Casino operator Boyd Gaming celebrated its market-leading online gambling position in New Jersey while lamenting its second quarter profit decline. Revenue in the three months ending June 30 came to $722.5m, down 2% from the numbers this time last year. Adjusted earnings nudged up $400k to $160.2m but this number was boosted by an $11.2m tax settlement with Atlantic City, where Boyd owns a 50% stake in the market-leading Borgata Hotel Casino & Spa.
Profits, meanwhile, plunged from $11.6m last year to just $700k, reflecting the loss of discontinued operations such as the Dania Jai Alai casino in Florida. The decline prompted Boyd to reduce its full-year operating income guidance to a range of $580m to $600m from previous estimates of $600m to $620m. Boyd CEO Keith Smith (pictured) blamed the downturn on “continued weakness in casual play.”
Revenue from Boyd’s Las Vegas Locals segment was off marginally to $148.3m, with a similar scenario in play in the Downtown segment, which fell $500k to $55.6m. The Midwest and South segment was off nearly 7% to $209.1m thanks to increased gaming capacity in the Biloxi, Shreveport and central Illinois markets. The Peninsula segment was down nearly 6% to $127.8m.
In New Jersey, Boyd’s share of the Borgata came to $181.9m, up $9m year-on-year. The increase is largely attributable to Boyd’s online gambling operations, which contributed $6.7m to the revenue pie. Even factoring out the aforementioned property tax refund, the Borgata’s adjusted earnings rose 11% to $30.8m.
In the post-earnings analyst call, Smith celebrated the New Jersey online joint venture with MGM Resorts (co-owner of the Borgata) and UK-listed online gambling operator Bwin.party digital entertainment. Smith acknowledged that the online gambling operation had lost $1.8m in the quarter but said the business had broken even in July, a “key milestone” in Smith’s eyes. Smith expects the online operation will “continue to operate on a break even basis” through the second half of the year.
Smith believes that the state’s three-months-and-counting online gambling revenue decline will reverse itself once the traditionally soft summer season segues into fall and people head back indoors. Smith says three-quarters of the Borgata’s online customers are not active brick-and-mortar casino customers, supporting his previously stated opinion that online gambling wouldn’t cannibalize brick-and-mortar revenue.
Boyd COO Paul Chakmak said the Borgata’s “standalone” share of New Jersey’s total online revenue was 29% and, when combined with PartyPoker‘s operations, the Borgata network “holds a 10 point lead on our nearest competitor.” Boyd CFO Josh Hirsberg said he expects New Jersey’s online market “will see consolidation … in the near future” but he declined specifics on how quickly he expects that consolidation to commence.
Boyd also plans to launch a mobile sports betting product in Nevada “in the next several weeks” to position itself for the upcoming NFL season.
