Earnings Call
Boyd Gaming Corp (BYD)
Earnings Call Transcript - BYD Q3 2025
Operator, Operator
Good afternoon, and welcome to the Boyd Gaming Third Quarter 2025 Earnings 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 we are hosting on Thursday, October 23, 2025. Our speakers for today's call are Keith Smith, President and Chief Executive Officer; and Josh Hirsberg, Chief Financial Officer. Our comments today will include forward-looking statements as defined by the Private Securities Litigation Reform Act. All forward-looking statements in our comments are as of today's date, and we have no obligation to update or revise these statements. Actual results may differ significantly from those anticipated in any forward-looking statement. There are specific risks and uncertainties, including those outlined in our filings with the SEC that could affect our results. During our call today, we will reference non-GAAP financial measures. For a full reconciliation of historical non-GAAP to GAAP financial measures, please consult our earnings press release and our Form 8-K submitted to the SEC today, both of which are available at investors.boydgaming.com. We do not offer a reconciliation of forward-looking non-GAAP financial measures due to our inability to foresee special charges and certain expenses. Today's call is being webcast live at boydgaming.com and will be accessible for replay in the Investor Relations section of our website shortly after the completion of this call. With that, I would now like to turn the call over to Keith Smith, Keith?
Keith Smith, CEO
Thanks, David, and good afternoon, everyone. The third quarter was another quarter of growth for our company with revenues once again exceeding $1 billion, while EBITDAR was $322 million for the quarter. After adjusting for our recent FanDuel transaction, we continue to deliver revenue and EBITDAR growth on a company-wide basis, while margins were consistent with the prior year at 37% as we successfully maintained efficiencies throughout our operations. During the third quarter, play from our core customers continued its long-term growth trend, and we saw further improvements in play from our retail customers. This strength in play drove healthy gaming revenue growth across all three of our property operating segments and more than offset the weakness in destination business. Across the portfolio, our results reflect continued broad-based improvements in customer demand, sustained operating and marketing efficiencies and the success of our capital investments focused on enhancing our property offerings. Now turning to segment results. Our Las Vegas Locals segment posted revenues of $211 million and EBITDAR of $92 million for the quarter. Gaming revenues continued to grow during the quarter, driven by strong demand from our local customers. We continue to benefit from ongoing growth in play from our core customers as well as improving trends in play from our retail customers. This growth in gaming revenue was offset by declines in our destination business, primarily at the Orleans. Excluding the Orleans, our Locals segment delivered year-over-year growth of 2% in both revenues and EBITDAR with gaming revenue growth in line with the broader locals market for the quarter, while margins for the third quarter were consistent with the prior year at 47%, supported by disciplined marketing and operating efficiencies. For the broader Las Vegas Locals market, gaming revenue growth was up more than 3% over the last 12 months, reflecting the resilience of the Locals market. The health of the Locals market is supported by solid wage growth throughout the Southern Nevada economy. Through August, average weekly wages were up more than 6% over the trailing 12 months, outpacing the national average. Over the last 10 years, the local population has grown at twice the national rate, reaching 2.4 million last year. During the same time frame, per capita income in the Las Vegas Valley has grown by more than 5% on an annual basis, while total personal income in Southern Nevada has nearly doubled. An important driver of this growth has been the increasing diversification of the local economy. While hospitality has continued to grow over the past decade and currently represents approximately 25% of the local job market, job gains have been more substantial in other sectors. These include education, health services, transportation, warehousing and professional and business services sectors. Construction jobs have also remained a steady performer, growing more than 5% since 2019. With more than $10 billion in projects currently underway across the Las Vegas Valley, construction employment should remain healthy well into the future. As we head into next year's tax season, we believe that our customers around the country will benefit from the tax bill passed by Congress this summer, including new deductions for tips and overtime and an additional deduction for seniors as well as a larger standard deduction for all taxpayers. In all, the Southern Nevada economy remains resilient and is more diversified than ever, positioning our Las Vegas Locals business for continued success. Next, in our Downtown Las Vegas segment, revenues and EBITDA were in line with the prior year, supported by continued strength in play from our Hawaiian customers. Much like our local segment, growth in gaming revenues was offset by softness in destination business, including lower hotel revenues and reduced pedestrian traffic along the Fremont Street experience. Next, our Midwest and South segment achieved its strongest third quarter revenue and EBITDAR performance in three years. For the quarter, revenues rose 3% to $539 million, while EBITDAR grew to $202 million, more than 2% over the prior year. Operating margins once again exceeded 37% as we remain disciplined in our cost structure and marketing spend. Growth in the segment was broad-based, including continued gains at Treasure Chest, more than a year after the opening of our new land-based facility there. Similar to our Nevada segments, gaming revenues increased year-over-year in the Midwest and South, driven by continued growth in play from our core customers and further improvements in play from our retail customers. Results in our Online segment reflected growth from Boyd Interactive as well as changes related to our recent FanDuel transaction. Given current trends, we are increasing our guidance for this segment to $60 million in EBITDAR for this year. For 2026, we expect approximately $30 million in EBITDAR from this segment. Finally, our managed business had another strong performance with continued growth in management fees from Sky River Casino. Demand has remained strong over the three years since Sky River opened, giving the Wilton Rancheria Tribe great confidence in the growth potential of the property's ongoing expansion. The first phase of this expansion will add 400 slot machines and a 1,600-space parking garage upon completion in the first quarter of next year. Once this first phase is complete, we will begin a second phase that will further enhance Sky River's appeal by adding a 300-room hotel, three new food and beverage outlets, a full-service resort spa and an entertainment and event center. Upon its completion in mid-2027, we are confident this expansion will further strengthen Sky River's position as one of Northern California's leading gaming and entertainment destinations. So in all, the third quarter was another quarter of growth for our company. Across the country, we continue to see strengthening play from our core customers and improvements in play from our retail customers against the backdrop of consistent and efficient property operations. While the fourth quarter has just started, it is worth noting that the customer trends we saw in the third quarter have continued into October, including improving play from both core and retail customers. Our strong operating performance is supported by the investments we are making throughout our portfolio as we enhance our casino floors, food and beverage outlets and hotel rooms. Hotel room renovations will be completed early next year at the IP and work is set to begin next month on our room renovation project at the Orleans. We are also continuing our modernization project at Suncoast with the complete transformation of our casino floor as well as enhanced meeting and public spaces. While we are dealing with ongoing construction, we are encouraged that Suncoast's performance is in line with the prior year, further increasing our confidence in the long-term growth potential of this investment. Following completion of our Suncoast renovations around the middle of next year, we plan to begin a similar project at the Orleans as we look to further enhance our offerings at this important property. In addition to these property enhancements, we are continuing to work on our growth capital projects with an annual budget of $100 million per year. In September, we completed our expanded meeting and convention center in Ameristar St. Charles. By nearly tripling the size of its meeting space, Ameristar can now accommodate more and larger events. This will create incremental visitation from new customers as well as groups who had previously outgrown our space. We are already seeing great interest with strong bookings in the fourth quarter and into the next several years. In Southern Nevada, construction is progressing on Cadence Crossing, our newest Las Vegas Locals property, scheduled to open in the second quarter of 2026. Cadence Crossing will replace our existing Joker's Wild casino with a modern and appealing gaming and entertainment facility. This investment will allow us to better serve the adjacent community of Cadence, one of the fastest growing master-planned communities in the nation. We are well positioned to keep pace with continued residential growth in the area with future plans for hotel, additional casino space and more non-gaming amenities. Next, in Illinois, we are continuing the design and planning work for our new gaming facility at Paradise and expect to start construction in late 2026, pending regulatory approval. Finally, development is well underway on our most significant growth opportunity, our $750 million resort development in Norfolk, Virginia. Pending regulatory approval, we are just a few weeks away from opening our transitional casino at the site. While we look forward to reaching this key milestone, our focus remains on the development of our permanent resort scheduled to open in November of 2027. This market-leading resort experience will feature a 65,000 square foot casino, a 200-room hotel, eight food and beverage outlets, live entertainment and an outdoor amenity deck. In addition to offering the highest quality gaming experience in the market, we will have the most convenient location for much of the 1.8 million residents of the Hampton Roads region as well as the 15 million tourists who visit nearby Virginia Beach each year. In all, our capital investments are delivering strong returns for our company, enhancing our competitiveness and supporting our long-term growth. At the same time, our substantial free cash flow and strong balance sheet allow us to continue returning capital to our shareholders. During the third quarter, we repurchased $160 million in stock and paid $15 million in dividends. So far this year, we have returned a total of $637 million to our shareholders. Share repurchases and dividends are important components of our balanced approach to capital allocation, and we intend to maintain a pace of $150 million per quarter in share repurchases, supplemented by our recurring dividend. In closing, we are pleased to deliver another quarter of strong performance as we continue to execute on our strategy and create long-term value for our shareholders. During the quarter, we continued to benefit from strong growth in play from our core customers as well as improving play from retail. Our capital investment program is delivering excellent returns and positioning us well for future growth. Our teams across the country are successfully maintaining efficiencies and delivering consistent property operating results, and we continue to return substantial capital to our shareholders while maintaining the strongest balance sheet in our company's history. Our success is a reflection of the dedication and contributions of thousands of Boyd Gaming team members across the country, and we are grateful for all that they do for our company and our guests. Thank you for your time today. I would now like to turn the call over to Josh.
Josh Hirsberg, CFO
Thanks, Keith, and good afternoon, everyone. During the third quarter, play from our core customers continued its long-term growth trend, while retail customers’ play also continued to improve. Management teams did their part remaining focused on operating efficiently and generating returns from our capital investments. As a result, excluding the effects of our recent FanDuel transaction, we continue to deliver growth in revenue and EBITDAR despite weakness in our destination business. We are continuing our capital investment program to enhance our guest experience while expanding our opportunities for growth. During the third quarter, we invested $146 million in capital, bringing year-to-date capital expenditures to $440 million. We now expect total capital expenditures for this year to be approximately $600 million. Our capital plans include approximately $250 million in recurring maintenance capital, an additional $100 million in maintenance capital related to hotel room renovation projects, $100 million in growth capital, which includes the recently completed meeting and convention space at Ameristar St. Charles, and the ongoing Cadence Crossing development here in Las Vegas. Finally, around $150 million for our casino development in Virginia. Our growth capital projects remain on budget and on schedule. In terms of our shareholder capital return program, we paid a quarterly dividend of $0.18 per share during the quarter, totaling $15 million. Also during the quarter, as Keith mentioned, we repurchased $160 million in stock, acquiring 1.9 million shares at an average price of $84.05 per share. Actual shares outstanding at the end of the quarter were 78.6 million shares, an 11% reduction in our share count since the third quarter of last year. Since we began our capital return program in October 2021, we have returned more than $2.5 billion in the form of share repurchases and dividends while reducing our share count by 30%. Going forward, we intend to maintain repurchases of approximately $150 million per quarter, supplemented by our regular quarterly dividend. This equates to more than $650 million per year or more than $8 per share. With strong free cash flow, low leverage and ample liquidity, we are maintaining the strongest balance sheet in our company's history while continuing to invest in our business and return capital to shareholders. As you may recall, during the quarter, we closed on our transaction to sell our 5% stake in FanDuel. We initially used proceeds from that transaction to repay our Term Loan A balance and borrowings outstanding under our revolver. As a result, our total leverage ratio declined from 2.8x at the end of the second quarter to 1.5x at the end of the third quarter. Our lease adjusted leverage declined from 3.2x to 2.0x. Finally, beginning with this quarter's financial results, we have provided the tax pass-through amounts as a separate line item on our GAAP income statement. Excluding the tax pass-through amount for this quarter, company-wide margins for the third quarter this year would have been 510 basis points above the margin we reported. In conclusion, with strong play from our core customers and improving trends among our retail customers, efficient operations, robust free cash flow, and a strong balance sheet, we have outstanding flexibility to continue executing our strategy for creating long-term value for our shareholders. With that, I'd like to turn the call to David to open the call for questions.
Operator, Operator
Thank you, Josh. Our first question comes from Barry Jonas of Truist.
Barry Jonas, Analyst
I wanted to start on Vegas. Can you talk about what you see as the main drivers of the weakness you're seeing in the destination business? And just help us feel comfort that you think the non-destination business won't see any of that related weakness.
Keith Smith, CEO
So maybe starting with the second half of your question. I think as we noted, we've seen strong play from our core customers. As we look at the database here and the source of our revenue here in Las Vegas, our local customers are performing extremely well, and our core customers are growing extremely well. The shortfall really was all about the destination business, which has been kind of widely reported and talked about. How long that continues? We'll all have to see. We have seen, as we look at our kind of forward 90-day bookings in our hotels here in Las Vegas, we've seen improvement, still soft, but certainly better results than we saw three months ago. So we turned the corner, hard to say, but the 90-day booking results certainly look better than they did three months ago.
Josh Hirsberg, CFO
And Barry, one thing I would add to Keith's remarks is that the impact of the destination business is focused on the Orleans. When you separate the Orleans from the rest of the business, several things become evident. There is growth in gaming revenues throughout the rest of the portfolio, growth in overall revenues, and growth in EBITDA, along with consistency in margins. We feel quite positive about the underlying customer trends overall. It's just one aspect of the business that we are managing. In fact, when examining the segment's performance, the EBITDA decline in Q3 can be attributed entirely to the Orleans, as it decreased even more than what we are seeing in the segment for the quarter.
Barry Jonas, Analyst
Got it. That's really helpful. And then just as a follow-up, we're starting to see some M&A deals come about. Curious if you could share your thoughts on the M&A pipeline, the environment, either in terms of buying whole assets or opcos?
Keith Smith, CEO
Look, we obviously have a fairly successful track record of M&A based on a disciplined strategy of making sure it's the right asset in the right market at the right price. We continue to look at it. We certainly note that a few things have traded recently. I don't know that we're necessarily seeing more pitch books across our desk, but we certainly pay attention and monitor opportunities. For the right opportunity, we're certainly prepared to dig in. But other than that, I'm not sure we have a whole lot to comment on.
Steven Wieczynski, Analyst
So Keith or Josh, if we think about the Midwest and South properties, I mean, those results were really solid, came in much better than we were expecting. So if you think about that portfolio, wondering if the trends you witnessed there were pretty much broad-based or there were markets or pockets of strength versus other markets? I guess just trying to figure out if certain markets are kind of outperforming other markets. And obviously, you guys called out Treasure Chest, I guess, excluding Treasure Chest.
Keith Smith, CEO
I think when we look across that portfolio that comprises some 17 properties, it was generally broad-based. Look, there's always one or two that don't perform maybe quite as strong in any given quarter, but it generally was broad-based strong results. We called out Treasure Chest because it's interesting to us and very positive that it continues to grow even after anniversarying its opening. So Josh, I don't know if you have anything to add?
Josh Hirsberg, CFO
Not really, Keith. I think that covers it.
Steven Wieczynski, Analyst
Okay. Keith or Josh, I have a broader question for you. If you take a step back and assess your Vegas Locals assets, how do you view their current position from a capital expenditure standpoint? Specifically, do you believe most of your assets in that market are in a favorable position compared to your peers, or do you anticipate needing to invest more in your portfolio over the next few years to compete with the newer supply? I noted your comments about Orleans and Suncoast.
Keith Smith, CEO
Right. So look, we've been talking about the renovation work we're doing at the Suncoast over the last year or so. And so that has been, I think, a very positive investment for us as we're not even fully through it yet, and we're seeing performance that's in line with the prior year. That gives us confidence that this will be a successful investment. Look, the Orleans needs a little bit of updating also. It's an important asset for us. Look, other than that, I think our portfolio of properties here in Las Vegas are well positioned. We're looking at a number of restaurant projects just as part of our overall capital plan to make sure the properties remain competitive. It's not significant capital, but it's important capital to be competitive. So you look at our slot floors, and I would put them on par with anybody's in the market and probably better than most. And so I think we feel pretty good with the exception of once again, needing to make, I think, an important investment in the Orleans to make sure it's competitive for the long-term.
David Katz, Analyst
I would like to hear your updated thoughts on the internal investments you are making in the portfolio and your perspective on returns, including the timing and hurdle rates. This information will assist us in future forecasting. What does the return process look like, and how should we assess the earnings potential?
Josh Hirsberg, CFO
Yes, it's Josh. I'll take it and then Keith can add anything. Generally, for modeling purposes, we think of a cash-on-cash return of around 15% to 20%. We've certainly achieved that with Treasure Chest, and we are seeing early signs of similar success with the meeting space at Ameristar St. Charles. The next project will be Cadence, which involves a $60 million investment. We fully expect that property, once operational, will generate incremental EBITDA over what we're currently receiving from the Joker's Wild facility and will meet that return expectation. After that, we are more reliant on regulatory approval for Paradise, but we are excited about that opportunity. A good benchmark is the 15% to 20% return, and we've been fortunate to meet or exceed that on the projects we've announced so far. We're working to condition the market to think about the pipeline of these projects and are focused on selecting those with the highest potential returns. Many renovations at Suncoast and the Orleans will fall under our maintenance capital budgets. However, as Keith mentioned, we're seeing positive early signs at Suncoast, such as new customers and increased visitation. We're encouraged by these investments, even though they are classified as maintenance capital. I hope that provides some clarity.
David Katz, Analyst
It does. And if I can just follow up and clarify, when we're thinking about the Orleans because it's in the maintenance budget, we aren't necessarily sort of holding it to the same standard or thinking about its earnings power longer term in the same way with that 15% or 20%, right?
Josh Hirsberg, CFO
Yes, I think that's right because it gets to be a blend of maintenance and capital and growth, and it's just hard to kind of distinguish between kind of what that project is. Is it more maintenance or is it more growth? So I think that's why we put it in maintenance really.
Brandt Montour, Analyst
The first question is just to clarify about the Orleans project for next year, which you mentioned. Is that in relation to your hotel rooms? Should we expect some potential disruption impact? I know there are easy comparisons here, and a couple of market factors affecting that property. How do you view that property going into next year?
Josh Hirsberg, CFO
I think it's a bit early to gauge the extent of any disruption. Our belief is that if we manage to start the project in the second half of next year, the disruption will be relatively limited at first. Once we have a clearer understanding of the program's scope and timeline, we can provide more detailed information. Our management teams at Suncoast have effectively navigated the disruption we've experienced thus far, which has been considerable, and that construction activity is ongoing. We're learning to manage these processes, each of which will be unique. So far, we've done well in managing at Suncoast. There's no denying that it impacts our performance to some extent. However, it's encouraging that our current performance aligns with last year's figures. At this point, we won't project disruption expectations related to Orleans until we have a better understanding of the timing and full project scope. Keith, do you want to add anything?
Keith Smith, CEO
No, I think just tagging on to what Josh said, as you're thinking about 2026 and thinking about the Orleans, I wouldn't anticipate anything significant as we begin to have more clarity on the timing of all of that and what's going to take place first and second. When we end up getting to 'the middle of the casino,' which, yes, we will have some disruption as we get into those types of things, yes, we'll be able to update you. At this point, as you're modeling out 2026, I wouldn't anticipate anything.
Brandt Montour, Analyst
Great. That's helpful. Just a quick second question about Midwest and South. How would you describe the promotional environment across your markets? Any sort of changes quarter-over-quarter? Or has it been pretty consistent from competitors?
Keith Smith, CEO
In several markets, there have been competitors who've been stepping on the gas, so to speak, with respect to marketing spend and being more aggressive. We have generally remained very disciplined. It is reflective in our margins that remain consistent year-to-year. While we may be up just a tick overall, once again, it is highly efficient, highly productive dollars reflected and we're able to grow revenue, we're able to grow EBITDA and we're able to maintain margins. We are seeing some enhanced marketing by our competitors, but we're not responding. Frankly, some of the enhanced marketing we're doing is in relation to declines in destination business, not in relation to what our competitors are doing.
Benjamin Chaiken, Analyst
On the Suncoast renovation, you mentioned being in line with the prior year a few times, but I would think that there was still some disruption. So to the extent there was, could you quantify that impact in 3Q and then maybe how you're thinking about 4Q even just anecdotally?
Keith Smith, CEO
Yes, I'd love to, but it's really difficult to quantify the disruption. Look, when we say it was in line with prior year revenue and EBITDA perspective, I think that says it all. There's clearly disruption. We have fewer slots on the floor today than we did a year ago because we're in the middle of the casino. There are a lot of walls up. There's ceiling work being done. It is disruptive, and it will continue to be disruptive. If you were to walk into the building today, we have a temporary front desk because we're doing work around the front desk area. But to date and through Q3, and we'd expect it to be through Q4, things are in line with the prior year. Our customers are hanging in there with us. The management team is doing a great job of taking care of our guests. The guests have had very strong positive reactions to what we've unveiled thus far. And so everything is working, but hard to quantify.
Benjamin Chaiken, Analyst
Okay. Understood. And then you've got a large expansion at Sky River, I believe, that opens early next year, 1Q, I believe. Understanding you earn management fees here, is there anything we need to watch out for in Q4 in terms of construction, just ahead of that opening?
Keith Smith, CEO
From a construction standpoint, everything is on the outside of the building. There really isn't any impact on the negative side to the ongoing construction or 'the opening whenever that happens sometime early next year.' It's parking garage, along with some added casino space that will house the added slots. The second phase that I described, which includes hotel towers, more restaurants, also is on the outside of the building. There will be no immediate impact or construction disruption from that.
Steven Pizzella, Analyst
Just curious, as we think about early next year, can you share any expectations you might have for a benefit from the tax bill?
Josh Hirsberg, CFO
Yes, Steve, that's a question we encounter frequently. We haven't discovered a way that we're comfortable with to estimate the overall benefit from that. There are several components involved, as Keith mentioned in his remarks, including taxes on tips and certain higher standard deductions and credits for seniors. Ultimately, we believe it's just an incremental benefit for us overall, but we have not quantified it in terms of revenue and EBITDA.
John DeCree, Analyst
Josh or Keith, I wanted to ask if you could provide a little color on kind of how the quarter played out and maybe the Cadence month-to-month. We kind of use the state GGR data to help us, but July and August looked pretty strong. September, maybe a little bit more mixed. So any color you could give us on kind of how the quarter played out, particularly in the Midwest and South regions.
Keith Smith, CEO
I think as we look across our portfolio, it was fairly steady. You have to take into account like in September where the holiday fell different, so we got a little bit bigger benefit technically in August than we did in September. But that's over the course of a 10-day period; it flips from one month to the other. When we look at core trends in the business week-to-week, not a lot of fluctuation. So I don't know that I have anything else to add other than that.
John DeCree, Analyst
That's great, Keith. And then maybe I know this one is difficult to track given the limited data, but curious if you could give us a little bit more color, again, in the Midwest and South, specifically on the retail play, some of the better trends you're seeing there. Is that kind of year-over-year growth in kind of spend, more customers coming in the door? And if you have any guesses, a number of theories, but kind of what might be driving that uptick in retail play?
Keith Smith, CEO
So it's a trend that actually has been going on for a couple of quarters now. We've been talking about it, and it continued in through the third quarter with the improvements kind of increasing, so to speak. I think we're seeing generally on the rated side, increases in frequency and increases in spend. Both ADT or spend are going up and frequency is increasing, which are positive trends. Josh, I don't know if there's anything else to add.
Josh Hirsberg, CFO
Yes. I would just add, just to clarify for everyone, retail has two buckets. It's the lower end of the rated. That's what Keith was just talking about in terms of spend and frequency. Then there's the unrated component as well. We can understand what's going on with the lower end of the rated piece. What's interesting as a group is the unrated business has also been improving sequentially over time and has actually been a big driver of the retail component. Both the low end of the retail rated piece that we know about and the unrated segment have both been improving year-over-year as we've moved through this year. It's been a consistent trend.
Daniel Politzer, Analyst
I was wondering if we could review the fourth quarter as there seem to be several factors at play. It would be helpful to clarify that Tunica is closing in November in Norfolk, and there's also a temporary casino opening in November. I don't believe there has been an update regarding Managed & Other, which would also be useful. Additionally, can you provide any details on the impact from the cybersecurity incident during the quarter?
Keith Smith, CEO
You should expect a very minimal impact from Tunica, so there's no need to adjust your models for it or for Norfolk. We've mentioned in previous calls that Tunica is a small, temporary facility, and our main focus is on the permanent one. You can assume this will break even as you consider the fourth quarter or even next year. As for the cyber event, we can only reiterate what was stated in the 8-K, which is that it did not affect our business operations, and we have cyber insurance to support us. There was a third question, but I lost track after that.
Josh Hirsberg, CFO
Yes. I think the key for Managed & Other, it's going to be a pretty stable business in Q4 relative to the trends of this year just because the business is operating at or very near capacity. Once it gets the incremental slots early next year, that's in the quarters following that I think we will start to see the benefit of that and then eventually from the expansion of the hotel and meeting space in mid-2027. So I think for Managed & Other for Q4 will be very similar to what you've seen in the earlier quarters of this year.
Daniel Politzer, Analyst
Got it. For my follow-up, I don't think you paid the taxes in the quarter on the FanDuel stake sale. When can we expect that? Also, regarding the tax front, is there any impact or offset you might be able to apply from the one big bill?
Josh Hirsberg, CFO
Not much of an offset. More than likely, the payment will occur sometime in the first quarter of next year.
Stephen Grambling, Analyst
I was hoping you could dig into the balance sheet a little bit. Just how are you thinking about the optimal leverage of the business, particularly if M&A opportunities maybe don't come to fruition, could we see that leverage tick back up? Or what would you be looking to do in terms of optimizing the balance sheet longer-term?
Josh Hirsberg, CFO
Before the FanDuel transaction, our leverage was approximately 2.8 times, with a long-term target of about 2.5 times. After the transaction in late July or early August, our leverage is now around 1.5 times. Given our current capital plans, mainly related to Virginia, we expect our leverage to increase over time, likely returning to around 2.5 times in the next 1.5 years. It’s unusual for our optimal leverage to be above our target, but it's not something we are actively pursuing right now. We're at 1.5 times, and whether or not we achieve our target is not our primary concern. Our leverage might stay at 1.5 times for a while, and while we don't think this is the ideal level, we currently have no reason to raise our leverage. We will remain cautious as we consider our options. We were successfully managing our business at 2.5 times, and though we have this windfall at 1.5 times, it doesn’t alter our previous approach. If we encounter opportunities such as share buybacks or returning more capital, we will evaluate those as they arise. Until then, we plan to operate the business between 1.5 to 2 times and will gradually increase our leverage in line with our capital plans. Keith, do you have anything you’d like to add?
Keith Smith, CEO
I think what Josh was referring to is that it has been less than 90 days since we received the payment, and our leverage has decreased to 1.5. We want to take a long-term perspective and be careful about how we manage the current leverage and position the company, which could involve mergers and acquisitions or other strategies. We don’t have a definitive answer at this moment, but we acknowledge the situation and are engaged in meaningful discussions about the best approach. I’m sure we’ll have more information to share in future quarters, but nothing specific to mention right now.
Stephen Grambling, Analyst
That all makes sense. If I could sneak one unrelated follow-up in. As we look at the Locals market, and you talked about the 6% wage growth there. It seems like it's about as wide as I've seen it relative to the GGR growth for that market in aggregate. Do you think there's a lead lag here? Or is there anything else that you would point out that's maybe creating that wider gap versus history?
Josh Hirsberg, CFO
Yes, Steve, that's a good observation. In our business, the impact of the destination business is reflected on the income statement through hotel revenues year-over-year, which were down about $5 million. The destination business accounts for a significant number of hotel room nights, primarily at the Orleans, but it has affected almost every property in Las Vegas and to some extent, those outside Las Vegas. This includes food and beverage and banquet business, both of which are highly profitable for us, and there’s also a considerable amount of gaming revenue linked to that business. While it's challenging to estimate the precise impact, it's likely contributing to that gap. We're also observing wage growth in our business, driven by a stronger local customer base. If you consider the wage growth alongside the destination business, you would likely see healthy gaming revenue growth that aligns with your expectations. That's how I view the situation.
David Hargreaves, Analyst
So in terms of Hawaii, I think you said revenue was steady. I'm wondering about headcount and volumes. How are things there?
Keith Smith, CEO
Look, Downtown volumes on the street are down, and that's frankly driven by visitation to Las Vegas because there's a strong correlation between visitor volumes Downtown and visitor volumes to Las Vegas. So visitation on the street is down, which is what kind of impacted, we call it destination business in the downtown area for us. Our core market, which is the Hawaiian market, performed normally. But we felt softness in the destination business. We felt softness from lack of tourism on the street.
David Hargreaves, Analyst
And then with respect to the Tunica closure, I'm just wondering if there's just leaving the building and leaving town something that maybe happens with the gaming equipment. Did you try to sell that property? Curious as to what happened there?
Keith Smith, CEO
I think the way to think about the closure of Tunica, first of all, when we're all done with this, the site will be scraped clean. We'll take everything down. We've already found homes for the equipment and all the recoverable assets, so to speak, in the building. The property had gotten to a point where EBITDA was fairly small and the level of maintenance capital required to maintain it at our standards was growing. We were looking at the data, looking at the maintenance capital that’s required and the current level of EBITDA and where the market is; it just made sense to close the building down. Not a decision we came to lightly, but it's a decision we came to. Once again, we will be able to reuse a lot of the gear and equipment, sell off some stuff that we don't have use for. Everything will be scraped clean. It will be turned back into just raw land, and we'll attempt to dispose of the land.
David Hargreaves, Analyst
Last one. I really applaud your conservatism with the balance sheet. If we look at your properties that are leased, are you happy with the EBITDA coverage of interest and rent at this point as you are with your leverage? How do you feel about the rent coverage picture?
Josh Hirsberg, CFO
Yes. I think we're happy with it and our landlord is happy with it, quite honestly. They don't have a corporate guarantee, but they really don't need one given the coverage there. So everything is a happy partnership there.
Chad Beynon, Analyst
First one on the opening or start of Missouri sports betting. I know you have a partnership with Fanatics. I believe it might be the first with them. I know that includes some of their branded retail sports books at your properties. So could you maybe talk about anything you're willing to disclose in terms of the relationship and then maybe future opportunities with this company given their ascension on market share that we've been able to track?
Keith Smith, CEO
Yes. So you're right. We have two properties in Missouri, Ameristar Kansas City, Ameristar St. Charles. Both of them received licenses, as Fanatics did, when the Missouri Gaming Commission issued licenses. People could be prepared to open the first of December. It is our first relationship with Fanatics. Whether or not that expands, it’s always hard to tell. It’s a strong relationship thus far. We know some of the folks in that organization. So we have a good relationship there. We will see, once again, how it develops and what other opportunities exist to take that relationship further. Nothing really to report other than that at this point.
Chad Beynon, Analyst
Okay. Great. And then in terms of some of the near-term, I guess, an inflection in Vegas in the destination market, we met with a lot of the companies on the strip in the past couple of weeks, and some pointed to November, others obviously talked about F1 maybe being more of a good guide this year and then the strength into Q1. Should all of that help you as well? And in terms of internal bookings, are you viewing maybe November as kind of an inflection point where you're starting to see good year-over-year growth? I guess that would be more Downtown, maybe excluding Orleans with some of the things that you've talked about?
Keith Smith, CEO
Yes. Once again, I noted earlier that as we look at our kind of 90-day booking pattern, today, sitting here or a week or so ago, it is much more positive than it was three months ago. It is still soft, but certainly better results than we saw three months ago. That makes us feel good about kind of the next several months, given those numbers, and that's true for Downtown as well as our Locals properties with hotels. We will see how it all comes together. As the strip continues to do better, as occupancy and rate on the strip continue to rebound, clearly that will benefit us. It's just an indication that people are traveling again and coming back out. So that will help us. Overall, our own bookings are once again better over the next 90 days than they were a couple of months ago.
Operator, Operator
This concludes our question-and-answer session. I'd now like to turn the call over to Josh for concluding remarks.
Josh Hirsberg, CFO
Thanks, David, and thanks to everyone for joining the call and the questions we received today. If you have any follow-ups, please feel free to reach out to the company. This concludes our call and you can now disconnect. Have a good day.