85% of Boyd’s New Jersey online gambling customers not Borgata customers

TAGs: borgata, Boyd Gaming, keith smith, New Jersey Online Gambling

boyd-gaming-borgata-casinoCasino 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 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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