Q3 2023 Boyd Gaming Corp Earnings Call
Participants
David Strow; VP of Corporate Communications; Boyd Gaming Corporation
Josh Hirsberg; Executive VP, CFO & Treasurer; Boyd Gaming Corporation
Keith E. Smith; President, CEO & Director; Boyd Gaming Corporation
Barry Jonathan Jonas; Gaming Analyst ; Truist Securities, Inc., Research Division
Brandt Antoine Montour; Research Analyst; Barclays Bank PLC, Research Division
Carlo Santarelli; Research Analyst; Deutsche Bank AG, Research Division
Chad C. Beynon; Head of US Consumer, SVP and Senior Analyst; Macquarie Research
Daniel Brian Politzer; Senior Equity Analyst; Wells Fargo Securities, LLC, Research Division
David Brian Katz; MD and Senior Equity Analyst of Gaming, Lodging & Leisure; Jefferies LLC, Research Division
John G. DeCree; Director and Head of North America Equity & High Yield Research; CBRE Securities, LLC, Research Division
Joseph Richard Greff; MD; JPMorgan Chase & Co, Research Division
Shaun Clisby Kelley; MD in Americas Equity Research & Research Analyst; BofA Securities, Research Division
Stephen White Grambling; Equity Analyst; Morgan Stanley, Research Division
Steven Moyer Wieczynski; MD of Equity Research and Gaming & Leisure Research Analyst; Stifel, Nicolaus & Company, Incorporated, Research Division
Presentation
David Strow
Good afternoon, and welcome to the Boyd Gaming Third Quarter 2023 Conference Call. My name is David Strow, Vice President of Corporate Communications for Boyd Gaming. I will be the moderator for today's call, which is being recorded on Tuesday, October 24, 2023. (Operator Instructions)
Our speakers for today's call are Keith Smith, President and Chief Executive Officer; and Josh Hirsberg, Executive Vice President and Chief Financial Officer. Our comments today will include statements that are forward-looking statements within the Private Securities Litigation Reform Act. All forward-looking statements in our comments are as of today's date, and we undertake no obligation to update or revise the forward-looking statements. Actual results may differ materially from those projected in any forward-looking statement. There are certain risks and uncertainties, including those disclosed in our filings with the SEC that may impact our results.
During our call today, we will make reference to non-GAAP financial measures. For a complete reconciliation of historical non-GAAP to GAAP financial measures, please refer to our earnings press release and our Form 8-K furnished to the SEC today and both of which are available at investors.Boydgaming.com. We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to project special charges and certain expenses.
Today's call is being webcast live at boydgaming.com and will be available for replay in the Investor Relations section of our website shortly after the completion of this call.
So with that, I would now like to turn the call over to Keith Smith. Keith?
Keith E. Smith
Thanks, David, and good afternoon, everyone. Our results for the third quarter reflect the value of our strategic focus on our core customers, the benefits of our growth initiatives and our diversified business model.
For the quarter, company-wide revenues grew 3% to $903 million. During the quarter, we continued to see growth in play from our core customers, increasing 1%. This is on top of last year's strong growth of 5% from this segment. This increase in play from our core customer segment was offset by a 4% year-over-year decline in retail play during the quarter.
Importantly, total play from our retail customer segment has remained at consistent levels since late last year, reflecting a stable retail consumer. We also produced growth in nongaming revenue during the quarter with hotel revenue increasing more than 4%, and food and beverage revenue growing nearly 5%. In both cases, driven by strong cash business.
And with respect to our growth initiatives, we once again delivered strong results from Sky River and our online gaming segments.
On a company-wide basis, EBITDAR decreased 5% to $321 million, while property level operating margins were 40%, reflecting ongoing cost pressures and a return to normal seasonality.
Now moving to segment results. In our Las Vegas Locals segment, operating performance on a year-over-year basis was similar to our performance in the second quarter of this year and consistent with the expectations we outlined on our last call. During the quarter, we continue to drive solid growth in core customer play, which increased 2%. Play from our retail customers was down approximately 4% year-over-year. However, performance from this customer group has remained stable in the local segment since late last year.
We also saw a nearly 6% increase in non-gaming revenue with both hotel and food and beverage revenues growing during the quarter. With respect to our EBITDAR and margin performance, our local results continue to be impacted by ongoing cost pressures in our business. Looking ahead to the fourth quarter, we expect that trends among both core customers and retail players will remain consistent with the last several quarters. We also expect the current cost pressures will continue into the fourth quarter, the overall expenses should be sequentially consistent with the levels we saw in the third quarter.
Also in the fourth quarter, we anticipate there will be some impact from the opening of a new competitor. As we have seen with previous openings of new properties, we expect some initial trial visitation from our customers to this new property. However, after this initial trial is over, we expect this impact will fade. Our customers will return and long-term growth will continue as the Las Vegas market absorbs this new capacity.
Next, in Downtown Las Vegas, underlying business trends remain healthy. Consistent with the second quarter, segment results were impacted by an ongoing room remodel project at Main Street Station as well as the final stages of the Fremont renovation.
The California, which benefits from Main Street station's hotel rooms, was also impacted during the quarter from the ongoing work at Main Street. Main Street's room remodel project is in its final stages, and we expect it to be complete by year-end, allowing both the California and Main Street to return to growth.
At the Fremont, we are driving strong results from the comprehensive remodel and expansion of our casino and non-gaming amenities, which we completed in October. Even with disruption during the third quarter, Fremont achieved strong revenue growth and record third quarter EBITDAR as our renovations drove increased traffic and visitation to the property. This strong performance of the Fremont comes against the backdrop of a thriving downtown Las Vegas market. Pedestrian traffic remains strong along Fremont Street, and we continue to benefit from solid visitation from our core Hawaiian customer segments.
Thanks to these healthy trends and our recent investments, we expect improved results in Downtown Las Vegas in 2024. Looking at our Southern Nevada operations as a whole, the continued growth of our core customer, the stability of the retail customer and the strength of the Las Vegas economy all give us optimism for the future. Visitation to Las Vegas is up nearly 8% year-to-date. Convention and meeting business is up 30% this year. Average daily room rates are up more than 10% across the market this year. Airport traffic is at all-time highs on a trailing 12-month basis. And with upcoming events like Formula One and the Super Bowl, a busy convention calendar the recent debut of the sphere in the fourth quarter openings of 2 new resorts with nearly 4,000 hotel rooms, the stage is set for continued growth in the Southern Nevada market.
Local economic indicators remain positive as well. Total employment in Southern Nevada is up nearly 5% over the last 12 months, and our local population continues to grow. The development pipeline remains robust with $6 billion in projects currently under construction in Southern Nevada. And with billions of dollars in additional projects now in the planning phase, the Las Vegas economy has a firm foundation for continued economic growth well into the future.
Moving to the Midwest and South region. Customer trends remained stable during the quarter. We continue to see broad-based growth in core customer volumes, offset by year-over-year declines in retail play. Similar to other segments, volume from retail customers has remained at consistent levels in the Midwest and South since the fourth quarter of last year.
Overall, our customer trends have been consistent across the Midwest and South segment in recent quarters and we believe these trends will continue in the fourth quarter. And much like Las Vegas, Cost pressures impacted the performance in the Midwest and South region during the quarter. We expect this will continue overall expenses in the fourth quarter, running at similar levels to the third quarter.
Next, in our online segment, EBITDAR continued to grow versus prior year, and this segment is now on track to achieve $60 million to $65 million in EBITDAR for the full year.
Similar to the second quarter, we benefited from strong results from FanDuel's operations as well as contributions from Boyd Interactive, which we acquired last November.
And finally, our managed and other business produced $19 million in EBITDAR during the quarter. Management fees from Sky River Casino in Northern California represents $17 million of this performance as this property has consistently exceeded our expectations since opening in August of last year. As a result of Sky River's strong performance, our company's loan to the tribe was effectively repaid earlier this month.
And based on the property's strong start, the tribe is actively working on plans to expand Sky River by adding additional casino square footage, hotel rooms and meeting and convention space. While these plans are still preliminary, the tribe and our company are optimistic about the potential of an expansion project given Sky River's performance to date.
As a result of Sky River's strong results, we expect our managed and other business to maintain a pace of about $19 million in EBITDAR during the fourth quarter and into next year. Recall that during last year's fourth quarter, we received a onetime development fee of $5 million related to the Sky River project.
So in all, on a company-wide basis, we continue to deliver solid results. Given our company's continued operating strength, low leverage and strong free cash flow, we're able to execute a balanced capital allocation program that includes reinvesting in our properties and returning capital to our shareholders. Over the past 2 years, we have returned over $1 billion to our shareholders while maintaining a strong balance sheet. Going forward, we remain committed to our $100 million per quarter share repurchase program and our regular dividend program.
In addition to this ongoing capital return program, we remain focused on investing in our core operating properties.
Our recently completed renovation of the Fremont and a project to move our Treasure chest operation onto land to improve the customer experience are just 2 examples of this initiative. The strong results we are achieving at the Fremont represent the potential of these types of investments.
With Fremont now complete and Treasure Chest nearing its final stages, we expect to announce additional projects sometime next year.
Beyond these capital projects, and as part of our ongoing maintenance capital plan, we are also making investments in many of our hotel food and beverage facilities to ensure we offer a fresh and relevant offering for our customers. This is not a new initiative, but rather part of an ongoing focus to ensure our properties amenities remain competitive and meet customer demands.
As an example, we recently introduced a new high limit room at the Suncoast and we'll be opening 7 new restaurant concepts nationwide during the fourth quarter with more to come next year.
We also have several hotel renovations starting in the fourth quarter and continuing into next year as we look to ensure our hotel product remains relevant for our customers. So -- and all this was another solid quarter for our company.
Once again, we proved the effectiveness and resiliency of our diversified business model, led by our focus on our core customer and strong performance from our growth initiatives. While we are not immune to cost pressures, our operating teams continue to manage the business efficiently. And going forward, we will continue to utilize our free cash flow to create shareholder value through our property reinvestments, our ongoing capital return programs and strategic acquisitions.
I would like to thank our entire team for their dedication, their contributions to another solid quarter of performance. It is an honor to be part of such a great group of team members. Thank you for your time today.
I'd now like to turn the call over to Josh.
Josh Hirsberg
Thank you, Keith. This was another solid quarter for our company. Our core customers are continuing to perform well even growing in this challenging environment.
In terms of our retail customers, consistent with recent quarters, we experienced softness on a year-over-year basis during the quarter. Retail customer volumes took a step down beginning in the fourth quarter of last year. However, sequentially, these volumes have remained consistent since then.
As we experienced year-over-year operating trends in the third quarter -- sorry, as we expected year-over-year operating trends in the third quarter were very similar to those in the second quarter. as we face more difficult comparisons and experience a continued return of seasonality to our business.
Our operating teams have continued to deliver at a very high level of efficiency. Property level markets were 40%, while company-wide margins were 36%. Consistent with what we experienced during the second quarter, major expense categories that increased year-over-year during the third quarter were wages, utilities and property insurance.
Moving to our online segment. We expect this part of our business to generate $60 million to $65 million in EBITDA this year. During the third quarter, the tax pass-through amount related to our online partnerships was $71 million this year versus $45 million last year in the third quarter. These amounts were recorded as both revenue and expense in this segment and impacted overall corporate-wide margins by more than 300 basis points this quarter compared to 200 basis points last year in the third quarter.
Capital expenditures were $108 million during Q3, including spend for both Fremont and Treasure Chest.
Year-to-date, capital expenditures have been $280 million. We continue to project total capital expenditures for the year of approximately $350 million, including $250 million of maintenance capital and $100 million related to Treasure Chest in Fremont.
Now that Fremont is complete and as we anticipate opening Treasure Chest mid next year, we expect to announce additional growth projects during the upcoming year. And as Keith already mentioned, as part of our annual maintenance capital spend this year and next year, we have planned several restaurant upgrades and hotel room remodels.
In terms of our capital return program, we have repurchased $106 million in stock during the quarter, representing 1.6 million shares at an average price of $65.30 per share. This resulted in an actual share count at the end of the quarter of 98.4 million shares.
Additionally, we paid a quarterly dividend of $0.16 per share on October 15. Between share repurchases and dividends, we have returned more than $1 billion to shareholders since resuming our capital return program 2 years ago. And by year-end, we will have returned over $1 billion through our share repurchase program alone.
As of September 30, we have approximately $426 million remaining under our current repurchase authorization.
Thanks to our substantial free cash flow, we have balanced our capital return program and our property reinvestments while maintaining a strong balance sheet. Our total leverage at the end of the quarter was 2.3x, while lease adjusted leverage was 2.7x.
We have no near-term maturities and ample borrowing capacity under our credit agreement. Our balance sheet is the strongest in the company's history. Providing us the confidence in our ability to reinvest in our portfolio and return capital to shareholders while pursuing opportunities to further grow our company.
David, that concludes our remarks, and we're now ready to take any questions.
Question and Answer Session
David Strow
(Operator Instructions) Our first question comes from Joe Greff of JPMorgan.
Joseph Richard Greff
Thank you, everybody. Afternoon, Josh, Keith. Just circling back on the topic of OpEx pressures. When you look at OpEx pressures by your reportable geographic segments, is there much of a difference in cost pressures in Las Vegas versus the Midwest and South?
It looks like in the quarter, the sequential changes in margins and expenses was more acute in the regionals versus the locals. I don't know if that's a fair way of looking at it on a sequential quarter-over-quarter changes this year versus last year. But if you could help us understand that, that would be great.
Josh Hirsberg
Yes. So Joe, I'll try to answer or give you a sense of that. I think there -- first of all, there is some seasonality related to expenses, right? So utilities, which were a large part of the increases when you look quarter-over-quarter, have to do primarily or in this percents are entirely impacting Nevada's operations.
On the other hand, when you look at increases in like property taxes or property insurance, that is more weighted toward -- although it did impact Nevada, but it's definitely more impacted the Midwest and South assets. And that can be kind of a one-off -- especially when you're looking year-over-year, I have to be a little careful because there are just kind of one-off changes that may not be impacting the business going forward.
I think the bigger component of -- when you look year-over-year is definitely labor. And there's really not anything unique regionally about that other than just the company's practices to give raises to its hourly team members on a July 1 basis. I don't think that's applied in the Midwest and South. But that's the only nuance there.
I generally think of the impact. These are nuances that you can point to as differences between the segments. But largely, the spread of costs are all pretty even across all the segments of our business. I hope that helps you a little bit.
Joseph Richard Greff
I do. That is helpful. And -- this is more of a specific question to Las Vegas Locals and Downtown with Durango and Fountain Blue opening up over the next 2 months here, are you experiencing above-average employee departures turnover? And with presumably higher wages on the strip associated with this new union contract, do you see labor pressures incrementally worsening in the fourth quarter and early next year? And if so, could you help quantify that amount?
Keith E. Smith
Yes. So with respect to kind of talent wars, if you will, and what we're experiencing on that front. We've seen a little bit of additional turnover as people are looking at some of these new positions, but it is not significant. We obviously have known these properties, we're going to be opening on these time lines for a while now, and so we've been able to prepare for it. So it's nothing significant, nothing that is impacting the business, Joe, in terms of additional turnover for employees kind of moving on to the next opportunity.
In terms of wages, hard to tell where they're going to land on the strip, except rates will be higher than they are today. Do I think it will impact, once again, will people migrate to the strip for those higher wages? I don't think so. They're already strip -- already pays generally more than we're paying in the locals market and people could already make that decision today if they wanted to. We've raised wages here over the course of last year or 2, and feel like we're in a good place, but it is a competitive marketplace, and I think we'll just have to see what happens on the strip and deal with it as it comes.
I don't have any prediction as to what will -- what will happen on the strip, how much of an increase it will be and what the ripple effect could end up being, but we'll obviously pay close attention.
Josh Hirsberg
Joe, I think 1 thought I would add to your question is I think as we look at expenses for Q3 and think about how they relate to what they may imply going forward. I think generally, we think or feel like the order of magnitude of expenses that we incurred in Q3. When you look at them by segment, that's what you largely can expect going forward, at least from what we know today.
In other words, we don't expect our overall expense structure to be increasing disproportionately going forward. We expect kind of the level of expenses that we're seeing in terms of total dollars to be largely the same.
David Strow
Our next question comes from Steve Wieczynski of Stifel.
Steven Moyer Wieczynski
So I'm not sure if this is a fair statement or not, and correct me if I'm wrong. But as we kind of think about moving forward, is it going to be tougher for you guys to cut operating expenses from here. If your revenue stream, your top line continues to be a little bit softer.
And if that's the case, is there anything you can do on the CapEx -- on the CapEx side of your business to offset some of those higher operating expenses? I mean, do you go down the path of cutting slot budgets or other things like that to potentially offset your higher operating expenses?
Keith E. Smith
Look, as we think about total operating expenses, given our margins today, we are running a very efficient business. And so I think it's a fair statement to say that we don't have as much room to fine-tune the business as we did, let's say, pre-COVID. And so we have to be very careful going forward in terms of how we adjust what we adjust to make sure it doesn't impact the top line.
Having said that, do we have flexibility on the CapEx side? I think, absolutely. I think we have a very robust maintenance capital budget that we're comfortable with. I think over the years, we've always been able to use that as a lever to balance any declines in the business or declines in overall free cash flow that we see. And when times are good, spend a little more and times are maybe a little tougher, we can always pull back.
We're very careful about it because we don't want to impact the overall condition of our properties in what is a very competitive market, not just here in Las Vegas, but across the country.
Steven Moyer Wieczynski
And then second question, wondering if you could give any update in terms of changes to the promotional environment around the majority of your operating market, meaning, have you seen any changes from your competitors to offset any type of slowdown they might be encountering from a visitation standpoint or spend standpoint.
And again, you've got 2 pretty big properties coming into Las Vegas locals market. And do you change the way you think about your promotional spending for that market specifically?
Keith E. Smith
Yes, I think, look, as you look across -- I think, the country globally, the promotional environment has been fairly stable or rational here in Las Vegas, the major operators have been very stable. And it has not been highly promotional. It's been stable. The people who got aggressive or the individual properties maybe who got more aggressive coming out of COVID have stayed aggressive.
The other operators have stayed kind of very disciplined through Q3, and I'd expect that to be continuing into Q4. As we look at our regional markets, it's largely the same. Those players that got aggressive post-COVID have stayed aggressive and those players that have remained disciplined -- or after COVID are still being disciplined. We're not seeing much in the way of people stepping out and getting aggressive. Our customers have the opportunity today to participate in those more aggressive programs. They don't. They stay with us. And so I don't see much changing in that landscape even with 2 new openings here in Las Vegas.
David Strow
Our next question comes from Barry Jonas of Truist Securities.
Barry Jonathan Jonas
I wanted to dig in a little bit more into the retail softness you've noted. Any specific geography or segment of the database you highlight? And if possible, can you maybe help frame the size and say, importance of retail versus core segments to any extent you're comfortable with?
Keith E. Smith
So I think when we think about the retail business, it I mean, it's an impact -- I mean, we saw similar impacts in Las Vegas that we saw in the Midwest and South. So it's not to the extent geographic in any sense or property specific, it's across all segments.
And so it's not isolated or unique to any 1 set of properties. I think as we think about kind of the overall impact of retail to kind of the core business. First, think about retail in two categories: one, being the unrated segment and the second component of retail being the lower end rated segments. And within our rated database, generally, the trend is pretty consistent. So that rated core customer growth is offsetting any softness in the lower end part of the database that falls into the retail category. Where we're seeing kind of -- where we don't have the ability to kind of offset through the growth in the core customers is the softness in the unrated segment. Certainly not the entire segment because some of those customers are obviously good. But we are seeing softness in the unrated segment. And for that -- and that's definitely related to the economic impact.
We track about 60% of our business overall. And so the rated business -- the unrated business as the category is about 40% of our business. So -- and that's on the slots side of things. So I don't know if that helps you understand kind of the customer trends that we're dealing with or not. But hopefully, that puts it in some sort of perspective for you, Barry.
Barry Jonathan Jonas
Yes, Josh, that's helpful. And then just as a follow-up, I appreciate the commentary on the Durango opening. But I guess I had a longer-term question around the Vegas locals market and your capital allocation strategy. Red Rock has been talking about ultimately doubling its footprint in the market. So I was just curious if you could talk about how you think about further investment or even expansion into the marketplace over time.
Keith E. Smith
Sure. So one of the things that I mentioned we're doing is upgrading many of our hotel rooms in many of our restaurants. And so that is to make sure that we have a very current relevant product for our customers. We do have significant acreage of many of our properties here locally at the Orleans, at the Sun Coast, at the Gold Coast, at Aliante to be able to grow these businesses. We've talked in the past about trying to invest in and leverage up strong existing businesses where we believe we can continue to grow them and get a good return on our investment.
The first two were Fremont and Treasure Chest, and we'll be announcing a few more next year. But certainly, our locals properties have some of those dynamics where we have very, very strong performers that we think can continue to grow their business with some additional capital investment.
I'm not ready to describe exactly what those are, that will be middle of next year. But we do have those opportunities. We are looking at them and reviewing them and we'll be in a place to talk about them sometime middle of next year.
David Strow
Our next question comes from Carlo Santarelli of Deutsche Bank.
Carlo Santarelli
Thanks. You guys obviously talked a little bit about the competitor opening in the fourth quarter. And just to kind of put into context, I would imagine it would be Orleans where you feel a little bit of impact. And I know you guys don't provide any kind of real property level, but just more or less looking to frame like what you think from a Las Vegas Locals impact perspective that, that opening could have on Orleans or the broader portfolio in an otherwise say, flattish environment. in 2024.
Just kind of thinking about the magnitude of what you see in that impact? And do you see any kind of lasting impact or do you believe it will just be trial and dry up fairly quickly?
Josh Hirsberg
Yes, Carlo. So it's a good question. I think -- look, I don't think we feel like we're going to have the direct impact as a result of the new competitor coming into the marketplace. And I think we believe that over time, the market will absorb the new supply and kind of all boats will benefit from a rising tide.
So I think that's a big picture how we think about what's going on. So there will be some kind of short to intermediate term pressure on our business. we're not the direct impact of it. And then over time, the market just kind of grows through all of that. And I think that's consistent with what we said in our market in our comments -- prepared comments.
When we think about the impacts to our business, I think we think of it primarily as Orleans, which is shortest by distance but not necessarily a direct and easy drive from that asset to the property. So that's a consideration. And then Sun coast on the other side of a major competitor here in Las Vegas.
So I think if we think about kind of generally the impact to the business overall, it's got to be kind of low to mid-single digits at most of the overall Las Vegas Locals segment. So we generate $450 million to $500 million of EBITDA, kind of worst case, 5% would be a $225 million EBITDA impact for all of next year. And I think that would be pretty conservative from our perspective.
Carlo Santarelli
Okay. Great. And then, Josh, if I could, just kind of a follow-up on some of the comments you made earlier. You talked obviously about the cost increases you guys walked through kind of the buckets where they were coming.
You also made a point of kind of saying that 4Q a lot of stability relative to 3Q as you look out to 2024, and we think about those various buckets, obviously, labor will be something that likely persists. But how much kind of a headwind are you thinking about for 2024 as it pertains to kind of the cost side and some of the buckets that you mentioned?
Josh Hirsberg
Yes. So I think what we're actually seeing is we kind of saw a pretty dramatic impact from expenses in 2022. And and into 2023. And I think we're starting to see a leveling off of those expenses to some degree. Not to say that there's -- they're not going to increase or they're not going away. But as I think about the expenses, like for instance, we've talked a lot about the minimum wage program we rolled out. Middle of next year, we'll anniversary that program.
Utilities that have been going up double digits really when you look at 2022 versus 2021, are now mid- to high single digits and starting to be in the low single digits. So we're starting to get to the point where they -- at least when we think about the major categories of expenses, they're feeling like their lane, they're starting to level off to some degree.
And a lot of this -- some of this has to do with kind of how we think about managing the business going forward. Some of these things, we don't have much control over like property insurance rates or property taxes to some degree. But I think as we evaluate where the expenses kind of year-over-year are trending, and we look at where we think in the near term, those expenses are going, which aren't -- we don't believe are changing materially. I think we feel like we're moving into a period of expenses that are -- that will grow, but just be more stable overall for us, and we'll be able to manage through it.
I think what gets more difficult is the question of if the consumer continues to get weaker, and we haven't seen that. We're not seeing it at the retail level. We've seen strength in the core customer. But I think what we're trying to paint a picture of from what we see today is a fairly stable expense environment. There's going to be nuances and seasonality and today currently at least a stable consumer environment.
We're going to have disruption with respect to Main Street hotel that will continue into Q4. Once that's all done, downtown should be ready to run for 2024. We'll have some disruption related to the introduction of the competitor, and we'll have to work through that in Las Vegas Locals through a period of 2024. But absent that, if you were able to kind of remove that impact in some way, I think you would have a business that has kind of very consistent performance with what we're seeing today.
And then the Midwest and South, also stable core customer, hopefully, a retail customer that doesn't show any further weakness going into 2024. And we kind of get beyond some of the construction that we felt at some of our assets in this quarter and so 2024 looks to be a stable year for us in the Midwest and South.
But I don't know if, Keith, you want to add anything to that because I've tried to kind of give it a big broad brush. But Carlo, I hope that helps.
David Strow
Our next question comes from David Katz of Jefferies.
David Brian Katz
We could go in another direction. Just talk online for a minute, obviously, progressing nicely there. Just recalling what you spent on the acquisition, I believe it was about $125 million and then some other investments.
Any color you can give us on where you think that might go or could go or payback period or ROI or any of that sort of vision would be helpful.
Keith E. Smith
Yes. So the acquisition of what then was Pala Interactive, which is now Boyd Interactive is moving along well. We relaunched the Stardust platform in Pennsylvania and New Jersey earlier this year, kind of beginning of May. And thus far, I'm very pleased with this performance.
We bought the business and we chose to get more directly or directly involved in the online gaming business because it's -- we view it as a long-term play. This wasn't about a short-term kind of IRR or ROI. This is really about kind of long-term controlling the journey of the customer having a holistic view of that customer and wanting to help build kind of another growth database and somebody we can market to.
So we're very happy with the early launches in Pennsylvania in the month of August, after just 90 days of being operating on the Stardust platform. We've exceeded the highest iGaming or casino levels that FanDuel had done when they were running it for us, so we're very happy with the performance, and it's growing.
But it's early. And we're not at a point of talking about returns on investment at this point, but it is a long-term play and something where -- once again, we view it as an important part of a long-term strategy having both an online business as well as a strong land-based business to compete effectively.
David Brian Katz
Understood. And with respect to the capital decisions you're making for next year, I just wanted to get a sense for where the boundaries are, are -- things that are more larger or more transformative. I know of 1 company that's up for sale that we've read about. Or strip investments and things like that. I just wanted to get a sense for how big we should think or should we just look at your portfolio and think about properties that may need some expansion or upgrade?
Keith E. Smith
Yes. I think when we were talking about capital investments, it was -- as I think I discussed in my prepared remarks, it's more about our maintenance capital budget and improving existing facilities, number one. So we're going to open 70 new restaurants in the fourth quarter this year across the country as a way to make sure that we have a fresh product for our customers. We've got several room remodels starting just because you need to do that. We'll continue to through those types of programs through 2024. We'll be opening another 7, 8 new restaurants next year and have some more room remodels. We will look at, and we will announce later in the year kind of our next phase of what you want to call it, expansion or growth capital programs like the Fremont, like Treasure Chest, we're not ready to discuss those yet.
But -- as I said, it will be an existing property that's a strong, high performer that's in a strong market where we think we can continue to grow the business. And we have several of those that fit that profile. We're just trying to decide what the priority is and when to get those projects started. But we're not prepared to talk about it now, but by -- certainly by the middle of next year, we'll be prepared to kind of discuss what is next for us in terms of "growth" as opposed to maintenance.
David Strow
Our next question comes from Shaun Kelley of Bank of America.
Shaun Clisby Kelley
Josh, just going back to the cost environment, I think that's clearly the incremental part of kind of what's going on here.
I just wanted to ask sort of -- as you look forward, what do you think the right leverage point for the business is? So to see margin expansion from here? What level of revenue do you think you would need as we start to get out into a little bit more steady state, let's look out '24 or '25? Is it -- can you do so on a very low single-digit number, i.e. 0%, 1%, 2%? Or does it need to be a little higher than that where maybe some of these costs while coming down look a lot more like prevailing inflation that might be 3% to 5%, whereas historically, it was maybe a little bit lower than that?
Josh Hirsberg
Sean, it's a good question. I think ultimately, the way we think about it is, I think it's kind of like costs that are piggybacking off of one another. So at some point, we're able to kind of manage through those costs, and we were able to do that over time. And then as utilities picked up or property taxes and property insurance picked up, became just a little much relative to softness with the retail customer.
I really don't think it takes a lot to turn -- to kind of turn it back around, so to speak. So to the extent we started to see growth off of a base, I think that's when we would be able to kind of outpace. We would be able to manage through the cost pressures. And so I think it's really difficult right now because I think part of what's going on in the business is a normalization. It is like if you think about -- and I know it's hard to think about when we had stimulus in the business, but stimulus really just came out of the business in '21 and '22. And we're kind of getting beyond that in '23.
At the same time, some of the decline in revenue is related to what's going on in the economy. So -- and it's hard to figure out how much of that is attributable to each one of those factors.
At the same time that all of that's going on, we're dealing with and working through the expense side of things. And so ultimately, I think once the business normalizes, which I think is part of what's going on, it's not all economic, that we will be able to kind of grow beyond that. And that's when you'll see us start to have flow-through on that incremental revenue.
That could happen in 2024, even with the soft retail consumer as long as that retail consumer were to remain consistent and not continually decline.
So I hope that gives you a sense of our perspective for that.
Shaun Clisby Kelley
Yes. And then maybe just to clarify to make sure we're all kind of clear on the modeling side. Your comment is related to sort of flattish operating expenses from here. I mean this is all a dollars comment, right? So to the extent we saw OpEx dollars up a bit quarter-over-quarter this quarter. This feels like a good run rate or base of expense even despite some seasonality, utilities, et cetera. This is sort of the right expense dollar base to kind of think about the business moving forward. Is that right?
Josh Hirsberg
Yes, that's the point I was trying to make. I think there will be seasonality, but that will give you the offset that some other costs will go up and it will all kind of come out in the wash, so to speak.
So that's our expectation today. We don't have any reason to think that there's going to be kind of outsized continued increases in costs. And to an earlier question, further evidence of that is the costs seem to be leveling out at the same time. So.
David Strow
Our next question comes from Brandt Montour of Barclays.
Brandt Antoine Montour
I wanted to focus in on the Las Vegas locals top line environment, demand environment. And we only have a couple of months out of the quarter from the state of Nevada. But it did look like the first 2 months of the quarter, the locals market overall grew a little bit.
Last quarter, you guys tracked with that market down modestly, but this quarter looks like -- for the quarter, you're down a little bit and the market was up. But again, we don't have September. So I guess the first question is, how -- maybe you could give us September in terms of just the cadence relative to the early 2 months of the quarter? And then the follow-up would be, if you think you're tracking below the market at all. Why is that? Is it a customer mix? Is it sort of the segmentation for your unrated play versus the market? And any other thoughts on that dynamic would be helpful.
Keith E. Smith
So if you're looking at the statistics that are put out by the game and control part of this is how you put those together for the last 3-months period, the last quarter, as you said, it's kind of August because they haven't issued September yet. Our market share is pretty much right on top of last year. We definitely lost. I mean maybe down 1/10 or something, but that's about it. And so we feel pretty good about how we're performing in terms of the Las Vegas locals market.
So it just -- the numbers in Nevada are hard to put together because they don't break them out specifically. So aggregating them is more of an art. But the way we do it, the way we've consistently done it, we're pretty much right on top of last year. Like I said, maybe off the 1/10.
Brandt Antoine Montour
Okay. That's helpful. And would you care to comment on how September cadence looked versus July and August?
Keith E. Smith
I really can't because I don't know how the market is going to perform. And so it's what's going to reporting in Nevada is unique. And so we'll not provide any comment on September until we see everybody else did.
David Strow
Our next question comes from John DeCree of CBRE.
John G. DeCree
Keith and Josh. Maybe on the demand side, the core customer play. I think in your markets, you've kind of mentioned that play was up low single digits. I'm curious if you could give us maybe a little bit more color there. Are you seeing your number of core customers grow? Or are they spending more? And then I guess the broader follow-up, I don't think you've been asked yet is, more broadly speaking, are you seeing spend per trip about the same or up and number of trips down? Or kind of how are you thinking about that broadly and then kind of on your core customer growth.
Keith E. Smith
Yes. So as we look at our core customers, it is a little bit of a mixed bag around the country, right? We do see good growth in guests and visitation in certain age demographics, frankly, at the higher end of the age demographics, a little less so at the lower end. It's different by region. We're seeing good growth, frankly, across all the age segments in Las Vegas. And it's one -- it's a mixed bag across the age segments in the MSR. Remember, as we came out of COVID, we're really more focused on the quality of the customers and the value that they're generating than we are absolute numbers.
And we're seeing larger increases in the daily spend and how much we are earning from those customers than we are in the actual growth of those customers. So we're very happy with both increases in volumes of customers but more increase in volumes of play.
John G. DeCree
Understood. That's helpful color, Keith. Maybe one more on the consumer side. You may have touched on it a little bit earlier. But on the hotel and SMB business, it sounds like it's price, cash rates and cash covers, but is that fair?
Are you also seeing an uptick in occupancy in the number of covers across the restaurants and F&B outlets as well?
Keith E. Smith
Yes. So I think as you think about the hotel, it really is more occupied rooms that generally speaking, across the portfolio, kind of a flattish average cash rate up a little bit in some markets, flat in others, but generally think of it as more cash occupied rooms. On the food and beverage side, it's more of increased in pricing than it is increase in covers.
David Strow
Our next question comes from Dan Politzer of Wells Fargo.
Daniel Brian Politzer
So I just want to hit on Midwest and South a bit. Revenue there has been down the past 4 quarters in a row. And I know you guys don't have a crystal ball. But I guess as you look at your portfolio, you think about the dynamics of core versus retail impacts of new competition and maybe lapping some of those easy comparisons in Louisiana, Mississippi. How do you think about revenue, the possibility of this starting to lap some of the easier comps and maybe being flat or even up modestly going forward?
Josh Hirsberg
Yes, Dan. I think what's driven kind of the softness in the Midwest and South has really been, I guess, 2 things that we've talked about. One is for the last couple of calls, we've talked about Mississippi and Louisiana. And they just have progressively kind of year-over-year variances have continued to kind of improve. They're still down, but down less sequentially each quarter if that makes sense. And even for Q3, they're down, but just down less. And so that's becoming less and less of a topic for us.
The other kind of theme that was a step for Midwest and South was a step down in the retail consumer which really started late last year. I think in order for us to kind of either the state -- be flat or to start to see some growth is as we need to make sure that, that retail consumer, while it's been consistent since Q4 of last year, need to make sure it's not stepping down further in Q4 of 2023.
It doesn't feel like it is. But at that point, once we know that, then we -- I think we can be comfortable with saying the business should begin to start to stabilize. And so -- and then the other thing is just to note and these are kind of not meant to be justifications for the point -- I mean, we do have one-off kind of impacts in throughout the portfolio in the Midwest and South, in particular, in Q3, we had issues with room supply at Ameristar St. Charles, because we were starting the room construction there. And that required us to actually unexpectedly take out more rooms than we had expected, aided kind of a ripple effect in terms of how we manage those rooms and who are in the rooms during the third quarter, which will fix or has been fixed going forward.
So there are some one off kind of things that are happening in the quarter just like with anything else. But I think to directly answer your question is, I think we really need to see the retail consumer just confirm on a year-over-year annualized basis once we kind of get to Q4 of this year, that is, in fact, continues to be stable.
And then I think you're in a point to say the Midwest and South should continue to be stable. I don't think we're at a point to say it should grow at this point.
Daniel Brian Politzer
Got it. And then just for my follow-up quickly, in terms of the CapEx, how should we kind of think about that project CapEx? Is it going to be similar to the $100 million you're spending in 2023? Given that you're kind of talking high level about the projects there.
Keith E. Smith
Yes. I think as you -- as we're thinking about it today, it's probably the right way to think about it until we're able to talk more about it as same size projects as we've announced in the past with Fremont and Treasure Chest, those were each in the $100 million range.
Josh Hirsberg
Yes. So Fremont was a $50 million project. Treasure Chest was a $100 million project. They obviously all weren't done within a 1-year time frame. So the whole concept has been as those kind of come off the conveyor belt, you take similar sized projects that are on the conveyor belt and -- or put those on the conveyor about whatever the analogy is. And end up in about the same place and the projects will be kind of 12 to 18 months in life so that it kind of ends up to be about a similar amount.
It's going to be a ballpark in the same range. Sometimes you're a little bit more, sometimes you're a little bit...
David Strow
Our next question comes from Stephen Grambling of Morgan Stanley.
Stephen White Grambling
I'll sneak one more in, which is as we look at the retail weakness or the unrated play weakness, when you look back over time, has that tended to lead any other segments of the consumer? Is there any protocol that you look at to say there's been a window where you can see sustained strength in your rated play while the unrated play has been weak for a prolonged period?
Keith E. Smith
Yes, I would say we haven't seen that. I would not say that weakness that we're seeing in the retail customer at this point or the unrated play is a precursor to anything, again, for the last 4 quarters, we've seen a little bit of weakness in retail, but we've seen continued growth in our rated -- in our core customers. So yes, there's today's world, post COVID and not much of a correlation going on.
Josh Hirsberg
Yes. And I'd tell you, it's really hard to harken back to any period of time just given how different the business is today than it was, say, pre-2019. Even in 2008, where you had obviously both segments of the business, core retail core continued was stable and strong even in that environment. It was just the retail consumer wasn't spending at the levels that they had historically. And ultimately, that -- that's what we persisted during that period of time. So it definitely was not a precursor to what was going on. But ultimately, we do have to recognize the business is very different today than it was.
Stephen White Grambling
Got it. And you also mentioned the normalization, and I realize I was trying to kind of get at this, but as we look at normalization in margins, is there any thought about what kind of structural changes that you do feel like have been made to kind of bracket where margins could end up in a normalization if that continues in the direction that you're alluding to.
Josh Hirsberg
Yes. Ultimately, I think the margins that you're seeing today, while still very respectful and strong for the company, I think do have the inefficiency of retail -- of a weaker retail consumer and some costs that I hope are not representative of the long-term cost structure of the business.
But we'll have to see how that plays. And ultimately, I think we would expect to see growth in revenue on the gaming side of things. And so all of those things would suggest that the margins we have today are -- well, really good and enviable can be better in an environment where you don't have as much economic impact.
David Strow
Our last question today comes from Chad Beynon of Macquarie.
Chad C. Beynon
Josh, in terms of the buyback, you've been pretty consistent over the past, I guess, 4 or 5 quarters, repurchasing $100 million about 1% of the shares outstanding, and the stock has kind of been in the $60 to $67 levels. Is there a level where you would consider increasing that amount on kind of a quarterly basis, just given some dislocation in the market, you've talked about the sandal stake and stability in the business. Just wondering if there's a number where you would kind of step up that $100 million repo number?
Josh Hirsberg
Yes. I think the way we think about it in today's environment, at least, is that we would probably -- we may accelerate within a quarter, the amount that we were going to spend if there was an opportunity to do that or -- but I think overall, we're comfortable with the level that we're spending today. And we would just end up buying more shares because the price was lower. I think we would change the amount materially. But it's going to be done on a case-by-case basis, We are not in any hurry. We want to be able to use our balance sheet in good times and bad. So today, when there's concern about the economy, we're very comfortable with our ability to continue to do what we're doing today, even look for ways to continue to grow the company.
And if we were at a different leverage point, we wouldn't be able to do those kinds of things. And I think in the environment where things are really good, Obviously, the strength of the balance sheet becomes even more powerful. So I don't think we want to get too far ahead of ourselves. We want to maintain that optionality. And we want to maintain the flexibility that comes with it.
Keith E. Smith
Yes. It's not simply about how much we want to spend on share repurchases. We do have this view of a balanced program. It depends where we're at in the CapEx cycle, where the leverage is with the strength of the business as well as our desire to want to buy back shares and continue that program. So we do have flexibility around it, but there's a lot that goes into that particular decision as to when we'd increase it and how much we'd increase it.
David Strow
Thank you. This concludes our question-and-answer session. I'd now like to turn the call back over to Josh for concluding remarks.
Josh Hirsberg
Thanks, David, and we appreciate everyone dialing in today and the questions you guys have asked. And to the extent there's any follow-up or additional questions, feel free to reach out to the company. Thanks again.
David Strow
Thanks, Josh. This concludes today's call. You may now disconnect.
