed sports betting legislation, and with our partner, FanDuel, we plan to offer retail and mobile sports betting in both states. Subject to regulatory approvals, we expect to launch sports betting in Kansas in the fall and Ohio around the first of the year, expanding our FanDuel partnership to eight of our nine regional states. We expect our existing online sports betting partnerships to generate approximately $30 million in EBITDAR this year, and this contribution should grow next year as sports betting expands into Kansas and Ohio. We also remain on track to complete our acquisition of Pala Interactive around the first of the year, allowing us to take a direct approach to the emerging online gaming industry.
Our online gaming strategy is built upon leveraging our geographic distribution, loyalty program, and customer database to build a profitable regional online casino business. Pala will provide us the full suite of products, technology, and expertise we need to execute that strategy without the need for additional significant investments or acquisitions. Of course, our 5% ownership of FanDuel is an important strategic asset that will grow more valuable as sports betting expands and FanDuel continues to build on its position as the nation's leader in online sports betting. In both our online and land-based operations, we are building a strong foundation for long-term growth. With our steady operational performance, attractive growth opportunities, substantial free cash flow, and commitment to maintaining a strong balance sheet, we are in an excellent position to continue returning capital to our shareholders.
We remain committed to returning $500 million to our shareholders this year through a combination of share repurchases and dividends. As we've noted before, we are targeting $100 million per quarter in recurring share repurchases supplemented by quarterly dividend payments. We're also creating value through our ESG initiatives. In June, we published our second ESG report detailing our significant progress to date. We are proud of the substantial progress we have made over the last several years, and we remain committed to being a leader in our industry when it comes to corporate responsibility and ESG. I invite you to learn more about our initiatives by visiting our website. In all, this was another outstanding quarter for our company.
Our business remains stable and robust, with financial results and the performance of our core customers sequentially in line with recent quarters and well above pre-COVID levels. Importantly, these trends are continuing into July. This exceptional performance is a tribute to our team members who are dedicated to creating memorable experiences for our guests and strengthening customer loyalty. It is a reflection of the skill of our management teams as they sustain strong operating margins despite increased cost pressures in the business. Our strong, diversified free cash flow and balance sheet are enabling us to pursue growth projects in both the land-based and online spaces while continuing to fulfill our commitment to return capital to our shareholders. We remain committed to our proven operating strategy, and we are confident in our ability to navigate today's uncertain economic environment and to continue to create long-term value for our shareholders.
Thank you for your time today. I'd now like to turn the call over to Josh.
Thank you, Keith. This was another strong quarter for our company. The sequential trends in our business continue to be very stable. The second quarter last year was the best quarter in the company's history, benefiting from significant government stimulus, limited entertainment options, and the lifting of COVID restrictions. EBITDA in the second quarter of last year grew 66% over 2019 levels, and margins improved almost 1,600 basis points. These dynamics began to normalize in the third quarter of last year, and the business has remained extremely stable on a sequential basis since then. These sequential trends demonstrate the strength and consistency of our business. We are certainly aware of the economic pressures weighing on the U.S. consumer. While predicting the future is particularly difficult now, there is no compelling reason today to say that the course of our business is changing.
Our consumer trends in July confirm the continued stability we have seen for the last year. Our focus on our core customer and disciplined execution of our business continue to drive our results. Our operation teams are managing through inflationary effects pressuring our business, as demonstrated by our second quarter margins, which were consistent with the margins we have delivered over the last 18 months. To strengthen our operations, substantial free cash flow and strong balance sheet, evidenced by the lowest leverage in our company's history, enable us to continue to execute our capital return program, balanced with strategic investments in both land-based and digital assets. During the quarter, total capital expenditures were approximately $52 million, resulting in approximately $100 million of capital expenditures invested year- to- date.
We expect to spend about $125 million in the second half of this year on maintenance capital and an additional $50 million for the Fremont and Treasure Chest expansion projects that Keith previously discussed. We will also be investing $170 million to acquire Pala Interactive, and subject to regulatory approval, expect this transaction to close around the first of the year. During the quarter, we continued our focus on returning capital to shareholders. We repurchased $168 million in stock, representing more than 3 million shares at an average price of $55.66 per share. This reduced our actual share count to 106.8 million shares at quarter end.
Since commencing our repurchase activity last October, we've repurchased approximately 6.4 million shares for a total of $381 million. With our board's recent $500 million increase to our share repurchase authorization, we have $481 million remaining under current authorizations. We plan to continue targeting $100 million per quarter of share repurchases as part of our recurring program to return capital to shareholders. We also distributed our second dividend of the year earlier this month with a payment of $0.15 per share, which is more than double the amount of the company's previous pre-pandemic dividend. In all, we expect to return over $500 million to our shareholders this year through dividends and recurring share repurchases. Our balance sheet is the strongest it has ever been.
We ended the quarter with leverage of 2.3 x and lease adjusted leverage of 2.8 x. During the quarter, we used a combination of cash and revolver borrowings to retire our remaining balance of 8 5/8% notes, resulting in nearly $20 million in annual interest expense savings. As we move forward, we will remain focused on maintaining our strong operating performance and growing our business through thoughtful investment in our existing portfolio and building our online presence. We will continue to maintain a strong balance sheet with a commitment to returning capital to our shareholders. That concludes our remarks, and we're now ready to answer any questions from participants on the call.
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. The first question is from the line of Carlo Santarelli with Deutsche Bank. Your line is now open.
Hey, Keith. Hey, Josh. Guys, if you wouldn't mind, I know you guys both mentioned in your remarks that kind of what you've seen over the last year has carried through into July. Is that statement kind of representative of what you're seeing both in Las Vegas between the locals and downtown market as well as the regional markets?
Yeah, Carlo, this is Keith. It is relatively consistent kind of across the portfolio. The trends in July throughout the different regions are mirroring what we saw, you know, earlier in the year. There's really not much of a change.
Okay, great. And then obviously, you know, you guys talked about some of the ambiguity that's out there and kind of the cost pressures and the way you guys have managed them. As you look ahead, if you had to kind of think about where the bigger risk comes from. The two buckets were kind of the health of the consumer, the health of the gaming customer versus, you know, kind of the competitive aspects, whether that is, you know, any kind of new supply coming into markets or whether that is competitor promotions, things of that nature. How would you kind of look at those two options?
Well, look, sitting here today, the consumer remains, you know, healthy. All the statistics that we see and all the trends that we see in our own business, it shows that the consumer's healthy. They've got strong balance sheets. While maybe consumer spending is off a little bit, it's coming off of historical highs, and so it still looks extremely robust. You know, competition is always coming into the business. You know, we're operating in a number of, obviously, different markets, but our team has a lot of history in fending off competition and competing with new entrants into the various markets that we do business in. Look, they both could be impactful. Obviously, if the consumer all of a sudden becomes unhealthy instead of healthy, it will impact our business.
You know, a big building goes up next door to one of our major EBITDA producers, it will be impactful. I don't, you know, 'cause I don't wanna be naive here, but I think we're confident in the near term that neither of those are significant issues for us.
Great. Thank you very much, Keith.
Yep.
Thank you for your question. The next question is from the line of Joe Greff with JP Morgan. Your line is now open.
Good afternoon, guys. My question is probably gonna sound like I'm being very negative, but it's really not meant to be negative. It's just to get an understanding of sort of a certain scenario analysis. If we think about, say like, you know, next year as an example, you know, we are in a recession and we are seeing the gaming consumer retrench a bit. Let's just say in that scenario, guys, that it's more spend per visit than visitation. How do you think about the flow-through on a, you know, a declining revenue environment, and the flow-through percentage in both the Locals and in the Midwest & South?
Yeah, Joe. That's, I think that is the question, that we need to try to answer. I think ultimately, you know, the way we think about that is trying to measure and understand what flexibility we have in managing adjustments in revenue, quite honestly. We can certainly scale marketing and labor and some of these other costs based on the levels of revenues that we're seeing at any particular time. I think one of the things that we have really had, you know, kind of learned through COVID and while we were closed is just a really good understanding of our costs and how they are interrelated.
We feel like that gives us the ability to be in a better position to manage through softness in revenue if that were to come as a result of, you know, declines in spend per visit. I don't think we're in a position really to kinda quantify, you know, what happens to flow through our margins very effectively. It'd just really be a shot in the dark, quite honestly.
Yeah. There's so many variables, you know. Is this? If there is a kind of reduction in spend per visit, is it coming through? Is it gaming? Is it non-gaming? Is it hotel? Is it F&B? What's happening to the actual volumes in the building? Is this a 2008 type recessionary environment, or is it a different recessionary environment that we find ourselves in? You know, trying to model it out and play what ifs is very difficult in this environment and probably more difficult on a phone call like this.
Thanks for the thoughts, guys.
Thank you for your question. The next question is from the line of Steven Wieczynski with Stifel. Your line is now open.
Yeah. Hey, guys. Good afternoon. This is gonna sound very similar to Joe's question, I think. I'm just gonna try to ask this a little bit differently, and I think you're probably gonna give me the same kind of answer as, you know, we don't know. You know, I would assume at this point you guys internally have probably run some different scenarios in terms of, you know, what, you know, a recession could look like on your business. I guess as high level as you can give, you know, how do you go about doing that? Meaning, you know, are you looking at the last couple recessions and kind of viewing those as what potentially could impact you?
This is probably a little bit more on the economic side of things. Are you saying that this recession this time around might not be as bad? I guess any kind of commentary around how, you know, you're thinking about the impact would be helpful.
Yeah. I think, Steve, you know, we do obviously try to model different scenarios, and you can imagine some are more detailed than others and some are very high level, just assuming different levels of revenue or EBITDA declines, just, you know, choosing different levels and running those through the models and understanding what happens. Also trying to replicate what happened previously in 2008, even though we understand that today is very different than what happened and what drove 2008.
You know, we try to say those are the extremes, if you will. I think the other thing that we try to understand is the business today at least feels very different than the business even pre-COVID, in the sense of who our customer is and our focus on that customer and also, you know, how we're marketing to that consumer. What is particularly insightful for us, at least today, is that our core customer that we're reinvesting in continues to be very stable and grow. I know you got that message from the commentary and from other comments that we've made, but, you know, what's driving our business is really a focus on a very loyal, high-quality customer, and that's what's driving our overall performance.
We look at, like, to Keith's comments earlier, to Joe's question. It's like we look at, you know, how are different customer segments potentially reacting? Because maybe it's just the lower-end consumer or a unrated consumer that falls away, and trying to understand those impacts. It's a non-answer answer that I'm gonna try to give you because I'm not gonna give you any kind of numerical result of it, but just to say that, you know, we are looking at all, you know, just blanket assume revenues are down X and see the impact and at the other extreme, you know, assume different segments are impacted differently. You know, that's how we're thinking about it. We also obviously are modeling in what we're seeing from cost pressures as well.
All that just gets put in, and we think about it obviously every day to try to understand what's gonna happen and how we're gonna react.
I guess then the simple follow-up to that answer is, you know, I guess under any scenario that you guys have, you know, potentially modeled out inside the company, what, you know, as draconian as you guys, you know, think things could get, you know, I guess the simple answer is, how do you feel about your. You know, is there any scenario, I guess, where, you know, you don't feel comfortable with your financial position, you know, at that point? I guess that's the simple, you know, question here.
Look, I think we've worked extremely hard and diligently over the last couple of years to, you know, have the strength of the balance sheet that we have and have, you know, extremely low leverage level in all the scenarios we run, you know, have us comfortable, given our low leverage and, you know, at least in the near term, what things may look like. We are dealing in a very uncertain environment, you know, in a very uncertain economy. Once again, everything we see says the business is pretty stable. If something were to happen, given our current financial strength, you know, we're not losing sleep.
Yeah. I think part of the whole philosophy of having a lower leverage level, the access to undrawn capacity that we have, is to be able to weather the uncertain times that we find ourselves in, that everybody's thinking about and wringing their hands about today, that, you know, at this point, you know, we're kind of just continuing to move through.
Okay. Great. Thanks for the color, guys. Really appreciate it.
Sure.
Thank you for your question. The next question is from the line of Barry Jonas with Truist. Your line is now open.
Hey. Great. Thanks, guys. I wanted to talk a little bit more about the labor environment. Is it still fairly tight, or have you been able to fill more positions? With that, do you see opportunities to grow revenues as you add more FTEs?
Yeah. I think, you know, labor is still a challenge for us. Not as much of a challenge as it was a year ago. We have more team members, and we've been successful in adding team members and have more today than we did a year ago. I would say that, you know, our retention rates are higher. Our turnover rates are lower today than they were six months ago. Applicant flow is higher today than it was six months ago, and so, you know, things are easier, but it's still a challenge. I think we still have the opportunity to add staff and be able to, you know, sell more hotel rooms and, you know, serve more people in our restaurants. I still think there is some upside there. Things are improved today over a year ago or even six months ago.
Great. Thanks, Josh. Just as a follow-up, how are you guys thinking about Eastside Cannery here? I know a competitor is planning on permanently closing some of their closed properties, so just curious how you're thinking about your options here?
Yeah. I think we've consistently thought about it in the context of demand. At this point, you know, our view is that we've been able to kind of leverage the benefit of Sam's Town, Las Vegas, which is near Eastside Cannery. Until we see perhaps more demand or something else to suggest we should consider reopening Eastside Cannery, for now it'll remain closed.
Great. All right. Thank you guys.
Thank you for your question. The next question is from the line of David Katz with Jefferies. Your line is now open.
Hi. Afternoon, gentlemen. Thanks for taking my question. I hope I can ask you something that you know you can answer, which is that the margins came across. Honestly, that was not you know intended at anyone in particular. The visibility, I understand, is quite limited for all of us. With respect to margins, they came across you know better than what we expected. And assuming that you know there is no change in you know business levels and that you know revenues continue to you know be approximately straight across or even up a little bit, how do you see your normalized you know new world post-COVID margins for each of the segments? If you could just give us a little color on each, that would be helpful.
Yeah. David, I appreciate your commentary. I think that, you know, it's almost, and I don't wanna be flippant about it, but it's almost like what you see is what you get from what the various regions are delivering. They've been very consistent really for the last, you know, 18 months or more. While we have said that we expect a little bit of pressure as a result of incremental marketing over time, a little bit of labor being added back, ultimately some of that is associated with revenue growth as well. We generally think that the levels that you're seeing today are ones that, you know, in the neighborhood you should expect to see from us kind of going forward. I think that's been a consistent message from us for quite some time.
We generally feel pretty good about where the business is these days in terms of being able to deliver those levels of margins.
Got it. Assuming that not a ton changes, which is totally potentially unfair, right? In the Locals market, a 53% EBITDAR margin is, you know, the neighborhood. Downtown, you know, 41% and MW&S is 38%-ish. That's a good place for us to hang out, notwithstanding some major change in the top line.
I think Locals is 50%+ . Downtown is high 30%s , and Midwest & South is high 30%s .
Okay. Helpful. Thank you.
Sure.
Thank you for your question. The next question is from the line of Shaun Kelley with Bank of America. Your line is now open.
Hi, everyone. Josh, Keith, just I wanted to ask a little bit about a question we get fairly regularly. You know, kind of in this consumer environment, one thing we're seeing, you know, throughout companies reporting in a broader space is sort of a return of promotional activity, right, across, you know, areas of the consumer that weren't promotional over the last couple of years. You know, we get this question as it relates to gaming, and I wanted to kind of turn it to you a little bit. The question is really just, you know, how would you think about, you know, a return of more normalized promotional activity impacting gaming?
I'm just kind of curious, first of all, is that a lever that you would lean on if you did see, you know, the consumer soften, or might you react differently? That's kind of the first part. The second part is just more of a mechanical, how would it play through the P&L? I think it's, in general, we're thinking about this as a net against revenue, but just how would you think about it actually playing through revenues versus margin?
Sure. Let me take a shot at it, Shaun, and then Josh can jump in. I think when we talk about the promotional environment in this industry, as we've come out of COVID, you know, different companies have kind of staked out a position. Some have gone back to pre-COVID levels of spend, and they got there fairly early after reopening after COVID. Some have actually exceeded pre-COVID levels of spending. Others, us being in this camp, have stayed very disciplined with what we, you know, continue to refer to as kind of a new operating model and are targeting the customers in different ways. We don't see ourselves getting back into these types of marketing wars. Once again, we have competitors in probably every jurisdiction where we do business that are marketing at pre-COVID levels.
We have competitors in every jurisdiction where we do business that are marketing ahead of pre-COVID levels, and we're standing pat. I just don't see us getting back into that game. If we were to, it would have a significant impact on margins, obviously, if we were to get back into that, into that promotional environment. I just don't see us doing it.
Yeah. I don't have anything to add.
Perfect. That's very helpful. Then, you know, second question or just follow-up would be, you know, Josh, you brought up a couple times cost pressures. You know, Barry asked a little bit about the labor side. I guess the real question here is, you know, this environment's been pretty dynamic even over the last quarter, you know, is there anything incremental that really sticks out? I mean, obviously you're always battling against, you know, some new cost line, and I mean, that's part of the job.
Is there anything new or, you know, new pressure that anybody should be aware of, you know, be it energy and utilities or something of the ilk that stands out, or is it just sort of normal course, albeit in a, you know, much more rampant inflationary environment today?
Yeah. Look, I think there are other cost pressures, but they're just not, you know, to the order of magnitude when you start talking about, say, labor, for instance. That's why labor is kind of the poster child for it. You know, we see it in the cost of goods sold, as Keith mentioned, and utilities across the board. You know, our teams have done, we've been very fortunate, a really good job in managing through those cost pressures, and we continue to stay focused on it. You know, some of it has to do with, you know, the business is continuing to come back as well, certainly on the hotel side and the F&B side.
You know, as we've mentioned, aspects of our gaming customer are continuing to grow. That helps us also offset some of the pressures that we're seeing. You know, I wouldn't say it's just one, certainly not one line item, and our teams are really doing a good job to remain focused on that and staying disciplined around kind of how we think about running the business going forward.
It's pretty clear in the results. Thank you very much.
Thanks.
Thank you for your question. The next question is from the line of Dan Politzer with Wells Fargo. Your line is now open.
Hey, good afternoon. Thanks for taking my question. So just on the downtown margins, they were pretty strong in the quarter. As we think about this business, I think revenues are still, call it 15%-20% below 2019. I guess, where are we in terms of the recovery? You know, is there still more room to go there, or was this just a function of, you know, unprofitable revenues or, you know, low margin revenues being removed from the business?
Yeah. I would say it's a combination of both. That, you know, downtown is largely driven by, you know, visitation on the Strip. As the Strip continues to build back, as meetings and conventions continue to build back on the Strip, and volumes there continue to build back, we expect there to be some continued growth in the business downtown. I think there also was, at least for us, you know, a fair amount of unprofitable or marginally profitable business that we're just not catering to these days. I think it is both factors as you describe them. It's not one or the other.
Yeah. The other thing.
Got it.
Just to remind everyone, you know, downtown had kind of a later start than the other two segments of our business. You know, they are just as our other two businesses were battling more difficult comps, downtown will start to experience that as well. It's a business that is kind of coming back and getting to the same level that the rest of our segments are, quite honestly. That's what we kind of contemplated for this year from that segment.
Got it. Then just sort of follow up, you know, it's been pretty clear you're seeing sequentially stable results in the business. You repurchased, I think, $165+ million of stock in the last quarter. Given you're trading kind of in that same neighborhood, is there any reason to expect that there, you know, you shouldn't be above that kind of $100 million bar per quarter that you've thrown out for buybacks?
Yeah. It's a fair question, but we continue to reiterate a target of $100 million a quarter because that is our target. You know, it could be higher, but I wouldn't expect it to be. That is, you know, our goal, and that's what we're putting out there. Could be higher if there's a dislocation, and we decide to buy back more, but I would not assume we will.
Got it. Thanks.
Thank you for your question. The next question is from the line of Brandt Montour with Barclays. Your line is now open.
Hey. Good afternoon. Thanks for taking my questions. You guys spoke a lot about the growth in your core consumer. That was pretty clear. I was hoping you could talk through ways in which you're taking pricing in the casino. Is it the case that there isn't much perceived inflation within the four walls, which is actually helping drive traffic and spend, or is there also a pricing component that you're able to take?
I don't think we've made any, quote-unquote, "pricing adjustments" within the four walls of the gaming floor, if you will. Look, we have higher average bets today than pre-COVID. You know, that's about it. You know, look, on food and beverage, we continue to increase prices where we can. Hotel rates continue to be up year-over-year. You know, we have increases in cash room sales, which are good with higher rates. Within the four walls of the casino, it's pretty limited in terms of you know, what we've done. We haven't done anything currently. Whatever we've done has been in place, frankly, since we reopened the business.
Okay. That's very helpful. Thanks. On the unrated side, and I caught your comments that it's stable. I was just curious, maybe if you could unpack that a little bit, if you're still seeing a fair amount of turnover there, but, you know, with those numbers being replaced, or if that's sort of slowing down, it's getting a little stickier.
Yeah. Unrated, it's really hard to answer with specificity. What we expect is going on or assume is going on is similar to what we're seeing in some of the lower tiers year-over-year, which is, you know, we are seeing declines in that part of the business that benefited the most from stimulus and, you know, the lack of entertainment options in COVID. That was largely at the lower end of the database, where we saw a lot of activity last year that we're seeing a little bit more softness this year. Now in the unrated segment, we're assuming that part of that's what's going on as well.
As in Keith's comments, he said it's been stable, so, you know, some of that softness is getting replaced by other unrated business, either from increased spend or new customers coming in. We know that we are signing up higher quality new customers, and that's contributing to the overall business, and that's coming from that unrated pool of customers. You know, it's all kind of kind of regenerating itself at this point to maintain a stable unrated business.
Great. Thanks, everyone.
Thank you for your question. The next question is from the line of Chad Beynon with Macquarie. Your line is now open.
Thanks. Good afternoon. Thanks for taking my question. Keith, just to follow up on your position of strength with the 2.8x levered balance sheet in the free cash flow. I know you talked about $500 million of capital return, but how are you thinking about opportunistic M&A in the regional markets where you could benefit from an operational improvement strategy and maybe even a long-term iGaming license or separately on the Strip where you could send your customers? Thanks.
Yeah, sure. In the environment we find ourselves in today, we really are spending almost all of our time focused on kind of maintaining the strength of our current operations, maintaining the strength of our balance sheet, and ensuring that we can, you know, maintain returning this $500 million to our shareholders. That is kind of job and priority number one. You know, look, we've been active over the decades in the M&A space. Today, and I think in the very near term, it's really about running this business at the optimal level and continuing to produce the results we're producing and ensuring that we can continue to return this capital to shareholders.
Okay, thanks. In terms of Pala, after the deal closes, how quickly can you be up and running, communicating with your customers, and, you know, trying to cross-sell them an iGaming product? Is that something that can be done within a few quarters, or is that something that might take a little bit longer? Thanks.
No, I'd expect within, call it, six months of the close of the transaction. You know, if we're able to close and we get all the regulatory approvals around the first of the year, you know, think about middle of 2023, and we should, you know, have a product where we're able to offer it to our customers.
Appreciate it. Congrats on the quarter.
Yep. Thank you.
Thank you for your question. We only have time for one more question. The last question is from the line of Joe Stauff with Susquehanna. Your line is now open.
Thanks, Keith, Josh. Two quick ones. I was curious, you know, from a Las Vegas Locals' perspective, certainly can't tell by the results. Wondering if, you know, that you've seen any of your California-based customers, you know, just moderate in terms of their visitation, if there had been maybe any changes or, you know, in those trends that you saw, whether that be in the second quarter, and/or, you know, July thus far. The second question is really about, you know, your capital reinvestment, in particular, buying back about $100 million of stock per quarter. Is there any like, are there any discussions possibly to maybe increase the dividend, more so than, you know, what is roughly a 1% yield?
You know, whether it be at the expense of the buyback or not, is there any discussions about boosting the dividend? Thank you.
Sure. On your last question, I think obviously with respect to any conversation about dividends, it will be up to our board. We're only two quarters into the restatement of our dividend, and so I think we're ways away from revisiting, whether, you know, what the trajectory of that is in the future, seeing as we've only just last week made the second payment. With respect to the California traffic, you know, here into Las Vegas is an interesting question. We've actually been monitoring it the best we can through, you know, zip codes where we draw customers and other information we are able to access. Even with the increase in gas prices over the last couple of months, we really haven't seen any significant change kind of in the business for our properties coming out of California.
It's been quite stable. I mean, it, you know, moves around a little bit, but it is not significant. It is something we're watching. Haven't seen any significant trends. Surprising to us, but those are the facts.
I would imagine, you know, that commentary applies thus far in July.
Yes. No change thus far in July.
Okay. Thanks very much.
Sure.
Thank you for your question. There are no additional questions waiting at this time, so I will pass the conference over to Josh Hirsberg for any closing remarks.
Thank you, Matt. Thanks everyone for joining the call today. If you have any follow-up questions, please feel free to reach out to the office. Thank you.
That concludes the Boyd Gaming second quarter 2022 conference call. Thank you for your participation. You may now disconnect your line.