Boyd Gaming Corporation (BYD) Q1 2022 Earnings Report, Transcript and Summary

Good afternoon, and welcome to today's Boyd Gaming First Quarter 2022 Earnings Call. My name is Sam, and I will be your moderator for today's call. [Operator Instructions] At this time, I'd now like to hand the call over to our host, Josh Hirsberg, Executive VP, Chief Financial Officer and Treasurer of Boyd Gaming. Josh, please proceed.

Thank you, Sam. Good afternoon, everyone, and welcome to our first 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 SEC filings that may impact our results. During our call today, we will make reference to non-GAAP financial measures. For a complete reconciliation of historical non-GAAP to GAAP financial measures, please refer to our earnings press release and our Form 8-K furnished to the SEC today and both of which are available at investors.boydgaming.com. We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to project special charges and certain expenses. Today's call is also being webcast live at boydgaming.com and will be available for replay in the Investor Relations section of our website shortly after the completion of this call. So with that, I'd now like to turn the call over to Keith Smith. Keith?

Thanks, Josh, and good afternoon, everyone. Our first quarter results were a great start to 2022 as we delivered another remarkable quarterly performance across our business and continued the momentum of a record 2021. Our continued focus on our core customer, enhanced capabilities and streamlined cost structure all contributed to record revenues, EBITDAR and operating margins in the first quarter. Company-wide revenues were up more than 14% year-over-year. EBITDAR grew nearly 16% and operating margins surpassed last year's record by more than 50 basis points. This growth was broad-based as each of our three operating segments posted new first quarter EBITDAR records. In our Las Vegas Locals business, revenues were up nearly 25%, EBITDAR rose 31% and margins reached a new first quarter record of more than 52%. This marks the fourth consecutive quarter that our locals margins have been above 50%. Our Downtown Las Vegas business continued its recovery, delivering record first quarter EBITDAR in margins of 37%. And outside of Nevada, our Midwest and South segment continues to perform well, growing revenues and EBITDAR over last year's record performances. While January got off to a slow start due to COVID and the Omicron variant, we saw business levels gradually return during the quarter as both case counts and concerns around COVID began to subside. Overall, customer trends during the first quarter remained consistent with the third and fourth quarters of last year, including rated guest counts, frequency and spend. Unrated play trends also remained consistent with the last several quarters. While some macroeconomic challenges are present today, as we look at the first three weeks of April, we have not noticed any meaningful shift in customer behaviour as business trends continue at the levels we have seen throughout each of the last three quarters. Looking at the remainder of the year, we anticipate there will be opportunities to further grow our business. One opportunity for continued growth is through our hotel business. Due to labor constraints, we are currently unable to accommodate all the demand we have from our core customers. As the labor market normalizes, we will be able to host more of these known players in our hotels, providing the opportunity for incremental growth in both gaming and nongaming revenues. Also, as travel continues to recover nationwide, we expect to see further recovery in our midweek destination and meeting and convention business, particularly at our Las Vegas properties. And we expect to see continued improvement in our Downtown Las Vegas segment over the next several quarters, with all three properties now open and visitation recovering throughout both the downtown and the broader Las Vegas markets. In addition, we're also investing in longer-term growth opportunities in both our land-based and online operations. In Louisiana, we plan to begin construction this summer on a land-based facility at Treasure Chest, which will replace our existing Riverboat Casino. We expect to complete construction and open this facility in late 2023. For more than 25 years, Treasure Chest has been a consistently strong performer for our company. By significantly enhancing its gaming and nongaming offerings, we'll provide a more attractive entertainment experience that will further expand our customer base while increasing its appeal to our loyal customers. We are also investing in Downtown Las Vegas. We have started work to expand the Fremont's casino space and dining options. Expanding our gaming floor will help us better leverage our location in the heart of the busy Fremont Street experience, especially during weekends. We are also enhancing the three months appeal by adding a food hall concept that will include six quick service restaurants, including several nationally known brands. Once complete early next year, we are confident these enhancements to the Fremont will drive further growth in our downtown segment. And in Northern California, construction work continues on Sky River Casino, which is on budget and on schedule to open early this fall with 2,000 slot machines, 80 table games and 17 food and beverage venues. We have a 7-year management agreement with the Wilton Rancheria Tribe to manage Sky River and will receive a management fee typical for these types of arrangements. With a compelling entertainment product in an ideal location just south of Sacramento, we are confident this project will be a tremendous step forward with the Wilton Tribe in realizing their vision of self-sufficiency. We look forward to opening Sky River’s doors in the coming months. In addition to these land-based investments, we advanced our online gaming strategy during the quarter with our announcement to acquire Pala Interactive. The acquisition of Pala will position us to take a direct approach to the emerging iGaming opportunity. With our geographic distribution, strong loyalty program and significant database, we are confident in our ability to build a profitable regional online casino business. This acquisition will provide us with both the operational and marketing expertise and technology we need to create a successful online casino business. Pala's technology includes a proprietary player account management system and a full suite of iGaming products, including a game studio. As we execute our gaming strategy, we remain fully committed to our sports betting partnership with FanDuel. By leveraging the FanDuel brand and the expertise of one of the nation's clear leaders in online sports betting, we have built a profitable sports betting business that will contribute approximately $30 million in EBITDAR to our results this year. And through our 5% equity ownership in FanDuel, we have the opportunity to participate in the expansion of sports betting across the country. While we actively invest in the future growth of our land-based and online operations, our robust free cash flow allows us to balance these investments with our ongoing program to return capital to our shareholders. We resumed our quarterly dividend on April 15 with a $0.15 per share payment, which is more than double our previous dividend payment of $0.07 per share. At the same time, we are continuing our programmatic approach to stock buybacks, targeting $100 million per quarter in share repurchases. We may also make opportunistic share repurchases from time to time. Our capital return program is an important part of our commitment to creating long-term shareholder value, and we remain on track to return approximately $500 million to our shareholders this year. As we continue to create value for our shareholders, we also remain committed to benefiting our stakeholders through our ESG initiatives. Later this quarter, we will share detailed information on our progress with the release of our annual ESG report. In this report, we will provide updates on our ESG efforts, including environmental, diversity, responsible gaming and corporate gaming initiatives. We look forward to sharing this information with you when our ESG report is published. Before I conclude, I want to take a moment to thank our team members who have played a vital role in our success over the last two years. Our team has overcome repeated challenges since the pandemic first began in early 2020. Despite COVID-related restrictions and labor shortages, our team members have come through and delivered consistently memorable service to our guests. That level of service is an important reason why we have built such a strong loyalty with our core customers. We are grateful for everything our team has done. And as part of our long-standing commitment to their well-being and professional fulfillment, we continue to invest in our team members in meaningful ways. Earlier this year, we announced that we will be increasing our minimum wage for all non-tipped team members to $15 per hour. We have already started implementing this program and expected to be completed over the next 12 months. This follows the payment of two appreciation bonuses over the last nine months, with more than $20 million paid to our nonexecutive team members. These investments are in addition to the many other benefits and offerings we have extended to our team members as part of our commitment to being an employer of choice. In summary, 2022 is off to a great start as our business continues to perform at a remarkably consistent level. With opportunities for growth throughout 2022 and 2023, we are confident our company is well positioned for continued success. Thank you for your time today. I'd now like to turn the call over to Josh.

Thanks, Keith. This was another successful quarter for our company as we maintained our operating momentum from 2021 with record first quarter revenue and EBITDAR. Company-wide margins also improved over the record first quarter we delivered last year and remain well ahead of pre-pandemic levels. The customer trends we saw throughout the second half of 2021 are continuing, with strong growth in business volumes from our core customers and consistency in our unrated business. Looking ahead, it is important to remember that second quarter year-over-year comparisons will be more challenging due to the impacts last spring from significant government stimulus and the improving COVID trends during that time. This challenging comparison does not reflect the change in the direction of our business. The positive trends of the first quarter are continuing into April with business volume similar to what we've seen throughout the last three quarters. With continued strength in our operations, substantial free cash flow and the lowest leverage in our company's history, we are able to continue executing our capital return program, balanced with strategic investments in our portfolio. We repurchased $132 million in stock during the quarter, representing 2.1 million shares at an average price of $62.86. The actual share count at the end of the quarter was 109.6 million shares. Since commencing our repurchase activity last October, we have repurchased 3.4 million shares through the end of March for a total of $213 million, leaving $149 million under our current board authorizations. We plan to continue our programmatic approach to share repurchases of $100 million per quarter and expect those repurchases to be supplemented with opportunistic buybacks from time to time. We intend to request additional authorizations from our Board as necessary to continue our programs. We also resumed quarterly dividend payments earlier this month with a $0.15 per share payment on April 15. In total, our dividend and share repurchase programs are on track, and we expect to return approximately $500 million to shareholders this year. At the same time, we continue to invest and maintain -- invest to maintain and grow our business. We expect to spend approximately $250 million this year on maintenance capital expenditures and an additional $50 million on the Fremont and Treasure Chest projects that Keith spoke about. During the first quarter total capital expenditure were $47 million. Separately, we have also agreed to acquire Pala Interactive for $170 million in cash and expect this transaction to close by the first quarter of next year. We ended the first quarter with leverage at 2.2 times and lease-adjusted leverage of 2.7 times. 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. Sam, that concludes our remarks, and we're now ready to answer any questions from participants on the call.

We will now begin the Q&A session. [Operator Instructions] Our first question comes from Barry Jonas of Truist Securities. Sir, you may proceed.

I actually had a question on the downtown segment to start. For those of us who've been following you guys for some time, I think it's interesting to note no impact from higher gas prices were noted. Maybe talk about the charter business and the strategy there going forward?

Sure. Thanks for the question. So downtown has performed exceptionally well over the last several quarters and Hawaiians are continuing to show up in our properties and our operations in strong numbers. We actually are not running our own charter currently, and so we are not kind of subject to the fluctuations in gas prices. We've modified that model and now are buying seats on Hawaiian Airlines and several other airlines. And so we don't -- we're not subject to that risk of fuel price changes.

And then I noticed you didn't mention void pay. Just curious if you can give any updates there? Maybe any comments on what you're seeing in terms of adoption? And if you think it's driving higher spend or play levels?

Yes. So I would say, and I think I probably said this last quarter, it continues to be a very slow, modest rollout. It is active in 13 of our properties through today. We are launching it or have launched it at one of our properties in Nevada on table games. And so we continue to expand it and roll it out. We continue to kind of work through some of the early kinks in the software that always happens with these types of products. We haven't done a major marketing push or launch yet. So it continues to once again be kind of a slow adoption, but a positive adoption. The people that have used it or that are continuing to use it like it. I can't tell you that they're playing at a significantly higher level, but they do enjoy it. They enjoy the ease and the convenience of it. So something that I think will take just a little more time to roll out and be fully adopted by the customer.

The next question is from Steve Wieczynski of Stifel. Steve, please proceed.

So Keith or Josh, I want to ask about your April commentary, which sounds like business trends continue to be very strong. Obviously, there's certain -- there's certainly concerns out there about the consumer potentially weakening. And I guess my question would be, have you seen trends remain strong across the whole portfolio? Or have you seen any changes across any markets or even across your database in terms of low-end customer spend versus the mid- or high-tier customers?

Yes. So as we look at the portfolio overall, I think the term we used in our prepared remarks was consistent or remarkably consistent. And that's what we've seen. The higher end of the database, the higher worth customers continue to perform at an exceptionally high level and performed extremely well. The mid-tier is performing well from an aged demographic standpoint. Our older customers once the Omicron and COVID count started to drop kind of mid-Q1, have performed extremely well and are coming out in big numbers. But the younger demographic, that kind of 45 to 65 age group has also continues to perform extremely well. The trends are really consistent. Look, we assume that there is some fall off or degradation in play with some of our customers. But honestly, it's not discernible as we analyze the database. To the extent that they're falling off on the unrated side, they're being replaced with additional players on the unrated side. But when we look at our core customers throughout our database, it's been remarkably consistent.

So that kind of leads into my second question. I'm going to sound probably a little bit pessimistic here again, so excuse me for that. But in terms of your return of capital program, Josh, you went through and kind of said you're still kind of sticking to that $500 million a year this year to shareholders. And I guess kind of given there's much smarter people out there to me that I believe we could be heading into a correction in terms of the economy, does that change your thinking at all? Meaning do you start to potentially hoard more cash versus returning cash to shareholders?

Yes, Steve, I think the way we think about it is, is that we've built in flexibility around our programs and the plans that we've made and discussed with the investment community to contemplate potential risks to our business. I mean, that's one reason we're running at the leverage levels we are. And we're not using every dollar of free cash flow that we have available to us to return to shareholders and dividends and share repurchases. We have flexibility there. We're not -- our growth capital programs aren't geared toward using up every dollar that we're generating as free cash flow. So I think as we look at kind of where we are today, understanding, not being naive about potential risk in the business, we've tried to build it in, in terms of having a flexible balance sheet, a strong balance sheet and understanding that we have flexibility and decision-making as we go forward. But we feel like we've built in some cushion in the way we're thinking about it and executing on these programs at this point.

The next question is from Shaun Kelley of Bank of America. Shaun, please go ahead.

Just maybe to start, Josh, I wanted to kind of go back to the core consumer that Steve asked about a little bit. I think just if we break down specific markets, could you just give us a sense of maybe some of the patterns you saw in maybe just the core regional side of the business. I think there, there's been some concern that maybe in March, things slowed down a little bit relative to trends seen earlier in the year, certainly, in the back half of last year. So could you just talk about maybe what you saw across some of the core regional markets and some of the behaviors there.

Yes. Look, I think that, certainly in March, we didn't -- and as Keith mentioned in his remarks, going into April, the business actually, in our mind, at least as we were looking at our trends in our business, continue to build through the quarter as we came away from Omicron. February was good and then it continued into March. Now you do have to realize, certainly, we started to see some of the stimulus benefits start to roll out in late March, and our Midwest and South business kind of really kicked in at a pretty high level pretty quickly. And then Las Vegas came in a little bit behind that. So -- but when we look at the general health of the business and look at the trends sequentially, as Keith mentioned in his remarks, and I know some people have heard me say this as well, it's just been -- it continues to be a consistent business. We don't see uniqueness’s in one market versus the other. We did have kind of one-off issues in some of the Midwest and South markets that we operate in, but that was exogenous. That wasn't related to customer trends. That was more of other things going on in those markets. So I think we generally feel pretty good about where things are trending today and acknowledging, I think, that in some of the unrated play, maybe there is softness there, but it's being replaced by other -- I mean our unrated business has been very consistent as a percentage of the overall volume of our business.

Yes, Shaun, maybe you should emphasize two things. One, as Josh said, the quarter actually strengthens as we went through it. January was impacted by Omicron, but it got stronger as case counts went down and these mask mandates, at least here in Nevada, came off. So that's important to understand. Secondarily, as we move into the second half of March and April and May, it is about a sequential improvement or sequential trend not year-over-year because clearly, the year-over-year comparisons are tougher in the second half of March and April because of the stimulus that was in the economy last year. So we have or are transitioning to looking at this sequentially from Q1 to Q2. And as we mentioned a number of times, as we look sequentially over Q3, Q4, Q1, the business continues to perform at a very high level. We continue to see strong growth in our database and strong performers -- strong performance from the upper tiers of our database.

And just my follow-up would be, obviously, the other area where there's a lot of question marks out there kind of remains the margin sustainability and really the broader inflation backdrop. So could you just comment a little bit, Keith, I think you mentioned getting back to a $15 or getting to a $15 minimum wage. Maybe give us a sense of either how much of your cost structure that could impact? Or just help us get a sense maybe broadly for where you think your -- what kind of headwind you may have from the kind of the labor side of the business as we progress through 2022?

Sure. So as we've talked about for probably a year now, these elevated margins that are now just part of our business and part of our core business, while we will not maintain 100% of the increase that we have generated, we do expect to maintain the majority of the increase. So we do expect over time some payroll to come back into the business and some marketing costs to come back into the business. So we expect to maintain very high margins, but not every point of what we've achieved over the course of the last couple of years. Built into our thinking and built into our commentary is the raising of our minimum wage to $15 an hour. And so while it's not insignificant, it has been kind of built into our estimates. And we believe that there are offsets as we are able to attract more team members as we're able to run less overtime by attracting more team members at $15 an hour, as we have less turnover in the business, it all nets out. So it's not a material impact to the overall margin profile of any one of our properties or any one of our regions.

And the one other thing I would add to it is I think about adding labor back, it really falls into kind of two categories. One is labor that we need to add back to relieve the strain of our team members where we're just too short in terms of the amount of labor we have. And then on the other side is there's -- there are revenue opportunities associated with bringing some of that labor back as well. I mean, Keith, in his remarks, talked about the opportunity on the hotel side of things. So I think we continue to have an opportunity on the non-gaming side as this business continues to return over time, and also on the gaming revenue side as well because it's not just about filling those hotel rooms with hotel guests that pay a cash ADR. It's about filling them with really high-quality casino customers that we're turning away today. So there are elements of costs that are going to come back into the business. And I'm sure there's some unanticipated costs that we haven't aren't aware of today. But at the same time, there's also revenue opportunities that we have the ability to capture over time as well. So it's not just on one side of the ledger, so to speak, that we will see pressure. There's also opportunities.

The next question is from Carlo Santarelli of Deutsche Bank. Carlo, please proceed.

Josh and Keith, you guys talked a little bit about the labor front. Just in terms of broader cost pressure and acknowledging, clearly, labor gaming taxes are the vast majority of your expenses, especially in your regional markets. Are you seeing any other signs of kind of pent up cost inflation, be it other utilities, things along those lines that are meaningful in any way?

Well, I think you captured it. Labor, marketing and gaming taxes are the largest share of the expenses when we look at the P&L. But certainly, utility costs are up when we look quarter-over-quarter and year-over-year, so there are incremental costs. I think Josh was just alluding to it, we will see incremental costs going up in the business. Are they having a material impact, no, but they are clearly up year-over-year. Outside of utilities, in food costs being up, the food costs being up are also being offset by increased menu prices and increased average check. And so there is a lever that we can pull as cost of food goes up. Utilities, it's hard to offset, so that's just a pure impact to the bottom line. So it's something we're monitoring and watching. But outside of those two issues, Josh, I'm not nothing is coming to mind where we're seeing significant incremental costs.

No, I think you and Carlo hit them all, really. It's labor and marketing-related items that are our biggest costs, that we're particularly focused on. And utilities have gone up as well. I think what we're taking some comfort in, at least is our ability to kind of maintain our margins while we're facing some of these cost increases. And so our operations teams are doing a really good job of balancing, trying to get labor into the business, facing some of these costs on the food side and on the utility side. But I think what we're also seeing is just our core customer and that focus on that core customer continue to kind of help us be successful in this environment. And we've just gotten a lot better as a company really since reopening since being closed for COVID. I mean we were working on this pre-COVID, but just getting really better at kind of being focused on that loyal core customer and continuing to try to drive that business from them is helping us offset some of these cost pressures.

And if I could just follow up kind of on that theme. If you think about kind of your nongaming tax related to OpEx in the first quarter, and then I think I believe it was down in several of the regions with some seasonality. And then you just kind of think about over time, seasonally, the way that, that OpEx has kind of trended, given kind of the minimum wage increase and given some of the other more real-time kind of inflationary pressures that may exist or some of the smaller stuff that you guys just kind of call out, is there a reason to believe like the seasonality of that OpEx changes materially off of the first quarter relative to how it's trended in prior years, normalized years, obviously, going back to '19 and prior.

So Carlo, just to make sure I understand your question, you're saying if you took the Q1 OpEx, excluding taxes, that -- is there seasonality related to that as you move through the year, that's your question?

Well I'm saying, would the seasonality be dramatically different than it's been in prior years. If we went back and looked at those numbers, '17, '18, '19 and kind of ran it from there, on a quarterly sequential basis, do you think there's a material change in the way that, that moves throughout the year this year, given some of the things that you're seeing, presumably on the cost side this year?

Yes. Look, I'm not sure if this is going to answer your question. So we obviously ask it again if I missed the point of your question. But I think ultimately, that if I look back I kind of typically look back at 2019 as a year to use for a base and look at that seasonality and use that to think about 2022, so there is some seasonality but I think it's not like dramatic. There -- I've noticed some but not like hugely variable.

Yes. And that was kind of what I got to. I guess what I -- was that more so this year, if you're putting the minimum wage and you're seeing other kind of costs that are going up in real time, are those things enough to kind of disrupt what has been the historical seasonality, I guess, is as easier way to ask.

I think -- yes, I hear what you're saying. So I think if you just looked at isolated cost, you would say that there's -- there could be some increased seasonality associated with those costs. In other words, you may have higher costs as you progress through the year because you're bringing on more labor and you're having those folks at a higher wage potentially. But I also want to point out, and I'm not -- there are offsets to that, that are going on in the business, whether where we're getting away from either temporary labor that we had to hire or either COVID-related costs that are no longer in the business as well. So I think it's not as clear cut as oh, we're going to add back labor. It's going to be at a higher cost, and that's going to grow over time. There are some puts and takes that are happening not only in the first quarter, but going to continue to happen throughout the year as well that will -- I don't know if they'll totally offset it, but they will mitigate some of that.

Yes. So Carlo, if you were looking at OpEx in isolation, using '19 as a seasonality base, yes, you'd expect there to be some incremental cost as you went through 2022 because of the increased minimum wage and increased utility costs that we're not -- maybe aren't fully baked in yet. But then once again, you have to pull back. And as Josh said, there'll be revenue opportunities. There'll be other offsets we may be using some contract labor that will be converted at a lower cost to in-house labor. And so it's hard just to think about OpEx in isolation without thinking about the kind of the whole property or the whole picture, if you will.

The next question comes from David Katz from Jefferies. David, please proceed.

Covered a lot of detail. So look, I think one of the topics we've talked about in the past is the degree to which the strength on the strip drives locals business. And potentially, there's any -- what the co-existence or co-habitation or interaction is between the strip and your locals business because at times, it has not, and I'm wondering whether there's any change to that.

I think that as The strip has performed well as Las Vegas has hit its kind of peak demand, that our locals business has also performed extremely well because we do get -- whether it's overflow pricing from the strip as the strip hotel rooms fill up, we're able to price our hotel rooms higher or whether it's just increased visitation as in the case of Downtown Las Vegas, where a large percentage of visitors to the strip visit Downtown Las Vegas and so we get the benefit of that. So there's always been somewhat of a symbiotic relationship between both downtown and locals properties and the strip because we don't have as much pricing power if the strip isn't full. So it exists today. Maybe a decade ago, it wasn't quite as strong. But I'd say at least for the last decade, it's been a fairly strong relationship. As they do better, we do better. As more out-of-town guests are in town, as people are traveling, as more people are coming through the airport, as meeting and convention business rebounds, we end up doing better in our locals properties.

And just as a follow-up, given the financial flexibility that you have, it is a strip asset a possibility in your future under the right circumstances?

Look, I think today, we are intensely focused on our core operations kind of continuing to fine-tune and maximize the results and the performance of these properties and making sure that we are focused on the future and have all the amenities and the physical assets, we need to continue to perform at this level. And that's why we're doing things like Treasure Chest and the Fremont and there's a handful of other smaller projects that could follow along once those are further into development. We've grown a lot, as we've talked about on prior calls through M&A. And it's something that we always have our eyes open to. But I think last time on this call, somebody said it may have been Josh, just because you can do something doesn't mean you should do something. And so we've always been a very disciplined acquirer. We'll continue to be extremely disciplined. But I got to tell you, our main focus now is on running our core business and extracting everything we can out of that. And making sure that we find our way through this inflationary environment we're in and continue to have a strong business going forward.

The next question is a follow-up from Joe Greff with JPMorgan. Joe, please go ahead.

Hey, everybody. I guess most of our -- everybody's focus on today's call is what's going on with the lower-end consumer and how you're thinking about margins going forward, and those two topics have been discussed enough. So the only thing I really have at this point late in the call is -- when we think about the CapEx going into Treasure Chest and into Downtown Las Vegas, do you anticipate? And can you help us understand what sort of disruption you might have in the near term before those things open up?

Yes. Good question, Joe. So if you think about the Fremont, first, the actual construction of the new food outlets, the food hall, if you will, is happening where the buffet used to be and on a piece of land that was vacant, right behind the building that's being incorporated in. And so up until recently when we hung some steel, people didn't even know there was construction going on at the property. So it really is, to a large extent, seamless as we build out that food facility there. And so that's a real benefit. As part of that, we're also building out some additional casino square footage, which once again is behind the wall. And so it has no impact on our existing operations. So that project should be largely not impactful to the Fremont's operations. In the case of Treasure Chest, separate land-based facility on a separate piece of land, the existing Riverboat operation will stay fully in business and producing full results until it's time to move over some of the gear in late 2023. And so really, no impact as you think about '22 or even early '23 on the Treasure Chest business because it's a whole separate building, kind of across the way from the existing facility.

And Josh, how much CapEx for these two projects in 2023?

In 2023, largely -- I mean, I'm trying to think. Let me see here if I have that -- spend $25 million. So it's about $60 million or $65 million for Treasure Chest. And I think like $10 million or $15 million remaining for Fremont because it will largely be finished later this year, first quarter of next. And Treasure Chest will take into the late 2023. So what's happening is Fremont largely gets done this year, finishes up first quarter next year, probably has $10 million or $15 million. And then Treasure Chest largely gets started probably later this year and mainly gets done in -- does get done in 2023 and opens in 2023. So I look at that as probably a $60 million, $65 million spend at that point. And then we'll be probably in the works planning something -- the next project to come online to take the place of, say, the Fremont as long as it has an adequate return relative to our alternatives. So that's how to think about it. And that would be on the top of a maintenance.

And then one final thing. With regard to the Sky River Casino opening in the fall, can you remind us what sort of advances you have out with the Tribe and your anticipation of the timing of that recovery of that advance?

Yes, Joe. So right now, we have -- it's about $105 million advanced. That's about $75 million or so of actual advances, and then the rest is interest that's been accruing those advances over the last several years that we've been supporting the Tribe to get them to the point where they could then arrange their own financing and develop the project. So that $105 million will continue to own interest until we are reimbursed from cash flow from operations. And so obviously, that's a little dependent on how well it does. It should be a good project. And so we would expect to be reimbursed over the first several years of that project. Separately from that, as you probably know, we earn a management fee that's about 25% effectively of pretax income that we earn once the project starts opening or does open rather. And so those are the two components of cash flow the company will start seeing once the project opens.

Next question is from Dan Politzer of Wells Fargo. Dan go ahead.

So I think a few months ago, you guys mentioned there was not much reason to think 2022 EBITDA wouldn't be at least equal to 2021 levels. Given you're out to a $45 million or so head start after the first quarter, but there's additional concerns out there on the consumer and on the cost side, how are you thinking about this? And what are you seeing across your portfolio that could maybe be the puts and takes to this?

Wow, Dan. I think -- look, I think when we look at it, and I don't really think -- it's hard to have a different view today. When we look at our business, except to be obviously cognizant of what everyone's worried about. It's a natural thing to be worried about, right, in terms of inflation, a war and all of those things that could weigh on the consumer. I think where we continually have confidence is in the underlying trends we're seeing in our consumer, which have been -- and I hate to be a broken record, but have been -- have largely not changed since we reopened. In fact, our core customers just continue to grow throughout all of this, even in periods of time when we had Omicron and the business took a little bit of a step back because of that, within that framework, the core customer is continuing to grow. So that's the only thing we have in our pocket that we can count on today. I think the second -- everything else is a concern that we just -- we'll deal with as we come to it if we ever come to it. And we can all be rational and reasonable to expect that to happen at some point, but maybe it doesn't. I'd say the other thing to think about, at least as we think about it is, Q2 last year was really good. We don't expect to replicate that. But what we expect to do over time is make up some of that difference through the growth in Q1, Q3 and Q4 that we expect naturally to happen. We -- it depends largely on how successful we are in Q2 and how we make up those differences over time. But that's how we think about the business today. We're not naive to the risks that are inherent in it. We still have some opportunities with respect to the top line aspects that we've talked about. And we're kind of working through every day. Our operations guys are doing a great job of managing the expenses and staying very tight and focused on executing our business. And I think that's what gives us the confidence in kind of how -- and where we sit today. I don't really know how else to really answer that question.

Yes, Josh, there's growth opportunities that he highlighted in terms of Las Vegas and the return of meeting and convention business here, just the return of out-of-town or destination travel to Las Vegas, certainly offset by things like higher wages and inflationary aspects. And so how does all that net out at the end of the day? Well, hopefully, it nets out to 0, and we end up where we were last year. But we'll work our way through it every day and every week as we move forward.

And then just for my follow-up on Pala Interactive, I mean given the focus is going to be on iGaming, how should we think about the revenue and maybe the EBITDA opportunity? And should we be thinking about there's an additional investment on technology or integration or on your rewards program just to integrate all these things together?

Yes, I wouldn't anticipate any significant additional cost. I mean we bought Pala because it gave us both the technology that we needed to roll this out as well as the operational and marketing expertise to run this business. And the management team is staying intact and becoming part of us. We don't see any other significant costs. Yes, we'll -- their team will have to develop an interface with our loyalty program. That's not a very big lift. And in terms of rolling it out, it's really more about other states approving this or adopting this legislatively. We're taking a regional, approach focused on the 10 states where we do business and maybe a few adjoining states where we get a lot of customers from. So we're not out there looking to have a national presence as much as a regional presence. So no significant incremental costs as we go forward, no anticipated additional acquisitions to be able to move this forward.

Next question comes from Thomas Allen of Morgan Stanley. Thomas, please go ahead.

So in prior cycles, you guys have benefited from higher oil and gas prices. Are you seeing that this cycle at certain properties?

Yes. I mean we're naturally seeing it in some of the Louisiana assets that's contributing to our results. But it's not outsized, I would say when we look at the trends of the business, they're just trending -- they're getting benefit, but it's like -- it's not outsized relative to the performance that we're seeing in the rest of the business. If that makes any sense.

It does. And then just my follow-up. So in Louisiana, retail, sports banging was legalized, I think launch in the fourth quarter of last year, online launched this -- in the first quarter. Any observations over the past few months?

No, look, we've seen it most of the properties we launched the FanDuel sports book retail at each one of our five Louisiana properties, so each one of the properties has a retail location up and running. And beyond -- FanDuel online is up and running. It's been incrementally positive as we've seen new customers come to the properties. It's not -- it's all incrementally positive. I don't really have any other color trying to think if there's anything else interesting to add, but I don't think so, Thomas.

Next question is from Joe Stauff of Susquehanna. Joe, please proceed.

I was wondering if you can maybe update us on the promotional environment in your various segments, Locals, South and Midwest. And if you see any competitive responses that you have to match, just wondering where that is now.

So I think just globally, kind of over -- across all the markets that it has been relatively stable. Many of our competitors post COVID opened up at a very high level, either at or in some cases, even slightly above pre-pandemic levels. And for the most part, they've stayed there. We obviously have not. And some of our competitors like us have taken a more conservative approach to marketing going forward. And most people have kind of stayed where they started. Some have gotten slightly more aggressive and some of the aggressive ones have maybe pulled back a little bit. But for the most part, I would say the promotional environment for the last several quarters has been kind of very neutral, if you will, nothing has materially changed in the business, whether it be here in Las Vegas or whether it be in the South or whether it be in the Midwest.

Thank you, Joe. There are no further questions waiting at this time. So I'd like to hand the call back over to Josh for closing remarks.

Thank you, Sam, and thank each of you for your thoughtful questions. If you have any follow-up, feel free to reach out to the company, and we'll try to facilitate getting those questions answered. Everybody, stay well. Thank you.

That concludes the Boyd Gaming first quarter 2022 conference call. Thank you all for your participation. You may now disconnect your lines.