Is this as good as it gets?
Boyd Gaming, Red Rock Resorts, Churchill Downs and Monarch Casino led off second-quarter reporting season for U.S.-focused casino companies with blowout numbers.
They achieved record EBITDA on revenues higher than pre-pandemic levels, even as some Boyd and Red Rock Las Vegas casinos remain closed.
They scored monster EBITDA margins. Could anyone have even imagined 57 percent margins, as Boyd achieved in downtown Las Vegas?
One can assume that what these companies achieved will be mirrored by other domestic casino operators, from giant Caesars on down to tiny Full House Resorts.
Boyd CEO Keith Smith and Red Rock CEO Frank Fertitta said business volumes are continuing strong, as is their commitment to maintaining those high margins.
But trees do not grow to the sky, and there is reason to think that customer spending could moderate as federal stimulus funds end and Covid continues to hang over everyone’s head.
Smith himself hinted at moderation in his company’s investor conference call. The second quarter was “probably a little peaky …so it’s probably not fair to take Q2 times four” to get annualized results, Smith said.
He also acknowledged that costs would rise and EBITDA margins fall from their lofty heights, though they will remain significantly higher than in the past.
Put another way, there’s plenty of reason for bullishness as profits grow and companies put greater free cash to good uses. But there’s probably reason for investors to not get carried away, and to put reasonable valuations on the profits they forecast.
A Time for Heroes
This space is devoted to issues related to investing in gaming companies, but I deviate here for a personal story.
A member of our family, the husband of Fantini Research Director of Public Policy Laura Briggs, has won a singular honor that deserves mention.
Patrick Briggs was the one member of the United States Air Force to receive this year’s Vanguard Award from the Non Commissioned Officers Association. The award goes each year to one enlisted member of each of the armed forces who performs an heroic act that saves lives or prevents serious injury.
In this case, Special Agent Briggs, who serves in the Office of Special Investigations, came upon a bus accident last September in Texas while driving to a temporary duty station in Oklahoma. There were 29 persons aboard the bus, many of them trapped inside. The back of the bus was in flames. People were screaming.
Upon seeing the wreck, Patrick immediately pulled over, assessed the situation and rushed to help. He put out the fire, helped extricate some passengers from the bus and attended to some of the injured.
According to Lt. Col. James Merenda, commander of his Field Investigations Squadron: “Agent Briggs’ actions at the scene of this horrific bus wreck were nothing short of incredible…Without his quick and decisive action, many families would be grieving today.”
So, Laura, we have long been proud of the work you do at Fantini Research. And we are certainly proud of Patrick, too.
