Good afternoon, and welcome to the Boyd Gaming third quarter 2026 earnings conference call. This is David Strow, Vice President of Corporate Communications for Boyd Gaming. I will be the moderator for today's call, which we are hosting on Thursday, October 22nd, 2026. At this time, all lines are in listen-only mode. Following our remarks, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star then Zero for the operator. Our speakers for today's call are Keith Smith, President and Chief Executive Officer, and Josh Hirsberg, Chief Financial Officer. Our comments today will include statements that are forward-looking statements within the meaning of 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 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, David, and good afternoon, everyone. Our third quarter performance reflects the benefits of our diversified business model, the ongoing strength of our core customer, and the appeal of the property investments we've been making across our portfolio. For the quarter, our Midwest and South properties delivered another solid performance, with revenue and EBITDA growth reflecting the consistent strength of this segment. In Las Vegas, play from local residents remained strong. However, this trend was offset by increased softness in destination business to Las Vegas, primarily at the Orleans and construction disruption at the Suncoast. In our online segment, Boyd Interactive once again contributed double-digit revenue and EBITDA growth, and we continued to benefit from the strong performance of Sky River Casino, driving increased management fees in our managed business. Company-wide revenues and EBITDA were down approximately 1% in the third quarter on a reported basis.
However, our third quarter results were impacted by several unusual items this year. These items include the permanent closure of Sam's Town Tunica in November of 2025, the sale of Sam's Town Shreveport on August 1st of this year, higher property taxes at Kansas Star, and a reduction in the tax pass-through amounts. After adjusting for these items, company-wide revenue actually grew 2%, while EBITDA was up 1%, a more accurate reflection of our performance in the third quarter. Now, turning to segment results. In our Midwest and South segment, taking into account the adjustments I mentioned, revenues increased almost 3% for the quarter. Gaming revenues were up more than 2%, and EBITDA grew nearly $5 million, or approximately 2.5%. These results were driven by continued strength in play from both core and retail guests, including growth in unrated play.
Adjusted operating margins for the quarter were 38%, consistent with the third quarter margins over the last several years. This performance demonstrates our continued ability to maintain operating efficiencies throughout the segment. During the quarter, we also benefited from the investments we have made throughout our Midwest and South portfolio. Across the segment, we've enhanced our gaming floors, introduced new food and beverage offerings, renovated hotel rooms, and successfully completed several growth projects. These investments are delivering solid returns for our company, helping drive continued growth in play from our core and retail customers across the segment. Next, in our Las Vegas Locals segment, results in the third quarter were impacted by increased softness in destination business to Las Vegas. This impact was primarily felt at the Orleans. The third quarter results also reflected the final phases of our renovation project at the Suncoast.
Excluding the Orleans and Suncoast, the remainder of our Las Vegas Locals portfolio grew both revenues and EBITDA 3%, consistent with recent quarters. This growth was driven by increased gaming revenue of 3.5%, with play from both core and retail customers continuing to grow, as well as strong growth in unrated play. At the end of the quarter, we completed our project to renovate and upgrade all of the public spaces at the Suncoast. Our guests are responding enthusiastically to the improvements, further strengthening our confidence in the long-term potential of the Suncoast. The final phase of the Suncoast project is the remodel of our hotel rooms, which started late in the third quarter. This project should be completed by the first quarter of next year. We are now preparing for a similar project at the Orleans that will enhance this property's competitive positioning and appeal.
We will begin this project early next year, and we expect only minimal disruption at the Orleans, as the initial phases will be in areas that are not currently accessible to the public. Throughout this year, our Las Vegas Locals results have been supported by continued growth in play from Southern Nevada residents, and the strong underlying fundamentals of the Southern Nevada economy give us confidence these trends will continue. These fundamentals include Southern Nevada's population recently surpassing 2.4 million residents, driven by an annual growth rate that is twice the national average. This population growth is driven by a local economy that continues to add jobs at a healthy pace, leading almost every major metro area in the country. Over the last 12 months, Las Vegas has reported the second highest job growth rate among the nation's 30 largest metro areas.
Local wage growth also continues to outpace the national average, increasing nearly 6% over the past 12 months. Southern Nevada remains an appealing destination for new residents, offering one of the most competitive cost of living environments in the Western U.S. In all, we remain encouraged by the continued strength of the Las Vegas economy and its prospects for our local segment. Moving next to downtown Las Vegas, our results for the third quarter reflect increased softness in destination business in Southern Nevada, as well as the impact of multiple storms on Hawaii during August and September. Additionally, in the second half of the quarter, we saw a significant increase in Hawaiian airfares. While airfares remain elevated today, they have started to moderate. Next, our online segment continued to benefit from double-digit growth at Boyd Interactive during the third quarter.
This was the first quarter since last year's FanDuel transaction to provide comparable year-over-year results and provides a clearer picture of this segment's performance. Finally, our management of the business delivered another quarter of strong growth, driven by increased management fees from Sky River. Sky River continues to perform at a high level, benefiting from the recent expansion project that added 400 slot machines and a 1,600 space multi-level parking structure. With this expansion off to a strong start, work is continuing on the next phase of the project, which will add a 300-room hotel, three new food and beverage outlets, a full-service spa, and a new entertainment and event center. Once complete in 2028, we are confident this expansion will further strengthen Sky River's position as one of Northern California's most successful and popular gaming destinations.
In all, our third quarter performance was supported by the benefits of our diversified business model, the ongoing strength of our customer base, and solid returns from our property investments and capital projects. Building on the success of our recent investments and capital projects, we continue to invest in our properties across the country. In Las Vegas, we expect to complete the remodel of 1,800 hotel rooms at the Orleans in November, followed by more than 400 rooms at the Suncoast in the first quarter of next year. We will be introducing five new food and beverage concepts across the country in the fourth quarter alone. As we continue to enhance our existing portfolio, we are also actively building our long-term growth pipeline.
In Virginia, our resort development in Norfolk remains on time and on budget for a November 2027 opening, and we expect to celebrate the topping off by the end of this year. Once complete, this scale resort will be a true market leader with a 65,000 sq ft casino, 200-room hotel, eight food and beverage outlets, live entertainment, and an outdoor amenity deck. It will also offer the most convenient gaming destination for many of the 1.8 million residents of the Hampton Roads region, as well as the millions of visitors who visit nearby Virginia Beach each year. Next, in Illinois, our Par-A-Dice Casino project continues in the design phase, and we expect to begin construction late next year. Once complete, this project will transform Par-A-Dice into an all-new entertainment facility. With a single-level casino floor and enhanced amenities, the new Par-A-Dice will be positioned for growth well into the future.
In Louisiana, we are planning to convert our Amelia Belle property into a land-based facility featuring a single-level gaming floor and expanded food and beverage offerings. This project is also in the design phase, and we expect to begin construction in late 2027, subject to the necessary regulatory approvals. As we continue to invest in the future growth of our business, we are balancing our capital investments with maintaining a strong balance sheet and returning significant capital to our shareholders. During the third quarter, we returned approximately $180 million to our shareholders through a combination of share repurchases and dividends. We intend to continue targeting share repurchases of $150 million per quarter, supplemented by quarterly dividends. In all, our third quarter results demonstrate the value of our diversified business model. In our Midwest and South segment, we continued to deliver growth across the segment.
In Las Vegas, we benefited from ongoing strength in play from local residents, and also completed our renovations of all public spaces at the Suncoast, positioning this property for future growth. Both our online and managed businesses continue to produce strong results, and we continue to build a strong pipeline for growth. Building on the success of our previous growth investments at Treasure Chest, Ameristar St. Charles, and Cadence Crossing, we are now focused on completing our market-leading resort in Virginia, which remains on track to open next year. In addition, we are moving forward with growth projects at both Par-A-Dice and Amelia Belle. Finally, our financial position remains strong with leverage of 2.2 times at the end of the quarter, supporting our balanced approach to capital allocation and positioning us to continue creating long-term value for our shareholders.
Our success is a reflection of our dedicated Boyd team members across the country and their commitment to delivering memorable experiences for our guests. I would like to thank them for everything they do for our company. Thank you for your time today, and now let's turn the call over to Josh.
Thank you, Keith. During the third quarter, play from both core and retail customers continued to grow. As Keith mentioned in our Midwest and South segment, adjusted revenues for the quarter grew nearly 3%, while EBITDA grew approximately 2.5%, as supported by growth in gaming revenues. In our Las Vegas Locals segment, excluding the Orleans and Suncoast, revenues and EBITDA each grew 3%, with gaming revenue growth of 3.5%. Increased softness in destination business to Las Vegas negatively impacted our Las Vegas Locals segment, primarily at the Orleans, and also impacted visitation to downtown Las Vegas. Despite these pressures in Las Vegas, we remain disciplined in executing our operating strategy. Excluding the Orleans and Suncoast, margins in our Las Vegas Locals segment were 47%, even with the third quarter in each of the last two years.
Company-wide, outside of the impact of destination business to Las Vegas, the remainder of our land-based portfolio across the country is performing well. Our Managed & Other and online businesses both continued to grow during the fourth quarter, contributing to the diversification of our revenues and EBITDA. During the quarter, we invested $159 million in CapEx, bringing our year-to-date CapEx to $456 million. We now expect to spend approximately $650 million for this year, including $250 million of maintenance capital, $75 million of incremental hotel capital associated with our Orleans Hotel remodel, which is on schedule to be completed by the end of this year. $50 million in growth capital, primarily related to completing Cadence and the design and pre-construction efforts related to our Par-A-Dice project. Finally, $275 million for our casino resort development in Virginia, which, as Keith mentioned, remains on schedule and on budget.
In terms of our capital return program, during the third quarter, we paid $15 million in dividends and made $164 million in stock purchases, representing 2 million shares. Our actual share count at the end of the third quarter was 71.2 million shares, a 9.4% reduction in our share count since the third quarter of last year. We plan to continue targeting approximately $150 million in shares per quarter, placing us on track, inclusive of dividends, to return more than $680 million to shareholders this year, representing approximately $9.80 per share in value for our shareholders. Given our strong free cash flow, we are able to make capital investments and return capital to shareholders while maintaining a strong balance sheet. We ended the quarter with traditional leverage of 2.2 times and lease-adjusted leverage of 2.7 times.
We have ample capacity available to us under our credit agreement, with our next debt maturity in December 2027. We expect to refinance that maturity later this year or in the first half of 2027. In conclusion, our consistent operating performance, strong balance sheet, and robust free cash flow position us well to continue creating long-term value for our shareholders. David, this concludes our remarks, and we are now ready to take any questions.
Thank you, Josh. We will now begin our question and answer session. If you would like to ask a question, please press star then one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to withdraw your request, please press star then two. If you are using a speakerphone, please use your handset when asking your question. We will now pause a moment while we compile our list of questioners. First question comes from Steve Pizzella of Deutsche Bank. Steve, please go ahead.
Hey, good afternoon, everybody, and thank you for taking my questions. Paul, Las Vegas Locals, you outlined some good underlying growth trends, ex destination and Suncoast. Given these trends, do you think the local segment can grow next year? Are you able to quantify the estimated destination and Suncoast impact?
Sure. Steve, I will take the first part. Basically, I think we believe that we could see modest growth next year in Las Vegas Locals' EBITDA. I think it is really dependent on what happens with the destination business. Q3 destination was a little bit softer than we expected, but we do not expect that to really continue into Q4 at that level. I think we would generally expect destination trends to be similar to what we have seen for the quarters preceding the third quarter. Suncoast disruption in Q3 was a little bit less than we expected. As we go into Q4 and 2027, Keith mentioned that Suncoast will have some rooms out of service in Q4 and then again in Q1.
Our expectation is to have very modest contribution from Suncoast in Q4, just given those rooms being out of service, and then for it to ramp up really coming into Q1 and into Q2 of next year. I will point out we have rooms coming online in Q4 and Q1, Suncoast, the Orleans in Q4, and Cadence contributed in Q3 and is continuing to ramp in Q4 to hit full stride around Q1 of next year.
Okay, thank you. That is helpful. Then just pivoting towards the buyback, can you talk about how you view share repurchases with the stock at current levels? Does it make you want to be more aggressive?
Look, we have signaled that we are targeting $150 million per quarter, and that is probably all we are going to say at this point. We have tended, if you look at our history, to be a little more aggressive as there is dislocation in the stock price. It is a function of other things we have going on and once again, trying to maintain this balanced approach, looking at what we are reinvesting in our properties, looking at our growth projects, looking at how many shares we want to buy back, or how much in terms of dollar value that we want to buy back. Our history does indicate that we do take advantage of dislocations in the stock price.
Okay, great. Thank you.
Yep.
Our next question comes from Steve Wieczynski of Stifel. Steve, please go ahead.
Hey, guys. Good afternoon.
Sure.
Keith, Josh, I want to go back to the destination weakness that you guys were referring to. I think at this point, we've heard that same narrative from you guys for the last, I think it's been probably the last two quarters or so. If I hear you right, just want to make sure we have this right, it sounds like it actually did intensify relative to where that was back in the second quarter. I think that's kind of what you guys were referring to. If that's true, maybe what gives you the conviction that you think that kind of turns around in the fourth quarter?
I think you heard it correct, which is, our view is that the softness in destination was a little stronger or intensified in Q3 vis-à-vis Q1 and Q2. I think you've probably heard this conversation from us for the last three or four quarters, actually. Part of that is driven by the fact that, in Las Vegas, as everyone knows, the third quarter, the summer quarter, is our weakest quarter. These types of pressures get intensified during the quarter. July looked okay. August was probably weaker than we anticipated. With the shift of the holiday, it's a little hard to tell, and September was a little bit better than August. Look, as we look at the fourth quarter, we look at having hotel rooms back at the Orleans. We've had more than 300 rooms out of service every day for the last year now.
Do we need those rooms on weekends or weekdays? The reality is no. Do we need those rooms on weekends? The answer is yes. That will support us, and we think that just the general trends will soften the impact of the weakness in destination as we look to Q4 and next year. Just a combination of factors.
Okay, that makes sense. Then, Josh, for M&A given, obviously, we've kind of seen gaming valuations here contract over the last, call it, six months or so, and with where your balance sheet is, your strong balance sheet, is that something that you're more thinking about these days? Then, Josh, totally unrelated to that, you were giving us guidance for the online and Managed & Other segments. Is what you told us last quarter still a fair range for those two segments? Thanks.
On the M&A side, look, I would say our comments haven't changed. Given changes in multiples and valuations of stock prices and other factors, it doesn't change our appetite, it doesn't make us more aggressive or less aggressive. We have the same discipline we've had over the years, which is we have a set of filters that it has to work its way through being the right asset at the right price in the right market, which means it has to be a stable market from a tax and regulatory standpoint. It has to be a high-quality asset. We have as big of an appetite as we've ever had, but we remain disciplined. Absent all the rumors of us looking at lots of things, they're just that, they're rumors. But we've grown a lot through M&A over the years. We tend to do it in chunks.
We grew a lot in 2011 and 2012 and took a few years off, grew a lot in 2017 and 2018. When the right opportunity presents itself, you'll see us execute. In the meantime, we remain disciplined.
Yeah. I think that we don't feel like we have to do anything. We have a good core business that has been operating consistently, generates a lot of free cash flow, and we just have to be really good at allocating that capital. Just to add the comments on the M&A side. In terms of online and Managed & Other, we previously gave guidance. What I would say is, given the performance in Q3, that the guidance still holds, but I would direct people toward the high end of the ranges that we had previously given for both of those segments, both online and Managed & Other.
Okay, great. Thanks, guys. Appreciate it.
Sure.
Our next question comes from Barry Jonas of Truist Securities. Barry, please go ahead.
Thanks, guys. You talked about a 3% growth in the Las Vegas Locals portfolio outside of the Orleans and Suncoast. Just curious how much of that is the addition of Cadence Crossing, and maybe just talk about the ramp that you're seeing there. Thanks.
Yeah. Cadence is definitely helping it, but it's not the majority of it. It's a component of it. It's probably, and I don't have the numbers in front of me, but it's probably like a third of it or so. It's continuing to ramp in Q4 as well. It's coming around. The revenues are ahead of, quite honestly, where we expected they would be. It continues to improve. We think it'll continue to kind of ramp from an EBITDA perspective, likely hitting full steam in Q1 of next year.
Got it. I just had a question about Pennsylvania and Midwest and South. With skill-based games being removed in that market, are you seeing or would you expect to see any upside to operations in the state? Thanks.
In Pennsylvania, where they've been shut down and they're, best of my knowledge, being removed, we would certainly hope that we see some uplift in the business at Valley Forge. Obviously, it's early and have nothing to report right now, but we certainly expect there to be some uplift. Exactly how much, hard to say, but we're paying attention.
Thank you.
Our next question comes from Dan Politzer of JPMorgan. Dan, please go ahead.
Hey, good afternoon, everyone. Thanks for taking the question. Maybe just a broader question going back to the destination commentary in the Las Vegas Locals market. It feels like we started to see the softening, I think it was this third quarter of last year, which kind of coincided with some of the softness on the Strip. I mean, it seems like these are obviously pretty related, but I guess what gives you that confidence that fourth quarter gets better? Along those lines, I think in the past you said that the fourth quarter could be kind of where you get back to flat or growth in the Locals market. Do you still feel like that's kind of within a realistic expectation?
I think when we look at the Locals market, a couple of things. One is, as both Josh and I pointed out in the prepared remarks, the core market, ex Suncoast and ex the Orleans, performed very well, performed at a similar pace as it had earlier in the year. That gives us confidence that the core business is actually performing well. Once again, Suncoast, the walls related to the construction project came down late in the quarter, so we'd expect that to begin to recover in Q4. As it relates to the Orleans, I guess what gives us confidence is a couple of things. One, once again, we're going to get 350-ish hotel rooms back that while we may not need them midweek, I said this earlier, we certainly can use them on weekends, especially during high-demand holiday periods, the rodeo period coming up and others.
I also think that we believe the kind of intensity increasing in the, what we call the destination softness, has a lot to do with the fact it was summer and it's the weakest quarter of the year in Las Vegas, and so these trends tend to get exaggerated. Then at the end of the day, there's probably just a little old-fashioned optimism in there also.
Yeah, I think I'd like to just make sure we're talking about the same thing. Big picture, and this is kind of broadly, applies broadly, not just destination, applies across Las Vegas and the Midwest and South. July was a good month for us. August was a very soft month, not only in the Midwest and South, but also in Las Vegas. September, I would say, was kind of more normal. It just wasn't strong enough to kind of offset the softness that we had seen in August. So when we think about the destination business, it followed that same kind of pattern, if you will. And so it was much softer in August than we had seen in any other month.
So we're just saying, and I even said it on the last earnings call, the anniversary of the destination business, we thought it was going to be down, but just down less. What we're saying is that in Q3, the softness in destination got worse than the trend that we had seen in the preceding four quarters. Going into the fourth quarter, we attribute a lot of the or some of the incremental softness associated with destination, as Keith said, to the slower seasonality in the business. I think what we're saying for Q4 and going forward is the destination business is going to have trends that are similar to what we saw before Q3. We're not suggesting it's going to be flat. We're not suggesting it's going to grow. We're not even saying it's going to be less bad.
It's going to be similar to the trends that we have previously seen. Then as we progress through the year next year, we'll get a sense of how it's going to perform. But we're not suggesting that we have any kind of crystal ball to suggest when what is really a broader impact on Las Vegas, i.e., it's not just our business, it's a market-driven kind of demand issue with destination business. When visibility changes on that's when it'll change in our business.
Got it. Thanks so much.
Our next question comes from David Bain of Texas Capital Bank. David, please go ahead.
Great. Good afternoon. Thank you. I guess first, once Suncoast renovations are fully complete and operational disruption kind of clears, if you will, can Locals margins recapture that 2025 level next year? I mean, it seems like a yes, given Josh's 3Q Locals margin comments, but are there any promotional, labor, or other considerations that we should think about when looking at next year on margins?
When you look at the Suncoast, you look at the Locals portfolio, Josh Hirsberg, I think, indicated that ex-Suncoast and the Orleans margins were 47%. It is a soft summer quarter. I think most of the quarters were hovering around the 50% level. I think as you think about the business next year, you can think about those margins. Suncoast is, for all intent and purpose, done with the exception of the rooms, which will have some small impact on the business. The rest of the portfolio is just performing as we'd expect, as we talked about with 3% EBITDAR growth and good gaming revenue growth. Once again, we're going to get some rooms back at the Orleans, and we'll just see how the destination business ebbs and flows. But I think we're comfortable thinking about that 50% margin number.
Oh, okay. Great. I hate to beat this to death, but just maybe a follow-up on the potential cadence of quarterly destination trends. It sounds like what you are saying is just it could be more seasonally acute right now, but there is nothing specific from a marketing or competitive variable disruption that you are seeing something new, like the all-inclusive options or anything that would be more aggravating to results. Is that what I am getting?
I think you assessed it right. There was no promotional activity in the quarter that significantly changed the cadence of destination business in our local segment. It was pretty typical. Aggressive room rates on the Strip, but they have been aggressive for more than the last couple of months. The local promotions to the Las Vegas residents generally do not have an impact, regardless that happens every so often. Yeah, nothing unusual in the quarter that would have exaggerated that.
Okay, great. Thanks, guys.
Thank you.
Our next question comes from Ben Chaiken of Mizuho. Ben, please go ahead.
Hey, thanks for taking my questions. Maybe going back to locals, and we've touched on some of this a few times, but can we maybe talk more about the investment at the Orleans and maybe flesh out what you're solving for? Is it just the hotel rooms for peak periods that you were referring to, Keith, I think a few questions ago? I guess I ask because it seems to serve one of the—obviously, it serves one of the softer segments. Is the idea just to invest in the long term despite near-term headwinds, or is there something the property doesn't have today that you think is contributing to the softness you're seeing over the last 12 months? Does that question make sense?
I think I understand what you're trying to ask. First of all, the hotel rooms needed to be remodeled. They're on a cadence, it's maintenance CapEx, and they just need to happen. That was just something that was going to happen kind of regardless of where we're at in the cycle. We have 1,800 hotel rooms there, so it took a long time to get through. So that's one issue. In terms of the broader renovation of the Orleans, it's time. The property is, in its current form, probably 30 years old, and while we've maintained it needs to simply be renovated and upgraded for the long-term competitiveness of it. It is an important asset in our portfolio. It is not as competitive today as it has been in the past and simply needs to be upgraded as part of the process.
You can just think of it as a major maintenance upgrade, is what it is. Every 30 years or so, these buildings need to be reinvested in and refreshed, and that's where we're at with the Orleans.
Okay. Understood. Okay.
Ben, what I would add to that is we're effectively doing the same thing at the Suncoast, and we're kind of bringing the property up to what would be viewed as a current competitive product. That's what we will do at the Orleans. And there, what we have seen is re-engagement of our customers. Not only our recurring, kind of loyal customers. We're picking up new customers and the excitement around the investments is really positive. While we treat it as maintenance capital, I think we expect there to be growing contributions after making those type of investments. Maybe to your point, there's nothing in particular we're trying to solve for except simply creating a higher quality
experience for our customers. And I think, I know investors are generally worried at times about disruption. And as Keith mentioned in his remarks, just to remind, in 2027, there won't be any disruption because all of the activity will be taking place in areas that are not available to customers today. And it'll be a different type of rollout.
Okay. That's all very helpful. Just one quick one. In Downtown, you mentioned both airfares and storms. Or sorry, yeah, airfares and storms, both of which make sense. Is there any way to kind of quantify and delineate between the two?
There really isn't. They kind of happened simultaneously. The last six weeks of the quarter, you had four storms impact the Hawaiian Islands. That's unprecedented. Over the years, that just doesn't happen in six weeks. At that same time, you saw airfares spike. Airfares around the country are generally up in the 20% category, so airfares spiked significantly higher than that. They've begun to recede and moderate, but they're still high.
Okay. Thank you.
Yep.
Our next question comes from Joe Stauff of Susquehanna. Joe, please go ahead.
Thank you. Hi, Keith, Josh. Could you give us maybe an update, building on the last couple questions, around the Orleans, about the competitive situation? We've been talking about this for, I guess now approximately two years, and just wondering if the level of competition that you're seeing from them in terms of excess promotion has stabilized. Then the second question on OpEx, looks like very tight management in the third quarter. Just wondering, are there any headwinds or special accruals that you have to solve for in terms of continuing management of that cash OpEx in the fourth quarter in particular?
On the OpEx part, I would say there is nothing special. Look, it is just the focus of the team. We have, obviously, a high-quality team that has been together for a long time, and they have a good handle on the business. In today's world, it is day-to-day combat, simply fighting through expenses and trying to make adjustments and ensure we maintain margins where they need to be and stick to our very disciplined approach that we have been executing post-COVID. I am not sure I fully understood the first half of your question.
First, it is just the promotional levels, especially impacting the Orleans from Palms and some of the other casinos, that has occurred over the past, say, year or year to two, and where that is.
Yeah. I will take a shot at it. Look, I think, first of all, think back to the question just before yours from Ben, in terms of the philosophy behind investing in the Orleans. It is really about making sure that we have and can remain competitive from the product that we are offering. I think that in relation to the significant marketing from properties around the Orleans and Gold Coast, we had really gotten to the point where we had adjusted our business to manage that business. If you remember that level of competition. If you recall, I am going to get all my dates wrong, but starting about a year ago, we had really the impact of destination. But if you look back at Q1 and Q2 of 2025, our business, in terms of the impact from that competitive pressure, that promotional activity, rather, had really started to stabilize.
Gold Coast has stabilized and started to improve, and the Orleans has just started to stabilize. Then destination started to impact. From my perspective, it is not that those properties are not having an impact, it is that we have learned how to manage through that competitive pressure. So really the focus is on understanding this destination business and figuring out how we are going to counter that over time, either through some kind of economic recovery that occurs or in terms of how we are running the business. I will point out that we are adjust at the Orleans in particular, we are, and we have been for several quarters now, adjusting how we operate to match that level of demand that we are seeing from destination customers. And we are choosing not to be aggressive in terms of promoting just to drive revenue.
In fact, on the other hand, we are sticking to what has made us successful since COVID, and that is making sure that we're investing in the right customers that is driving profitable revenue. There's no reason to promote or discount rooms aggressively. As we think, if you take all that, put it in the blender, and sit around and think about where we need to invest and where we want to ensure that our portfolio remains competitive, the Orleans is an obvious example of where we need to deploy capital.
Appreciate that. Thank you.
Our next question comes from Lizzie Dove of Goldman Sachs. Lizzie, please go ahead.
Hey, thanks for taking the question. I just wanted to broaden it out, I guess, to the consumer environment more broadly. I guess it's hard to separate out just from the destination market and airfare and all of that, but to the extent, some of the volatility that we've seen there and with gas prices, how you think that's impacting, whether it be the Las Vegas Locals market or more on the Midwest and South side of things, and if you could comment any recent trends quarter to date.
Looking at the third quarter, what I would say is, and we talked about this in our prepared remarks, we saw strong growth from our core customers. We saw strong growth in unrated play, both here in Las Vegas. Once again, ex-Suncoast and the Orleans, as well as throughout the Midwest. We saw good growth in ADT or spend from our core customers, up mid-single digits or better. And once again, good growth in unrated play. Softness in the low end of the database, no surprise. More economically sensitive to inflationary items, whether it be gas prices or just inflation in general. I think that that comment or that explanation is applicable both to Las Vegas as well as across the Midwest.
We're not seeing any real significant distinction between the South or our East Coast properties or our Midwest properties or our Las Vegas properties in terms of how the consumer is spending, or at least our consumer is spending their money.
Got it. Makes sense. Then, you've had those pretty consistent trends in the Midwest and South, adjusting for the tax and whatnot this quarter, this year. I guess as you look to next year on a normalized basis, ex the sale, how do you think about, there were some tailwinds this year, especially earlier in the year, from tax refunds and whatnot, potentially. But as you look to next year, just the sustainability of this kind of underlying growth that you've seen.
Yeah. Look, I think that we think there are several kind of different initiatives or items that are enabling the Midwest and South to deliver the levels of performance that it has. And in reality, it's the same thing that's happening in Las Vegas outside of the Orleans and Gold Coast, Suncoast rather. And that is, people naturally are staying a little bit closer to home. They're spending more closer to home. Secondly, there was some degree, probably, of benefit from the tax bill, and that affected Las Vegas as well as the Midwest and South. I think we're also, whenever we have had good success in investing in our products, both in Las Vegas and the Midwest and South.
We don't look at it really as, oh, there was one item that is contributing to the success of the Midwest and South, or for that matter, the properties outside of the Orleans and Suncoast. As we look at our business trends and the underlying health of our consumer, just generally across all the segments within our databases and even looking at unrated outside of the database, we don't really see that shifting at this point. We don't see any reason that suggests that it's going to change. As we look at 2027, we would expect the Midwest and South to largely perform consistently in terms of similar levels of growth that we have seen in 2026.
We would expect with a little bit of portfolio changes, and I'll tell you what I mean by that in a minute, in Las Vegas, outside of the Orleans, really, to continue to grow at similar paces. We'll get the benefit of the rooms at the Orleans and Suncoast coming online, and we'll get Suncoast to start contributing, most likely in late Q1 and Q2, and Cadence will hit full steam as well. Ultimately, as we sit here, there's components of our business that feel good today, have felt good throughout the year, and don't show any signs of why they wouldn't continue in that direction in 2027.
Great. Thank you.
Our next question comes from Trey Bowers of Wells Fargo. Trey, please go ahead.
Hey, guys. Thanks for the question. Just two quick ones. The first one, I am going to kind of repeat a previous question, but curious, when you guys have the stock kind of as dislocated as it is right now, does that change the calculus around any kind of M&A or strategic moves, given you obviously show with your repo how much you feel the stock is undervalued. If something came along, would when the stock is down like this kind of possibly impact the thought process of doing a deal?
Hard to, I think, address that or answer that in the abstract, right? It all is really all fact, and fact and circumstances, if you will. We have to see what we are doing, what the opportunity is. We are certainly flexible in terms of our balance sheet and where leverage would go to, depending on the type of acquisition, the significance of the acquisition. Is it a smaller tuck-in? Is it larger, more strategic? Where is the stock, and how much do we feel like we should buy back? We have a strong balance sheet. We have had one for a while, and we want to continue to have a strong balance sheet. We use the word balanced approach to capital allocation, and we are serious when we say it.
We take all this into account, but we are flexible in terms of where leverage goes, as long as we can see it returning to a level we are comfortable with. It is kind of hard to answer your question in the abstract without very specific facts or circumstances to address, but that is how we think about it. But Trey, I think you highlight exactly what we have been saying for quite some time. The reason that we want to have a strong balance sheet with low leverage is so that we can do all the things that we have communicated and do on a regular basis, and then not have to forgo opportunities as they come along, obviously all within reason. Just because we have a strong balance sheet does not mean we are going to run out and just spend it frivolously or without discipline.
We have shown that we do not do that. History shows that as well. We will continue to have that discipline, but when an opportunity comes along, we feel like it makes sense for the company. We do not have to sacrifice share repurchases or capital investments or whatever else we are thinking about doing because of the low leverage. I think that is one thing that we have learned to appreciate, and we hope the market learns to appreciate over time, as when coming out of COVID, people highly questioned whether we should have the leverage where we are. I think we said that the benefit of doing that is so that we can tell you what we are going to do, and you can be pretty sure that we are going to be able to keep doing that. Obviously, there is some ranges of extremities that would prevent that at some point.
But then as long as everything's kind of in the range, you know we're going to make these investments, we're going to make these share repurchases, we're going to pay down debt, we're going to maintain a strong balance sheet. And then if an acquisition opportunity comes along and it meets the criteria, we don't have to second-guess that we can do it because we can, and then we'll deleverage back down to these leverage levels again and just reset for the next time.
It is the strength of the position that we occupy, the strength of the position that the company has put itself in is to be able to have that flexibility. So we'll use it carefully, but we don't have to make choices.
And then a quick follow-up. Just given the amount of time we spent talking about destination and the Orleans on this call, you guys already break out Las Vegas Locals. Would it make sense to also break out that destination property and therefore be able to highlight more concretely just what's going on in the actual specific locals market? Thanks, guys.
Yeah. Interesting thought. Look, it is interesting, the focus on destination. The benefit of having a diversified portfolio is that this is one small segment of our portfolio. It is a small segment within Las Vegas Locals and even smaller segment within the total Boyd portfolio. We think about the Midwest and South and our Managed & Other business and our online business and how well everything else is performing. I don't think in the near term we think about breaking it out by itself. It's just the Orleans. It's a part of the Orleans business. It's not all of the Orleans business. And yeah, it's being impacted today, but when you look at the rest of the business, as Josh Hirsberg indicated, outside of this piece of the business of the Orleans, the rest of our portfolio is performing extremely well.
Yeah. I think to that point and to the diversification point, I know there's a lot of focus, and there should be a conversation around destination, but overall, not even adjusting for anything, we're essentially down 1% in revenues into the dime. The business has been consistent all year long, and the stock's vastly underperformed that level of consistent performance.
Thanks, all.
Our next question comes from David Katz of Jefferies. David, please go ahead.
Hi. Afternoon. Thanks for taking my question. I want to focus just on Virginia for a minute. Observing a divide between public operators who either support or oppose iGaming legalization, when and if it should occur in their markets. Should we presume that you are inclined to be supportive and embrace iGaming in hypothetical markets and/or Virginia, should it become a reality?
Yeah. Properly regulated, properly taxed, legalized, yes, we are supportive of iGaming, whether it be in Virginia or in other places in the United States. It is our position today. It has been our position for a while. We have enough experience with this over the last decade plus. This is complementary to our overall business. It is not predatory. It does not hurt the business. It is complementary, so we are supportive of it.
Understood. Presumably you would use the assets, brands or whatever it is that you already own in pursuing that, correct?
TBD. It just depends, once again, on facts and circumstances. We have largely used the Stardust brand up in Canada and in Pennsylvania and in New Jersey where we launch it. We also have a couple other brands we are using in those states. So it just depends on how many skins there are or what the opportunities are. Like I said, it is a little bit fact-based, so it is hard to answer right now.
Okay, thanks. Good luck.
Thank you.
Our next question comes from Chad Beynon of Macquarie. Chad, please go ahead.
Hi, good afternoon. Thanks for taking my question. I wanted to ask about the Chicago VLT distributed gaming opportunity. I think that is something that was originally talked about when Illinois legalized this form of gaming over a decade ago, and now it looks like the catalyst might be near-term. So how are you thinking about Lattner and the opportunities to expand into that market? Thanks.
Yeah. Look, I think we evaluate that just like we would evaluate any other opportunities. Lattner is a smaller piece of our business, but we evaluate. So we have to consider that in context of the other opportunities that are available to us. But there is not really much more I can say about it at this point.
Yeah. Look, the Lattner team will be focused on trying to get some of those licenses, but it is not anything that will be a tailwind for us, that will move the needle for us, that will in any way, shape, or form propel us to the next level. But it is something that you can be assured that the Lattner team is looking at. It has been on the radar screen for a while. It is just not a significant driver of our overall business.
Yeah. It is a well-run piece of our business, but unfortunately a small piece.
Thank you. One more on potential expansion or M&A. Does the return to seasonality on the Strip or destination markets, particularly with, let us call it, mid and/or below properties and what we have seen with financials in the first half of the year, what we saw at 2025, does that change how you are thinking about M&A opportunities. What I am getting at is, I think, the operational leverage for these low to mid-end focused properties have been hit really hard where obviously the higher end ones have held up and maybe the returns are just harder to get there. Penciling them now after seeing some of these results in the past six months from other Strip operators. Thanks.
Yeah, look, I would say that today's conditions really do not change our calculus and how we look at M&A. I go back to the litany of things that are important to us, higher quality assets at the right price in stable markets. We do not have to, as Josh mentioned, have to do anything, so we are not going to buy assets just because they are cheap or they maybe are priced right. They have to be a high-quality asset. They have to produce significant amount of EBITDA to move the needle for us, for us to be interested, and have to be in stable tax and regulatory jurisdictions. So, seasonality, dislocation of value, and those types of things does not really change how we view it. It still has to be the right asset for us.
Thank you. Appreciate it.
Our next question comes from Brandt Montour of Barclays. Brandt, please go ahead.
Hi, everybody. Thanks for taking my question. Back to Las Vegas Locals. If you were to take out destinations in the Suncoast and just look at the core business, is there any reason why that business would look differently third quarter into fourth quarter seasonality-wise versus the last three years, which I think you typically did something like mid to high teens. Any reason why it wouldn't look like that this year? Then just sort of an embedded question there. Are you concerned at all about the midterm elections in the state of Nevada and if that could affect either foot traffic or just sort of distract your customers in the fourth quarter?
Yeah. As it relates to the upcoming elections, we really don't see that having a material impact on the business one way or the other. If it did, it would probably be happening now with all the commercials on TV to the extent people actually watch terrestrial TV these days and watch all those commercials. But we've seen it in the past, we've had Democratic governors, Republican governors, there's been change in administration. It's not going to have any sort of material impact on the business. Interesting, but not impactful to the direction of the business. I'll let Josh tackle the first half of your question.
Yeah. Brandt, I think ultimately, sequentially, it's difficult to talk about. I'd feel more comfortable without the numbers in front of me, just saying year over year. When you look at the business, again, excluding the Orleans and Suncoast, we expect the same level of growth. I think there are going to be changes that sequentially make it a little bit different. You're not going to have the drag of construction disruption from Suncoast. You're going to probably have, at least from our perspective as we think about a little bit different impact from destination business going from Q3 to Q4. Talking sequentially, when you have so many moving pieces, I'd be hesitant to do that on the fly. I've tried to do it in the past and hopefully I've learned to stop doing that.
I think I'd prefer to just talk about it year over year.
Okay. Thanks, everyone.
Yep.
Thanks, Brandt.
Our last question comes from John DeCree of CBRE. John, please go ahead.
Great. Thanks, guys. Just one to revisit your commentary on the online business. Keith, I think you spoke to it a little bit about maybe new markets, Virginia, but as you think about investment capital, you've got a number of casino development projects in front of you. What would you need to see from the return profile or opportunity to invest more dollars in the online segment? Not just M&A, but greater maybe investment in brand or customer acquisition. Do you think that could be a bigger piece of the business over time?
A couple of comments. I think as we think about today's online business, it's performing at a very high level, strong margins, and we're comfortable with what our CPAs are in terms of what we're paying to acquire customers. Don't feel like we need to juice it or become more aggressive. It's a very efficient business, very well run, very comfortable with the trajectory, and as we've talked over the last couple of quarters, it is growing nicely. As we think about potential M&A in that world, it's not unlike brick and mortar land-based M&A. It's got to provide a high return. It's got to be additive to the overall business, i.e. adds something that we can't otherwise do on our own. So we look at it in a similar fashion. Are we afraid to do M&A in that world?
No, but the returns have to be significant, the price has to be right, and we have to see that it's additive to the whole business at the end of the day. So we really don't view it any differently. It doesn't distract, and we don't separate it out when we look at land-based M&A from any online opportunities. It's kind of all part of the same calculus.
Yeah, John, your question's a good one because I think ultimately, most people think about our M&A just on the land-based side, and we have done a couple of smaller acquisitions around to add to the capabilities of Boyd Interactive, and I think we will continue to look for bite-size opportunities that not only add to what the offering is, but enhance, from our perspective at least, the ability for that business to grow over a longer period of time. It is a good part of our business, and we could see that becoming a larger part of our business and continuing to contribute to the overall diversification and growth of the company.
I don't want people to misconstrue the comments to mean we're going to pursue the strategies that some of our peers have, because that's not how we think about it, and those strategies are good for those companies, but we do look for opportunities to grow that business further.
Got it. That's helpful. Josh, Keith, I appreciate the color on that one. Thank you.
Sure.
This concludes our question and answer session. I'd now like to turn the call over to Josh for concluding remarks.
Thanks everyone for joining the call. All the questions were really good, even though there were a lot of them. We appreciate the interest and happy to follow up with you after the call if you have any further questions. Feel free to reach out to the company.