85% of Boyd’s New Jersey online gambling customers not Borgata customers
March 6, 2014
Casino operator Boyd
Gaming is singing the praises of its market-leading online gambling
operations in New Jersey. On a conference call with analysts following the
release of Boyd’s Q4 and FY 2013 results, CEO Keith Smith
continued to rubbish the notion that online gambling cannibalizes
brick-and-mortar casino revenue.
Boyd and MGM
Resorts share ownership of Atlantic
City’s market-leading Borgata casino, and Smith notes that
85% of its New
Jersey online gambling customers to date “have not been active Borgata
customers.” Boyd called this “clear evidence” that online gambling is
“complementary not competitive” with Boyd’s land-based operations.
Smith acknowledged that Boyd’s online gambling operation – a joint venture
with MGM and Bwin.party
digital entertainment – didn’t make a “meaningful contribution” to
Boyd’s Q4 numbers, but Smith was content knowing the Borgata/PartyPoker platform
controlled 43% of New Jersey’s online market (30% via the Borgata alone). Smith
expects things to further improve now that the company has tightened up the geolocation
problems that hindered the market’s early days. The platform also launched
its first 3G and 4G mobile product for Android devices in February and the iOS
version is due in the “near future.”
As for its overall performance, Boyd revenue grew 9.1% to $681.5m, thanks
mainly to the late
2012 addition of Peninsula Gaming’s operations. Earnings
rose 30.4% to $131.5m but costs resulted in a net loss of $47.3m for the
quarter, which sounds terrible until you realize the company lost $899.9m in Q4
2012. For the full year, Boyd revenues rose 16.6% to $2.89b while recording a
net loss of $80.3m. The company closed out 2013 with total debt of $4.43b.
Investors have pushed the stock down nearly 4% in after-hours trading, but
that’s far better than the 18.6% drop the stock took when Boyd published its Q3
figures.
The Borgata’s Q4 revenue was up $9.5m — $2.2m of which came via its online
operations – to $157.1m. Boyd’s Las Vegas locals market revenue was flat at
$148.6m while the downtown Las Vegas segment saw revenue rise 3.7% to $59.8m.
The midwest and south segment fell 8% to $196m and the Peninsula segment
returned $119.9m.
Looking further afield, Smith described Japan
as “another interesting possibility” for expansion. Smith says Boyd is no longer
content to confine itself to US shores and has begun “examining the landscape”
and making local connections to gain a sense whether Japan would be “a good fit”
for the company’s growth strategy. Really, all Smith needs to do is ask himself
one question – are
you prepared to spend $10b – but Smith says the slow pace of legislation
means that “we’re probably pretty far away from worrying about how to finance
it.”
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