David Hargreaves

David Hargreaves asked about headcount and volumes in the Downtown Las Vegas segment, specifically regarding Hawaiian customers. He also sought details on the Tunica closure, including equipment disposition and the rationale behind the decision. Finally, he inquired about the EBITDA coverage of interest and rent for leased properties.

Answer

President and CEO Keith Smith stated that Downtown volumes were down due to lower Las Vegas visitation impacting destination business, while the Hawaiian core market performed normally. He explained that the Tunica site will be scraped clean, equipment reused or sold, and the closure was due to small EBITDA and growing, unviable maintenance capital needs. CFO Josh Hirsberg confirmed satisfaction with the EBITDA coverage for leased properties, noting a happy partnership with landlords.

David Hargreaves from Barclays inquired about the revenue, headcount, and volumes specifically from the Hawaiian customer segment in Downtown Las Vegas. He also asked about the Tunica closure, specifically the disposition of gaming equipment and any attempts to sell the property. Finally, he questioned the company's satisfaction with the EBITDA coverage of interest and rent for its leased properties.

Answer

Keith Smith, President and CEO, explained that Downtown Las Vegas volumes were down due to reduced overall visitation to Las Vegas, impacting destination business, but the core Hawaiian market performed normally. Regarding Tunica, Keith Smith stated the site would be scraped clean, equipment and recoverable assets would be reused or sold, and the land would be disposed of, as the property's small EBITDA and growing maintenance capital needs made continued operation unviable. Josh Hirsberg, CFO, confirmed satisfaction with the EBITDA coverage of interest and rent for leased properties, noting that both the company and its landlord are content with the current arrangement.

David Hargreaves inquired about how Q1 capacity adjustments specifically impacted yields, the current stage of implementing dynamic pricing, and for an update on the sales and capacity plans for the Antarctica flight program.

Answer

CFO Rick Goldberg explained that lower Q1 capacity from dry dock timing was a primary factor in driving higher occupancy and yields. CEO Natalya Leahy stated that while dynamic pricing is showing progress, there is more to come, and highlighted growth from new channels. She also confirmed the Antarctica program is performing exceptionally well, is nearly sold out for 2026, and that capacity for the 'Fly Cruise' option has been increased for 2026 and 2027 to meet high demand.

David Hargreaves of Barclays asked for clarification on the quarter's tax inflection and inquired whether the increased commissions and royalties from the new National Geographic and Disney agreement are now fully reflected in the company's margin structure.

Answer

Executive L. Dyson Dryden stated he would follow up offline on the specific tax accounting question but noted that cash taxes remain minimal due to significant NOLs. He clarified that the financial impact of the new partnership agreement is not yet fully reflected in the results. The associated costs will be implemented over time, with step-ups in royalties occurring next year and another in 2026 as the full benefits of the collaboration come to fruition.

David Hargreaves asked about any plans to access the debt markets given current spending and a flattish outlook, and also requested an update on the company's target leverage range.

Answer

Chairman and CEO Thomas Baltimore stated there is no current need to access debt markets, citing $1.4 billion in liquidity and proceeds from planned asset sales. He reaffirmed that the company's guiding principle for leverage remains 3 to 5 times net debt to EBITDA and that they are confident in getting inside 5x in the near future.

Asked for clarification on the company's leverage target and the specifics of its debt repayment plan following the transaction.

Answer

The leverage target of around 3x is a long-term goal that accounts for future investments like the Lotto bid, not a revision of prior statements. The $2 billion debt repayment will include a required term loan paydown, with the remainder flexibly allocated to bonds or the revolver.