US casino operator Boyd Gaming reported an 11.6% drop in Q1 earnings, dragged down by crap weather at its operations outside Nevada and a seven-figure operating loss from its online gambling operations in New Jersey. Revenue for the first three months of 2014 fell nearly 4% to $708.3m while earnings slipped from $163.5m to $144.5m. Boyd estimates the weather woes pushed earnings down between $10m and $12m. Boyd reported a net loss of $6.2m in Q1, an improvement over the $7.3m loss in the same period last year.
Boyd’s Las Vegas Locals segment revenue was basically flat at $151.4m, while earnings rose 2% to $40m. The Downtown Las Vegas segment rose 3% to $55.7m while earnings rose 31.2% to $9.3m, its best showing in five years, thanks to increased walk-in traffic from the Fremont Street Experience. The Midwest and South/Peninsula properties were hardest hit by the severe winter weather, which pushed Midwest and South revenue down 7.5% to $211.6m and earnings down 11.2% to $44.1m. Peninsula properties saw revenue fall 8.6% to $122.3m and earnings were off 11.6% to $44.8m.
The Borgata Hotel Casino & Spa, the market-leading casino in Atlantic City that is co-owned by Boyd and MGM Resorts, saw revenue rise 1% to $167.3m, of which $7.7m came via the Borgata’s online gambling operation. But the Borgata’s earnings fell 28% to $20.4m, in part due to the snowmageddon that walloped the state and its neighboring feeder markets. The decline was also due to a $3.2m operating loss from the online gambling operation, of which $2m went to non-recurring marketing and advertising expenses associated with the online product launch.
On a post-earnings call with analysts, Boyd CEO Keith Smith celebrated the Borgata having led all New Jersey online competitors since the market opened and noted that the Borgata brand represented nearly one-third the total market and nearly 40% when combined with Boyd’s online partner Bwin.party. Smith said this left his company “well positioned for similar success as other states move forward.”
Smith noted that once you strip aside the non-recurring startup costs, the online division’s operating loss was only around $1m, and Smith believes this figure “will narrow fairly quickly as we go through Q2 and Q3.” Smith rejected suggestions that reducing marketing would decrease market share, saying “the reason we control, generally, 1/3 of the market by ourselves is simply the power of [the Borgata] brand … We’ll continue to market and advertise in a prudent fashion … and provide the right incentives to our customers to keep them on our site. But we don’t think kind of pulling back to a more normal run rate is going to impact our market share.”